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Logistical Management Chapter 6: Operational Integration Integrative Management Value Proposition Economic Value Lowest Total Landed Cost Market Value Relevancy Value Attractive Assortment Customization Economy-of-Scale Efficiency Economy-of-Scope Segmental Diversity Effectiveness Product/ Service Creation Product/ Service Presentation Product/ Service Positioning Procurement/ Manufacturing Strategy Market/ Distribution Strategy Supply Chain Strategy Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Internal Integration The Great Divide Procurement and Manufacturing Integration Distribution and Marketing Integration The challenge of managing across functional boundaries. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Supply Chain Flows Product- Service Value Flow Resource Base Market Accommodation Flow Information Flow End Customers Cash Flow Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Supply Chain Framework R E S O U R C E B A S E PRODUCT-SERVICE VALUE FLOW MARKET ACCOMMODATION FLOW BEHAVIORAL CONTEXT Relationship PLANNING AND CONTROL CONTEXT Measurement Technology and Planning OPERATIONAL CONTEXT Material and Service Supplier Integration Internal Operations INFORMATION FLOW FINANCIAL FLOW Customer Integration E N D C U S T O M E R S Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Supply Chain Context, Competencies and Supportive Capabilities Customer Integration Internal Integration Segmental Focus Relevancy CrossFunctional Unification Standardization Responsiveness Simplification Flexibility Compliance Material/Service Technology and Supplier Planning Integration Integration Strategic Information Alignment Management Operational Fusion Internal Communication Financial Linkage Supplier Management Connectivity Collaborative Forecasting and Planning Measurement Integration Relationship Integration Functional Assessment Role Specificity Activity Based and Total Cost Methodology Comprehensive Metrics Financial Impact Guidelines Information Sharing Gain/Risk Sharing Structural Adaptation Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Factors Increasing Likelihood of Supply Chain Relationship Success Retailers Manufacturers • • • • • • • • • • • High level of cooperation Similarity of goals/ objectives Clear communications Senior management support Control of inventory Information sharing Recognition of mutual benefits Controlled implementation Joint task force Commitment/ resource dedication Benefits realization Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Common Obstacles Confronted When Creating Supply Chain Relationships Retailers Manufacturers • Low-volume stockkeeping units (SKU’s) • Resistance of manufacturers to change • Information systems • Noncompatible data formats • • • • • • Lack of communication Trust level Noncompatible systems Understanding of technical issues Resistance of customers to change Readiness of retailers Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1997 Global Logistics Expenditures Gross Domestic Logistics Product (GDP) Cost (US$ Logistics Region Country (US$ in Billions) in Billions) Cost to GDP North America Canada 658 80 12.1 Mexico 695 106 15.3 United States 8083 849 10.5 Total 240 1035 11 Europe Belgium/ Lux. 240 27 11.4 Denmark 123 16 12.9 France 1320 158 12 Germany 1740 228 13.1 Greece 137 17 12.6 Ireland 60 8 14 Italy 1240 149 12 Netherlands 344 41 11.9 Portugal 150 19 12.9 Spain 642 94 14.7 United Kingdom 1242 125 10.1 Total 7238 884 12.2 Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1997 Global Logistics Expenditures (cont.) Region Pacific-Rim Country PRC India Hong Kong Japan Korea Singapore Taiwan Total South America Brazil Venezuela Argentina Total Reamining Other Countries Total Logistics Expenditures Gross Domestic Logistics Logistics Product (GDP) Cost (US$ Cost to GDP (US$ in Billions) in Billions) (%) 4250 718 16.9 1534 236 15.4 175 24 13.7 3080 351 11.4 631 78 12.3 85 12 13.9 308 40 13.1 10063 1459 14.5 1040 156 15 185 24 12.8 348 45 13 1573 225 14.3 9690 1492 15.4 38000 5095000 13.4 Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Characteristics of Global Development Typical Characteristics Three Stages of Development Product Focus Marketing Strategy Export/ Import Domestic Production and Distribution Specific Customers International Operations Local Presence Local Market Customization Supported by Postponement or Local Production Focused Specific Market Areas which may Cross National Boundaries Global Brands All Economic Regions Globalization The Stateless Enterprise Supply Chain Strategy Agents and Third Party Logistics Service Providers Management Information and Decision Support Human Resource Development Transportation Driven with Integrated Financials Home Country Focused with Limited EDI Subsidiaries and Local Distributors with Specific Business Charters and Visible Local Presence Decentralized Management of Local Operators and Strategic Alliances With Local Profit Responsibility World Wide Flow of Key Resources to Leverage Global Sourcing and Marketing Advantages Centralized Planning with Locally Flexible Distribution Supported with Common Systems Management with "Home Country" Focus and Limited International Experience Limited Top Management with International Experience and Strong "Home Country" Decision Focus International Training and Experience Required for All Upper Level Management with Some Requirements for Mid Level Management Independent Data Base and Decision Support Integrated Data Base and Decision Support Copyright Michigan State University 2000 Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. International Logistics Documentation •Export irrevocable commercial letter of credit. A contract between an importer and a bank that transfers liability or paying the exporter from the importer to the (supposedly more creditworthy) importer’s bank. •Bank draft (or bill of exchange). A means of payment for an import-export transaction. Two types exist: transaction payable on sight with proper documents (sight draft), and transaction payable at some fixed time after acceptance of proper documents (time draft). Either type or draft accompanied by instructions and other documents (but no letter of credit) are a documentary draft. •Bill of lading. Issued by the shipping company or its agent as evidence of a contract for shipping the merchandise and as a claim to ownership of the goods. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. International Logistics Documentation (cont.) •Combined transport document. May replace the bill of lading if goods are shipped by air (airway bill) or by more than one mode of transportation. •Commercial invoice. A document written by the exporter to precisely describe the goods and the terms of sale (similar to a shipping invoice used in domestic shipments). •Insurance certificate. Explains what type of coverage is utilized (fire, theft, water), the name of the insurer, and the exporter whose property is being insured. •Certificate of origin. Denotes the country in which the goods were produced in order to assess tariffs and other government-imposed restrictions on trade. Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.