Chapter 1 – Discussion Questions – Answers
1.
Define the science and practice of logistics.
Answer:
Logistics management is the process whereby suppliers, manufacturers, and
distributors store and move products through the supply chain to their customers. The APICS Dictionary defines logistics as "the art and science of obtaining,
producing, and distributing material and product in the proper place and in
proper quantities." The Council of Supply Chain Management Professionals
(CSCMP) defines logistics as “that part of supply chain management that plans,
implements, and controls the efficient, effective forward and reverse flow and
storage of goods, services, and related information between the point of origin
and the point of consumption in order to meet customers' requirements." These
definitions imply that logistics creates competitive value by optimizing logistics operations costs and productivity, high capacity and resource utilization,
and close integration with customers and suppliers. Furthermore, the success
of these objectives depends upon the close collaboration and integration of logistics partners that populate the supply channel system. Logistics creates competitive advantage by flawlessly executing customer service objectives, achieving conformance to quality standards, and increasing marketplace value.
2.
What are the components of logistics management?
Answer:
Logistics is best understood by dividing it into three closely integrated sets of
management functions. The first is warehouse management. This function is
responsible for the storage and handling of inventories beginning with supplier
receipt and ending with dispersion to internal or external customers. Critical
concerns are the pursuit of lean philosophies of warehouse management, environmental sustainability of warehousing resources, reduction of wastes, use of
third party logistics (3PL) partners, utilization of warehouse management systems (WMS), integration with transportation, and pursuit of flow-through techniques for storage and picking. The second function of logistics is transportation management. This function is defined as the movement of product from
one node in the supply chain to another, ending with delivery to the customer.
Critical concerns are management of private fleets and 3PL partners; audit,
payment, and claims; transport routing, tracking, and optimization; government
regulation, security, and compliance; and the utilization of transportation management systems (TMS). The third and final function of logistics is performance measurement. Because of the size of the capital invested in warehousing
and transportation, managers must keep a close accounting of the performance
of these functions through the deployment of logistics administration and analytic modeling techniques capable of providing full visibility to logistics costs
and operational performance.
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3.
Define the concept and practice of supply chain management (SCM).
Answer:
SCM is about a company integrating its process capabilities and marketplace
strategies with those of its suppliers and customers on a strategic level. Integrative supply chains consist of many trading partners participating simultaneously in a collaborative network containing multiple levels of competencies
and various types of relationships. SCM enables companies to activate the synergy to be found when a community of firms utilizes the strengths of each other
to build superlative supply and delivery processes that provide total customer
value.
SCM can be viewed from several perspectives. Definitions of SCM take into
account a wide spectrum of applications incorporating both strategic and tactical objectives. For example, the APICS Dictionary, 14th edition, defines SCM
as
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
The Council of Supply Chain Management Professionals (CSCMP) defines
SCM as encompassing the
planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also
includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management
within and across companies.
4.
What is meant by channel network node congruence?
Answer:
Channel network node congruence means that each channel business must construct an individual supply chain strategy and set of operational objectives that
simultaneously provides for competitive advantage for both the firm and the
collective channel network. This process will reveals the gaps and regions of
potential conflict existing between the strategies and metrics of individual
channel players. Without strategic and operational alignment, the supply chain
will have weak links that will easily break as the pressure of demand variability
and missing partner capabilities appears at times of channel stress. As supply
chain convergence matures, the number of nodes occupying peripheral positions can be more closely integrated into the direct channel. The goal is to increase the length of the contiguous supply chain, thereby expanding opportunities for collaboration, customer value, and operations excellence while at the
same time minimizing conflict and increasing compromise over costs, performance metrics, service value propositions, and delivery velocity targets.
Achieving supply chain congruence can be contentious as companies find
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themselves working with several separate channel networks as their business
ecosystems evolve in new directions.
5.
What are the three basic channel entities and what is their role in the supply
chain?
Answer:
The basic structure of a supply chain consists of a producer with one supplier
and one customer. The manufacturing entity is responsible for the production
of products (or services). The role of the supplier is to provide production inventories to the manufacturer who, in turn, produces finished products that are
then sold to the customer.
6.
What are the basic flows found in every supply chain?
Answer:
Channel networks have four basic flows that connect the three channel entities
together. The first flow is concerned with the transfer of information up and
down the channel. The second flow represents the movement of inventory as it
is transformed from materials into finished goods and final sale to the customer.
The third flow tracks financial settlement at each entity in the channel. The
final flow reflects today's growing concern with sustainability and is centered
on reverse logistics, recycling, conservation, and waste disposal.
7.
Describe the basic supply chain strategies.
Answer:
There are three main supply chain strategies that could be followed in channel
management: stable, reactive, and efficient reactive. A stable supply chain is
characterized by a long trading history between channel entities; a heavy focus on execution, efficiencies, and cost performance; and the use of simple
connectivity technologies with little need for real-time information sharing.
An example would be a fastener supply chain that focuses on scale production, stable pricing, and readily available inventories. A reactive supply chain
is one where channel entities act to fulfill the on-demand requirements from
customers. Such supply chains are perceived as cost centers, use minimal networking technologies, and regard throughput as the main goal of the channel
structure. An efficient reactive supply chain acts as an efficient, low-cost provider of goods and services. This channel entity focuses on efficiency and
cost management to keep total delivered costs low and regards connectivity
technologies and internal process automation as the key to increasing profits,
expanding capacities, and increasing channel product and information velocities.
8.
What are the competency attributes necessary to achieve a lean supply chain?
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Answer:
Lean supply chains contain six core competencies.
 Lean improvement tools. Application of a toolbox of methods designed to
attack wastes anywhere in the supply chain. Important methods are the
“five S” system of improvement (sort, set in order, shine, standardize, and
sustain work management); SMED/quick change over (reduce operational lead times inhibiting process performance in the supply chain);
process flow analysis (linkage of processes and removal of barriers between channel nodes enabling the acceleration of the flow of goods to the
customer); total productive maintenance (TPM) (ensuring the availability
of productive equipment in the supply chain); and Six Sigma and statistical methods (performance metrics to ensure total quality across the supply chain).
 Process standardization. A fundamental objective of lean SCM is the
elimination of waste through the standardization of internal and external
business processes. Standardization enables companies to effectively apply improvement methods to any process and track, measure, and demonstrate improvement results. Standardization also enables identification of
inhibitors of flow, such as batch and queue processing, unnecessary
transportation, and product storage. Standards should not be limited
solely to products and processes, but should also be expanded to determine how information is shared across the supply chain. Industry standards should be used whenever possible, and supply channel partners
should participate in confirming the common standards to be used.
 Lean SCM technologies. Today’s supply chain has access to a wide spectrum of technologies for the implementation of lean practices. Technologies such as ERP and SCM business systems; point technologies such
CRM, APS, and global trade management (GTM); bar coding and RFID
devices; and Internet connectivity applications are fundamental in the
creation of a common information platform. These technologies enable
channel partners to link systems to form an information network providing real-time, channel-wide visibility to demand and supply, unplanned
channel events and risks, and common performance measurements.
 Cross-enterprise collaboration. The commitment of channel participants
to the level of lean involvement mirrors the general intensity of cross-enterprise collaboration. At the lowest level, internal optimization, channel
entities engage in lean initiatives focused on reducing local internal costs
and cycle times to enhance customer satisfaction, but rarely will pursue
lean improvement outside the four walls of their company. Businesses at
level two, transactional/informational collaboration, will pursue lean
with channel partners to establish and monitor common channel performance metrics. In level three, shared processes and co-development, network partners seek to more deeply integrate lean by creating cross-channel lean project teams to effectively establish consensus on
improvements to common performance and planning processes. Finally,
in the fourth level, linked competitive vision, collaborating partners will
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utilize lean improvement as a common lever to activate new dimensions
of joint strategy and marketplace collaboration, compliance and transparency, performance and risk management, sustainability, and shared resources.
 Sustainability. Sustainability is a natural extension of lean and it resides
at the heart of a lean supply chain. By standardizing and rationalizing
productive processes to remove wastes and excess inventories, lean improvement teams can reduce the use of materials, redundant and meaningless labor, pollution, and power. Lean sustainability directly targets all
forms of channel waste. Making processes more efficient removes wastes
caused by poor product and process design, inaccurate documentation,
scrap, and poorly used people skills, knowledge, and capabilities. An important consideration is planning for the recycling or disposal of defective products and packaging materials.
 Demand management. A central principle of lean is the demand-pull. The
demand pull is set in motion at the point of sale. Replenishment is then
pulled from upstream delivery channel partners, node-by-node, all the
way back to the producer. The demand-pull requires lean processes that
are: visible and transparent, demand-driven, driven by information technology applications, and integrated.
Lean concepts and practices enable the structuring of supply chains that
build and sustain a stream of value to the customer. Lean supply chains enable
cross-channel teams to broaden and enrich channel communications concerning quality, change management, collaboration opportunities, and joint metrics
that keep supply chains focused on continuous improvement as they drive toward network competitiveness and profitability.
9.
World-class supply chains can be described as being “demand-driven.” Describe the operational attributes necessary to be demand-driven.
Answer:
Being demand-driven means that companies must move beyond operational
optimization and restructure their supply chains to sense and proactively respond to actual demand signals arising from customers rather than just reactively countering emerging disruptions in the supply network. Demand-driven
organizations are more demand sensing, capable of more demand shaping, and
able to execute a more profitable demand response than companies that are
simply supply-centered. A demand-driven strategy centers on the configuration
of supply chain processes, infrastructure, and information flows that are driven
by the demand channel rather than by the constraints of factories and distribution intermediaries located upstream in the supply network. In the end, being
demand-driven is more than just filling orders: it is using demand signals to
scale processes and resources quickly across the entire supply network.
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10. Supply chains can be said to possess levels of maturity. Describe the key attributes supply chains can use to gauge their level of maturity.
Answer:
Supply chain maturity is measured by assessing performance against following
four critical attributes:
 Flexibility. This attribute places agility and nimbleness as the central operating features of the mature supply chain. In turn, the flexible supply
chain contains three operating principles: management of visibility (access to and broadcast of critical supply chain information); velocity
(speed by which intelligence and assets are moved through the supply
chain); and variability (management of change occurring in the marketplace and in supply chain capabilities).
 Predictability. This attribute seeks to dampen the effect of supply chain
disruption by using risk management methods that make the channel environment more predictable. The goal is to enable supply chains to be
more resilient to disruptions by identifying and profiling risk variables,
quantifying risk for business decision making, and activating mitigation
alternatives so that supply chains can be adjusted intelligently to meet the
challenges of today’s changing global economic and market conditions.
 Resiliency. This attribute is defined as the ability of a supply chain to recover from disruptions of any type. Mature supply chains use metrics
such as time-to-recovery, value-at-risk (VAR), and resiliency indexes to
provide visibility to impending disruptions and enable the establishment
of comprehensive preventive and mitigation plans that ensure a company’s viability in the wake of disruptive events.
 Sustainability. The keynote of a world-class supply chain is its ability to
sustain high levels of performance regardless of changes in supply channel structures, the trauma of disruptive events, and the pressure of the
competition. Mature supply chains overcome the negative challenges of
the marketplace by leveraging the core competencies of the internal organization and the deepening collaboration of channel partners to build
superior demand-driven supply networks.