Chapter 7_Inventory Management

Chapter 7_Inventory Management - 1 Module 2 Logistics...

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Unformatted text preview: 1 Module 2 Logistics Management (Inventory, Warehousing & Transportation) Background: Logistics Management 2 The part of SCM that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods and services, related information, and money between the point of origin and the point of consumption in order to meet customers requirements.-CSCMP Downstream or Forward Upstream or Backward Logistics in the U.S. Economy Components of 2008 Logistics Costs ($B) Inventory Carrying Costs (all business inventory: $2.064 trillion) Interest $ 4 Taxes, obsolescence, depreciation, insurance 280 Warehousing 112 Total Inventory-Related Costs $396 Transportation costs Motor carriers: Truck-intercity $403 Truck-local 189 Subtotal $592 3 Logistics in U.S. Economy, cont. Other carriers: Railroads $ 60 Water (inter. 33; domestic 5) 33 Oil pipelines 10 Air (inter. 16; domestic 25) 33 Forwarders 32 Subtotal $168 Total Transportation Costs $760 Administration / Shipper Costs $ 56 TOTAL LOGISTICS COST $1,344 4 Logistics Costs 5 Year Inventory Carry Cost Transport Costs Admin Costs Total U.S. Logistics Logistics Cost As % of GDP 1960 31 44 3 78 14.7 1965 38 64 4 106 14.7 1970 56 91 6 153 14.7 1975 97 116 9 222 13.5 1980 220 214 17 451 16.1 1985 227 274 20 521 12.3 1990 283 351 25 659 11.4 1995 302 441 30 773 10.4 2000 374 594 39 1,007 10.3 2005 395 739 46 1,180 9.5 2008 420 864 52 1,344 9.4 2009 360 697 43 1,100 7.8 2010 396 769 47 1,212 8.3 0.07 0.08 0.09 0.1 0.11 0.12 0.13 0.14 0.15 0.16 0.17 Logistics Costs as % of GDP 6 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 Transport and Inventory Costs % of GDP 7 WHY LOGISTICS NOW? THE DRIVING CHANGE! Deregulation Technology Power shift in the supply chain Globalization 8 EXAMPLES OF LOGISTICS COST TRADE-OFFS Inventory vs. Production (order cycle length) Inventory vs. Cost of lost sales (COLS) Transportation vs. COLS Transportation vs. Inventory Transportation vs. Warehousing Total Logistics Concept: to find the lowest total cost that supports an organizations customer service requirements 9 Cost of Lost Sales vs. Inventory Cost $ Units COLS Inventor y Total Cost Cost of Lost Sales vs. Transportation Costs $ Service 50% 100 Transportatio n Costs Total Cost COLS 12 Chapter 7 Inventory Management Course Topics Overview Supply Management Purchasing Supplier relationships Strategic Sourcing Distribution Warehousing Transportation Modes International Logistics Transportation Mgmt Integration Project Management Process Integration Performance Measurement Operations Management Forecasting Inventory Mgmt Resource Planning Process Mgmt Inventory Definition and Basic Types 14 Inventory - the stock of any item or resource used in an organization Four broad categories of inventories Finished goods Raw materials Work-in-process (WIP) Maintenance, repair & operating (MRO) Functions of Inventory...
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Chapter 7_Inventory Management - 1 Module 2 Logistics...

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