Traditional View: Logistics in the Us Economy
Overview:
Traditional View: Logistics in the US Economy (2006, 2007) * Freight Transportation $809, $856 Billion * Inventory Expense $446, $487 Billion * Administrative Expense $50, $54 Billion * Total Logistics Costs $1.31, $1.4 Trillion * Logistics Related Activity 10%, 10.1% of GNP
Traditional View: Logistics in the Manufacturing Firm -Profit 4% * Logistics Cost 21% * Marketing Cost 27% * Manufacturing Cost 48%
Supply Chain Management: The Magnitude in the Traditional View
Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies
Example: A typical box of cereal spends 104 days from factory to sale A typical car spends 15 days from factory to dealership
Supply Chain Management: The True Magnitude * Compaq estimates it lost $.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed * When the 1 gig processor was introduced by AMD, the price of the 800 mb processor dropped by 30% * P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand
SUPPLY CHAIN * All stages involved, directly or indirectly, in fulfilling a customer request * Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers * Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service) * Customer is an integral part of the supply chain * Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions * Probably more accurate to use the term “supply network” or “supply web” * Typical supply chain stages: customers, retailers,
Traditional View: Logistics in the US Economy (2006, 2007) * Freight Transportation $809, $856 Billion * Inventory Expense $446, $487 Billion * Administrative Expense $50, $54 Billion * Total Logistics Costs $1.31, $1.4 Trillion * Logistics Related Activity 10%, 10.1% of GNP
Traditional View: Logistics in the Manufacturing Firm -Profit 4% * Logistics Cost 21% * Marketing Cost 27% * Manufacturing Cost 48%
Supply Chain Management: The Magnitude in the Traditional View
Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies
Example: A typical box of cereal spends 104 days from factory to sale A typical car spends 15 days from factory to dealership
Supply Chain Management: The True Magnitude * Compaq estimates it lost $.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed * When the 1 gig processor was introduced by AMD, the price of the 800 mb processor dropped by 30% * P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand
SUPPLY CHAIN * All stages involved, directly or indirectly, in fulfilling a customer request * Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers * Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service) * Customer is an integral part of the supply chain * Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions * Probably more accurate to use the term “supply network” or “supply web” * Typical supply chain stages: customers, retailers,