Logistical Management

Chapter 6: Operational Integration

 Integrative Management Value
Proposition

Economic Value Market Value Relevancy Value

Lowest Total Landed Cost Attractive Assortment Customization

Economy-of-Scale Efficiency Economy-of-Scope Segmental Diversity
Effectiveness
Product/ Service Creation Product/ Service Presentation Product/ Service
Positioning
Procurement/ Manufacturing Market/ Distribution Strategy Supply Chain
Strategy 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 Distribution
and and
Manufacturing Marketing
Integration 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 Market Accommodation End

(Relational) Flow
Base Information Flow 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 PRODUCT-SERVICE VALUE FLOW E
E MARKET ACCOMMODATION FLOW N
S D
BEHAVIORAL CONTEXT
O
Relationship
U C
PLANNING AND CONTROL CONTEXT
R U
C Measurement Technology and Planning
S
E OPERATIONAL CONTEXT T
Material and
Service Supplier
Internal Customer O
Operations Integration
B Integration
M
A INFORMATION FLOW
E
S FINANCIAL FLOW
R
E 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 Internal Material/Service Technology and Measurement Relationship

Integration Integration Supplier Planning Integration Integration
Integration Integration
Segmental Focus Cross- Strategic Information Functional Role Specificity
Functional Alignment Management Assessment
Unification
Relevancy Standardization Operational Internal Activity Based and Guidelines
Fusion Communication Total Cost
Methodology
Responsiveness Simplification Financial Connectivity Comprehensive Information
Linkage Metrics Sharing
Flexibility Compliance Supplier Collaborative Financial Impact Gain/Risk
Management Forecasting and Sharing
Planning
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
• High level of cooperation
• Similarity of goals/ objectives
• Clear communications
• Senior management support
• Control of inventory
Manufacturers
• 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
• Low-volume stockkeeping
units (SKU’s)
• Resistance of manufacturers to
change
• Information systems
• Noncompatible data formats
Manufacturers
• 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.)
Gross Domestic Logistics Logistics
Product (GDP) Cost (US$ Cost to GDP
Region Country (US$ in Billions) in Billions) (%)
Pacific-Rim PRC 4250 718 16.9
India 1534 236 15.4
Hong Kong 175 24 13.7
Japan 3080 351 11.4
Korea 631 78 12.3
Singapore 85 12 13.9
Taiwan 308 40 13.1
Total 10063 1459 14.5
South America Brazil 1040 156 15
Venezuela 185 24 12.8
Argentina 348 45 13
Total 1573 225 14.3
Reamining Other Countries 9690 1492 15.4
Total Logistics Expenditures 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
Product Marketing Supply Management Information and Human Resource
Focus Strategy Chain Decision Support Development
Strategy
Agents and Transportation Home Country Management with
stic Production Specific Third Party Driven with Focused with "Home Country"
Distribution Customers Logistics Service Integrated Limited Focus and Limited
Providers Financials EDI International
Experience
Subsidiaries and Decentralized Limited Top
ocal Market Focused Specific Local Distributors Management Independent Data Management with
ustomization Market Areas with of Local Base International
upported by which may Specific Business Operators and and Experience and
tponement or Cross National Charters and Strategic Alliances Decision Support Strong "Home
al Production Boundaries Visible With Local Profit Country" Decision
Local Presence Responsibility Focus
International
World Wide Flow Centralized Integrated Training and
All of Key Resources Planning with Data Base Experience
obal Brands Economic to Leverage Global Locally Flexible and Required
Regions Sourcing Distribution Decision Support for All Upper Level
and Marketing Supported with Management with
Advantages Common Systems Some Requirements
for Mid Level
Management
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 .