This summary includes all chapters of
- the book (Bowersox, D. J. (2013). Supply chain logistics management. New York: McGraw-Hill),
- the 10 papers (1. Clusters and the New Economics of Competition (Porter), 2. The evolution of Spatial Economics (Fujita), 3. A Dynamic Framework for Managing Hori...
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SUMMARY DISTRIBUTION MANAGEMENT
Tilburg University | MSc Supply Chain Management | Distribution Management | Book, sheets and
articles | Bowersox, D. J. (2013). Supply chain logistics management. New York: McGraw-Hill. | Marloes
Vissers | 03-2018 |
Part I: Roots in spatial economics and industrial location theory
Lecture 1 and 2
Conceptual relationships between physical distribution and spatial economics & industrial location
theory (e.g. clusters)
Part II: Market distribution
Lecture 3 - 8
Customer Service, Transportation, Warehousing, Network Design, Case studies, Dynamic and complex
environments, City logistics (not included in the summary)
Part III: International locations decisions for plants
Lecture 9 and 10
Strategic roles of international plants
1
,Table of contents
Lecture 1 | Chapter 1 | 21st-Century Supply Chains ............................................................................................... 2
Lecture 1 | Chapter 2 | Logistics ............................................................................................................................. 8
Lecture 2 | Michael E. Porter – Clusters and the New Economics of Competition .............................................. 13
Lecture 2 | Masahisa Fujita – The Evolution of Spatial Economics: From Thünen to the New Economic Geography
.............................................................................................................................................................................. 15
Lecture 3 | Chapter 8 | Transportation ................................................................................................................ 19
Lecture 3 | Sven Verstrepen – A Dynamic Framework for Managing Horizontal Cooperation in Logistics .......... 23
Lecture 4 | Chapter 12 | Network Design ............................................................................................................. 26
Lecture 4 | Sunil Chopra – Designing the distribution network in a supply chain ................................................ 30
Lecture 5 | Chapter 9 | Warehousing ................................................................................................................... 35
Lecture 5 | Chapter 10 | Packaging and Handling ................................................................................................ 38
Lecture 6 | Callioni – Inventory Driven Costs ........................................................................................................ 42
Lecture 6 | Tang & Tomlin – The Power of flexibility for mitigating supply chain risks ........................................ 44
Lecture 7 | Chapter 3 | Customer Relationship Management ............................................................................. 47
Lecture 9 | DuBois - International Manufacturing Strategies of U.S. Multinationals: A Conceptual Framework
Based on a Four-Industry Study ............................................................................................................................ 52
Lecture 10 | Vereecke and Van Dierdonck – The Strategic Role of the Plant: Testing Ferdow’s model .............. 57
Lecture 10 | Vereecke and Van Dierdonck – A Typology of Plants in Global Manufacturing Networks .............. 60
Lecture 10 | Meijboom and Vos - Site competence dynamics in international manufacturing networks:
instrument development and a test in Eastern European factories ..................................................................... 64
2
,Lecture 1 | Chapter 1 | 21st-Century Supply Chains
As recently as the 1990’s, the delivery process ranged from 15 to 30 days. Despite this lengthy process,
often things went wrong (inventory out-of-stock, lost or misplaced orders etc.) because of the large
number of product and process variations.
Nowadays, customers want to have a wide range of products which they can customize and which can
be delivered very fast. Massive change has occurred as a result of available information technology
(IT). Nowadays, information is characterized by speed, accessibility, accuracy and relevancy. Because
of this, a global economy has emerged.
In the information age, reality and connectivity among businesses create new types of relationships
called Supply Chain Management. Because of this, products can be manufactured to exact
specifications, delivered fast and with a zero-defect (six-sigma) performance.
The supply chain revolution
Managers today are experiencing a supply chain revolution and a related logistical renaissance. These
terms are related, but represent different aspects of contemporary management.
Supply chain management: multiple firms collaborating to leverage strategic positioning and
improving operating efficiency. The supply chain relationship reflects a strategic choice.
Logistics: the work required to move and geographically position inventory and creating value by doing
this. Logistics is a subset and occurs within a supply chain.
Supply chain revolution: During the industrial revolution, firms began to realise they could not totally
be self-sufficient. They started developing business relations to jointly perform essential activities.
However, primarily due to a lack of high-quality information, each firm within the channel would first
go for its individual goals instead of the general goal. During the last decade of the 20th century, channel
strategy and structure began to shift towards integration and collaboration.
Why integration creates value
To explain the integrated management, it is useful to point out that customers have at least three
perspectives of value:
1. Economic value (high quality at a low price)
2. Market value (convenient product/service assortment and choice)
3. Relevancy value (right products/services at the right place and time)
Generalized Supply Chain Model
The concept of an integrated supply chain links participating firms into a coordinated competitive
unit. Value is created by 5 critical flows: information (facts related), product, service, financial and
knowledge (knowhow, the way of doing things). The message conveyed by the figure is that the
integrated value-creation process must be aligned and managed from material procurement to end-
customer product/service delivery in order to achieve effectiveness, efficiency, relevancy and
sustainability.
3
,Information System Functionality
The factor that cause the realisation of supply chain management is information technology. Four
reasons why timely and accurate information has become more critical in supply chain:
1. Customers perceive real-time information about their order
2. Information can reduce inventory and HR requirements
3. Increases flexibility for a better use of resources to gain competitive advantages
4. Transfer and exchange of information is facilitating collaborations and relationships
Supply chain information systems (SCIS) are the thread linking logistical activity into an integrated
process. It contains four levels (from bottom to top):
1. Transaction systems (formalized rules, procedures and standardized communications)
2. Management control (performance measurement and reporting)
3. Decision analysis (software tools to assist managers in identifying, evaluating and comparing
strategic and tactical alternatives to improve performance)
4. Strategic planning (organizes and synthesizes transaction data into a relational database that
assists in strategy formation and evaluation)
Supply Chain Information System Modules
SCIS initiates, monitors, assists in decision making, and reports on activities required for completion of
supply chain operations and planning. Types of SCIS:
1. Enterprise Resource Planning ERP (Backbone of most firm’s logistic information system)
2. Communication systems
3. Execution systems
4. Planning systems
The most important ERP modules (that are important for supply chain):
1. Enterprise integration and administration (transaction process flows)
a. General administration
b. Accounts receivable and payable
c. Financial inventory accounting
d. General ledger
e. Human resources
4
, 2. Enterprise planning and monitoring (facilitate exchange of planning and coordinating
information within firm and between supply chain partners)
a. Sales and operations (S&OP)
b. Supply chain visibility and event management (EMS)
c. Supply chain compliance
3. Enterprise operations (support day-to-day supply chain operations)
a. Customer Relationship Management (Customer master database, forecasting)
b. Logistics (inventory management, order processing, WMS, TMS)
c. Manufacturing (MRP II, Capacity requirement planning, Quality management)
d. Purchasing (order administration, MRP, supplier relationship management)
e. Inventory deployment (integrated inventory planning, adv. planning and scheduling)
Communication technology: the hardware and technical software that facilitates information
exchange between systems and physical infrastructure within the firm and between partners.
Consumer connectivity: because of internet, retailers and manufacturers are more in direct contact
with the end consumers. This connectivity has developed two dimensions of communication:
1. Ordering (e-commerce, online ordering, order-to-delivery tracking)
2. After-sale connectivity (reverse logistics, fast problem solving)
The rapid emergence of supply chain relationships is being driven by
1. Integrated management and supply chain processes
2. Responsiveness
3. Financial sophistication
4. Globalization
Integrative Management and Supply Chain Processes
Attention is focussed on improved integrative management, driven by the will to achieve best practice
on a specific function and therefore create greater efficiency for the overall process. Excellence in
supply chain performance is based on the achievement of eight key processes (table below). Executing
high supply chain performance, these operational successes can be achieved.
Process Description
Demand planning responsiveness The assessment of demand and strategic design to achieve
maximum responsiveness to customer requirements
Customer relationship collaboration The development and administration of relationships with
customers to facilitate strategic information sharing, joint
planning and integrated operations
Order fulfilment/service delivery The ability to execute superior and sustainable order-to-
delivery performance and related essential services
Product/service development launch The participation in product service development and lean
launch
Manufacturing customization The support of manufacturing strategy and facilitation of
postponement throughout the supply chain
Supplier relationship collaboration The development and administration of relationships with
suppliers to facilitate strategic information sharing, joint
planning and integrated operations
Life cycle support The repair and support of products during their life cycle,
including warranty, maintenance and repair
Reverse logistics The return and disposition of inventories in a cost-effective
and secure manner
5
, The challenge of integrated management is to combine
best practice functions to achieve lowest total process
cost by capturing trade-offs that exist between
functions. This can mean that the cost of one function
increases in order to decrease the total process costs.
The focus on functional goals are supported by
integrative tools such as Total Cost Analysis, Process
Engineering and Active-Based Costing (ABC).
Three important facets of supply chain are
1. Collaboration: facilitates cross-organizational
sharing of operating information, technology
and risk as ways to increase competitiveness.
2. Enterprise Extension: facilitate joint planning and operations with customers and suppliers.
Enterprise extension is based on two basic principles:
1. Information sharing: to achieve a high degree of cooperative behaviour.
2. Process specialization: planning joint operations with the goal of eliminating non-value-
adding activities within the supply chain
3. Integrated Service Providers (ISPs): Outsourcing transportation and warehousing to
specialists. A development in the logistic service industry is shift towards multifunctional
outsourcing. Integrated Service Providers began to market a range of logistic services from
order entry to product delivery, this is called value-added services (VAS). Common names for
ISP’s are third-party (asset-based) and fourth-party service providers (non-asset based).
Responsiveness
Information connectivity created the potential for developing responsive business models.
1. Push or anticipatory business practice (traditional model)
2. Pull or responsive business model (demand driven)
The Anticipatory Business Model (Push) is driven by production based on market forecasting. Mistakes
in forecast caused differences in what firms planned to do and what they were actually doing, with
unplanned inventory as a result.
Buy
Forecast components Manufacture Warehouse Sell Deliver
and materials
6
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