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This discussion will focus on performance-based logistics (PBL) and its importance to the organization. Focus on examining PBL from a global perspective.For example, discuss the following support items:ContractingProduct support integrationOptimizing system availability while minimizing the overall logistics footprint to reduce costNeeds to be 400–600 words. .pdf .pdf .pdf .pdf .pdf Unformatted Attachment Preview Globalization Doing business in foreign countries can be very exciting and profitable, but it involves both opportunities and risks. Let us first examine the opportunities: With the explosion of new communication vehicles such as the Internet and global TV networks, communication boundaries have virtually disappeared. Companies are now able to market products and communicate with prospects and customers about their products faster, easier, and less expensively than before. Technology has also allowed companies to produce product less expensively and faster. No longer must a product be made in the same place as the company is headquartered. Countries with large populations, such as China, offer new consumer market opportunities. If not everyone in your target country can afford to buy your product, then at least there may still be opportunities to sell your product into well-defined niches or highly targeted sub-markets within the country. The North American Free Trade Agreement (NAFTA) and other recent trade agreements have enhanced trading relationships and significantly reduced the cost of trade. The World Trade Organization works to advance global free trade by arbitrating trade disputes and monitoring trade policies of member countries. Finally, restructuring of political boundaries, such as the collapse of Communist power in Eastern Europe, has also introduced new market opportunities. Risks Undertaken by Global Business Ventures With increased opportunities, there are always increased risks. You may find your product does not work in some or all countries outside your home country when operating on a global basis. Consequently, you may have to modify it. In addition, you may find your international competition is greater than anticipated. Again, you may have to modify your product for different reasons to meet or exceed this new competition Modifications add to the cost of producing your product. In addition, you may experience increased shipping costs, insurance costs and payment costs when doing business in foreign countries. All may significantly add to the cost of your product, so that it is no longer competitive or attractive in other markets 1 Globalization Many companies expect their global sales to grow as quickly as their domestic sales. This is not always true. Despite technology advances, international sales may still take longer to complete than domestic sales due to business culture and other issues. Be sure to adjust your international sales forecasts to reflect these longer sales cycles. Getting paid for an international sale, especially in your home currency, may be more difficult or slower than a domestic sale, especially if the payment process cannot be completed with a credit card. Wire transfers, letters of credit, and other payment vehicles require additional effort and time to process. Some countries may not even maintain enough of your currency to make the required payment. In addition, if you choose to accept your buyer’s currency, you may find that when you convert it to your home country’s currency the exchange rate has changed. In some cases, due to currency fluctuations, you may receive less money than you expected Geographic distance and different legal systems also create risks. Enforcing a contract in a foreign court of law or arbitrating a dispute can be both lengthy and costly Unexpected civil strife or war in your prospect’s country may create delays in getting your product to your customer, or your product may not reach your customer at all. If your product does reach your prospect, it may be damaged. If you have insurance, you may find that it does not cover international civil strife or acts of war. 2 Logistics and Transportation Overview: Logistics and Transportation Logistics and transportation are a critical aspect of supply chain management. By definition, logistics focuses on the physical and related information flow of products produced by a company. Specifically, this includes transportation and warehouse networks as well as order management systems, warehouse storage and retrieval systems, and scheduling and tracking systems. Transportation There are five typical transportation methods available to a company: Highway: Parcel, postal, trucking, and courier services dominate the U.S. national logistics infrastructure, representing the most widely used mode of product movement. According to the U.S. Department of Transportation (n.d.) statistics, U.S. companies and individuals transported almost $6.4 trillion in goods in 1997 over the national road system, representing 80\% of the total value of products moved in that year. Highways provide the most flexible transportation method and have become extremely cost effective for supply chain planners. Water: Accounting for approximately 21\% of all ton-miles (U.S. Department of Transportation, n.d.); this method is best suited for commodities with a high weight-to-value ratio, such as lumber, oil, or products for which timeliness of arrival is not critical. Air: This method of transportation is good for commodities with low weightto-value ratios, such as software or music CDs. Rail: Very similar characteristically to water transport, but slightly more flexible. Rail is very cost effective for larger items but does have limited locations. Combination: Most companies use the most cost-effective combination of the aforementioned transportation methods. Warehousing Networks At the other end of the transportation spectrum is warehousing where storing, repackaging, staging, and sorting of products occur. The primary purpose of warehousing is to improve supply chain flexibility, shorten lead times, and reduce inventory or transportation costs. It is important to note that warehousing is not primarily used for goods storage but has a much more significant role in the optimization of the entire supply chain. In fact, three types of warehousing techniques are primarily designed to maximize cost efficiencies: consolidation warehousing, cross-docking, and hub-and-spoke systems. Consolidation warehousing involves product shipments from several facilities (usually production plants) combined into a larger shipment (larger shipments are more costeffective to ship). Cross-docking is when larger shipments received in the consolidation process are broken down into smaller components for shipment to customers in specific geographic regions. Hub-and-spoke systems are essentially a combination of consolidation warehousing and cross-docking. Warehouses act as hubs with the sole function of sorting or transferring products (they generally do not hold inventory). The shipments are transferred along shipping spokes to final warehouse or inventory locations for customer demand point delivery. To support the concept of operational flexibility, companies use these warehouse techniques in combination with inventory controls to optimize the delivery chain and control costs. Postponement warehousing is a concept in which final assembly of products is delayed until the last possible moment in the supply chain operation— individual components can be maintained in their most generic condition until assembly. For improved customer support, warehousing principles can be used to shorten lead times or the time it takes to deliver the product to the customer. There are two aspects in customer delivery: the time it takes to deliver to the final transshipment warehouse and the time it takes to deliver to the customer. The customer only sees the time it takes to deliver the product and not the warehouse shipment time. Thus, assortment warehouses can be used to maintain a wider inventory selection for a longer period of time. Spot stock warehouses are used to maintain a selection of seasonal goods, such as gardening products. These warehousing techniques are focused on reducing delivery time to the customer. Reference U.S. Department of Transportation. (n.d.). Retrieved October 20, 2009, from http://www.dot.gov/new/index.htm Supply Chain Adaptation Introduction As business becomes more global, companies have realized an important source of supply chain efficiency; therefore, competitive advantage can be found in supply chain operations. In search of this potential competitive advantage, many companies have embarked on initiatives to expand their supply chains into China. An Example of Supply Chain Failure You will now examine a company with a global supply chain initiative that has elected to include China. This company chose suppliers in China based on lower component prices. These suppliers were able to offer lower prices due to access to cheap labor. The company knew its competitors were using suppliers in China and would have a competitive advantage if it did not act quickly to do the same. Because the company was new to China, its leaders recognized that there was risk to having a supply chain that extended that far. To address that risk, the company established safety stock throughout the supply chain. The result was excessive inventories because of the bullwhip effect and reoccurring obsolescence. This caused the cost of procuring parts from China to be greater than procurement from the Midwest. The company also moved forward with this initiative using its current ordering system. The current system was based on historical orders and was not based on an economic order quantity. The result was expensive changes to orders as requirements from customers evolved. The company also found that due to both distance and communication issues, its kanban system in place with local suppliers did not function well with suppliers in China. Another issue causing difficulties was that the company was struggling to adapt its MRP II system to the different needs of the supply chain, causing the company to make inaccurate orders to its China suppliers. This resulted in stockouts and having customers dissatisfied with response times. Supply Chain Adaptation What could have prevented these supply chain issues? 1 Supply Chain Adaptation First, the company should have been more prudent in establishing its safety stock policies. If demand was level and predictable, the business may have been better off using longer ordering and transportation lead times rather that safety stock to address the risk concerns. The company could have then used the economic order quantity (EOQ) formula to assess the relevance of its order quantities and frequency. Radio frequency identification (RFID) technology would have brought the capability to identify company inventory anywhere in its global supply chain on a real time basis. Through advanced and innovative information technologies, many companies have met this stock challenge by replacing inventory with information. Perhaps, more importantly, the company should have viewed this initiative from a strategic perspective rather than as a cost-reduction program. If the company had moved forward in a strategic manner, identifying what competitive advantage(s) could be obtained and sustained against its competitors, efforts would have likely improved company performance in both the short- and long-term periods. Supply Chain As a Strategic Weapon Today, companies are seeking competitive advantage through supply chain initiatives. Using these initiatives as cost-reduction programs rather than strategic initiatives aimed at establishing and sustaining competitive advantage is likely to reap only short-term benefits. Companies must view supply chains as systems that can bring additional value to customers and additional profits to stakeholders and shareholders. Companies approaching the supply chain as a potential source of competitive advantage today have many tools available, including the use of offshoring, development of a postponement strategy, or the adaptation of new inventory identification and tracking technology. When used as a strategic weapon, the supply chain can enhance company performance and customer satisfaction. 2 Quality Management in the Supply Chain Introduction The word quality can be considered a very ambiguous term. If a consumer wants to buy an 18-carat gold watch that costs US $25,000, is it necessarily higher quality than a watch that can survive being under a polar icecap strapped to the propeller of a nuclear submarine? Is the watch with the 5year warranty that lasts for 4 years higher quality than the watch with the 2year warranty that lasts for 3 years? Is the gas barbecue that gets rusty after 2 years unacceptable quality compared to the one that does not rust for 3 years? For a formal quality system to be established—and more broadly speaking, before a process can even be set up by either a service provider or manufacturing company—a clear specification of customer expectations is required. In fact, this is one of the very first steps when a company-wide Six Sigma program is installed. Customer Expectations The starting point for setting up a product line or service operation is to define customer expectations; this not only assists in defining a process that gets the product built or service provided, but it is a necessary step to better ensure that the product or service actually meets the customers’ expectations. An auto company that makes a dramatic improvement in the quality of its seat upholstery may be viewed as having delivered poor quality if customers care less about that than the smoothness of the ride. A service example might be a fast-food restaurant that touts its timeliness of service— surely an important customer expectation—but sacrifices the accuracy of the order, and the customer ends up with a hamburger when he or she expected a cheeseburger. Once again, the definition of customers expectations needs to be understood. In this example, it is likely that customers would prefer 100 percent order accuracy in 4 minutes rather than 95 percent order accuracy in 2 minutes. Metrics In the logistics industry, there are a variety of quality metrics to assess the functions performance. They can be broken down from the perspectives of the end customer, players in the middle of the supply chain, and from the company’s perspective. In addition, vendor certification will play a key role in performance measurements. Vendor certification is a term that is typically used for firms that subcontract to other firms upstream in the supply chain to 1 Quality Management in the Supply Chain perform some service or manufacturing for them. Conclusion Just as with any product manufacturing company or typical service company, a logistics organization, wherever it may be in the supply chain, can and must have its quality performance measured and reported so that necessary improvements can be made. 2 FAQ: Efficiency in the Supply Chain Question 1: What is a postponement strategy? Answer 1: A postponement or delayed differentiation strategy involves manipulating the point at which a company differentiates its product or service. These delays move the point at which a company differentiates its product closer to the customer. Companies that execute this strategy most effectively have developed standard products that can be quickly, easily, and inexpensively differentiated or customized once the actual consumer demand is realized. To support this type of strategy, companies must develop and implement specific inventory strategies that satisfy consumer service expectations and meet company objectives on inventory-carrying costs while mitigating the risk of holding the right inventory, at the right place, at the right time, and in the right form. Question 2: What is the bullwhip effect? Answer 2: The bullwhip effect occurs when there is a lack of information along the supply chain. In the simplest terms, the bullwhip effect is when companies establish safety stock in an effort to minimize and/or eliminate stockouts at the next customer level. This phenomenon takes place when partners through the supply chain have information that is not aligned or congruent with others in the supply chain, causing suppliers to carry additional inventory to protect against stockouts at the next customer. The further down the supply chain, the more variables are introduced, causing suppliers to carry even more inventory to satisfy the uncertain demand from the customer. The term bullwhip describes the phenomenon as even small incremental changes by the end of the supply chain cause exponential changes in demand throughout the supply chain. As the small movements occur and the suppliers react, the end result is excess inventory, and therefore cost, to the suppliers and, ultimately, the final customer. 1 FAQ: Efficiency in the Supply Chain Question 3: What is offshoring? What is the impact to the supply chain? Answer 3: Offshoring is a relatively new tactic used by companies where companies relocate business processes from one country to another. There can be many reasons for offshoring, including those strategic in nature. Most often though, offshoring is used to support efforts to reduce costs, primarily by obtaining a comparative advantage by exploiting the availability of cheap labor. Most companies began offshoring efforts by relocating noncritical or noncore elements of their businesses offshore; today’s companies are effectively and efficiently offshoring virtually any aspect of the business deemed appropriate, including core production and service functions. Even more startling are companies shifting innovation efforts offshore by relocating research and development (R&D) activities to other countries. There is much public attention on the impact of offshoring on domestic jobs and companies are simultaneously addressing concerns of higher levels of risk in supply chains due to loss of control and visibility from these extended supply chains. The fact is with the proliferation of the Internet and the ability for instantaneous communication, companies that do not include offshoring in their supply chain portfolio of strategic weapons, will likely be at competitive disadvantage. Question 4: What is a Kanban system? Answer 4: Kanban is a manufacturing and inventory control signaling system that originally used cards to signal the need for an item. Kanban is perhaps most well-known and has been historically used in conjunction with and in support of just in time (JIT). Kanban systems can be an effective weapon in the efforts to minimize or eliminate the bullwhip effect in a supply chain. By sending congruent and orderly signals with the result being a high level of visibility or transparency throughout the supply chain, suppliers develop the confidence to carry lower inventories to protect against changing demand by the customer. The result of this activity is lower costs for those in the supply chain and ultimately the customer. 2 FAQ: Efficiency in the Supply Chain Throughout its deployment, one of the Kanban system’s strengths has been its simplicity. Kanban systems have not remained static and have progressed to include faxbans and now e-bans as electronic information exchange has become more common. Although Kanban systems have been used primarily within factory walls and between manufacturer and supplier, another progress has been the use with customers to support replenishment methods used at the point of purchase by the customer (Cork, 2006). Question 5: What is MRP? What is the difference between MRP and MRP II? Answer 5: MRP (materials requirements planning) is a production planning and inventory control system used by most firms in one form or another. While MRP is most commonly associated with a software application or program, it can be used without the aid of software or a computer. MRP and MRPII are both predecessors to today’s ERP (enterprise resource planning) systems employed by many firms. The primary objectives of a MRP system are fundamental to a business. The first object ... Purchase answer to see full attachment