Logistics Management and Strategy Logistics Management

1 Logistics Management and Strategy Logistics Management and Strategy Logistics Management Competing through the supply chain 3rd edition Alan Harrison and Remko van Hoek A concise, applied and strategic introduction to the subject of Logistics and supply chain Management , perfect and Strategy for modern managers and students of Logistics and supply chain Management . Logistics and supply chain Management continue to transform the competitive landscape and have become Competing through the supply chain one of today's key business issues. This third edition of Logistics Management and Strategy continues to take a practical, integrated and international approach to Logistics and includes the very latest research to reflect the innovative and exciting developments in this subject area. 3rd edition A clear framework guides the reader through the four parts of the book, covering: l an introduction to Logistics and its contribution to competitiveness and value creation, l leveraging Logistics operations within the context of the customer, l supplier partnerships, interfaces and the challenges of integration, l leading-edge thinking in Logistics and the future challenges ahead.

2 New to this edition 3rd l more on reverse Logistics together with green, ethical and CSR issues, l revised chapters on supply chain planning and control and on agility, edition l fully revised final chapter ties in the future challenges facing Logistics more closely with the rest of the book. Harrison and van Hoek Every chapter features case studies with study questions, activities and end of chapter discussion questions to help students explore logistical concepts in operational detail. Teaching support notes and PowerPoint slides for lecturers can be downloaded from the book's website at Well written and contains a wealth of valuable ideas and concepts.'. Dr Jan de Vries, University of Groningen Very up-to-date, both in terms of its conceptual framework and the topics covered. Remarkably clear and easy to read.'. Dr Tony Whiteing, University of Huddersfield Alan Harrison is Professor of Operations and Logistics at Cranfield School of Management , and Director of Research at The Cranfield Centre for Logistics and Supply Chain Management .

3 Remko van Hoek is Professor of Supply Chain Management at The Cranfield Centre for Logistics and Supply Chain Management . He is also Vice President Procurement at Nuon in the Netherlands. Alan Harrison and Remko van Hoek 1 18/10/07 13:56:29. 3/17/08 9:35 AM Page i Logistics Management and Strategy Competing through the supply chain 3/17/08 9:35 AM Page ii We work with leading authors to develop the strongest educational materials in Logistics , bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing, please visit us on the World Wide Web at: 3/17/08 9:35 AM Page iii Logistics Management and Strategy Competing through the supply chain Third Edition Alan Harrison Remko van Hoek 3/17/08 9:35 AM Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE.

4 England and Associated Companies throughout the world Visit us on the World Wide Web at: First published 2002. Second edition published 2005. Third edition published 2008. Pearson Education Limited 2002, 2005. Alan Harrison and Remko van Hoek 2008. The rights of Alan Harrison and Remko van Hoek to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners.

5 The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affliliation with or endorsement of this book by such owners. ISBN: 978-0-273-71276-3. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Harrison, Alan, 1944 . Logistics Management and Strategy : competing through the supply chain / Alan Harrison, Remko van Hoek. 3rd ed. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-273-71276-3 (pbk. : alk. paper) 1. Business Logistics . 2. Industrial Management . I. Hoek, Remko I. van. II. Title. 2008. dc22. 2007046447. 10 9 8 7 6 5 4 3 2. 11 10 09 08. Typeset in Stone Sans by 3. Printed and bound in Malaysia The publisher's policy is to use paper manufactured from sustainable forests.

6 3/17/08 9:35 AM Page v To Nick, Katie, Maryl and Ticho, with love. 3/17/08 9:35 AM Page vi 3/17/08 9:35 AM Page vii Contents Foreword xv Preface xvii Author's acknowledgements xix Publisher's acknowledgements xx How to use this book xxiii Plan of the book xxv Part One COMPETING THROUGH Logistics . 1 Logistics and the supply chain 3. Introduction 3. Logistics and the supply chain 4. Definitions and concepts 6. Supply chain: structure and tiering 8. Material flow and information flow 12. Material flow 12. Information flow 14. Competing through Logistics 15. Hard objectives 16. Supportive capabilities 18. Soft objectives 22. Order winners and qualifiers 23. Logistics Strategy 25. Defining Strategy ' 26. Aligning strategies 27. Differentiating strategies 28. Summary 30. Discussion questions 31. References 31. Suggested further reading 32. 2 Putting the end-customer first 33. Introduction 33. The marketing perspective 34.

7 Rising customer expectations 35. The information revolution 35. Segmentation 36. Quality of service 44. Customer loyalty 45. 3/17/08 9:35 AM Page viii viii Contents Value disciplines 46. Customer relationship Management (CRM) 47. Measuring service quality 50. Setting priorities for Logistics Strategy 50. Step 1: Diagnose current approach to market segmentation 50. Step 2a: Understand buying behaviour 52. Step 2b: Customer value analysis 53. Step 3: Measure Logistics Strategy driver 54. Step 4: Specify future approach to market segmentation 54. Summary 57. Discussion questions 58. References 63. Suggested further reading 64. 3 Value and Logistics costs 65. Introduction 65. Where does value come from? 66. Return on investment (ROI) 67. Financial ratios and ROI drivers 69. How can Logistics costs be represented? 71. Fixed/variable 71. Direct/indirect 76. Engineered/discretionary 78. Activity-based costing (ABC) 81.

8 ABC example 82. Cost time profile (CTP) 83. A balanced measurement portfolio 85. Balanced measures 86. Supply chain Management and the balanced scorecard 87. Supply chain financial model 88. Supply chain operations reference model (SCOR) 89. Summary 93. Discussion questions 94. References 95. Part Two LEVERAGING Logistics OPERATIONS. 4 Managing Logistics internationally 99. Introduction 99. Drivers and Logistics implications of internationalisation 101. Logistical implications of internationalisation 102. Time-to-market 105. Global consolidation 106. Risk in international Logistics 109. 3/17/08 9:35 AM Page ix Contents ix The tendency towards internationalisation 111. Focused factories: from geographical to product segmentation 111. Centralised inventories 112. The challenges of international Logistics and location 115. Extended lead time of supply 116. Extended and unreliable transit times 116. Multiple consolidation and break points 116.

9 Multiple freight modes and cost options 117. Location analysis 118. Organising for international Logistics 120. Layering and tiering 120. The evolving role of individual plants 121. Reconfiguration processes 122. Reverse Logistics 129. Managing for risk readiness 130. Immediate risk readiness 130. Structural risk readiness 131. Corporate social responsibility in the supply chain 132. Summary 136. Discussion questions 137. References 137. Suggested further reading 137. 5 Managing the lead-time frontier 139. Introduction 139. The role of time in competitive advantage 140. Time-based competition: definition and concepts 140. Time-based initiatives 141. Time-based opportunities to add value 141. Time-based opportunities to reduce cost 144. Limitations to time-based approaches 146. P:D ratios and differences 146. Using time as a performance measure 147. Using time to measure supply pipeline performance 148.

10 Consequences when P-time is greater than D-time 150. Time-based process mapping 153. Stage 1: Create a task force 154. Stage 2: Select the process to map 154. Stage 3: Collect data 155. Stage 4: Flow chart the process 155. Stage 5: Distinguish between value-adding and non-value-adding time 155. Stage 6: Construct the time-based process map 156. Stage 7: Solution generation 156. 3/17/08 9:35 AM Page x x Contents Managing timeliness in the Logistics pipeline 161. Strategies to cope when P-time is greater than D-time 162. Practices to cope when P-time is greater than D-time 163. A method for implementing time-based practices 164. Step 1: Understand your need to change 165. Step 2: Understand your processes 165. Step 3: Identify unnecessary process steps and large amounts of wasted time 166. Step 4: Understand the causes of waste 166. Step 5: Change the process 166. Step 6: Review changes 166. Results 167.