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Supply Chain Logistics Management Chapter 15: Network Integration North American Logistics Geography Distribution NetworkTotal Cost Dimensions Expense Components Handling + Inbound Transport + DC Handling + Inventory + Customer Transport ____________ Total Cost Definition of Systems Analysis Total integrated effort to accomplish the desired objective A set of interrelationships designed to achieve the desired objective Principles of System Integration Total system performance is singularly important Components or parts of system need not have optimum construction A functional relationship exists between components called trade-offs which may enhance or hinder system performance Components linked together in a balanced system will produce greater end results than the sum of individual components 15-* McGraw-Hill/Irwin Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright? 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Key Trade-Offs Cost to cost Increase transportation to reduce inventory Lot size -- Inventory Inventory -- Transportation Cost to service Increased logistics cost to obtain increased service and the potential for more revenue Lead time -- Transportation Product variety -- Inventory Overall SC cost -- SC service 15-* McGraw-Hill/Irwin Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright? 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Transportation Cost Integration (Spatial) Basic economies Economy of size (quantity discount) Economy of distance (tapering principle) Activity based cost Loading and unloading Movement Information Generalized relationship Transport Cost Number of Distribution Locations Outbound Inbound Total Transport Transport Cost as a Function of Distribution Locations 15-* McGraw-Hill/Irwin Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright? 2002 by The McGraw-Hi
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