Page 126 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 6: Information Technology Framework

Operations include the transaction activities necessary to manage and process orders, operate Notes
distribution facilities, schedule transportation, and integrate procurement resources. This process
is completed for both customer and enterprise replenishment orders.
Customer orders reflect demands placed by enterprise customers. Replenishment orders control
finished good movement between manufacturing and distribution facilities.

6.3.1 Planning and Coordination

Logistics system planning/coordination components form the information system backbone
for manufacturers and merchandisers. These components define core activities that guide
enterprise resource allocation and performance from procurement to product delivery. The
specific components are discussed as follows:
1. Strategic Objectives: Primary information drivers for many enterprises are strategic
objectives that define marketing and financial goals. These strategic objectives are typically
developed for a multiyear planning horizon that often includes quarterly updates.
Marketing’s strategic objectives define target markets, products, marketing mix plans,
and the role of logistics value-added activities such as service levels or capabilities. The
objectives include customer base, breadth of products and services, planned promotions,
and desired performance levels. Marketing goals are the customer service policies and
objectives that define logistics activity and performance targets. The performance targets
include service availability, capability, and the quality elements. Financial strategic
objectives define revenue, sales and production levels, and corresponding expense, as
well as capital and human resource constraints.
The combination of marketing and financial objectives defines the markets, products,
services, and activity levels that logistics managers must accommodate during the planning
horizon. Specific goals include projected annual or quarterly activity levels such as
shipments, dollar volume, and total cases. Specific events that must be considered include
product promotions, new-product introductions, market rollouts, and acquisitions. Ideally,
the marketing and financial plans should be integrated and consistent. Inconsistencies
will result in poor service, excess inventory, or failure to meet financial goals.
The combination of marketing and financial strategic objectives provides direction for
other enterprise plans. While the process of establishing strategic objectives is, by nature,
unstructured and wide ranging, it must develop and communicate a plan detailed enough
to be operationalised.
2. Capacity Constraints: Capacity constraints and logistics, manufacturing, and procurement
requirements evolve from the strategic objectives. Internal and external manufacturing,
warehousing, and transportation resources determine capacity constraints. Using activity
levels defined by the strategic objectives, capacity constraints identify material bottlenecks
and effectively manage resources to meet market demands. For each product, capacity
constraints determine the “where,” “when,” and “how much” for production, storage, and
movement. The constraints consider aggregate production and throughput limitations
such as annual or monthly capacity.
Capacity problems can be resolved by resource acquisition, speculation, or postponement
of production or delivery. Capacity adjustments can be made by acquisition or alliances
such as contract manufacturing or facility leasing. Speculation reduces bottlenecks by
anticipating production capacity requirements through prior scheduling or contract
manufacturing. Postponement delays production and shipment until specific requirements
are known and capacity can be allocated. It may be necessary to offer customer incentives
such as discounts or allowances in order to postpone delivery. The capacity constraints

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