Page 51 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes 2.6.2 Market Distribution Performance Cycles

Market distribution operations are concerned with processing and delivering customer orders.
Market distribution is integral to sales performance because it provides timely and economical
product availability. The overall process of gaining and maintaining customers can be broadly
divided into transaction-creating and physical-fulfilment activities. The transaction-creating
activities are advertising and selling. The physical fulfilment activities include (1) order
transmission, (2) order processing, (3) order selection, (4) order transportation, and (5) customer
delivery. From a logistical perspective, market distribution performance cycles link a supply
chain with end customers. This interface can be conflictive.

Marketing is dedicated to satisfying customers to achieve the highest possible sales penetration.
So, in most firms, marketing and sales impose liberal policies when it comes to accommodating
customers. This may mean that marketing and sales will typically seek broad product assortments
supported with high inventory or that all customer requirements, no matter how small or how
profitable, will be satisfied. The marketing expectation is that zero logistical defect service will
be achieved across the supply chain and customer-focused marketing efforts will be supported.

2.6.3 Manufacturing Support Performance Cycles

Manufacturing is the node in a supply chain that creates form value. To a significant degree,
manufacturing efficiency depends on logistical support to establish and maintain an orderly
and economic flow of materials and work-in-process inventory as required by production
schedules. The degree of specialization required in market distribution and procurement can
overshadow the importance of positioning and timing inventory movement to support
manufacturing. Because customers and suppliers are not involved, manufacturing logistics is
less visible than its counterparts.
The identification of manufacturing logistical support as a distinct operating area is a relatively
new concept. The justification for focusing on performance cycles to support production is found
in the unique requirements and operational constraints of flexible manufacturing strategies. To
provide maximum flexibility, traditional manufacturing practices related to economy of scale
are being re-evaluated to accommodate quick product switchover and shorter production runs.
Exacting logistical support between supply chain participants is required to perfect such time-
sensitive manufacturing strategies. It is important to once again stress that the mission of logistical
manufacturing support is to facilitate the what, where, and when of production, not the how.
The goal is to support all manufacturing requirements in the most efficient manner.
Manufacturing support operations are significantly different than either market distribution or
procurement. Manufacturing support logistics is typically captive within individual firms,
whereas the other two performance areas must deal with the behavioural uncertainty across the
supply chain. Even in situations when outsource contract manufacturing is used to augment
internal capacity, overall control of a single enterprise is greater than in the other two operating
areas. The benefits to be gained by exploitation of this control opportunity are the prime
justification for treating manufacturing logistical support as a distinct operating area.

2.6.4 Procurement Performance Cycles

Several activities or tasks are required to facilitate an orderly flow of materials, parts, or finished
inventory along a supply chain: (1) sourcing, (2) order placement and expediting, (3)
transportation, and (4) receiving. These activities are required to complete the procurement
process. Once materials, parts or resale products are received, the subsequent storage, handling
and transportation requirements to facilitate either manufacturing or market distribution are

46 LOVELY PROFESSIONAL UNIVERSITY