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Supply Chain The Role of Logistics in The Supply Chain
• The steps and the firms that perform Partnering

these steps in the transformation of raw inputs
into finished products bought by customers. • Establishing a strategic alliance or
partnership with a firm that specializes in
Inbound Logistics transportation or logistics.
The delivery of goods and services that are • Using a logistics partner to store
purchased from suppliers and/or their finished goods at the logistics partner’s hub or
distributors. distribution center.
Outbound Logistics In-Transit Inventory Costs
The delivery of goods and services that are • Combination of transportation and
sold to a firm’s customers and/or distributors. carrying costs associated with delivery of raw
materials and components that are inbound to
Supplier-Managed Inventories the plant.
• Inventories in a firm’s facility that are Disintermediation
the responsibility of the supplier to maintain
and to replenish as necessary. • The trend to reduce many of the steps
in the supply chain by reducing the
Consignment Inventories number of intermediaries in the chain.
• Inventories that are physically present • Cross-docking is a shipment process
in a firm’s facility but that are still owned by the that transports goods from one form of
supplier. ground transportation to another with
EDI (electronic data exchange) no storage time
• Direct link between a manufacturer’s • Direct-to-Store (DTS) Delivery is a type

database and that of the vendor. of logistics service in which
merchandise is delivered directly from
Quick Response (QR) Programs the supplier or manufacturer to the
retailer’s stores,
• Just-in-time replenishment system using
bar-code scanning and EDI. • JIT II®: vendor and customer work
closely together, eliminating many of
Efficient Customer Response (ECR)
the intermediate steps that now exist.
• Strategy for bringing distributors,
suppliers, and grocers together using bar-code
scanning and EDI.
Quality Gurus • Proposed the concept of “total quality
control,” making quality everyone’s
- Individuals who have been identified as responsibility.
making a significant contribution to improving
the quality of goods and services. Stressed interdepartmental communication.
Walter A. Shewhart Philip Crosby
- Statistician at Bell Laboratories • Preached that “quality is free.”
- Developed statistical control process methods Genichi Taguchi

to distinguish between random and nonrandom
variation • Emphasizes the minimization of
variation.
- Developed the “plan-do-check-act” (PDCA) - Concerned with the cost of quality to
cycle society.
- Extended Juran’s concept of external
W. Edwards Deming failure.
- Advocated Statistical Process Control (SPC) Quality in Goods
- Methods which signal shifts in a process that
will likely lead to products and/or services not o Performance
meeting customer requirements.
o Features
- The Deming Prize - Highest award for industrial
excellence in Japan. o Reliability
Joseph M. Juran o Durability
- Emphasized the importance of producing o Conformance

quality products through an approach focused
on quality planning, control, and improvement. o Serviceability
- Defined product quality as “fitness for use” as o Aesthetics

viewed by the customer in:
o Perceived quality
Quality of design, Quality of conformance,
Availability, Safety, Field use
- Categorized the cost of quality as:
Cost of prevention, Cost of detection/appraisal,

Cost of failure
Armand Feigenbaum
related to producing both high
quality products and low quality
Quality in Services components, with the goal of
o Tangibles minimizing the total cost of
o Reliability quality.
o Responsiveness – Costs of poor quality:
o Competence
o Courtesy • Detection/appraisal
o Credibility costs
o Security
• Internal failure costs
o Access
o Communication • External failure costs
o Understanding the customer
• Total Quality Management (TQM)
Additional Views of Quality in Services
– An approach for integrating
• Technical Quality versus Functional quality at all levels of an
Quality organization
– Technical quality—the core • Focuses on producing high quality

element of the good or service. goods and services
– Functional quality—customer Elements of TQM

perception of how the good
• Leadership
functions or the service is
delivered. Top management vision, planning and
support
• Expectations and Perceptions
• Employee involvement
– Customers’ prior expectations
(generalized and specific service All employees assume responsibility for
experiences) and perception of inspecting the quality of their work.
service performance affect their
satisfaction with a service. • Product/Process Excellence
• Satisfaction = Involves product design quality and

(Perception of monitoring the process for continuous
Performance) – improvement.
(Expectation)
• Cost of Quality
• Continuous Improvement
– Framework for identifying
A concept that recognizes that quality
quality components that are
improvement is a journey with no end
and that there is a need for continually • View of the quality program as a quick
looking for new approaches for fix.
improving quality.
• Drive for short-term financial results.
• Design quality
• Politics and turf issues
Specific characteristics of a product that
determine its value in the marketplace. Six Sigma
• Conformance quality • Goals of Six Sigma
The degree to which a product meets its - To reduce process variation to the
design specifications point where only 3.4 defects per million
are produced by a process that involves
Implementing TQM a high volume of manufactured units or
service transactions on a continuous
• Successful Implementation of TQM basis.
– Requires total integration of - Provide a framework and
TQM into day-to-day methodologies to analyze and evaluate
operations. business processes and reduce waste.
• Causes of TQM Implementation Failures • Successful Implementation
– Lack of focus on strategic - Training and selection of the workforce
planning and core
competencies - Impressive cost savings of program
– Obsolete, outdated The Deming Prize

organizational cultures.
- Initiated by Japan in 1951 to recognize the
Obstacles to Implementing TQM importance of high quality products.
• Lack of a company-wide definition of - Name after W. Edwards Deming

quality.
• Lack of a formalized strategic plan for

change.
• Lack of a customer focus.
• Poor inter-organizational
communication.
• Lack of real employee empowerment.
• Lack of employee trust in senior

management.

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Supply Chain The Role of Logistics in The Supply Chain

• The steps and the firms that perform Partnering

Outbound Logistics In-Transit Inventory Costs

• Direct link between a manufacturer’s • Direct-to-Store (DTS) Delivery is a type

Walter A. Shewhart Philip Crosby

- Statistician at Bell Laboratories • Preached that “quality is free.”

- Developed statistical control process methods Genichi Taguchi

Joseph M. Juran o Durability

- Emphasized the importance of producing o Conformance

- Defined product quality as “fitness for use” as o Aesthetics

- Categorized the cost of quality as:

Cost of prevention, Cost of detection/appraisal,

– Technical quality—the core • Focuses on producing high quality

– Functional quality—customer Elements of TQM

• Satisfaction = Involves product design quality and

• Conformance quality • Goals of Six Sigma

– Obsolete, outdated The Deming Prize

• Lack of a company-wide definition of - Name after W. Edwards Deming

• Lack of a formalized strategic plan for

• Lack of a customer focus.

• Lack of real employee empowerment.

• Lack of employee trust in senior

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