The Role of Logistics in the Supply Chain
The continued emphasis on globalization with respect to both suppliers and customers ha caused the supply chain to become longer in terms of time and distance, As a consequence, the logistics associated with both the delivery of raw material and component to the company and the delivery of finished goods to its customers have taken on added importance. However, the lengthening of the supply chain runs counter to the firm's need for flexibility to provide customers with a wide variety of products that can be delivered quickly. Companies have therefore adopted various strategies to compensate for the longer supply chain. For example, companies are locating distribution center co er to customer markets so they can better serve thee markets
Another approach to addressing the is ue of a growing supply charm involves the establish hint of a strategic alliance or partner hip with a firm that specialize in transportation or log: tics. For example. L.L. Bean, a well-known mail-order firm specializing in outdoor equipment and clothes, has established such a partnership with FedEx. As a result. FedEx employees, who are physically located on a full-time basis at the L.L. Bean distribution facility in Freeport, Maine, handle all of the outbound shipments to L.L. Bean's customers (including the shipment of some packages by UPS). An alternative approach to using a logistics partner is for 3 firm to store finished goods at the logistics partners hub or distribution center, Establish-hang an inv memory at the point in the distribution channel will significantly reduce the delivery time of critical products. As an illustration, some companies that produce medi .al products for implants may maintain a supply of their products at FedEx's hub in Memphis. Tennes-ee Requests for these products, in many cases, can be delivered the same day or. at most, the next morning, to any location in the United States. Laura Ashley, a chain of high-fashion boutiques, similarly maintains an inventory of high-usage items :.H Fedfixs distribution center in Memphis. Such an arrangement allows retail operations ro re rock the follow ing day with items that have sold out. (See OM in Practice box for an .thcr role for a logi-ric partner.)
In- Transit Inventory Costs
The stretching of the supply chain to all comer of the globe ha 'cd manager-0 closer look at the various costs associated with the delivery of referred to as in-transit inventory costs and are usually material and components that are inbound to the plant. These are sold FOB at the vendor's plant. (FOB stands for free-on-b which is the point .u which ownership and title to the goods are transferred from the supplier to the customer.