Sonic provides much of this informa

Sonic provides much of this information on the Web. Using a browser, customers can pull tracking information on parts shipments and confirm deliveries, giving them visibility of a part from order entry through to delivery. "On the reverse side, where we have recovery operations for monitors and hard drives and laptops, the customer can track the reverse flow of those units through the pipeline and check the status of a particular repair as it moves through the shop floor in Louisville," says Collins.
Source: Kurt C. Hoffman, "With Critical Parts, Delivery is Counted in Hours, Not Days," Global Logistics & Supply Chain Strategies, June 2000, pp. 58-60, 62.
Total Cost of Manufacturing
The marketing and manufacturing strategies of a firm drive logistical service require-ments. For example, MTO manufacturing strategies typically require less finished goods inventory than MTP and ATO strategies. However, MTO strategies typically re-quire component inventory support and may result in high-cost market distribution. In light of such cost trade-offs, the design of a logistics support system should be based on the Total Cost of Manufacturing (TCM).
Total cost of manufacturing consists of production/procurement, inventory/ warehousing, and transportation. All of the above costs are impacted by manufacturing strategy. As such, TCM represents the foundation for formulating a market distribu¬tion strategy. Figure 5-5 represents a generalized model of the TCM per unit ranging across strategic alternatives from MTO to ATO to MTP. Naturally, exact cost relation¬ships will depend upon specifics related to each business situation. The design objec¬tive is to identify the manufacturing strategy that best fits the marketing opportunity confronted.



Quantity
MTO ATO MTP

156 Part 1 Logistics in Supply Chain Management
In Figure 5-5, the cost of manufacturing and procurement declines as quantity in-creases, reflecting economy of scale associated with MTP. Inventory and warehousing costs increase, reflecting the impact of larger manufacturing lot sizes. Transportation cost per unit decreases as a result of shipment consolidation. In contrast, MTO strate¬gies reflect high per unit manufacturing and procurement costs which are, in part, off¬set by lower inventory and warehousing costs. In the MTO strategy, transportation cost per unit is higher, reflecting small shipment and/or premium transportation. The value of Figure 5-5 is to generalize relationships and visualize important trade-offs. The TCM results from functional integration of manufacturing, procurement, and lo¬gistics. From a perspective of integrated management it is important for manufacturing firms to design a supply chain strategy that achieves lowest total cost of manufacturing across the entire process.