LOGISTICS MANAGEMENT

The

Logistics

Product
OUTLINE
1. The Logistics Product.
2. Nature of Logistics
Product 3. Product
Classification. 4. Product
Life Cycle.
5. Product Characteristics.
Planning Triangle

Inventory Strategy
Inventory Strategy
• Forecasting
• Forecasting
• Inventory decisions • Inventory decisions • Purchasing and supply • Transport Strategy
Transport Strategy
Purchasing and supply
• Transport fundamentals
scheduling decisions scheduling decisions • Storage fundamentals • • Transport fundamentals

Storage fundamentals • Transport decisions

• Transport decisions
• Storage decisions • Storage decisions Customer
Customer

Product in the service goals

service goals
• The product
• The product

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• Logistics service
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• Ord . proc. & info. sys.

• Logistics service
• Ord . proc. & info. sys.
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Location Strategy
Location Strategy
• Location decisions
• Location decisions
• The network planning process
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• The network planning process

3-3

THE LOGISTIC PRODUCT

It is a set of characteristics that are dealt with by the logistics
manager to reach a competitive advantage, the logistic product
 is formed and reconfigured to reach the best position in the
market and customers respond with their approval of the
product.
The product is the focal point of the logistics system design
and it generates the return for the organization. It is
necessary to clearly understand this essential element to
create a good design of the logistics system.
NATURE OF LOGISTICS PRODUCT
It is the output or outcome of any process and the product consists
of a tangible part, and another intangible part, in order to create
what is called the total supply of the company's product.
The tangible part of the product consists of properties such as:
weight, size, shape, features, performance, and time resistance.
The intangible part of the product, it is after sales service,
company reputation, communication to obtain correct and
timely information, flexibility in meeting individual customer
needs and correcting mistakes.
The company's product consists of a mixture of the company's
tangible and intangible services.
PRODUCT CLASSIFICATION
CONVENIENCE PRODUCTS
The goods and services that customers buy frequently, in real
 time, and with little comparison between various other goods.
It needs a wide spread of outlets and the cost of distribution is
high, but it is justified due to the large sale.
Examples: Banking services and many food products.
Pepsi-Cola and Coca-Cola have realized that their soft drink
products are generic. Consequently, one of the distribution
channels is the channel for distributing soft drinks to consumers by
means of vending machines located in any place where a number
of people gather.
SHOPPING PRODUCTS
They are the products in which customers prefer to shop from
several places to compare prices, quality and performance, and
the purchase is made after careful comparisons.
The number of distribution points is less compared to goods and
services from general products.
Examples: Clothing.
Home furniture.
Medical services.
SPECIALTY PRODUCTS
These are the products that customers are willing to make an
effort to obtain and often wait a while to get the products.
Examples:
 Some of the cars that are made according to the customer's
request. Management consulting.
Customization (DELL).
WHICH CLASSIFICATION?
INDUSTRIAL PRODUCTS
They are industrial goods and products, and they are those
intended for people and institutions to produce other goods or
services.
Somewhat different from customers' products, goods are
classified according to their entry into the production process.
For example, semi-finished goods that are part of the final product,
such as raw materials and parts of components.

PRODUCT LIFE CYCLE

v
Introduction
 s

e
Growth Maturity Decline
l

Time

PRODUCT LIFE CYCLE

1- The introduction stage: It is the stage that occurs after the
introduction of a new product in the market, and sales at this
stage are not high. The distribution strategy is a conservative
strategy with storage limited to a small number of sites and the
product is available in a limited way.
2- The growth stage: It is the stage that takes place if the
product meets acceptance from the market, then sales usually
increase rapidly. Distribution planning is difficult, especially
when there is no historical background to help determine stock
levels.
PRODUCT LIFE CYCLE
3- The maturity stage: It is the stage in which the sales growth is
slow or stable at the top and usually the volume of production is
stable and does not change quickly at this time. This stage is
characterized by the multiplicity of storage points and work to
provide the product in different distribution areas.
4- The decline stage: It is assumed that the volume of sales
decreases in most of the products as a result of technological
changes and competition or a change in the desire or
tendencies of the customer and often the number of storage
points and product stock and access to the centralization of the
site decreases.
PRODUCT CHARACTERISTICS
WEIGHT-BULK RATIO
The ratio of product weight to volume is a measure of it,
especially when calculating the cost of transportation and
storage that has a direct relationship with them.
The products with high density (i.e. the ratio of weight to volume
is high) such as steel shows good use for transport equipment
and means of storage, and therefore the cost is low for them,
and in any case, low density products such as chips, the cost of
transportation is high as well as the cost of handling and
storage high compared to the selling price.
Effect of Weight-Bulk Ratio on
Logistics Costs
f

t
 n

t
l

i Transportation costs
g

Storage costs

Weight-bulk ratio

00
Total costs (transport + storage)

3-20
 VALUE-WEIGHT RATIO
The dollar value of the product being transported and stored is
an important factor in determining the logistics strategy and
the storage cost is value sensitive.
Products with low value-to-weight ratios such as coal have a low
storage cost but a high transportation cost as a percentage of
the selling price and the storage cost is calculated as a
percentage of the product's value. Products with a high
value-to-weight ratio such as electronic equipment and jewelry
show the opposite and result from that. The total cost curve for
logistics is U-shaped
 Value-Weight
Ratio on
Logistics Costs
f

Total costs (transport + storage)

e

s
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p
t

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c l

a
s

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c

Effect of
 costs

Value-weight ratio 0

Storage costsTransportation

3-22

SUBSTITUTABILITY
When customers find that the difference is little or that there
is no difference between the product of one of the
institutions and that of competing suppliers of this institution,
then these products in this case are called products of high
substitution and the following form shows the general impact
of the transportation service and the level of inventory.
Effect of Transport Service and Inventory
Level on Logistics Costs
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p
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p
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Total costs
e
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(transport + lost
p costs)

a
s
p

sales + storage t

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Transport

costs
Lost sales

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s
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Storage costs

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 Improved transportation service 0
(a)
Total costs
(transport + lost
sales + storage
costs)
L

Storage costs
Transport costs
0

Lost sales
0 Average inventory level (b)

0
3-24
 RISK
The risk characteristics of a product such as perishability such as
food and flammability such as gasoline.
When the product appears high risks, this leads to placing
restrictions on the distribution system, and in this case, the cost of
transportation and storage is high in dollars or as a percentage of
the sale value.
For example: products such as watches and mobile phones have a
high risk of being stolen, so special precautions must be taken
when handling and transporting them. Fruits and others need to be
stored and transported in refrigerators.
 Product Risk on
Logistics Costs
Total costs (transport +
t

s
storage)
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t c

s i

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Transport costs
Effect of
s

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Storage costs

Increasing degree of risk in the product 0

3-26