OPMG 402

Logistics and Materials Management

Lec_1: Introduction

A s s i s . P ro f. M o h a m m e d A b d e l g ha ny
A s s i s t a n t P ro fe s s o r, I n d u s t r i a l E n g i n e e r i n g ,
Mechanical Engineering Department
E - m a i l / M A b d e l g h a ny @ n u . e d u . e g
Te l . / + 2 0 1 1 4 4 8 7 6 7 0 2
What is Logistics Management?
• Originally a military-based term referring to the movement of equipment and
supplies to armies (the practical art of moving armies).

• It is planning, implementation and control of the efficient, effective forward

and reverse flow and storage of goods, services and related information
between the point of origin and the point of consumption in order to meet
customer requirements (Council of Logistics Management).

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Supply Chain Vs. Logistics Management
• Supply chain, refers to a large network of organizations that work
collaboratively to deliver products from a supplier to a customer.

• Logistics Management,
• It forms part of the supply chain,

• Logistics is responsible for movement, storage, and the coordination of goods in the
supply chain.

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Imagine Life without Logistics !
• The products we have access to would be limited to what is made
and grown very close to where we live.

• Global trade would be slow, expensive, and very limited.

• R&D would be hindered because of smaller consumer markets.

• Some of the cool electronics we use every day might not exist.

• Many resources would be wasted due to spoilage and a mismatch of

supply and demand.

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Logistics Associated Names
• logistics; • materials management;

• physical distribution; • procurement and supply;

• business logistics; • product flow;

A widely respected definition

Logistics = Materials Management + Distribution

• “Materials Management” term will be mostly used through the course.

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The Seven Rs of Logistics
• Effective logistics management is about getting:

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Delivery Lead Time
• Delivery lead time is the time from receipt of an order to the delivery of the
product.

• Most customers want delivery lead time to be as short as possible.

• A manufacturing company must determine a process strategy to achieve this.

• There are five basic process strategy choices: engineer-to-order, make-to-order,

configure-to-order, assemble-to-order, and make-to-stock.

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Manufacturing Strategies & Lead Time

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Three Phases of the Flow of Materials

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Physical Supply/Distribution
• Physical supply/distribution includes all activities involved in moving goods;
• from the supplier to the beginning of the production process, and

• from the end of the production process to the consumer.

• The activities involved are:

• Transportation. • Packaging.
• Distribution inventory. • Material handling.
• Warehousing. • Order entry

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Manufacturing Planning & Control
• Manufacturing planning and control are responsible for the planning and control of
the flow of materials through the manufacturing process.

• The five major levels in manufacturing planning and control:

1) Strategic business plan.

2) Production plan (sales and operations plan).

3) Master production schedule.

4) Material requirements plan.

5) Purchasing and production activity control

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1. Strategic Business Plan
• Strategic Plan: is a statement of the major goals and objectives the
company expects to achieve over the next 2 to 10 years or more.
• It shows the kind of business, products, markets, and so on — the firm
wants to do in the future.

• The development of the strategic plan is the responsibility of senior

management.

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Strategic Business Plan
• Strategic Business Plan (Business Plan): It is a restated strategic plan in
financial terms, including projected revenues, a projected balance
sheet, and a projected income statement.

• The level of detail in the strategic business plan is not high.

• It is usually stated in dollars rather than units.

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2. The Production Plan
• It is also referred to as aggregate production plan.

• Plans are developed for groups of products – aggregated into categories –

rather than for individual products.

• The planning horizon is usually 6 to 18 months and is usually reviewed each

month or quarter.

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The Production Plan
• Given the strategic business plan, production plan is concerned with:
• The quantities of each product group that must be produced in each period.

• The desired inventory levels.

• The resources of equipment, labor, and material needed in each period.

• The availability of the resources needed.

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3. The Master Production Schedule
• It is a plan for the production of individual end items.

• It breaks down the aggregate production plan to show, for each period, the
quantity of each end item to be made.

• Inputs to the MPS are the aggregate plan, the forecast for individual end
items, sales orders, inventories, and existing capacity.

• The level of detail for the MPS is greater than for the production plan.

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4. The Material Requirements Plan (MRP)
• MRP is a plan for the production and purchase of the components used
in making the items in the master production schedule.

• It shows the quantities needed of the components and parts and when
manufacturing intends to make or use them.

• The level of detail of MRP is high.

• The planning horizon is at least as long as the combined purchase and

manufacturing lead times.

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5. Purchasing and Production Activity
Control (PAC)
• It represents the implementation and control phase of the production
planning.

• Purchasing is responsible for establishing and controlling the flow of raw

materials into the factory.

• PAC is responsible for planning and controlling the flow of work through the
factory.

• The planning horizon is very short, perhaps from a day to a month.

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Level of detail versus planning horizon

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Work-in-Process Inventory
• Company's unfinished goods waiting to be completed and sold.

• Materials that have been partially completed through the production process.

• Reducing the amount of time that inventory spends in production is a good way
to reduce the costs associated with it.

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Priority – Capacity Relationship
• Priority relates to what products are needed, how many are needed, and when
they are needed.

• Capacity is the capability of manufacturing to produce goods and services – It is

the quantity of work that labor and equipment can perform in a given period.

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Capacity Management
• Capacity Management is concerned with:
• Calculating the capacity needed to manufacture per the requirements of the priority plan.

• Finding methods to make that capacity available.

• If the capacity cannot be made available when needed, then the plans must be
changed.

• Determining the capacity required, comparing it to available capacity, and making

adjustments must occur at all levels of the manufacturing planning and control system.

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Sales and Operations Planning (SOP)
• SOP is a cross-functional business plan.

• SOP is a dynamic process in which the company plans are updated on a regular basis,
usually at least monthly.

• The process starts with the sales and marketing departments, which compare actual
demand with the sales plan, and update the marketing plan.

• The updated marketing plan is communicated to other related departments, which

adjust their plans to support the revised marketing plan.
What if departments cannot achieve the new marketing plan?!
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Manufacturing Resource Planning
• Due to the large amount of data and number of calculations needed, a computer-based system
is needed.

• A fully integrated planning and control system is called a manufacturing resource planning
(MRP II system).

• The term MRP II is used to distinguish the manufacturing resource plan (MRP II) from the
material requirements plan (MRP).

• The system is intended to be a fully integrated planning and control system that works from the
top down and has feedback from the bottom up – shown in next slide.

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Manufacturing
Resource
Planning
•At any planning level, if there
are any changes is needed in
priority plans due to capacity
problem, changes should be
reflected in the levels above.

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Enterprise Resource Planning (ERP)
• ERP is similar to the MRP II system except it does not dwell on manufacturing, the whole
enterprise is taken into account.

• Essentially, ERP encompasses the total company, whereas MRP II encompasses just
manufacturing.

• The larger scope of ERP systems allows the tracking of orders and other important planning
and control information throughout the entire company, from procurement to ultimate
customer delivery.

• Many ERP systems allows sharing information between firms.

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Lecture Summary
• What is logistics management?

• Difference between logistics and supply chain.

• The 7 Rs of logistics.

• Delivery lead time and the five manufacturing strategies.

• Three phases of materials flow.

• The five levels of manufacturing planning and control.

• WIP inventory, MRP II, and ERP systems.

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