CHAPTERONE

ANOVERVI
EW OFLOGI
STI
CS

I
ntr
oduct
ion

I
ntr
oduct
ionLogi
sti
csi
snotnewi
dea.Fr
om t
hebui
l
dingoft
hepy
rami
dst
other
eli
efof
hungeri
ndi
ff
erentpar
tsoft
hewor
ld,t
hepr
inci
plessuppor
ttheef
fect
ivef
low of
mat
eri
alsandi
nfor
mat
iont
omeett
her
equi
rement
sofcust
omer
s.Thr
oughoutt
he
hi
stor
yofmanki
nd war
shav
ebeenwonand l
ostt
hroughl
ogi
sti
csst
rengt
hsand
capabi
l
iti
es–ort
hel
ackoft
hem.Thesamei
sappl
i
edt
otoday
‘sbusi
nesscompet
it
ion.
Al
lor
gani
zat
ions mov
e mat
eri
als.Manuf
act
urer
s bui
l
dfact
ori
es t
hatcol
l
ectr
aw
mat
eri
alsf
rom suppl
i
ersanddel
i
verf
ini
shedgoodst
ocust
omer
s;r
etai
lshopshav
e
r
egul
ardel
i
ver
iesf
rom whol
esal
ers;at
elev
isi
onnewsser
vicecol
l
ect
srepor
tsf
rom
ar
oundt
hewor
ldanddel
i
ver
sthem t
ovi
ewer
s;mostofusl
i
vei
ntownsandci
ti
esand
eatf
oodbr
oughti
nfr
om t
hecount
ry;
nowaday
‘st
ankst
otechnol
ogy
!Wheny
ouor
dera
bookorDVDf
rom awebsi
te,acour
ierdel
i
ver
sitt
oyourdoor
.Ev
eryt
imey
oubuy
,rent
,
l
ease,hi
reorbor
row any
thi
ngatal
l
,someonehast
omakesur
ethatal
lthepar
tsar
e
br
oughtt
oget
heranddel
i
ver
edt
oyourdoor
.Logi
sti
csi
sthef
unct
iont
hati
sresponsi
ble
f
ort
hismov
ement
.Iti
sresponsi
blef
ort
het
ranspor
tandst
orageofmat
eri
alsont
hei
r
j
our
neybet
weensuppl
i
ersandcust
omer
s.Onanat
ionalscal
e,l
ogi
sti
csi
nvol
vesahuge
amountofef
for
t.TheUSAhasagr
ossdomest
icpr
oduct(
GDP)ofUS$10t
ri
ll
i
on,
soi
ts
popul
ati
onof280mi
l
li
onpr
oducesandconsumesanav
erageofUS$36,
000ofgoods
andser
vices.Thewor
ld‘
ssev
enl
argesteconomi
es(
USA,Japan,Ger
many
,UK,Fr
ance,
I
tal
yandCanada)hav
eacombi
nedGDPofUS$20t
ri
ll
i
on.Al
loft
his–whet
heri
tisoi
l
pr
oducedi
nCanada,consumerel
ect
roni
csi
nJapan,car
sint
heUKorcof
feepr
oduct
s
i
nEt
hiopi
a– r
eli
esonl
ogi
sti
cst
ocol
l
ectmat
eri
alsf
rom suppl
i
ersanddel
i
veri
tto
cust
omer
s.Mi
l
li
onsofpeopl
ear
einv
olv
edi
nthi
sef
for
t,andi
tcost
sbi
l
li
onsofdol
l
arsa
y
eart
okeepev
ery
thi
ngmov
ing. Gener
all
y,t
hisi
ntr
oduct
orychapt
eri
sdesi
gnedt
o
pr
ovi
deabasi
cunder
standi
ngoft
henat
ureandscopeofl
ogi
sti
cs,
andi
tsev
olut
ionas
amoder
nbusi
nessdi
sci
pli
ne.I
ndoi
ngsoi
twi
l
lout
li
net
hekeyact
ivi
ti
esofl
ogi
sti
cs
managementandcr
it
icalr
olel
ogi
sti
cspl
aysi
ntur
ningt
hemar
ket
ingandbusi
ness

Equi
ppedByA.
Z(2015E.
C) Page1
obj
ect
ivesofbot
hmanuf
act
uri
ngandser
viceent
erpr
isesi
ntor
eal
i
tyandi
tsr
olef
ort
he
dev
elopmentofcount
ryeconomy
.
Chapt
erObj
ect
ive
Att
heendoft
hischapt
erst
udent
swoul
dbeabl
etounder
stand:
 t
hebasi
cconcept
sinl
ogi
sti
csmanagement
.
 t
hehi
stor
ical
evol
uti
onofl
ogi
sti
csmanagement
 t
hedi
ff
erencebet
weenl
ogi
sti
csandsuppl
ychai
nmanagement
 t
hemai
nfunct
ionsofl
ogi
sti
csmanagement
1.
1Basi
cconcept
sofl
ogi
sti
cs
Whati
slogi
sti
csmanagement
?Somepeopl
edef
inei
tver
ygener
all
yandbr
ief
ly
say
ing e.
g.Logi
sti
cs i
s suppor
t;ot
her
s gi
ve ext
ensi
vel
ylong and pr
eci
se
def
ini
ti
ons,whi
chr
unf
orpages.Butt
heunder
lyi
ngconceptcanbedef
inedf
rom
t
hef
oll
owi
ngper
spect
ivesasshownbel
ow.
Per
spect
ives Def
ini
ti
on

Di
cti
onar
y
The branch ofmi l
i
t ar
y sci
ence hav
ing t
o do wi
th
procuri
ng, mai
ntai
ning and t r
ansport
ing mat
eri
al,
personnelandf
acil
i
ties

Char
ter
ed I
nst
it
ute of Logi
sti
csi
s..
.theposi
ti
oni
ngofr
esour
ceatt
her
ightt
ime,i
nthe
Logi
sti
cs and Tr
anspor
tri
ghtpl
ace,
att
her
ightcost
,att
her
ightqual
i
ty.
(
UK)

I
nter
nat
ional soci
ety of Thear
tandsci
enceofmanagement
,engi
neer
ingandt
echni
cal
l
ogi
sti
cs act
ivi
ti
es concer
ned wi
thr
equi
rement
s,desi
gn,suppl
yi
ng and
mai
ntai
ningr
esour
cest
osuppor
tobj
ect
ives,
plansandoper
ati
ons.

Mi
l
itar
yLogi
sti
cs The desi
gn and i
ntegr
ati
on ofal
laspect
s ofsuppor
tfort
he
oper
ati
onalcapaci
tyoft
hemi
l
itar
yfor
ces,andt
hei
requi
pmentt
o
ensur
ereadi
ness,
rel
i
abi
l
ity
,andef
fi
ciency
.

Counci
l of Logi
sti
cs Par
toft
he suppl
ychai
n pr
ocess t
hatpl
ans,i
mpl
ement
s and

Equi
ppedByA.
Z(2015E.
C) Page2
Management(
CLM) cont
rolt
heef
fi
cient
,ef
fect
ivef
lowandst
orageofgoods,ser
vices
andr
elat
edi
nfor
mat
ionf
rom t
hepoi
ntofor
igi
ntot
hepoi
ntof
Most accept
abl
e consumpt
ion f
or t
he pur
pose of conf
ormi
ng t
o cust
omer
def
ini
ti
on r
equi
rement
s.

N.
BThr
oughoutourdi
scussi
onwewi
l
luset
hedef
ini
ti
ongi
venbyt
hecounci
lof
l
ogi
sti
csmanagement(
CLM)
.
I
nor
dert
ocl
ear
lyunder
standl
ogi
sti
csl
et’
saddonemor
egener
aldef
ini
ti
on:
 Logi
sti
csi
sanopt
imi
zat
ionpr
ocessoft
hel
ocat
ion,mov
ementand
st
orageofr
esour
cesf
rom t
hepoi
ntofor
igi
n,t
hroughv
ari
ouseconomi
c
act
ivi
ti
es,
tot
hef
inalconsumer
.
 Logi
sti
cshasbeencal
l
edbymanynamesbasedont
het
ypeoft
heor
gani
zat
ion,
i
ncl
udi
ng t
he f
oll
owi
ng:busi
ness l
ogi
sti
cs,channelmanagement
,phy
sical
di
str
ibut
ion,mat
eri
als management
,suppl
y management
,mi
l
itar
ylogi
sti
cs,
humani
tar
ianl
ogi
sti
cs,
andThi
rdPar
tyLogi
sti
cs(
3PL)
.
1.
2 Ev
olut
ionofl
ogi
sti
cs
• Theconceptof“
Logi
sti
cs”st
art
edmanyyear
sbef
oreChr
istandwasusedby
Gr
eekgener
als(
Leont
heWi
se,Al
exandert
heGr
eat
)inor
dert
odescr
ibeal
lthe
pr
ocedur
es f
ort
he ar
my’
s pr
ocur
ementon f
ood,cl
othi
ng,ammuni
ti
on,et
c.
Al
exandert
heGr
eatwasabi
gfanoft
hemobi
l
ityofhi
str
oopsandhedi
dn’
twant
hi
str
oopst
ost
ayi
nonepl
acewai
ti
ngf
orsuppl
i
esf
rom Macedoni
a.Thus,he
t
ri
edt
oresol
vet
hei
ssuesofsuppl
i
esbyusi
ngsuppl
i
esf
rom t
hel
ocalr
esour
ces
ofhi
sdef
eat
edenemi
es.
• Formanyy
ear
s,l
ogi
sti
cswer
eal
way
sani
ssuei
nwaraf
fai
rs.Ki
ngdomsand
gener
alswi
thst
rat
egi
cpl
anni
ngonl
ogi
sti
cswer
ethosewhowont
hewar
.Wor
ld
WarI
Iwas t
he maj
ormot
ivat
ion ofl
ogi
sti
cs t
oincr
ease r
ecogni
ti
on and
emphasi
s,f
oll
owi
ngt
hecl
eari
mpor
tanceoft
hei
rcont
ri
but
iont
owar
dtheAl
l
ied
v
ict
ory
.

Ev
eni
nthe1950sand‘
60s,t
hemi
l
itar
ywast
heonl
yor
gani
zat
ionusi
ngt
het
erm
l
ogi
sti
cs.Ther
ewasnot
rueconceptofl
ogi
sti
csi
npr
ivat
eindust
ryatt
hatt
ime.I
nst
ead,
depar
tment
alsi
l
osi
ncl
udi
ngmat
eri
alhandl
i
ng,war
ehousi
ng,machi
ning,account
ing,
Equi
ppedByA.
Z(2015E.
C) Page3
mar
ket
ing,
andsoon,
wer
ethenor
m.St
art
ingf
rom t
heear
ly‘
60s,
manyf
act
ors,
suchas
der
egul
ati
on,compet
it
ive pr
essur
es,i
nfor
mat
ion t
echnol
ogy
,gl
obal
i
zat
ion,pr
ofi
t
l
ever
age,et
c.,cont
ri
but
edt
othei
ncr
easeofl
ogi
sti
cssci
encei
nthef
orm wenow i
t
t
oday

• Thef
ivephasesofl
ogi
sti
csdev
elopment
—wor
kpl
acel
ogi
sti
cs,f
aci
l
ityl
ogi
sti
cs,
cor
por
atel
ogi
sti
cs,suppl
ychai
nlogi
sti
cs,andgl
oball
ogi
sti
cs— ar
epl
ott
edi
n
t
imei
nFi
gur
ebel
ow.
• Wor
kpl
acel
ogi
sti
csi
sthef
lowofmat
eri
alatasi
ngl
ewor
kst
ati
on.
• Theobj
ect
iveofwor
kpl
acel
ogi
sti
csi
sto st
reaml
i
net
hemov
ement
sofan
i
ndi
vi
dual
wor
kingatamachi
neoral
onganassembl
yli
ne.

• Wor
kpl
acel
ogi
sti
csi
sthef
lowofmat
eri
alatasi
ngl
ewor
kst
ati
on.Theobj
ect
ive
ofwor
kpl
acel
ogi
sti
csi
stost
reaml
i
net
hemov
ement
sofani
ndi
vi
dualwor
kingat
amachi
neoral
onganassembl
yli
ne.

Equi
ppedByA.
Z(2015E.
C) Page4
 • Faci
li
tyl
ogi
sti
csi
sthef
low ofmat
eri
albet
weenwor
kst
ati
onswi
thi
nthef
our
wal
l
sofaf
aci
l
ity(
thati
s,i
nter
wor
kst
ati
onandi
ntr
afaci
l
ity
).Thef
aci
l
itycoul
dbe
af
act
ory
,ter
minal
,war
ehouse,
ordi
str
ibut
ioncent
er.
• Cor
por
atel
ogi
sti
csi
sthef
lowofmat
eri
alandi
nfor
mat
ionbet
weent
hef
aci
l
iti
es
and pr
ocesses ofa cor
por
ati
on (
int
er-
wor
kst
ati
on,i
nter
-f
aci
l
ity
,and i
ntr
a-
cor
por
ate)
.
• Suppl
ychai
nlogi
sti
csi
sthef
low ofmat
eri
al,i
nfor
mat
ion,andmoneybet
ween
cor
por
ati
ons(
int
erwor
kst
ati
on,
int
erf
aci
l
ity
,int
ercor
por
ate,
andi
ntr
achai
n).
• Gl
oball
ogi
sti
cs i
sthe f
low ofmat
eri
al,i
nfor
mat
ion,and money bet
ween
count
ri
es.Gl
oball
ogi
sti
csconnect
soursuppl
i
ers’suppl
i
erswi
thourcust
omer
s’
cust
omer
sint
ernat
ional
l
y.
• Next
-Gener
ati
onLogi
sti
cs:Ther
ear
emanyt
heor
iesast
othenextphaseof
l
ogi
sti
cs dev
elopment
.Manyl
ogi
sti
cians bel
i
ev hatcol
et l
abor
ati
ve l
ogi
sti
cs,
l
ogi
sti
cs model
s bui
l
t wi
th cont
inuous and r
eal
-t
ime opt
imi
zat
ion and
communi
cat
ionbet
weenal
lsuppl
ychai
npar
tner
s,wi
l
lbet
henextphaseof
ev
olut
ion

1.
3 Logi
sti
csv
ersessuppl
ychai
nmanagement(
SCM)

Conf
usi
onov
ert
het
ermssuppl
ychai
nandl
ogi
sti
csmanagementhasgr
ownov
ert
he
l
astdecade. Resear
ch woul
dindi
cat
ethatt
odayt
he t
wo t
erms ar
e of
ten used
i
nter
changeabl
y,whi
l
eot
her
sfeel
str
ongl
ythatt
her
ear
edi
sti
nctdi
ff
erences.
Cont
rar
ytosuppl
ychai
nmanagement
,logi
sti
csf
ir
stcamei
ntopl
ayi
ntheear
ly1950’
s.
I
tdeal
swi
thmanagi
ngt
hesuccessi
onofgoodsbet
weent
hepoi
ntoft
hedepar
tur
eand
t
hepoi
ntofar
ri
val
.Logi
sti
csi
nvol
vescompact
ing t
hei
nfor
mat
ion and t
heact
ual
busi
nessaspectoft
het
ransact
ion.Thi
sincl
udesf
act
orssuch as:t
ranspor
tat
ion,
mat
eri
alhandl
i
ng,packagi
ng,andsecur
it
ymeasur
es.Theessenceofl
ogi
sti
csi
svi
tal
,
becausewi
thouti
tther
out
ing,schedul
i
ng,pr
epar
ati
on,di
str
ibut
ion,pl
an,pr
ocedur
es,
depar
tur
eandar
ri
val
timesoft
hephy
sical
mat
eri
alsbei
ngshi
ppedf
rom poi
ntAt
opoi
nt

Equi
ppedByA.
Z(2015E.
C) Page5
 Bmi
ghtbedi
stor
ted.
Essent
ial
l
y,suppl
ychai
nmanagementandl
ogi
sti
csgohandi
nhand,
smal
ldet
ail
smar
k
t
he bol
d di
ff
erences.The ov
eral
lspect
rum i
s cont
rol
l
ed by t
he suppl
y chai
n
managementt
eam,bei
ngt
hatt
heyar
enotonl
yresponsi
blef
orachi
evi
ngcust
omer
sat
isf
act
ionul
ti
mat
elybutal
socont
ri
but
ingt
omaxi
mizat
ionofpr
ofi
t.Logi
sti
csi
sli
ke
t
hesmal
lpuzzl
epi
ecef
it
ti
ngpr
eci
sel
yint
othesuppl
ychai
nmanagementpi
ctur
e,bei
ng
t
hati
ttakesi
ntoaccountt
hepr
oject
ionofeachst
eppr
iort
othet
imeofar
ri
valoft
he
expect
ed pr
oduct
.Logi
sti
cs and Suppl
yChai
n Managementdo noti
nter
twi
ne,i
n
def
ini
ti
on.Nonet
hel
ess,
mut
ual
cont
ri
but
ionbybot
hleadst
omor
ethanj
ustshi
ppi
ng.
Suppl
y chai
n managementi
sthe managementofa net
wor
k ofi
nter
connect
ed
busi
nessesi
nvol
vedi
ntheul
ti
mat
epr
ovi
sionofpr
oductandser
vicepackagesr
equi
red
byend cust
omer
s.Ul
ti
mat
elyt
hegoalofmanagi
ng t
hesuppl
ychai
nispr
ovi
ding
excel
l
encet
ocust
omer
sbymov
ingt
hepr
oductt
othef
inaldest
inat
ionandmaki
ngi
ta
pr
ior
it
ytomeetal
lrequi
rement
ssetf
ort
hbycust
omer
s.Thi
smakesi
tpossi
blef
ort
he
busi
nessdet
ail
stobemoni
tor
edf
rom anov
eral
ldept
h.Fr
om f
inanci
alaspect
s,t
ohow
accur
atet
hei
nfor
mat
ioni
sgi
venandt
o how i
ntr
icat
etheor
gani
zat
ioni
s.Al
lthe
mov
ementi
nvol
vedbegi
nsf
rom t
hemomentacust
omeragr
eest
odobusi
ness.Li
ke
t
het
erm suggest
s,i
t’
sachai
n!

Logist
ics SupplyChainManagement
Iti
sconcernedwi
thget
ti
nggoods& SCM encompasses al l those acti
vi
ti
es
servi
ceswheretheyarerequi
red& when associ
atedwithmovementofgoodsfr
om raw
they materi
alstagetot
heenduser
aredesir
ed
Logist
ics is used wi t
hin a si ngl
e Suppl y chai n management r equi
res
organi
zati
on. coor dinat
ion and i mplementat
ion through
variousor ganizati
onsinthesuppl
ychain.
Logisti
cs is a par t of Supply Chai
n Suppl ychai nmanagementi sanextensionof
management Logi sti
csmanagement .
Logisti
cs adds val
ue when invent
oryis Effective SCM excel sinr educi
ng operati
ng
corr
ectlyposi
ti
onedtofaci
l
itat
esales cost s, impr oves asset pr oduct
ivi
ty and
reducesor dercycl
etime
TheconceptofLogi sti
csmanagementi s TheconceptofSuppl ychainmanagementi s
rel
ativ
elyold rel
at iv
elynew

Equi
ppedByA.
Z(2015E.
C) Page6
Logist
ics management i
s a nar
rower Supply chai
n management i
s a br
oader
concept concept

1.
4 Obj
ect
ivesofbusi
nessl
ogi
sti
cs

I
tist
hrought
hel
ogi
sti
calpr
ocesst
hatmat
eri
alsf
lowi
ntot
hemanuf
act
uri
ngcapaci
ty
ofani
ndust
ri
alnat
ionandpr
oduct
sar
edi
str
ibut
edt
oconsumer
s.Ther
ecentgr
owt
hin
gl
obalcommer
ceandt
hei
ntr
oduct
ionofe-
commer
cehav
eexpandedt
hesi
zeand
compl
exi
tyofl
ogi
sti
caloper
ati
ons.Logi
sti
csaddsv
aluet
othesuppl
ychai
npr
ocess
wheni
nvent
oryi
sst
rat
egi
cal
l
yposi
ti
onedt
oachi
evesal
es.Cr
eat
ingl
ogi
sti
csv
aluei
s
cost
ly.
1.Rapi
dresponse:
Thi
sisf
lexi
bil
i
tyobj
ect
iveofanor
gani
zat
ion:Somecompani
esmeasur
ethi
sas
r
esponset
imet
ocust
omer
‘sor
der
.Onanav
eragehowmucht
imedoweneedt
o
f
ulf
il
lonepar
ti
cul
art
ypeofcust
omer
‘sor
deri
nay
ear
?Thi
sisameasur
eof
Rapi
dresponseLogi
sti
csshoul
densur
ethatt
hesuppl
i
eri
sabl
etor
espondt
o
t
hechangei
nthedemand v
eryf
ast
.Ent
ir
epr
oduct
ionshoul
d changef
rom
t
radi
ti
onalpushsy
stem t
opul
lsy
stem t
ofaci
l
itat
erapi
dresponse.I
nst
eadof
st
ocki
ngt
hegoodsandsuppl
yi
ngondemand,
order
sar
eexecut
edonshi
pment
-
t
o-shi
pmentbasi
s.I
nfor
mat
ionTechnol
ogypl
aysani
mpor
tantr
oleher
easan
enabl
er.I
T hel
psmanagementi
n pr
oduci
ng and del
i
ver
ing goodswhen t
he
consumerneedst
hem.Thi
sresul
tsi
ntor
educt
ionofi
nvent
oryandexposesal
l
oper
ati
onaldef
ici
enci
es.Now t
hemanagementr
esol
vest
hesedef
ici
enci
esand
sl
ashesdowncost
s.
2.Mi
nimum v
ari
ance:
Thi
sisdel
i
ver
yobj
ect
iveofanor
gani
zat
ion,t
hiscanbemeasur
edas‗
OnTi
me
Del
i
ver
y‘or
.If100 del
i
ver
iesar
e made i
n a mont
h/quar
ter
/yearhow many
r
eachedaspert
hecommi
tmentmadet
othecust
omer
?Anyev
entt
hatdi
srupt
s
asy
stem i
svar
iance.Logi
sti
csoper
ati
onsar
edi
srupt
edbyev
ent
sli
kedel
aysdue
t
oobst
acl
esi
ninf
ormat
ionf
low,t
raf
fi
csnar
ls,act
sofgod,wr
ongdi
spat
ches,
damagei
ntr
ansi
t.Tr
adi
ti
onalappr
oachi
stokeepsaf
etyst
ocksandt
ranspor
t

Equi
ppedByA.
Z(2015E.
C) Page7
 t
hegoodsbyhi
ghcostmode.Thecostoft
hisappr
oachi
shuge.Logi
sti
csi
s
expect
edt
omi
nimi
zet
heseev
ent
s,t
her
ebymi
nimi
zeandi
mpr
oveononet
ime
del
i
ver
y.
3.Mi
nimum i
nvent
ory
Thi
siscomponentofcostobj
ect
iveofacompany
.Inv
ent
oryi
sassoci
atedwi
th
ahugebaggageofcost
s.I
tist
ermedasanecessar
yev
il
.Obj
ect
iveofmi
nimum
i
nvent
oryi
smeasur
edasI
nvent
oryTur
nsorI
nvent
oryTur
nov
erRat
io.
Amer
icanscal
lthi
smeasur
east
urnv
eloci
ty.Logi
sti
csmanagementi
ncr
eases
t
heset
urnswi
thoutsacr
if
ici
ngcust
omersat
isf
act
ion.Hi
ghert
urnsensur
e
ef
fect
ive ut
il
izat
ion ofasset
s dev
oted t
o st
ock.Logi
sti
calmanagement
shoul
dkeept
heov
eral
lwel
lbei
ngofacompanyi
nvi
ew andf
ixami
nimum
i
nvent
oryl
evelwi
thoutt
ryi
ngt
omi
nimi
zet
hei
nvent
oryl
evelasani
sol
ated
obj
ect
ive
4.Mov
ementconsol
idat
ion:
Tr
anspor
tat
ioni
sthebi
ggestcont
ri
but
ort
ologi
sti
cscost
.Tr
anspor
tat
ioncost
depends on pr
oductt
ype,si
ze,wei
ght
,di
stance t
o be t
ranspor
ted et
c.f
or
t
ranspor
ti
ngsmal
lshi
pment
sjusti
nti
me[
reduct
ioni
ninv
ent
orycost
s]expensi
ve
t
ranspor
tmodes ar
e used whi
ch agai
ntend t
o hi
ke t
he cost
s.Mov
ement
consol
i
dat
ioni
spl
anni
ngsev
eralsuchsmal
lshi
pment
stoget
her[
ofdi
ff
erent
t
ypesofshi
pment
s]byi
ntegr
ati
ngi
nter
est
sofsev
eral
play
ersi
nthesuppl
ychai
n.
Gener
all
y,l
argeshi
pmentsi
zeandl
ongdi
stancesr
educet
ranspor
tat
ioncostper
uni
t.Mov
ementconsol
i
dat
ionshal
lresul
tint
oreduct
ioni
ntr
anspor
tat
ioncost
s.
5.Qual
it
y
I
fthequal
i
tyofpr
oductf
ail
slogi
sti
cswi
l
lhav
eto shi
pthepr
oductoutof
cust
omer
‘spr
emi
sesandr
epeatt
hel
ogi
sti
csoper
ati
onagai
n.Thi
saddst
ocost
s
andcust
omerdi
ssat
isf
act
ion.Hencel
ogi
sti
csshoul
dcont
ri
but
etoTQM i
nit
iat
ive
ofmanagement
.Inf
act
,commi
tmentt
oTQM hasmadet
hemanagement
‘swor
ld
ov
erwakeupt
othesi
gni
fi
canceofl
ogi
sti
csf
unct
ion.Logi
sti
cscanpl
aya
si
gni
fi
cantr
olei
ntot
alqual
i
tyi
mpr
ovementbyi
mpr
ovi
ngt
hequal
i
tyofl
ogi
sti
cs
per
for
mancecont
inuousl
yandcont
inual
l
y.
6.Li
fecy
clesuppor
t[cr
adl
etocr
adl
elogi
sti
calsuppor
t-pr
oduce,pack(
cradl
e)

Equi
ppedByA.
Z(2015E.
C) Page8
 andr
epack(
cradl
e)]Logi
sti
csf
unct
ioni
sexpect
edt
opr
ovi
del
i
fecy
clesuppor
t
t
othepr
oductaf
tersal
e.Thi
sincl
udes
A.Af
tersal
esser
vice:t
heser
vicesuppor
tneededbyt
hepr
oductoncei
tissol
d
dur
ingi
tsl
i
fecy
cle
B.Rev
ersel
ogi
sti
cs:
Productr
ecal
lasar
esul
tof
-Ri
gidqual
i
tyst
andar
ds[
cri
ti
cali
ncaseofcont
ami
nat
edpr
oduct
swhi
chcan
causeenv
ironment
alhazar
d]
-Tr
ansi
tdamage[
leaki
ngcont
ainer
scont
aini
nghazar
dousmat
eri
al]
-Pr
oductexpi
rat
iondat
ing
-Ri
gidl
awspr
ohi
bit
ingunsci
ent
if
icdi
sposalofi
temsassoci
atedwi
thpr
oduct
[
packagi
ng]
-Ri
gidl
awsmaki
ngr
ecy
cli
ngmandat
ory-Er
roneousor
derpr
ocessi
ngbysuppl
i
er
1.
5 Economi
cImpact
sofLogi
sti
cs
Logi
sti
csi
sani
mpor
tantcomponentofGDPandi
tpl
aysakeyr
olei
ntheeconomyi
n
t
wosi
gni
fi
cantway
s.
1.Logi
sti
csi
soneoft
hemaj
orexpendi
tur
esf
orbusi
nesses,t
her
ebyaf
fect
ingand
bei
ngaf
fect
edbyot
hereconomi
cact
ivi
ti
es.I
ntheUni
tedSt
ates,
forexampl
e,l
ogi
sti
cs
cont
ri
but
edappr
oxi
mat
ely10.
3per
centofGDPi
n1996.U.
S.i
ndust
ryspent
Ast
udyi
ndi
cat
edt
hat30% oft
hewor
kingpopul
ati
onsi
ntheUKar
eassoci
atedwi
th
wor
kthati
srel
atedt
ologi
sti
cs.Appr
oxi
mat
ely$451bi
l
li
onont
ranspor
tat
ionoff
rei
ght
andabout$311bi
l
li
onon:
war
ehousi
ng,
stor
ageandcar
ryi
ngi
nvent
ory
.Theseandot
her
l
ogi
sti
csexpensesaddedupt
oabout$797bi
l
li
on.
2.Faci
li
tat
ingt
hesal
eofv
irt
ual
lyal
lgoodsandser
vices.
Tounder
standt
hisr
olef
rom asy
stemsper
spect
ive,
consi
dert
hati
fgoodsdonotar
ri
ve
ont
ime,
cust
omer
scannotbuyt
hem.I
fgoodsdonotar
ri
vei
nthepr
operpl
ace,
ori
nthe
pr
opercondi
ti
on,nosal
ecanbemade.Thus,al
leconomi
cact
ivi
tyt
hroughoutt
he
suppl
ychai
nwi
l
lsuf
fer
.
 Logi
sti
cs adds v
alue bycr
eat
ing ut
il
it
yOne oft
he f
undament
alway
sthat
l
ogi
sti
csaddsv
aluei
sbycr
eat
ingut
il
it
y.
Fr
om aneconomi
cst
andpoi
nt,
uti
l
ityr
epr
esent
sthev
alueorusef
ulnesst
hatani
tem or

Equi
ppedByA.
Z(2015E.
C) Page9
ser
vicehasi
nful
fi
ll
i
ngawantorneed.
 Ther
ear
efourt
ypesofut
il
it
y:f
orm,possessi
on,t
ime,andpl
ace.Thel
att
ert
wo,
t
imeandpl
aceut
il
it
y,ar
eint
imat
elysuppor
tedbyl
ogi
sti
cs.Whi
l
efor
m and
possessi
on ut
il
it
yar
e notspeci
fi
cal
l
yrel
ated t
ologi
sti
cs,nei
therwoul
d be
possi
blewi
thoutget
ti
ngt
her
ighti
temsneededf
orconsumpt
ionorpr
oduct
iont
o
t
her
ightpl
aceatt
her
ightt
imeandi
nther
ightcondi
ti
onatt
her
ightcost
.These
'
'
fi
ver
ight
sofl
ogi
sti
cs"cr
edi
tedt
oK.Gr
osv
enorPl
owman,
aret
heessenceoft
he
t
wout
il
it
iespr
ovi
dedbyl
ogi
sti
cs:
timeandpl
aceut
il
it
y.
 Logi
sti
csf
ir
stl
yaf
fect
sthet
imeut
il
it
y,i
nthatl
ogi
sti
cscanpr
ovi
dev
aluef
ort
he
cust
omert
hroughdel
i
ver
ingapr
oduct
,ormaki
ngav
ail
abl
eapr
oductatt
her
ight
t
imef
orpur
chase.Logi
sti
csi
sdi
rect
lyr
esponsi
blef
orget
ti
ngapr
oductt
oit
s
pl
aceofpur
chaseorr
edi
str
ibut
ionont
ime.
 Thepl
aceut
il
it
yisdeemedt
hev
aluegar
ner
edf
rom pr
ovi
dingt
hegood/
ser
vice
f
orpur
chaseorconsumpt
ionatt
her
ightpl
ace,Logi
sti
csi
saf
unct
iondi
rect
ly
r
esponsi
blef
orget
ti
ngapr
oductorser
vicet
oit
spl
aceofpur
chase.
 Possessi
onut
il
it
yist
hev
alueacust
omerr
ecei
veswhent
heyhav
ethegoodi
n
t
hei
rhand ori
sexper
ienci
ng t
heser
vice,f
orexampl
epossessi
on ut
il
it
yis
nonexi
stentf
ort
hecust
omeri
fthepr
oducti
stoar
ri
vei
n10day
sti
me.Logi
sti
cs
i
sindi
rect
lyr
esponsi
ble,t
hrought
imeandpl
aceut
il
it
yofdel
i
ver
ingpossessi
on
ut
il
it
ybypr
ovi
dingt
hegood/
ser
vicef
oracust
omert
opur
chaseatagi
vent
ime
andpl
ace.
 For
m ut
il
it
yist
hev
alueofani
tem whi
chhasbeenassembl
edf
rom i
t¡
¦sv
ari
ous
component
s,soacardoorwoul
dhav
eal
otf
orum ut
il
it
y,butanent
ir
ecarwoul
d
hav
eahi
ghf
orm ut
il
it
y.Logi
sti
csi
sindi
rect
lyr
esponsi
ble,t
hrought
imeand
pl
aceut
il
it
yofdel
i
ver
ingt
hev
ari
ouscomponent
sthatmakeupf
orm ut
il
it
yby
pr
ovi
dingt
hegood/
ser
vicef
oracust
omert
opur
chaseatagi
vent
imeandpl
ace
i
nor
dert
oassembl
ethef
inal
product
.
1.
6Funct
ionsand/
ort
hewor
kofl
ogi
sti
cs
I
nthecont
extofsuppl
ychai
nmanagement
,logi
sti
csexi
stst
omoveandposi
ti
on
i
nvent
oryt
oachi
evedesi
redt
ime,pl
ace,andpossessi
onbenef
it
satt
hel
owestt
otal
cost
.Inv
ent
oryhasl
i
mit
edv
alueunt
ili
tisposi
ti
onedatt
her
ightt
imeandatt
her
ight

Equi
ppedByA.
Z(2015E.
C) Page10
l
ocat
iont
osuppor
towner
shi
ptr
ansf
erorv
alue-
addedcr
eat
ion.I
faf
ir
m doesnot
consi
stent
lysat
isf
yti
meandpl
acer
equi
rement
s,i
thasnot
hingt
osel
l
.Forasuppl
y
chai
ntor
eal
i
zet
hemaxi
mum st
rat
egi
cbenef
itofl
ogi
sti
cs,t
hef
ullr
angeoff
unct
ional
wor
kmustbei
ntegr
ated.Deci
sionsi
nonef
unct
ionalar
eawi
l
limpactcostofal
lot
her
s.
I
tist
hisi
nter
rel
ati
onoff
unct
ionst
hatchal
l
engest
hesuccessf
uli
mpl
ement
ati
onof
i
ntegr
atedl
ogi
sti
calmanagement
.Fi
gur
e2-1pr
ovi
desav
isualr
epr
esent
ati
onoft
he
i
nter
rel
atednat
ureoft
hef
ivear
easofl
ogi
sti
cal
wor
k:
1.or
derpr
ocessi
ng;
2.i
nvent
ory
;
3.t
ranspor
tat
ion;
4.war
ehousi
ng,
mat
eri
alshandl
i
ng,
andpackagi
ng;
and
5.f
aci
l
itynet
wor
k.
Asdescr
ibedbel
ow,wor
krel
atedt
othesef
unct
ionalar
eascombi
nest
ocr
eat
ethe
capabi
l
iti
esneededt
oachi
evel
ogi
sti
cal
val
ue.

Fi
gur
e1.1I
ntegr
atedl
ogi
sti
cs

1.
7 Ther
oleofl
ogi
sti
csi
nSCM

Equi
ppedByA.
Z(2015E.
C) Page11
Logi
sti
csf
aci
l
itat
esi
nget
ti
ngpr
oduct
sandser
vicesasandwhent
heyar
eneededand
desi
redt
othecust
omer
.Ital
sohel
psi
neconomi
ctr
ansact
ions,ser
vingasamaj
or
enabl
erofgr
owt
hoft
radeandcommer
cei
naneconomy
.Logi
sti
cshascomet
obe
r
ecogni
zedasadi
sti
nctf
unct
ionwi
tht
her
iseofmasspr
oduct
ionsy
stems.Pr
oduct
ion
anddi
str
ibut
ionwer
eear
li
erv
iewedasasequent
ialchai
nofext
remel
yspeci
ali
zed
act
ivi
ti
es.Ther
oleofl
ogi
sti
csi
stoensur
eav
ail
abi
l
ityofal
lther
equi
redmat
eri
als
bef
oreev
eryst
epi
nthi
schai
n.Obv
iousl
y,i
nvent
oryofr
awmat
eri
als,semi
-f
ini
shedand
f
ini
shed goodsi
samustacr
osst
hischai
nto ensur
eit
ssmoot
hfunct
ioni
ng.
The
conceptofl
ogi
sti
cshasi
tsbaseupont
hesy
stemsappr
oach.Ther
eisasi
ngl
echai
n,
wi
thf
lowofmat
eri
alsst
art
ingf
rom t
hesuppl
i
er,
thent
othepl
antandf
inal
l
ytot
heend
cust
omer
,and al
so t
hese act
ivi
ti
es ar
e done sequent
ial
l
yin or
dert
o achi
eve
cust
omer
sat
isf
act
ion atl
ow cost
.Fort
hist
o be successf
ult
her
e has t
o be co-
or
dinat
ioni
ntheact
ivi
ti
esoft
hedepar
tment
.
The concept
s ofsuppl
ychai
n managementand l
ogi
sti
cs mustbe compar
ed or
,
mor
eappr
opr
iat
ely
,rel
atedt
oeachot
her
.Logi
sti
csmanagementi
sthemostwi
del
y
accept
edt
erm andencompassesl
ogi
sti
csnotonl
yint
hepr
ivat
ebusi
nesssect
orbut
al
soi
nthepubl
i
c/gov
ernmentandnonpr
ofi
tsect
ors.
I
nthet
went
y-f
ir
stcent
ury
,logi
sti
csshoul
dbev
iewedasapar
tofmanagementandhas
f
oursubdi
vi
sions:
o Busi
nessl
ogi
sti
cs:Thatpar
toft
hesuppl
ychai
npr
ocesst
hatpl
ans,
i
mpl
ement
s,and cont
rol
sthe ef
fi
cient
,ef
fect
ivef
low and st
orage of
goods,ser
vice,andr
elat
edi
nfor
mat
ionf
rom poi
ntofuseorconsumpt
ion
i
nor
dert
omeetcust
omerr
equi
rement
s.
o Mi
li
tar
ylogi
sti
cs:Thedesi
gnandi
ntegr
ati
onofal
laspect
sofsuppor
tfor
t
heoper
ati
onalcapabi
l
ityoft
hemi
l
itar
yfor
ces(
depl
oyedori
ngar
ri
son)
andt
hei
requi
pmentt
oensur
ereadi
ness,
rel
i
abi
l
ity
,andef
fi
ciency
.
o Ev
entl
ogi
sti
cs:Thenet
wor
kofact
ivi
ti
es,
faci
l
iti
es,
andper
sonnelr
equi
red
t
oor
gani
ze,
schedul
e,anddepl
oyt
her
esour
cesf
oranev
entt
otakepl
ace
andt
oef
fi
cient
lywi
thdr
awaf
tert
heev
ent
.
o Ser
vicel
ogi
sti
cs:Theacqui
sit
ion,schedul
i
ng,andmanagementoft
he
f
aci
l
iti
es/asset
s,per
sonnel
,and mat
eri
alst
o suppor
tand sust
aina

Equi
ppedByA.
Z(2015E.
C) Page12
 ser
viceoper
ati
onorbusi
ness.
Val
ue-
AddedRol
esofLogi
sti
cs
Fi
vepr
inci
plet
ypesofeconomi
cut
il
it
yaddv
aluet
oapr
oductorser
vice.I
ncl
udedar
e
f
orm,t
ime,pl
ace,quant
it
y,and possessi
on.Gener
all
y,pr
oduct
ion act
ivi
ti
es ar
e
cr
edi
tedwi
thpr
ovi
dingf
orm ut
il
it
y;l
ogi
sti
csact
ivi
ti
eswi
tht
ime,pl
ace,andquant
it
y
ut
il
it
ies;
andmar
ket
ingact
ivi
ti
eswi
thpossessi
onut
il
it
y.Eachwi
l
lbedi
scussedbr
ief
ly.
 For
m Ut
il
it
y:For
m ut
il
it
yref
erst
othev
alueaddedt
ogoodst
hrougha
manuf
act
uri
ngor
assembl
ypr
ocess.
 Pl
ace Ut
il
it
y:Logi
sti
cs pr
ovi
des pl
ace ut
il
it
y by mov
ing goods f
rom
pr
oduct
ionsur
pluspoi
ntst
opoi
ntswher
edemandexi
sts.
 Quant
it
yUt
il
it
y:Today
’sbusi
nessenv
ironmentdemandst
hatpr
oduct
snot
onl
ybedel
i
ver
edont
imet
othecor
rectdest
inat
ionbutal
sobedel
i
ver
edi
n
t
hepr
operquant
it
ies.
 Possessi
onUt
il
it
y:Possessi
onut
il
it
yispr
imar
il
ycr
eat
edt
hrought
hebasi
c
mar
ket
ingact
ivi
ti
esr
elat
edt
othepr
omot
ionofpr
oduct
sandser
vices.
Logi
sti
calAct
ivi
ti
es
The r
esponsi
bil
i
tyoft
he l
ogi
sti
cs manageri
ncl
udes a numberofact
ivi
ti
es.The
number
andi
mpor
tanceoft
heseact
ivi
ti
est
othebusi
nessv
ari
esaccor
dingt
othe
par
ti
cul
aremphasi
spl
acedont
hel
ogi
sti
csf
unct
ion.
 Tr
aff
ic and Tr
anspor
tat
ion i
nvol
ves t
he phy
sicalmov
ementorf
low of r
aw
mat
eri
alsorf
ini
shedgoodsandi
nvol
vest
het
ranspor
tat
ionagenci
est
hatpr
ovi
de
ser
vicet
othef
ir
m.
 War
ehousi
ng and St
orage i
nvol
ves t
wo cl
osel
y r
elat
ed act
ivi
ti
es:
i
nvent
ory
managementand war
ehousi
ng.A di
rectr
elat
ionshi
p exi
sts bet
ween
t
ranspor
tat
ionandt
hel
evelofi
nvent
oryandnumberofwar
ehousesr
equi
red.I
tis
i
mpor
tantt
oexami
net
het
rade-
off
srel
atedt
othev
ari
ousal
ter
nat
ivesi
nor
dert
o
opt
imi
zet
heov
eral
l
logi
sti
cssy
stem.
 I
ndust
ri
alPackagi
ngi
nvol
vest
henecessar
ypackagi
ngneededt
omov
ethepr
oduct
t
o
themar ket
.Logi
sti
csmanager
smustanalyzet
het r
adeoff
sbet
weent
het
ype
oft
ransport
ati
onsel
ect
edandit
spackagi
ngr
equi
rements.

Equi
ppedByA.
Z(2015E.
C) Page13
 Mat er ialsHandl ingi simpor t
antt oef ficientwar ehouseoper ationandconcer nst he
mechani calequi pment f or shor t-dist ance mov ement of goods t hr
ough t he
war ehouse.
 OrderFul fi
l
lmentconsi stsoft heact i
v i
tiesi nv olvedwi thcompl etingcust omeror ders.
 Orderf ulfi
ll
mentconcer nst het otall eadt imef rom whent heor deri spl acedt o
actual del i
veryi nsat isfactorycondi t
ion.
 DemandFor ecast i
ngi nv olvest hepr edict ionofi nv ent oryrequi r
ementand
mat er ialsandpar tsessent i
al toef fect i
v ei nv ent or ycont r
ol.
 Product ionPl anni ngconcer nst hedet ermi nat ionoft henumberofuni tsnecessar yto
prov idemar ketcov erage.Thei nt egrat ionofpr oduct i
onpl anni ngi nt
ol ogisticshas
becomei ncreasi nglypopul ari nl argecompani est oef f
ecti
v elyf orecastandcont r
ol
i
nv ent or y.
 Cust omerSer v
ice l ev els play an i mpor tantpar ti nl ogist i
cs by ensur ing t he
cust omer get st her ightpr oduct ,att her ightt imeandpl ace.Logi sti
csdeci sions
aboutpr oduct availabil
ityandi nv entor yl eadt imear ecr it
icaltocust omerser v ice.
 Plantand War ehouse Si tel ocat i
on i s concer ned wi t
h cr eat i
ng t he time and
placer elationshi psbet weenpl ant sandmar ket s, orbet weensuppl ypointsandpl ants.
Sitelocat i
oni mpact st ranspor tat i
onr at esandser v i
ce,cust omerser vice,inv entory
requi rement s,andpossi bleot herar eas.Par tsandSer vi
ceSuppor tisconcer nedwi th
mai nt aininganadequat echannel t
oant ici pat edr epai rneeds.
 Salv ageandScr apDi sposaldeal swi thr ever sel ogi sti
cssy stemsandchannel sin
ordert oef fectivelyandef fi
cient lydi sposeofcont ainersandot herscr apatt heend
oft hedi str
ibut i
onchannel .

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ppedByA.
Z(2015E.
C) Page14