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Chapter 1
Fundamentals of
Logistics and Supply
Chain Management
Lecturer: Dr. Nguyen Hang Giang Anh

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Learning Objectives

❖ Describe a supply chain and define supply chain

management.
❖ Describe the objectives and elements of supply chain
management.
❖ Describe basic supply chain management activities.
❖ Understand the definition and importance of Logistics.
❖ Describe Logistics activities.
❖ Identify the challenges and current trends in Logistics.
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Main Content

1. Supply Chain

2. Logistics
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1. SUPPLY CHAIN
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Products and Operations

❖ Products: Goods (tangible) and Services (intangible).

❖ Operations: manufacturing, serving, transporting, selling,
training, and so on. The main outputs are products.

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What is a Supply chain?

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Activities in Supply Chain

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Structure of the Supply chain

❖ Supply Chain is a series of activities and organizations

that move materials from initial suppliers to final
customers.

❖ Upstream supply chain activities: involve initial supplier,

second tier supplier, first tier supplier.

❖ Downstream supply chain activities: involve first tier

customer, second tier customer, final customer.

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Supply Chain of Coca-Cola
 Supply Chain Management LOGO

❖ Supply chain management is defined as: “The planning and

management of all activities involved in sourcing and procurement,
conversion, and all logistics management activities. Importantly, it
also includes coordination and collaboration with channel partners,
which can be suppliers, intermediaries, third-party service
providers, and customers” - Council of Supply Chain
Management Professionals (CSCMP)

❖ Goals:
o Produce and distribute products at the right quantities, to the
right place, at the right time.
o Minimize total cost while satisfy service level requirements.
https://www.youtube.com/watch?v=Mi1QBxVjZAw

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Importance of SCM

When a firm, its customers, and its suppliers all know each
other’s future plans and are willing to work together → the
planning process is easier and much more productive.
o lower purchasing and inventory carrying costs,
o better product quality,
o higher levels of customer service.
→ all leading to more sales and better profits.
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2. LOGISTICS
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What is Logistics?

“Logistics is defined as the process of planning, implementing

and controlling the efficient, effective flow and storage of goods,
services and related information from point of origin to point of
consumption for the purpose of conforming to customer
requirements” - Council of Supply Chain Management
Professionals (CSCMP)

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Basic Definitions

❖ Logistics is the function responsible for the flow of

materials/information from suppliers into an
organization, through operations within the
organization, and then out to customers.

❖ Logistical value proposition:

▪ Cost minimization.
▪ Service benefits/Customer satisfaction.

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Role of Logistics

Inbound logistics: activities between external suppliers and the organization.

Outbound logistics: activities between external customers and the
organization.
Operations within the organization: activities between internal suppliers and
internal customers.
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Activities of Logistics

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Importance of Logistics
❖ Return on assets (ROA) is a fundamental indicator of
efficiency, measuring how well a business is using its
assets to generate profit.
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Example

Assume that ABC company currently has sales of 20

million/year, with
❖ a stock level of 35% of sales,
❖ annual holding cost for the stock is 20% of value,
❖ operating cost is 8 mil./year,
❖ other assets are valued at 15 mil.
Question: What is the current return on assets? How does
this change if stock levels are reduced to 25% of sales?
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Solution
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Current Trends in Logistics (1/2)

❖ Improving communication
o Electronic data interchange (EDI).
o Electronic point-of-sales data (EPOS).
o E-purchasing of e-procurement.
o Support of EDI.
o Item coding (often bar-coding, QR codes).
o Electronic Fund Transfer (EFT).
❖ Improving customer service
o Lower lead-times.
o Synchronized material movement.
o Mass customization. 20
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Current Trends in Logistics (2/2)
❖ Other significant tendencies:
o Globalization.
o Reduced number of suppliers.
o Concentration of ownership.
o Outsourcing.
o Make or Buy.
o Cross-docking.
o Direct delivery.
o Stock reduction methods.
o Increasing environmental concerns.
o More collaboration along the supply chain. 21
2. role and structure of supply LOGO
chains
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Link:
http://www.youtube.com/watch?v=V4JRH3e4xrg&feature
=related

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