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Logistics processes

Topic 2 – Logistics Processes
Outline
1.1

Customer Service

1.2

Demand Forecasting

1.3

Inventory Management

1.4

Logistics Communications

1.5

Materials Handling

1.6

Order Processing

10 Procurement .Topic 2 – Logistics Processes Outline (con’t) 1.9 Plant & Warehouse Site Selection 1.7 Packaging 1.8 Parts & Service Support 1.

12 Traffic & Transportation 1.Topic 2 – Logistics Processes Outline (con’t) 1.13 Warehousing & Storage 1.14 Integration of Logistics Activities .11 Reverse Logistics 1.

While supply chain logistics is the traditional process associated with the acquisition and distribution of goods.1. -.There is no value to a product until it is in the hands of the customer or consumer. .1 Customer Service ★ The logistics function is the final phase of the buyer-seller sales transaction . -. ★ Coyle. Bardi and Langley (1992) dichotomized logistics into (i) supply chain logistics and (ii) service response logistics.the one involving the physical transfer of goods. service response logistics is the process of coordinating nonmaterial activities necessary to the fulfillment of the service in a cost and customer-service-effective way.

of lead-time (time spent to serve). safe delivery and correct orders c) Communication d) Convenience .1.1 Customer Service Good logistical customer service is contingent upon a) Cycle time b) Dependability .flexibility .

 Such forecasts determine: a.2 Demand Forecasting  Demand forecasting involves determining the quantity of product and accompanying service that customers will require at some point in the future. Finished goods inventory positioning e.1. Allocation of resources to logistics activities in order to service forecasted demand . Production schedules b. Purchasing & acquisition strategies c. In-plant inventory d.

Work-in-process c. Finished goods  Inventory consumes physical space.3 Inventory Management  Inventory management involves trading off the level of inventory held to achieve high customer service levels with the cost of holding inventory.  Main categories of inventory: a.1. personnel time and capital – significant opportunity costs . including capital tied up in inventory. Raw materials b. warehousing and obsolescence.

e. its suppliers and its customers b.1. All the individual logistics activities d.4 Logistics Communications  Effective communication must take place among: a. work-in-process and finished goods e. coordinating warehousing of materials. Major functions within an organization such as logistics and engineering. Various members of the supply chain. Various aspects within each logistics activity.g. An organization. c.g. e. intermediaries and secondary customers or suppliers  Accurate and timely communication is fundamental to successful logistics management . including those not directly linked to the organization.

 Effective logistics management strives to minimize the amount of handling performed on an item since handling adds no value to a product.1. Minimize travel distance c. Minimize losses from waste. in-process inventory and finished goods within a plant or warehouse. Eliminate handling wherever possible b.  Objectives to support this: a. Minimize work-in-process d. spoilage and theft .5 Materials Handling  Materials handling covers every aspect of the movement or flow of raw materials. breakage. Provide uniform flow that is free of bottlenecks e.

order status enquiries. Operational elements – order entry/editing. etc.1. etc. . shipping. Credit & collection elements – credit checking. scheduling. etc. Speed and accuracy of order processing have a big impact on customer’s perception of an organization’s service level because it is a key area of a customer’s interaction with the organization. tracing & expediting and product information requests. Communication elements – order modification. accounts receivables processing/collection. invoicing. c.6 Order Processing   Components of order processing: a. b.

Marketing – the package’s size.1. Logistics – the package performs 2 roles: i.7 Packaging   Packaging performs 2 basic functions: a. and therefore reduce handling costs Packaging requirements for export are more stringent than those for domestic markets because of longer distances travelled and more physical handling. Makes it easier to store and move products. Protects the product from damage while being stored or transported ii. colour and printed information acts as a form of communication or advertising b. . weight.

 Logistics is responsible for making sure that spare (extra) and replacement parts are available: a. When and where the customer needs them.  An organization’s product offering includes providing customers with after-sales service involving repair and parts replacement.1. When and where the repair process needs them.8 Parts & Service Support  Logistics’ responsibility does not end when the product is delivered to the customer. b.  Overall objective is to reduce equipment downtime for customers .

Availability of transportation services and links f.  Considerations in site selection: a. Location of raw materials.1. Local taxes. environmental issues .9 Plant & Warehouse Site Selection  Plant & warehouse selection affects logistics’ ability to effectively manage inbound movement and storage of materials and products. as well as outbound flows. legal concerns and regulations. e. component parts and subassemblies c. Location of target markets b.g. Availability & cost of labour e. Security g. Availability & cost of land d.

 Includes: a. timing of purchases c. quality control .1. selection of suppliers b. pricing d. transportation modes and carriers e.10 Procurement  Procurement is the process of acquiring materials and services to ensure the operating effectiveness of an organization’s manufacturing and logistics processes. packaging f.

handling. storage and disposal of returned products and waste materials.  Logistics must have effective procedures for collection.11 Reverse Logistics  Reverse logistics covers: a. distribution and packaging processes d. Transportation of reusable or recyclable materials to remanufacturing or reprocessing locations  Product can be returned from customers due to defects. shipping errors and trade-ins etc. Removal and disposal of waste materials from the production.1. overages. sorting. Salvage & scrap disposal for return goods c. . Handling of return goods b. transportation.

national and international transportation regulations Often the single largest cost item in logistics . and includes the return flow as well. intermodal c.1. rail.  Involves:  a. pipeline. Ensuring compliance with local. Movement of products b. Selection of shipment method – air. sea. truck. Routing – choosing a specific path for the movement d.12 Traffic & Transportation  Traffic and transportation covers the movement or flow of goods from point-of-origin to point-of-consumption.

Safety and maintenance procedures f.13 Warehousing & Storage  Warehousing and storage involves the management of the space needed to hold or maintain inventories  Activities include: a. Layout and design of storage facilities c. Operating procedures for handling and moving products within the warehouse e. Personnel training g. Decisions on what products should be stored where d. Decisions on whether storage facilities should be owned.1. leased or rented b. Productivity measurement .

suppliers and service providers. its customers. personnel and information within an organization.  The objective of integrating logistics activities is to achieve an orderly flow of materials.14 Integration of Logistics Activities  Integrated logistics management refers to the administration of various logistics processes as an integrated system.1. . and among the organization.

Intermediary-Customer . Marketing-Distribution e. Purchasing-Production c. Distribution-Intermediary (wholesaler and/or retailer) f.1. Supplier-Purchasing b. Production-Marketing d. a.14 Integration of Logistics Activities  Critical Business Interfaces Integration is crucial at the following business interfaces in order to prevent inventory buildup.

Summary and Conclusion .

1. . 2. Integration of these processes and activities improves customer service for an organization while reducing overall logistics costs. Logistics is network of related processes and activities.