Professional Documents
Culture Documents
14-1
Logistics
Logistics is:
“…that part of supply chain management that plans, implements, and controls the
efficient, effective flow and storage of goods, services, and related information from
point of origin to point of consumption in order to meet customer requirements.”
Products have little value to the customer until they are moved to the
customer’s point of consumption
• Time utility- products are delivered at the right time.
• Place utility- products are delivered to the desired location.
The Objective of Transportation
Shipper (party that requires the movement of the product between two points in
the supply chain)
Transportation cost
Inventory cost
Facility cost
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Legal Forms of Transportation
Transportation service companies are classified legally as either common,
contract, exempt, or private carriers.
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Transportation Modes
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Trade-offs in Transportation Design
• Transportation and inventory cost trade-off
• Choice of transportation mode
• Inventory aggregation
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Choice of Transportation Mode
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Inventory Aggregation: Inventory vs.
Transportation Cost
As a result of physical aggregation
Inventory costs decrease
Inbound transportation cost decreases
Outbound transportation cost increases
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Trade-offs Between Transportation Cost
and Customer Responsiveness
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Tailored Transportation
• The use of different transportation networks and modes based on
customer and product characteristics
• Factors affecting tailoring:
• Customer distance and density
• Customer size
• Product demand and value
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Role of IT in Transportation
• The complexity of transportation decisions demands to use of IT
systems
• IT software can assist in:
• Identification of optimal routes by minimizing costs subject to delivery
constraints
• Optimal fleet utilization
• GPS applications
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Risk Management in Transportation
Three main risks to be considered in transportation are:
Risk that the shipment is delayed
Risk of disruptions
Risk of hazardous material
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Making Transportation Decisions in
Practice
Align transportation strategy with competitive strategy
Consider both in-house and outsourced transportation
Use technology to improve transportation performance
Design flexibility into the transportation network
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Global Logistics
Global Logistics Intermediaries
• Customs Brokers- move through customs & handle
documentation.
• International Freight Forwarders- move goods to foreign
destination
• Trading Companies- Put buyers & sellers together &
handle export/import arrangements.
Reverse Logistics
• Backwards flow of goods from customers in SC when
goods are returned by a customer in the supply chain
• Retail returns range 6% to 40% of sales
• Often is an unwanted SC activity
• Poor reverse logistics can hurt firm
• Green reverse logistics programs - designed to return
unneeded products for recycling. These programs reduce
environmental impact on landfills & deal with dangerous
contaminants.