Logistics in Supply Chain

BLCP 201
Logistics in Supply Chain
• Logistics
• Logistics Management
• Value Added Roles of Logistics
• Logistics Activities
• Logistics in the Firm
• Logistics interfaces with Marketing
 Logistics
• Logistics is the management of the flow of things
between the point of origin and the point of
consumption in order to meet requirements of
customers or corporations.
• The resources managed in logistics can include
physical items, such as food, materials, animals,
equipment and liquids, as well as abstract items,
such as time, information, particles, and energy.
• The logistics of physical items usually involves the
integration of information flow, which is material
handling, production, packaging, inventory, transp
ortation, warehousing, and often security.
 Logistics Management
Perspective Definition
Inventory Management of materials in motion and at rest
Customer Getting the right product, to the right customer, in the right
quantity, in the right condition, at the right place, at the
right time, and at the right cost (called the "seven Rs of
logistics")

Dictionary The branch of military science having to do with procuring,

maintaining and transporting materials, personnel, and
facilities.
International The art and science of management, engineering, and
Science of Logistics technical activities concerned with the requirements,
design, and supplying and maintaining resources to
support objectives, plans, and operations

Utility/Value Providing time and place utility/value of materials and

products in support of organization objectives
 Logistics Management
Perspective Definition
Council of Supply That part of the supply chain process that plans, implements,
Chain Management and controls the efficient, effective flow and storage of goods,
Professionals service, and related information from point of origin to point
of consumption in order to meet customer requirements

Component support Supply management for the plant (inbound logistics) and
distribution management for the firm's customers (outbound
logistics)
Functional Materials requirements determination, purchasing,
management transportation, inventory management, warehousing,
materials handling, industrial packaging, facility location
analysis, distribution, return goods handling, information
management, customer service, and other activities
concerned with supporting the internal customer
(manufacturing) with materials and the external customer
(retail stores) with product.
Common culture Handling the details of an activity
 Logistics Management
Logistics management subdivisions.
• Business logistics
– Part of supply chain that plans, implements and control
goods/services/information
• Military logistics
– Design and integration of support for operational capability of
military forces and equipments
• Event logistics
– Network of activities, facilities and personnel required to organize,
schedule and deploy resources for an event
• Service logistics
– Acquisition, scheduling and management of the facilities/assets,
personnel and materials to support/sustain a service
operation/business
 Logistics
Logistics is the process of anticipating
customer needs and wants; acquiring the
capital, materials, people, technologies, and
information necessary to meet those needs
and wants; optimizing the goods or service-
producing network to fulfill customer
requests; and utilizing the network to fulfill
customer requests in a timely manner.
Value-Added Roles of Logistics

Production Marketing
Form utility Possession
utility

Logistics
Place utility
Time utility
Quantity utility
 Value Added Roles of Logistics
• Form Utility:
– Value added to goods through a manufacturing or assembly process.
• Place Utility:
– Moving goods from production surplus points to points, where
demand exist by adding value to goods through transportation
• Time Utility:
– Availability of goods/services at that point when customer demands
them. Value added to good/services by having at a demand point at a
specific time.
• Quantity utility:
– Delivering the proper quantities of items to where it is demanded
• Possession utility:
– Create basic market activities related to promotion of
product/services.
Logistics Activities
 Logistics Activities
1. Transportation
2. Warehousing and storage
3. Industrial packaging
4. Inventory
5. Order fulfillment
6. Demand forecasting
7. Production planning/scheduling
8. Procurement
9. Customer service
10.Facility location
11.Return goods handling
12.Part and service support
13.Salvage and scrap disposal
 Logistics Activities
• Transportation
– Very important and largest activity in the logistics
system.
– Major role for the movement of goods/products.
– Logistics management to select the most suitable
mode/s of transportation and carrier
 Logistics Activities
• Packaging
– Industrial packaging protect the products during
transportation
– Type of transportation mode may require different
packaging requirement.
– Tradeoff between cost and damage to be considered.
 Logistics Activities
• Storage
– Involve two separate activities; inventory
management and warehousing
– Management should pay attention when making
decision relating to storage activities
 Logistics Activities
• Materials Handling
– Important to warehouse design and efficient operations
to handle the goods/materials
– Placement of goods in a warehouse between storage,
order-picking and docks.
– Concerns the usage of the right equipment for most
efficient handling of goods in the warehouse
 Logistics Activities
• Inventory Control - has two dimensions;
– Assuring adequate level : to ensure sufficient level of
inventory by monitoring the current inventory
(replenish if needed)
– Certifying inventory accuracy : As inventory deplete to
fill customer order, the facility information system can
track the status. An annual physical count is done to
ensure accuracy.
 Logistics Activities
• Order Fulfillment
– Activities involve with filling and shipping of
customer orders.
– An important factor to consider is Lead time (time
when a customer order is made till the goods is
receive by the customer)
 Logistics Activities
• Forecast
– A process to anticipate the required inventory
level especially to ensure efficient control of
material/components for manufacturing
– Must have a plan in conjunction with the
marketing forecasts of demand to ensure proper
inventory level are kept
• Production Planning
– Planning relates to the forecasting in term of
effective inventory control
– Managers can calculate the number of units to
manufacture to ensure adequate market coverage
 Logistics Activities
• Procurement
– as a part of logistics as transportation cost relate
to the distance when purchased of materials
– In terms of transportation and inventory cost, the
quantities purchased would affect total logistics
cost
– To purchase from suitable and reliable supplier so
that the supply is being replenish timely and no
operational issues encounter
 Logistics Activities
• Customer Service
– The process of interacting directly with customer to
influence or take orders. Including coordinating
among inventory control, manufacturing,
warehousing and transportation to guarantee
promises being kept
– Level of service an organization offers/promise to its
customers. Include order fill rates and on-time
delivery rates.
 Logistics Activities
• Facility location
– Site location can impact an organization’s business
– A location would alter time and place relationships
between facilities and markets or between supply
points and facilities. It does affects transportation
cost.
 Logistics Activities
• Other activities
– Other activities includes parts and service support,
return goods handling, and salvage and scrap disposal.
– Require the development of a reverse logistics system
that allows used, broken or obsolete products to be
returned to supplier for disposition.
 Logistics in the Firm
Logistics Interfaces with Manufacturing/Operators
• Interface between logistics relates to the length
of the production run
• Manager weight the advantage or disadvantages
of a long versus short production runs and their
impacts on inventories
• Organizations today tend toward shorter
production run and to reduce the time and
expense with changing production – “JIT” or
“LEAN” , trend moving towards “pull” system
compared to “push” system. ….cont..
 Logistics in the Firm
….cont..

Logistics Interfaces with

Manufacturing/Operators
• Production manager keen to minimize seasonal
demand for production – possible to produce
well ahead of time to meet demand.
• Packaging might be a factor in influencing sales
• Marketing manager placed great concern over
the packaging of the product appearance,
information and related aspect.
….cont..
 Logistics in the Firm
….cont..
Logistics Interfaces with
Manufacturing/Operators
• Consumer package has to fit into the package or
external package; size, shape and other
dimension of the consumer package affect the
use of industrial package
• The physical dimensions and the protection
aspect of consumer package affect the logistics
system in the area for transportation, materials
handling and warehousing
Logistics interfaces with Marketing
• Price
– Adjust price to meet transportation weight
• E.g., Different weight break offers different pricing.
– Discount schedule for the purchase of larger
quantities
• e.g., Higher volume gets better rates.
– Volume sold under different schedules
Logistics interfaces with Marketing
• Product
– Physical dimensions affects the transportation
e.g., packaging requirements
– New products often refurbish old products in the
market – improve/maintain sales
– Consumer packaging influence sales for many
products and affects the logistics system.
Logistics interfaces with Marketing
• Promotion
– Marketing area that receives much attention
through advertising.
– Distribution of products to consumer/customer
– “Push and pull” strategy of products through
distribution channel
– Predicting consumer behavior difficult to
accommodate.
Logistics interfaces with Marketing
• Place
– Marketing are more involve in the decision making
on transactions- wholesale or direct deal
– Wholesale- larger quantity
– Small retail- less quantity
– Suppliers need to purchase transportation service
meet delivery needs