Learning Objectives

• To understand the economic impacts of logistics

• To learn what logistics is
• To learn about the increased importance of
logistics
• To understand the systems and total cost
approaches to logistics

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 Learning Objectives
• To expose you to logistical relationships within
the firm
• To learn about marketing channels
• To provide a brief overview of activities in the
logistics channel
• To familiarize you with logistics careers

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 Key Terms
– Cost trade-offs – Mass logistics
– Disintermediation – Materials management
– Economic utility – Physical distribution
– Form utility – Place utility
– Landed costs – Possession utility
– Logistics – Postponement
– Marketing channels – Power retailer

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 Key Terms
– Sorting function – Systems approach
– Stock-keeping units – Tailored logistics
(SKUs) – Time utility
– Stockouts – Total cost approach
– Sustainable
products

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 CHAPTER 1

An Overview of Logistics

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 Economic Impacts of Logistics
• Macroeconomic Impacts
• Economic Utility
– Possession utility
– Form utility
– Place utility
– Time utility

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Table 1-1: The Cost of the Business Logistics System in
Relation to a Country’s Gross Domestic Product (GDP)

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 Logistics: What It Is

• Council of Logistics Management definition:

“Logistics is that part of the supply chain process that
plans, implements, and controls the efficient,
effective forward and reverse flow and storage of
goods, services, and related information between
the point of origin and the point of consumption in
order to meet customers’ requirements.”

Source: www.cscmp.org

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The Increased Importance of Logistics

• A Reduction in Economic Regulation

• Changes in Consumer Behavior
• Technological Advances
• The Growing Power of Retailers
• Globalization of Trade

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 The Systems and Total Cost
Approaches to Logistics
• Systems Approach
– Interdependence of company and logistics goals
– Interdependence of functional areas
• Stock-keeping units (SKUs)
– Interdependence of logistics activities or
Intrafunctional logistics

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Figure 1-1: Control Over the Flow of Inbound
and Outbound Movements

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Figure 1-2
The Utilization of
Logistics Service as a
Major Selling Point

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 The Systems and Total Cost
Approaches to Logistics
• Total Cost Approach
– Cost trade-offs: changes to one activity cause
some costs to increase and others to decrease

– Total Logistics Concept: to find the lowest

total cost that supports an organization’s
customer service requirements

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Logistical Relationships within the Firm

• Finance
• Production
• Marketing

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Logistical Relationships within the Firm
• Marketing
– Place Decisions
– Price Decisions
• Landed costs
– Product Decisions
• Stockouts
– Promotion Decisions

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 Marketing Channels
• “set of institutions necessary to transfer the title to
goods and to move goods from the point of
production to the point of consumption and, as such,
which consists of all the institutions and all the
marketing activities in the marketing process.”
Source: American Marketing Association Dictionary, www.marketingpower.com

• Channel members
– Manufacturers
– Wholesalers
– Retailers
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 Marketing Channels
• Ownership channel
– Covers movement of the title to the goods
• Negotiations channel
– Buy and sell agreements are reached
• Financing channel
– Payments for goods
• Promotions channel
– Promoting a new or existing product
• Logistics channel
– Moving and storing product throughout the
channel
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Channel Intermediaries/ Facilitators
• Ownership channel
– Banks, finance companies
• Negotiations channel
– Brokers
• Financing channel
– Banks, insurance companies, finance companies
• Promotions channel
– Advertising agencies, public relations agencies
• Logistics channel
– Freight forwarders

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Activities in the Logistical Channel
• Customer service • Demand forecasting
• Facility location • International logistics
decisions • Materials handling
• Inventory • Packaging
management • Reverse logistics
• Order management • Warehousing
• Procurement management
• Transportation
management

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Responsibilities of Logistics Managers

• A specialist • A generalist
– Freight rates – Understands functional
– Warehouse layouts relationships
– Inventory analysis – Relates logistics to
– Production other firm operations,
– Purchasing suppliers, customers
– Transportation law
– Controls large
expenditures

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 Logistics Careers
• Most business organizations are potential
employers
• “Logistician” highlighted as one on the 50 best
careers for the year 2010
Source: U.S. News & World Report

• Career paths for the two most recent CEO’s of

Wal-Mart included assignments in logistics
and distribution.

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 Logistics Professionalism
Professional Organizations Dedicated to Advancing the
Professional Knowledge of their members:
• APICS – The Association for Operations Management (www.apics.org)
• American Society of Transportation and Logistics (AST&L) (www.astl.org)
• Council of Supply Chain Management Professionals (www.cscmp.org)
• Delta Nu Alpha (DNA) (www.deltanualpha.org)
• International Society of Logistics (SOLE) (www.sole.org)
• Supply Chain & Logistics Association Canada (SCL) (www.sclcanada.org)
• The Chartered Institute of Logistics and Transport in the UK – CILT
(UK) (www.ciltuk.org.uk)
• Warehousing Education and Research Council (WERC) (www.werc.org)

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Copyright Notice

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