Transportation & Distribution Planning

Lecture 3

Logistics Integration & Customer

Service

Course Instructor: Sayda Uzma Tahira

uzma.tahira@ucp.edu.pk

UCP Business School, University of Central Punjab, Lahore

The Relationship between Required Inventory and
Order Cycle Length from a Customer Perspective
• Order cycle can be defined as the time that elapses
from when a customer places an order until the order is
received.
• shorter the order cycle, the less inventory required to
be held by the customer.

Shorter the order

cycle, less
inventory would
be required

2
The General Relationship of the Cost
of Lost Sales to Inventory Cost
 By increasing inventory costs (either by
increasing the inventory level or by
increasing reorder points), organizations
can usually reduce the cost of lost sales
 In other words, an inverse relationship
exists between the cost of lost sales and
inventory cost.

3
The General Relationship of the Cost of
Lost Sales to Inventory Cost

4
The General Relationship of the Cost of
Lost Sales to Transportation Cost
Organizations can usually trade off increased
transportation costs against decreased lost sales
costs.

5
The General Relationship of Product
Dollar Value to Various Logistics Costs

6
The General Relationship of Product
Weight Density to Logistics Costs
The higher the density, the more weight can fit in
an area of warehouse, container space – hence
more efficient the use of warehousing / container
space

7
 The General Relationship of Product
Susceptibility to Loss and Damage to Logistics
Costs

8
Factors Affecting Customer Service Levels
31%
Product or quality
mistakes

12% Damaged
goods

7%
Other

6%
Frequently cut
items

44%
Late delivery
9
 The Value Chain of typical
manufacturing firm & Logistics

INDIRECTLY
create the
value as
perceived by
the customer

DIRECTLY
create the
value as
perceived
by the
customer

10
 Corporate Strategy
 Strategy is the process whereby plans are formulated for
positioning the firm to meet its objectives
 Strategy formulation begins with defining a corporate strategy
This Involves;
 Assessing needs, strengths, and weaknesses of the four major
components;
 Customers

 Suppliers

 Competitors

 Company Itself

 Corporate strategies are converted to more specific strategies for

various functional areas of the firm such as supply chain and
logistics

11
Corporate to Functional Strategic
Planning

12
 Supply Chain Strategy
 Supply chain strategy determines the
nature of material procurement,
transportation of materials,
manufacture of product or creation of
service, distribution of product
 All functional strategies must support
one another and the competitive
strategy

13
Classification of Products

14
Choosing the Right Supply Chain
Strategy

15
Choosing the Right Supply Chain Strategy

Functional Innovative
Products-- Products--
Low margin Predictable Unpredictable
demand demand
Efficient supply Staple food
chain products

Responsive Electronic
supply chain equipment
High margin
2-16
The objectives of Logistics Strategy
 Minimize cost
 Minimize investment
 Maximize customer service

Use
ROLA

17
An important objective in Logistics
Strategy
Maximize return on logistics
assets (ROLA) Costs of
Logistics’ logistics
contribution operations
to sales

ROLA RevenueCosts
Assets
Investment in
logistics
assets

18
Logistics Planning
 Levels of logistics planning;
 Strategic
 Tactical
 Operational
 What to Plan;
 Customer service levels
 Facility location
 Inventory decisions
 Transportation Decisions

19
 Strategic, Tactical, and Operational Decisions
Decision area Strategic Tactical Operational
Seasonal equip- Dispatching
Transportation Mode selection
ment leasing

Inventories Location, Control policies Safety stock levels Order filling

Order Order entry, transmittal, Processing

processing and processing system orders, Filling
design back orders

Purchasing Development of supplier- Contracting, Expediting

buyer relations Forward buying

Warehousing Handling equipment Space utilization Order picking

selection, Layout design and restocking

Facility Number, size, and

location location of warehouses
2-7
Flow of Logistics Planning

21
 The total logistics concept
 System-wide management of entire logistics
chain as a single entity instead of separate
management of individual logistical functions.
 Integrated Logistics a process of planning,
coordinating and arranging the potential
operational activities so as to optimize the
productivity to ensure success.
 With businesses today looking for better
connectivity and collaboration in real-time, the
concept of integrated and smarter logistics have
shaped up in the recent times.
The financial impact of logistics
 Challenges of Global Logistics

 extended supply lead times;

 production postponement with local added value;
 complicated node management;
 multiple freight transport options;
 extended and unreliable transit times; and
 the need for greater visibility in the supply chain.
Your Takeaways?