MK 223: DISTRIBUTION AND

LOGISTICS MANAGEMENT

Course Credits 12 Lecture Hours Wednesdays

1000 – 1200 hours
UDBS C.033
Course Pre- MK 101 Seminar Hours Fridays
requisite 1300 hours
UDBS C. 124

GENERAL INTRODUCTION

“Knowledge for Management Excellence” [Know ME]

Preamble
 It is one of the areas that has been neglected for
quite sometimes.
 What is around us is due to logistics that is
transportations, home affairs, humanitarian and
military affairs
Key issues
 Distribution
 Logistics
 Business Logistics
 Supply Chain
 Competitive advantage through Distribution and
Logistics Management
Several names are used to refer
Logistics and Distribution
 Physical Distribution
 Logistics
 Business Logistics
 Materials Management
 Product Flow
 Procurement and Supply
 Marketing Logistics
 Supply Chain Management
 Demand Chain Management
 The key relationships include;
 Logistics= Materials Management +
Distribution
 Supply Chain is a bit broader

 Supply of raw materials and components

 Delivery of products to the final customers
 SC= Suppliers + Logistics + Customers
 Historical Perspective
 1950s and early 1960s
 Distribution systems were unplanned and uncoordinated
 Manufacturers manufactured, retailers retailed
 In some ways goods reached the shop
 Distribution represented by haulage industry and manufacturers own account fleet
 1960s and early 1970s
 Physical Distribution came up
 Recognition of interrelated physical activities Transport, storage, material handling, packaging
could be linked together and managed effectively
 System approach and TC approach emerged
 PD Manager-Planning and Distribution for Improved services and reduced costs
 Initially the benefits were recognized by the manufacturer
 Historical Perspective
 1970
 Important decade
 Distribution was accommodated in the mngt structure of the organization
 Change in structure and control of the distribution chain
 Power of manufacturers and suppliers declined and increased in the number of
major retailers
 Larger retail chains developed distribution structures-regional and local depots to
supply their stores
 1980s
 Cost increases
 Professionalism in the Distribution
 Long term planning and cost savings measures: Centralized Distribution, severe reduction in
Stock holding, use of computer to provide information
 Growth of 3rd party distribution service industry with increased IT
Historical Perspective..
 Late 1980s and early 1990
 Advancement in ICT
 Broadening the concept to include materials management
and physical distribution
 The term logistics was used to describe the concept
 An opportunity to improve customer service and reduce
logistics costs
 1990s
 Amplified to provide the product to the final customer-SCM
 Acting together of the manufacturers and retailers
Historical Perspective…
 2000-2010
 Increased competition
 Operation efficiency
 Flexibility
 Time to market
 Logistics and Supply chain became recognized as key
to success
 2010 and Beyond
  
 What is Logistics & SC
 Logistics
 Those activities that focus on flow and storage of raw materials,
in process inventory, finished goods, and related information
from the point of origin to point of consumption for the purpose
of conforming to customer requirements’.
 The activities ensure the right amount of the right products to the
right place at the right time at the lowest possible price.
 Supply Chain
 A sequence of firms that perform activities required to create and
deliver a good or service to consumers or industrial users.
What is business Logistics
 According to CLM

‘ ....... the process of planning, implementing and

controlling the efficient, cost effective flow and
storage of raw materials, in process inventory,
finished goods, and related information from the
point of origin to point of consumption for the
purpose of conforming to customer requirements’
Logistics
 Decisions in the area of
Distribution and Logistics
Strategic Tactical Operational
 Customer Service  Transport  Goods receipt and
 Channel of Distribution  Vehicle checking
 Supply Points Types/Sizes/Number  Bulk Storage
 Location Points  Contract Hires  Order Picking
 Depot Configuration  Primary Routes  Stock Replenishment
 Depot Types and  Delivery Schedules  Order marshalling
Number  Driver Resources  Load Scheduling
 Location and Size of  Support Facilities  Returns
Depots  Depot Storage  Personnel availability
 Transport Model Choice  Design and Layout  Stock update
 3rd Party or own account  Space allocation  Documentation
 Direct Delivery  Storage media Completion
 Stock Levels  Handling methods  Vehicle maintenance
 Fork-lift truck types and  Vehicle workshop activity
numbers
 
Logistics
Summary of Logistics Activities
 Components of Business
Logistics
 Materials Management (raw materials, parts and
components, initial processing towards the factory)
 Physical Distribution (finished goods inventory,
distribution to warehouses, retailers then to
customers)
 Thus the scope of business logistics commences from
procurement and raw materials management through
the delivery of the final product
Supply Chain Management
 Christopher (2011)
 The management of upstream and downstream relationships with
suppliers and customers in order to deliver superior customer value at
less cost to the supply chain as the whole.
 CLM
 It is the systematic, strategic coordination of the traditional business
functions and tactics across these business functions within a
particular company and across businesses within the supply chain for
the purposes of improving the long-term of the individual companies
and the supply chain as the whole
 Before and now
 Vertical Integration vs Strategic Partnership
SCM
SCM
Logistics versus Supply Chain
Mngt
 Council of Logistics Management
“Logistics is the process of planning, implementing and controlling the
efficient, cost‐effective flow and storage of raw materials, in ‐process
inventory, finished goods and related information from the point of
origin to point of consumption for the purpose of conforming to
customer requirements.”
 Handfield and Nichols
SCM is the integration of all activities associated with the flow and
transformation of goods from raw materials through to end user,
as well as information flows, through improved supply chain
relationships, to achieve a sustainable competitive advantage.
Relationship between SCM and
Logistics, alternativ 1

Logistics SCM
Relationship between SCM and
Logistics, alternativ 2

LOGISTICS SCM
Relationship between SCM and
Logistics, alternativ 3

LOGISTIC
SCM
S
Relationship between SCM and
Logistics, alternativ 4

Supply Chain
Management Logistics
Relationship between SCM and
Logistics, alternativ 5

SCM is only a new word for

logistics
Key differences between SCM
and Logistics Management
 LM is concerned with optimizing flows within the
organization while SCM is concerned with the
integration, cooperation and coordination of all the
partners in the value chain.
 LM creates a single plan for the flow of products
and information through a business while SCM
builds upon this framework and seeks to achieve
linkage and coordination between processes of
other activities in the pipeline.
 Logistics Management

Inbound Flow of raw materials and parts Outbound flow of finished products

Suppliers Producer Customers

Supplier Network Marketing Channel

Supply Chain Management

Why SCM then?
 It is aimed at reducing or eliminating the buffers of
inventory that exists between organizations in a
chain through the sharing of information on
demand and current stock levels.
 There four stages of Supply Chain Integration
( Baseline, Functional Integration, Internal
Integration and External Integration)
 The Logistics/SCM Mission
 Getting the right goods or services to the right place, at the
right time, and in the desired condition at the lowest cost
and highest return on investment.
 Product / Service Utility
 Possession Utility ‐ the value or usefulness that comes from a
customer being able to take possession of a product
 Form Utility ‐ in a form that can be used by the customer and is
of value to the customer
 Place Utility ‐ available where they are needed by customers
 Time Utility ‐ available when they are needed by customers
 Logistics obviously help time and place utility
 Importance of Logistics &
Distribution System
 Maintaining competitive edge
Successful business logistics provide a competitive edge against other organizations. It
provides a system or process by which customer needs can be fulfilled in a more efficient
manner. A business should strive to provide shipments of merchandise in a more accurate
and fast manner than competitors do. The Internet has made it possible for many
companies to do this.
 Building Good Consumer Relations
Providing product in an efficient manner, which business logistics helps to do, also helps to
build good consumer relations.
 Creating Finished Product
A business needs to ensure there are enough raw materials available to make finished
products. Without quality goods, a business cannot make quality product. Having enough
products stocked is also necessary for supply and demand purposes and to maximize
customer satisfaction.
Goal of Logistics
 Logistics aims at achieving a target level of
customer service at the lowest cost possible
 Six operational objectives of the logistics system
 Rapid response-react quickly to changes
 Minimum variance- output eg consistent in delivery times
 Minimum Inventory-keeping minimum inventory
 Movement Consolidation-economies in transportation costs
 Quality-conformance to quality standards
 Life cycle support-ability to handle returns (defective, recycling)
Significance of SC and Logistics
Mngt
 Relating Marketing Channels, Logistics, and
Supply Chain Management
 Supply Chain Management and Marketing Strategy
 • Aligning a Supply Chain with Marketing Strategy
 • Understand the customer
 • Understand the supply chain
 • Harmonize the supply chain with the marketing strategy
Achieving Competitive
Advantage through Logistics
 FP is highly associated with firm’s ability to create sustainable competitive
advantage(CA).
 Firm’s performance (FP) in the market place is based on the linkage of the 3Cs
(Company, Customers and its competitors).
Achieving Competitive
Advantage through Logistics
 CA can be explained as the ability of an organization to differentiate
itself in the eyes of customer from its competition, and to operate at
a lower cost and hence greater profit.
 Thus C.A depends upon cost advantage and value advantage
 Cost adv. is achieved due to
 greater sales volume,
 economies of scale enabling fixed costs to be spread over a greater volume
and
 the impact of the experience curve
 Capacity Utilisation
 Low Inventory
 Low Wastage
 Asset Turn
Achieving CA ......
 Value adv. Is achieved thru
 differentiation plus delivery services,
 after sales services,
 financial packages
 Tailored Services
 Distribution Channel Strategy
 Reliability
 Responsiveness
 Information
 Flexibility
Achieving CA.....
Service Leader Cost and

High
Service Leaders
Value advantage

(3) (4)

Commodity Cost Leader

Market (2)
(1)
Low

Low High
Cost advantage
Value Chain
 CA cant be understood by looking at the whole
firm.
 Activities in the firm constitute to cost adv. and
value adv.
 Value Chain disaggregates a firm into strategically
relevant activities in order to understand the
behaviour of costs position and create a basis for
differentiation.
VCA
Marketing and Logistics
Interface
 4 Ps, Place being neglected which implies Right
product, in the Right place and at the Right time
 Easy to make differentiation in the market place
 Customers are willing to accept substitutes
 Increasing power of customer service as a means of
differentiation
 Assists in customer relationship and retention
 Marketing
 Place Decisions, Price Decisions (Landed costs), Product
Decisions (Stockouts), Promotion Decisions