Logistics/Supply Chain and Operation

Management
A Value Chain

Adel Sakr by

dr.adelmsakr@gmail.com

01112183988

MBA – 2021
1
ams
 Logistics/Supply Chain
and Operation
Management

An Introduction

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 CHAPTER 1

INTRODUCTION
TO LOGISTICS / SUPPLY CHAIN AND
OPERATION MANAGEMENT

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What is Management?
 “ Management is the process of undertaken
by one or more individuals to coordinate the
activities of others to achieve results not
achievable or possible by one individual
acting alone.”
 Peter Drucker, a management pioneer,

defined management as:

“the Process of making people more
productive.”
He emphasizes:
Performance, Quality and Service.

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 Material Machine
Manpower Resource Resource Money
Resource Resource

M2 M3 M4
M1

The Empowered M=4

Manager
M’s

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What is Management?
 “ Management is the process of efficient allocation and
utilization of the different 4 M’s Organizational Resources.”
i.e. M =4 M’s. These are as shown in next diagram:
 Manpower Resource: Human resources, employees,
labors, staff and other supporters..etc.
 Material Resource: all types of materials, papers,
documents, facilities, procedures and process..etc.
 Machine Resource: Computers, desks, tools and any
other technology..etc.
 Money Resource: Budget, Financial resources, and other
transactions needed to facilitate the work and harmony of the
above three resources.. etc..”

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Learning Objectives

 To familiarize with basic concepts of logistics

/supply chain and Operation management
 To understand recent evolvement of logistics
 To understand the reasons for its recent

growth in importance
 To understand the importance of IT in

logistics

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 What is the relation between
Logistics/SC and Operation?

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 Difference between Logistics/SC and
Operation
SC

Opertion
Internal
Logistics
Ex
ter

Support
na

Both
l

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What is Supply Chain management SC
 Supply chain management is the management
of the flow of goods or services and includes
all processes that transform raw materials
into final products. It involves the active
streamlining of a business's supply-side
activities to maximize customer value and
gain a competitive advantage in the
marketplace.

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 What is Operation Management OM
 Operations management focuses on running a
business effectively and efficiently, including
maintenance, material planning and the analysis
of production systems. Operations managers
coordinate the internal business operations,
driving not how the product or service is
moved, but how it is developed. This generally
requires professionals to be skilled in building
rapport with organizational stakeholders,
current in technology applications and adept at
analysis.

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  Productionis the creation of goods
and services

Operations management (OM) is the set

of activities that creates value in the form
of goods and services by transforming
inputs into outputs

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 What is Logistics Management?
LM

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.

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 The Difference Between Supply Chain Management and
Operations Management

 The major difference between supply chain

management and operations management is
that supply chain is mainly concerned with
what happens outside the company –
obtaining materials and delivering products –
while operations management is concerned
with what happens inside the company.
(Floridatechonline)

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Logistics VS Supply Chain Management
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.

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 Logistics VS Supply Chain Management

What is the difference?

 
 A Supply chain is the network of:
◦ facilities (warehouses, factories, terminals, ports,
stores, homes)
◦ vehicles (trucks, trains, planes, ships)
◦ logistics information systems
  connecting suppliers’ suppliers with its customers’
customers.
Logistics is:
◦ “what happens in the supply chain”
◦ “putting the right material in the right place at the
right time“
◦ it provides much of the Supply Chain’s value-added.

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 The Difference Between SC/L/O Management

 According to Tim Dhoull, “an operations

manager needs to understand the series of
processes within a company in order to get
them to flow seamlessly, and in this  sense, the
role is directly related to supply chain
management. The coordination involved in
setting up these processes in practice
represents logistics; the combination of
understanding and coordinating the work of a
company are therefore central to a successful
operations manager”.

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 The Difference Between SC/L/O Management

 Although there are differences, these terms

and roles are very much inter-related and in
order to be profitable in this competitive age,
companies must have an experienced and
effective team of supply chain, logistics and
operations managers.

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 Functions of logistics, production, and SCM in a value chain
[from Ivanov and Sokolov (2010)]

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Supply Chain Schematic

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Ten Critical Decisions
Ten Decision Areas
 Service and product design
 Quality management

 Process and capacity

design
 Location
 Layout design
 Human resources,
job design
 Supply-chain
management
 Inventory management
 Scheduling
 Maintenance

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 The Critical Decisions
 Process and capacity design
 What process and what capacity will these
products require?
 What equipment and technology is necessary
for these processes?
 Location
 Where should we put the facility?
 On what criteria should we base the location
decision?

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 The Critical Decisions
 Layout design
 How should we arrange the facility and
material flow?
 How large must the facility be to meet our
plan?
 Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our employees to
produce?

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 The Critical Decisions
 Supply-chain management
 Should we make or buy this component?
 Who are our suppliers and who can integrate
into our e-commerce program?
 Inventory, material requirements planning,
and JIT
 How much inventory of each item should we
have?
 When do we re-order?

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 The Critical Decisions
 Intermediate and short–term scheduling
 Are we better off keeping people on the
payroll during slowdowns?
 Which jobs do we perform next?
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?

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The Objective of Logistics/SC
 Maximize overall value created
 Supply chain value: difference between what

the final product is worth to the customer

and the effort the supply chain expends in
filling the customer’s request
 Value is correlated to supply chain

profitability (difference between revenue

generated from the customer and the overall
cost across the supply chain)

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 Products & Services

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 Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction

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 Characteristics of Service
 Intangible product
 Produced and
consumed at same time
 Often unique
 High customer
interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
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 Industry and Services as
Percentage of GDP
90 −
Services Manufacturing
80 −
70 −
60 −
50 −
40 −
30 −
20 −
10 −
0−
Germany
Canada

China

Mexico

South Africa
France

Hong Kong
Czech Rep

Russian Fed
Australia

US
Japan

Spain

UK
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A Revised Strategy is Generating
Great Top Management Interest

 Historical perspective of distribution

(Peter Drucker, 1962):
“The last frontier of cost economies”

 The contemporary view:

Distribution is a new frontier for demand
generation—a competitive weapon.

 Both views are important!

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 Logistics Management

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History of Logistics

Global
Logistics
Scope & Influence

Supply Chain
Logistics

Corporate
Logistics
Facility
Logistics
Workplace
Logistics

1950's 1960's 1970's 1980's 1990's

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Phases of Logistics Development
1. Workplace Logistics

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Phases of Logistics Development
1. Workplace Logistics
Definition:
◦ the flow of material at a single workstation.

Objective:
◦ to streamline the movements of an individual
working at a machine or assembly line.

Origins:
◦ Principles developed by fathers of Industrial
Engineering during and after WWII.
◦ Also known as: Ergonomics.

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 Phases of Logistics Development
2. Facility Logistics

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Phases of Logistics Development
2. Facility Logistics
Definition:
◦ the flow of material between work stations within
the four walls of a facility (interworkstation, intra
facility).
◦ Facility can be a factory, terminal, warehouse,
distribution center (DC).
Origins:
◦ developed in mass production assembly lines in
1950’s, 60’s and 70’s.

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Phases of Logistics Development
3. Corporate Logistics

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Phases of Logistics Development

3. Corporate Logistics
 Definition:
◦ the flow of material and information between the
facilities and processes of a corporation. (inter
workstation, inter-facility, intra-corporate).
 
Objective:
◦ Develop and maintain a profitable customer service
policy while maintaining and reducing total logistics
cost.

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Phases of Logistics Development
3- Corporate Logistics
Logistics takes place and
between

Manufacturers Its factories Warehouses

Wholesalers Distribution Centers

Its distribution
Retailers Retail Stores
centers (DCs)

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Phases of Logistics Development
4. Supply Chain Logistics

Supplier Manufacturer Wholesaler Retailer Customer

Supply chain is optimized when material,

information and money flow simultaneously,
in real time, and paperless.

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Phases of Logistics Development

4. Supply Chain Logistics

Definition:
◦ the flow of material, information and
money between corporations
(interworkstation, interfacility,
intercorporate, and intrachain).
 

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Phases of Logistics Development
5. Global Logistics
 

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Phases of Logistics Development
5. Global Logistics
 Definition:
◦ The flow of material, information, and
money between countries.
◦ Connects suppliers’ suppliers with its
customers’ customers internationally.
◦ Much more complicated than domestic
logistics given the many languages, laws,
currencies, time zones, cultures, etc.
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Key Activities/Processes

 Primary
◦ Setting customer service goals
◦ Transportation
◦ Inventory management
◦ Location
 Secondary, or supporting
◦ Warehousing
◦ Materials handling
◦ Acquisition (purchasing)
◦ Protective packaging
◦ Product scheduling
◦ Order processing

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Logistics Strategy and Planning

 The objectives of logistics strategy

◦ Minimize cost
◦ Minimize investment
◦ Maximize customer service
 Levels of logistical planning
◦ Strategic
◦ Tactical
◦ Operational

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Strategic, Tactical, and Operational Decision Making

Decision area Strategic Tactical Operational

Transportation Mode selection Seasonal equip- Dispatching
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 of warehouses
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 Relationship of Logistics to Marketing
Product
Marketing

Promotion
Price

Place-Customer
service levels

Transport
Logistics

Inventory
carrying costs costs

Lot quantity Warehousing

costs Order processing costs
and information
costs
Dickson Chiu 2006

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Relationship of Logistics to
Production
 Coordinates through scheduling and strategy
◦ make-to-order
◦ make-to-stock
 An integral part of the supply chain
◦ Affects total response time for customers
◦ Shares activities such as inventory planning
 Costs are in tradeoff
◦ Production lot quantities affect inventory levels and
transportation efficiency
◦ Production response affects transportation costs and customer
service
◦ Production and warehouse location are interrelated

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Supply Chain is Multi-Enterprise

Conventional
Focus Scope
Company

Suppliers Customers

Supplier’s Customers/
suppliers End users

Acquire Convert Distribute

Product and information flow

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Effect on Logistics Foreign Outsourcing
Domestic sourcing Foreign sourcing
Profit Profit Increase
G&A G&A
Marketing Marketing

Logistics Increase
Logistics

Overhead Tariffs
Overhead
Materials
Materials

Labor Reduction
Labor

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Reality of SCM Scope

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 Increasing Significance of Logistics
 Costs are high
◦ About 10.5% of GDP domestically
◦ About 12% of GDP internationally
◦ A range of 4 to 30% of sales for individual firms, avg. about 10%
◦ A high as 70-80% of sales if purchasing and production are included
 Customers are more demanding of the supply chain
◦ Desire for quick response
◦ Desire for mass customization
 An integral part of company strategy
◦ Generate revenue
◦ Improve profit
 Logistical lines are lengthening
◦ Local vs. long distance supply
◦ Globalization of trade
 Logistics is a key to trade and an increased standard of living
◦ Law of comparative economic advantage applies
 Logistics adds value
◦ Time and place utilities

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Analysing the definition of logistics
management
 Logistics management is a subset of
supply chain management.

 It includes the actions required to:

- prepare (plan);
- organise (implement); and
- execute (control) the activities of a firm
when moving materials or finished
products to customers.

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Analysing the definition of logistics
management

 Logistics management encompasses

many of a firm’s strategic, tactical and
operational activities.

 An objective of logistics management is

to be efficient across the entire system.

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 THANK YOU

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