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Logistics and Supply Chain
Logistics and Supply Chain
Introduction 1
to Logistics and
Supply Chain
PETER DRUCKERS stated
that:
Logistics Management
Logistics management is the process of
planning,
implementing and
controlling
the efficient, cost-effective forward and reverse flow of raw
materials, in-process inventory, finished goods, services,
and related information from point of origin to point of
consumption
for the purpose of conforming to customer requirements.
Council of Logistics Management
Logistics activities
Plant
Customer
and warehouse
service site
selectionforecasting
Demand
Procurement
Distribution
Packaging
communications
Reverse
Inventory
logistics
control
Traffic
Materialand
handling
transportation
Warehousing
Order processing
and storage
Parts and service support
Logistics Is Relevant to All
Types of Organizations
The definition of logistics includes the
flow of materials and services in both the
manufacturing and service sector.
The service sector includes entities such
as the government, hospitals, banks,
retailers and wholesalers.
Definition of Logistics
Management
Logistics has been called by many names including
the following:
– Materials management
– Physical distribution
– Business logistics
– Channel management
– Distribution
– Industrial logistics
– Logistical management
System Approach/Integration
Logistics is, in itself, a system; it is a network of
related activities with the purpose of managing
the orderly flow of goods, information and
service with the logistics channel.
The systems approach simply states that all
functions or activities need to be understood in
terms of how they affect, and are affected by,
other elements and activities with which they
interact.
System must be viewed as a whole
• Suppliers
• Intermediate
customers
• Final customers
Integrated Company
effort profit
• Product • Maximize long-term
• Price profitability
• Lowest total costs
• Promotion
given an acceptable
• Place (distribution) level of customer
service
Marketing-Logistics
Concepts
Time and place utility –customer service
level –customer satisfaction
Christopher s.5
It is only in the recent past that
business organizations have come to
recognize the vital impact that
logistics management can have in
the achievement of competitive
advantage.
Martin
Christopher
12 Components of
Logistics Management
Management actions
Inputs into Planning Implementation Control
logistics Outputs of
Natural logistics
resources
(land, facilities, Competitive
and equipment) advantage
Logistics management Time
Human and place
resources Suppliers Raw In-process Finished Customers
materials inventory goods utility
Efficient
Financial movement
resources to customer
Information Proprietary
resources Logistics activities asset
• Customer service • Plant and warehouse site
• Demand forecasting selection
• Distribution • Procurement
communications • Packaging
• Inventory control • Reverse logistics
• Material handling • Traffic and transportation
• Order processing • Warehousing and storage
• Parts and service support
The Outputs of the Logistics
System
The outputs of the logistics system are
competitive advantage,
time and
place utility,
efficient movement to the customer, and
providing a logistics service mix such that
logistics becomes a proprietary asset of the
organization.
SCM (CSCMP Definition)
Christopher s. 16,38
1 3
Place/
customer service
levels
Customer service,
Parts and service support,
Return goods handling
Inventory Transportation
carrying costs costs
Inventory management Traffic and transportation
Packaging
Reverse logistics
Source: Adapted from Douglas M. Lambert, The Development of an Inventory Costing Methodology: A Study of the Costs
Associated with Holding Inventory (Chicago, IL: National Council of Physical Distribution Management, 1976), p. 7.
Inventory carrying costs: capital costs,
inventory service cost (insurance and taxes on
inventory), storage space costs, inventory risk
costs.
Lot quantity costs: procurement and production
related costs varying with changes in order size
or frequency.
Order costs, setup costs, capacity lost, material
handling cost, price differentials due to buying
in different quantities
TRADE-OFF APPROACH
IN LOGISTICS
Central goal of trade off in logistics is to maximize long
term profitability and the effective use of assets.
MARKETING
Price Promotion
Place/
customer service
levels
Inventory Transportation
carrying costs costs
LOGISTICS
Order processing
and information
costs
Source: Adapted from Douglas M. Lambert, The Development of an Inventory Costing Methodology: A Study of the Costs
Associated with Holding Inventory (Chicago, IL: National Council of Physical Distribution Management, 1976), p. 7.
81
Future Challenges in
Logistics
Just in time
Aim to reduce waste and redundant inventory
by delivering products, components, materials
when they are needed.
Needs close coordination
Reduces inventory, increases customer service
level
JIT in retail and grocery: QR and ECR
Quick response