Lecturer: Duong Vo Nhi Anh, VNU-HCM

Office: Room O2-602

Email: dvnanh@hcmiu.edu.vn

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Course Objectives

 Understand the definitions Logistics and Supply Chain

 Understand the concept and key points of Supply Chain
Management.
 Understand how to manage Supply Chain and Logistics in
real companies.
 Apply to a group project.

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References
 Text book: Logistics - An Introduction to Supply
Chain Management, Donald Waters, PALGRAVE MACMILLAN, 2003.
 Reference books: Supply Chain Logistics Management, Donald J.
Bowersox, David J. Closs and M. Bixby Cooper, McGraw Hill, 2002.
 Lecture Notes: Logistics and Supply Chain Management

Grading
 Midterm Exam 30%
 Assignment 30%
-Quiz, Home works 25%
-Group Project 75%
 Final Exam 40%

3
Weeks Week of Text Assignment and Homework Problems
of Semester
Course
1 22 Lecture 1: Fundamentals of Logistics and Supply Chain Management Read Chapter 1 and 2
(Jan.30,12) Homework problems:
(5,6 page 25, case study page 51)

2&3 Lecture 2 and 3: Locating Facilities Read Chapter 5

-Making group for presentation 2 chapters: chapter 8: Measuring and Improving Performance and chapter 9: Procurement Homework problems:
(1, 2, 3, 4 page 134)

4 Lecture 4: Planning Resources Read Chapter 6

Homework problems:
(1, 2, 3, 4 page 164)

5 Measuring and Improving Performance: Student Presentation Read Chapter 8

6 Lecture 5 : Controlling Material Flow Read Chapter 7

Homework problems:
(case study page 192-193 )

7 - Midterm Review Read Chapter 7

- Group Project Assignment Homework problems:
(case study page 192-193 )

Midterm Exam Review Lectures 1-5

8 Lecture 6: Group Project Instruction Read Chapter 9

Homework problems: (case study 247-248 )
Project

9 Procurement: Student Presentation Read Chapter 9

10 Lecture 7: Inventory Management Read Chapter 10

Homework problems
(1,2, 3, 4, 5, 6, 7 page 280)

11 Lecture 8: Warehouse & Material Handling Read Chapter 11

Homework problems:
(case study page 304 and question 4 page 306)

12 Field Trip (Attendance is expected- No excuses)

-Project Presentation
-Final Review

Final Examination Review Lectures 6-8

 Chapter 1
Fundamentals of Logistics

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Learning Objectives

DEFINE ‘logistics’ and associated terms

UNDERSTAND the role and structure of supply chains
LIST different activities of logistics and understand the
relationships between them
DISCUSS the aims of logistics
SHOW how logistics contributes to customer satisfaction
RECOGNISE the importance of logistics to every
organization.

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1. Basics Definition
 All organizations move materials.
Manufacturers: raw materials finished goods.
 Definition of Logistics: Logistics is the function that is
responsible for the movement of materials (and information).
It is responsible for the transport and storage of materials
between suppliers and customers.
 According to the
Council of Supply Chain Management Professionals (CSCMP), a
professional organization for Logistics and SCM professionals,
logistics is defined as: “the process of planning, implementing and
controlling the efficient, effective flow and storage of goods, services
and related information from point of origin to point of consumption
for the purpose of conforming to customer requirements”

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Basic Definition (contd.)
What is products?

what is products?
Basic Definition (contd.)
Products: Goods (tangible) and Services (intangible)
Operations: Operations include manufacturing, serving,
transporting, selling, training, and so on. The main outputs
are products.
OPERATIONS
INPUT OUTPUT

- People - Manufacture - Goods

- Buildings - Serve - Services
- Raw materials - Supply - Profit
- Equipment - Transport - Waste
- Information - Sell - Wages
- Investment - Train etc…
etc. . . etc…

Fig. 1.2. Operations of a organization

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Basics Definition (contd.)
 LOGISTICS is the function responsible for the flow of
materials from suppliers into an organization,
through operations within the organization, and then
out to customers.

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Inbound logistics: activities between external suppliers and the
organization
Outbound logistics: activities between external customers and
the organization
Operations within the organization: activities between internal
suppliers and internal customers
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Link:
http://www.youtube.com/watch?v=V4JRH3e4xrg&featur
e=related

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2. THE SUPPLY CHAIN

-Different names for these chains of activities and organizations.

emphasize the operations, refer to the process;
emphasize marketing, call it a logistics channel;
look at the value added, call it a value chain,
see how customer demands are satisfied, call it a demand chain.
---Here we are emphasizing the movement of materials and will
use the most general term of supply chain.

A SUPPLY CHAIN consists of the series of activities and

organizations that materials move through on their journey
from initial suppliers to final customers.
2. role and structure of supply
chains
Inbound logistics: activities between external
suppliers and the organisation
Outbound logistics: activities between external
customers and the organisation
Operations within the organisation: activities between
internal suppliers and internal customers

Fig. 1.5. Supply Chain

Structure of the supply chain
SUPPLY CHAIN = a series of activities and organizations
that move materials from initial suppliers to final
customers
Upstream supply chain activities: involve initial supplier,
third tier supplier, second tier supplier, first tier supplier
Downstream supply chain activities: involve first tier
customer, second tier customer, third tier customer, final
customer

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17
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 Benefit from Supply Chain

Do you want to avoid supply chain?

EG: The market of vegetables

the sugar and sugar cane, beet

Well , You can get answer from figure!

3. ACTIVITIES OF LOGISTICS
 Procurement or purchasing.
 Inward transport or traffic management
 Receiving
 Warehousing or stores
 Stock control, Order picking and Materials handling.
 Outward transport
 Physical distribution management
 Recycling, returns and waste disposal
 Location and Communication
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 point of origin to
point of consumption for the purpose of conforming to customer
requirements (Council of Logistics Management (CLM) -
http://cscmp.org/default.asp)
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Summary of logistics activities

Case Study
NIKE logistics center
http://www.youtube.com/watch?
v=NkfHVYv5nUo&feature=related

How UPS Cargo Containers Work

http://www.youtube.com/watch?v=MyeqlieHhi4

Simulation http://www.youtube.com/watch?
v=_0UJ0lKnn_o&feature=related

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Organizing Logistics

Fig1.8. Organizing Logistics

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 4. Aims of logistics
When you buy an item, what kind of contents will be take into your
consider?
Aims of Logistics
Logistics is responsible for the flow of materials through a
supply chain. This function is also called supply chain
management.

LOGISTICS is the time-related positioning of resources, or

the strategic manage­ment of the total supply-chain
The SUPPLY-CHAIN is a sequence of events intended to
satisfy a customer.

The overall AIM OF LOGISTICS is to achieve high

customer satisfaction. It must provide a high quality
service with low – or acceptable – costs.

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Importance of Logistics
profits earned
Return on Assets=
assets employed

Stocks, Current
money etc. Assets

Property, Assets
Equipment, Fixed Assets
Plant, etc.

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Importance of Logistics (cont.)

profits earned
Return on Assets=
assets employed
Customer Sales
Satisfaction

Operating Profit
Profit
Costs Margin

Product Price
Features

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 Example:
ABC currently has sales of $ 20 mil. a year, with a stock level of 35% of
sales. Annual holding cost for the stock is 20% of value. Operating
costs are $8 mil./ year and other assets are valued at $15 mil. What is
the current return on assets? How does this change if stock levels are
reduced to 25% of sales?

Solution: Taking costs over a year, the current position is:

Cost of stock = stock × holding cost = (20 × 0.35) × 0.2 = 1.4 mil. /year
Total costs = operating cost + cost of stock = 8 + 1.4 = 9.4 mil./year
Profit = sales − total costs = 20 − 9.4 = 10.6 mil. /year
Total assets = other assets + stock = 15 + (20 × 0.35) = 22 mil.

Return on assets = profit / total assets = 10.6 / 22 = 0.4818 (48.18%)

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 Example (cont.):

The new position with stock reduced to 25% of sales has: ???
Cost of stocks = 20 × 0.25 × 0.2 = 1 mil. /year
Total costs = 8 + 1 = 9 mil. /year
Profit = 20 − 9 = 11 mil./year
Total assets = 15 + (20 × 0.25) = 20 mil.
Return on assets = 11 / 20 = 0.55 or 55%

 Reducing stocks gives lower operating costs, higher profit

and a significant increase in Return on Asset (ROA).

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Development of logistics
pressures to the use of logistics
 Changes of Customers.
 Changes of Competition
 Other changes in retail markets
 International trade continues to grow.
 Organizations become to outsource peripheral activities and
concentrate on their core operations.
Current trends
Improving communication
Electronic data interchange (EDI)
Electronic point-of-sales data (EPOS)
e-purchasing of e-procurement
…
Support of EDI:
 Item coding (often bar-coding)
 Electronic Fund Transfer (EFT)

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Current trends
Improving customer service
 Lower lead-times
 synchronized material movement
 mass customization
Other significant tendencies
 Globalization
 Reduced number of suppliers
 Concentration of ownership
 Outsourcing.
 Make or Buy.

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Current trends
Other significant tendencies
 Cross-docking
 Direct delivery
 Stock reduction methods
 Increasing environmental concerns
 More collaboration along the supply chain

Three important themes for logistics consider

LEANNESS, AGILITY and INTEGRATION. Ideally,
logistics should aim for all three of these

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Current themes
LEAN Logistics
 faster deliveries, reduce stock levels, reduce handling, lower
costs, reduce waste etc.
AGILE Logistics
 flexible and responsive, customized service, respond quickly
to a changing demand.
INTEGRATION Logistics
 co-operate with other organizations

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 Summary
❑Every organization creates products to satisfy customer demand. The
operations that create these products need an effective and efficient
flow of materials. In this sense, ‘materials’ are all the goods and
services needed to create products.
❑ Logistics is the function that is responsible for the flow of materials
into, through and out of an organization.
❑ Materials move through a series of related activities and
organizations between initial suppliers and final customers. These
form a supply chain. Each product has its own supply chain.
❑ There are many possible structures for supply chains, but the
simplest view has materials converging on an organization through
tiers of suppliers, and products diverging through tiers of customers.
❑ Logistics consists of a series of related activities. These range from
procurement at the beginning of operations, through to physical
distribution at the end.

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Summary (cont.)
❑ An overall aim for logistics is to achieve high customer
satisfaction or perceived product value. This must be achieved
with acceptable costs.
❑ Every organization depends on the movement of materials, and
the way this is done affects costs, profits, relations with suppliers
and customers, customer service, and virtually every other
measure of performance.
❑ There are a lot of pressures for improving logistics. Current
trends are: Improving communication, Improving customer service,
some other significant tendencies.
❑ Current themes:
LEAN logistics, AGILE logistics, INTEGRATION logistics.

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 Quiz 01
Prob.01
ABC currently has sales of $ 20 mil. a year, with a stock level of 35%
of sales. Annual holding cost for the stock is 20% of value. Operating
costs are $8 mil./ year and other assets are valued at $15 mil. What
is the current return on assets? How does this change if stock levels
are reduced to 25% of sales?

Solution: Taking costs over a year, the current position is:

Cost of stock = stock × holding cost = (20 × 0.35) × 0.2 = 1.4 mil./year
Total costs = operating cost + cost of stock = 8 + 1.4 = 9.4 mil./year
Profit = sales − total costs = 20 − 9.4 = 10.6 mil. /year
Total assets = other assets + stock = 15 + (20 × 0.35) = 22 mil.

Return on assets = profit / total assets = 10.6 / 22 = 0.4818 (48.18%)

Prob.02
Draw a Supply Chain for Bottle of water
 Home work 01
(Due: next class)
 5. The cost of logistics varies widely from organization to organization. What factors affect
these costs? Are the costs fixed or can they be controlled
 6. How could you find the best balance between service level and costs?
measures of service, perhaps emphasising an internal view rather than an external one. 

 1.5 The cost of logistics varies widely from organisation to organisation. 

What factors affect these costs?  Are the costs fixed or can they be
controlled?
There can be a huge variety of logistics costs in different types of
organisation.  The usual ones are the type of materials moved, its weight,
volume, perishability, value, special handling, packaging, distances moved,
and so on.  Some of these are under the control of logistics managers, but
the majority are not (but perhaps logistic manages can influence them).
 
1.7 How can a company find the best balance between service level and costs?
This is a difficult question for which there is no simple answer.  Balancing
costs and benefits is a key theme in logistics, and we return to it frequently
in the book.
 Customers

Manufacturers

Suppliers

Transportation

Material Production Inventory &

Warehousing
Transportation
Transportation
Fig. 1.3. Logistics Network
In practice, most organizations get materials from many
different suppliers, and sell products to many different
customers.
The supply chain converges as raw materials move in
through the tiers of suppliers, and diverges as products
move out through tiers of customers.
A manufacturer might see sub-assembly providers as first
tier suppliers, component makers as second tier suppliers,
materials suppliers as third tier suppliers, and so on. It
might see whole­salers as first tier customers, retailers as
second tier customers, and end users as third tier
customers .

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Quiz 01
Draw a
Supply Chain for
Milk Products.