1

LOGISTICS SYSTEMS (FACILITY & TRANSPORTATION)

Antony Paulraj
Professor in Supply Chain Management
NEOMA Business School, Reims, France
 Course Coordinator 2

Antony Paulraj
Email: antony.paulraj@neoma-bs.fr
 Course Presentation 3

• In this course, you will learn the basis of efficient facility and
transportation management that includes topics such as
transportation, warehousing, logistics networks, environmental
sustainability, and the last mile delivery.

• Wherever appropriate, you will also understand how logistics

decisions could subsume economic, environmental as well as social
considerations.

• The course is based on business cases, reducing the theoretical

contents to the minimum. Additionally, wherever appropriate, you
will also understand how to integrate environmental and social
issues in these decisions
 Course Objectives 4

AT THE END OF THIS COURSE, YOU WILL BE ABLE TO:

• identify situations in which various logistics management

decisions can lead to considerable decrease of costs and/or
increase of profits.

• understand and apply different analytical and management

techniques applied to logistics.
 Course Structure 5

SESSIO
TYPE TOPICS
N
Lecture;
01 Case analysis; Understanding logistics systems - Introduction
Group Activities
Lecture;
02 Case analysis; Sustainability and logistics - An overview
Group Activities
Lecture;
03 Case analysis; Transportation management
Group Activities
Lecture;
04 Case analysis; Warehouse management
Group Activities
Lecture;
05 Case analysis; Facility and transportation decisions - I
Group Activities
 Course Structure 6

SESSIO
TYPE TOPICS
N
Lecture;
06 Case analysis; Facility and transportation decisions - II
Group Activities
Lecture;
07 Case analysis; International logistics management
Group Activities
Lecture;
08 Case analysis; Designing global supply chain networks
Group Activities
Lecture;
09 Case analysis; Last mile delivery
Group Activities
Lecture;
10 Case analysis; Outsourcing of logistics systems
Group Activities
 Assessment 7

Group work (50%): Case studies and in-class exercises

Final exam (50%): A 2-hour exam covering materials taught in class
 8

Session 1 - introduction

UNDERSTANDING LOGISTICS SYSTEMS

 9

History and Development

 History of Logistics 10

• Building of historical landmarks

• Pyramids of Giza
• The Taj Mahal

• Logistics were employed by one of the authors of

military theory, baron Antoine Henri Jomini (1779-
1869), a French general with Swiss ancestry.

• Logistics = a theory of movement, provisioning and

accommodation of armies  military logistics.
 History of Logistics 11

• World War II.: Logistics were successfully

employed. By means of mathematical methods, a
number of problems were solved on the western
front in Europe, such as provisioning, transport,
deployment.

• After the War: Logistic activities were extended for

the solution of analogical problems in civilian use
 beginning of Business Logistics.
 Development of Logistics 12

Stage 1:
Logistics were limited to distribution. Problems
relating to transaction with finished products and
related physical distribution were dominant. The
problem of inventories was not important.

This pioneering period culminated in the sixties -

this approach is not used any more.
 Development of Logistics 13

Stage 2:
Corporate logistics were gradually extended to
supplying (purchases, procurement) and to
production management.

The method of the employment of logistics in the

distribution, production and supplying departments
was narrow-minded, and the effects were only
partial.
Time period: 1970 - 1980.
 Development of Logistics 14

Stage 3:
Companies create complete logistical chains and
systems connected with customer and supplier. The
integration of corporate activities and the
development of supplying, production and
distribution systems is actually being materialized.

It is an integrated logistics.
Time period: 1980 - 2000
 Development of Logistics 15

Stage 4:
Integrated logistical systems will be optimized as a
whole in the foreseeable future.

It is a very complex, system-related problem. One of

the requirements is the establishment of strategic
alliances between companies, their customers,
product suppliers and logistics providers.
 16

Definitions
 Definition of Logistics 17

Organizing, planning, managing and materializing

the goods flow, starting with development and
purchases and ending with production and
distribution according to the final customer´s order,
so that all the requirements are met at the lowest
possible cost and minimum capital expenditure.
(European Logistics Association)
 Definition of Logistics 18

Logistics is a tremendous tool to approach

systematically a private or public company in
order to improve the quality according to the
wishes of the clients, to improve the flexibility of
the production, to integrate the total organization
of partners, service suppliers, collaborators,
distributors and clients.
(Institute of Logistics)
 Definition of Logistics 19

Logistics is the process of planning, implementing

and controlling the efficient, effective flow and
storage 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)
 Definition of Logistics 20

Logistics management is that part of supply chain

management that plans, implements, and controls
the efficient, effective forward and reverse flow
and storage of goods, services and related
information between the point of origin and the
point of consumption in order to meet customers’
requirements.
(Council of Supply Chain Management)
 Definition of Logistics - Seven “Rs” 21

ensuring the availability of

 the RIGHT product,
 in the RIGHT quantity and
 RIGHT condition,
 at the RIGHT place,
 at the RIGHT time,
 for the RIGHT customer,
 at the RIGHT costs.
(Institute of Logistics)
 Logistics vs. Supply Chain System 22

Cooper et al., 1997

 Logistics vs. Supply Chain System 23

Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+

Demand forecasting

Purchasing

Requirements planning
Purchasing/
Production planning Materials
Management
Manufacturing inventory

Warehousing
Logistics
Material handling

Packaging

Finished goods inventory Supply Chain

Physical Supply Chain
Management
Distribution Management
Distribution planning

Order processing

Transportation

Customer service

Strategic planning

Information services

Marketing/sales

Finance
 Definition of Logistics and Supply Chain 24
Management

Three views on the relationship between logistics and SCM

 What is a Logistics (Supply Chain) System? 25

 Logistics system (or a supply chain system) is primarily

concerned with the efficient integration of suppliers, factories,
warehouses and stores so that merchandise is produced and
distributed in the right quantities, to the right locations and at
the right time, and so as to minimize total system cost subject to
satisfying customer service requirements.

 Customer is an integral part of this system.

 Typical logistics system stages: customers, retailers, distributors,

manufacturers, suppliers.

 All stages may not be present in all supply chain systems (e.g., no
retailer or distributor for Dell).
 Break-out Session 26

What does Logistics involve?

Why study Logistics?
 27

What does Logistics involve?

 Scope of Logistics for Most Firms 28

Business logistics

Physical supply Physical distribution

(Materials management)

Sources of Plants/
Customers
supply operations
• Transportation • Transportation
• Inventory maintenance • Inventory maintenance
• Order processing • Order processing
• Acquisition • Product scheduling
• Protective packaging • Protective packaging
• Warehousing • Warehousing
• Materials handling • Materials handling
• Information maintenance • Information maintenance

Focus firm’s internal supply chain

 Logistical Activities 29

· Primary
- Setting customer service goals
- Transportation
- Inventory management
- Location

· Secondary, or supporting
- Warehousing
- Materials handling
- Acquisition (purchasing)
- Protective packaging
- Product scheduling
- Order processing
Logistical Activities 30
 Break-out Session 31

List all the key activities of the logistics function

(including the ones we just discussed). Discuss their
existence and importance to the management of the
following:
• A TV manufacturer (Sony)
• A touring musical group (Berlin Philharmonic)
• A hospital (Hospital Center University de Rouen)
• A city government (Rouen)
• A fast-food chain (McDonalds)
 32

What does Logistics involve?

Logistics Channels
Logistics Channel 33
Logistics Channel 34
Logistics Channel 35
Logistics Channel 36
Logistics Channel 37
 38

Importance of Logistics
Why Study?
 39

Supply Chains are increasingly becoming Global

Some Examples
 Singer Sewing Machines 40

h Body shells from USA

h Motors from Brazil

h Drive Shafts from Italy

h Assembled in Taiwan

h Sold around the world

Li and Fung Coats 41
 Significance of Logistics 42

 Costs are high

 About 12% of GDP internationally
 A range of 4 to 30% of sales for individual firms, avg. about 10%
 As 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
 Logistics adds value
 Time and place utilities
Impact on Financial Performance 43
Logistics – Competitive Positions 44
 Group Activity 45

Logistics (Supply Chain) Strategy

Good and Bad

Use the “Hall-of-Famers-and-Shamers” document as part of

this exercise. You should also be prepared to discuss your
choices and to contrast this with other groups in class.
WALMART 46
 DELL – Supply Network Structure 47

Supplier 1 CUSTOMERS

Supplier 2

Supplier 3 DELL TPMs

Supplier N
HUB
Supply Base LOW COST AND CUSTOMIZATION
HIGH VELOCITY, LOW INVENTORY AND LOW OVERALL COST
 48

LOGISTICS SYSTEMS - TYPES

Think about these products/services in terms of: 49

• Product/Service lifecycle
• Profit margins
• 4 V’s
Types of Logistics Systems (Supply Chains) 50
 Two Distinct Functions! 51

• Physical Function

• Market Mediation Function

Types of Logistics Systems (Supply Chains) 52
Types of Logistics Systems (Supply Chains) 53
Types of Logistics Systems (Supply Chains) 54
Types of Logistics Systems (Supply Chains) 55
Types of Logistics Systems (Supply Chains) 56

56
Types of Logistics Systems (Supply Chains) 57
 Drivers of Logistics Performance 58

Break-out
Session
 Considerations for Logistics Drivers 59

Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation / Proximity /

Dedicated Flexibility
Information What information is best suited for
each objective
Considerations for Logistics Drivers 60