Chapter 2 – Role of Logistics in Supply Chains

Council of Supply Chain Management Professionals (CSCMP)
the process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from point of origin to the point of consumption for the purpose of conforming to customer requirements
Seven R’s of Logistics (Customer Perspective)
getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and the right cost
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
-activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers
-to varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution-strategic, operational and tactical
-an integrating function which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions, including marketing, sales, manufacturing, finance, and information technology
Inventory management
How much to order, when to order, where inventory should be held, and what line items should be available at specific locations
What functions will be performed, how many warehouses are needed, where to locate these warehouses, and what size of warehouses
protects products during transportation and storage and includes materials such as cardboard boxes or plastic bins, stretch wrap, banding, bags, and so on
Materials Handling
-is important in warehouse design and efficient warehouse operations and equipment
-logistics managers are concerned with the short-term distance movements into, within, and out of a DC
-in order to properly balance service and cost, safety and productivity, and volume and capacity, logistics professionals must effectively manage four critical dimensions (movement, time, quantity, and space)
Inventory Control
can be found in manufacturing facilities and warehouses. Has two dimensions
Assuring Adequate Inventory Levels
requires monitoring current inventory levels and placing replenishment orders or scheduling production to bring inventory levels up to a predetermined level
Certifying Inventory Accuracy
to assure that the actual physical inventory levels match those shown in the information system, cycle counts are taken of items every period during the year
Order Fulfillment
-consists of activities involved with filling and shipping customer orders
-critical to logistics because of lead time (i.e., elapsed time from when a customer places an order until they receive satisfactory fulfillment of that order)
-the four basic processes/activities (that also affect lead time) are order transmittal, order processing, order preparation, and order delivery
Facility Location
-logistics managers are concerned with and should have input in…decisions
-a … change could alter place and time relationships among facilities and markets or among supply points and facilities
-thus, such changes will affect transportation costs and service, customer service, and inventory requirements
Reverse Logistics System
-will allow used, broken, or obsolete products to be returned to the supplier for disposition
Form Utility
-refers to the value added to goods via manufacturing or assembly processes (results when raw materials or components are combined to make finished products)
-certain logistics activities can also provide a type of … (e.g.: breaking bulk and mixing products change a product’s form – ship size and package characteristics)
-production is credited with this
Place Utility
-refers to the value added to goods by having them at the location where they are needed (e.g.: retail)
-logistics creates this through transportation (i.e., moving goods from production surplus points to points where demand exists)
-extends market boundaries; therefore, adds economic value to the goods (i.e., increased competition leads to lower prices and increased product availability)
-logistics is credited with this
Time Utility
-refers to the economic value added to a good/service by having it at a demand point at a specific time when it is needed (not only where but when needed)
-via proper inventory maintenance, the strategic location of goods and services, and transportation
-logistics is credited with this
Quantity Utility
-refers to the added economic value associated with delivering the proper quantities of an item to where it is demanded (i.e., when, where, and how much)
-via inventory control, production forecasting, and production scheduling
-logistics is credited with this
Possession Utility
-refers to the satisfaction that comes from owning a product or enjoying a service. Satisfaction comes from the right use the product/service as intended
-created through activities relating to the promotion and sale of products/services (promotion refers to the in/direct contact with customers so to increase the desire to possess a good/service)
-examples: leasing, installation, and warranties
-marketing credited with this
Manufacturing and marketing
by its nature, logistics focuses on processes that cut across traditional functional boundaries – particularly interfacing with two internal functional departments
Pull System
this practice lowers inventory levels, which can lower total logistics costs even though production costs can increase
implied in this approach is collaboration with the channels of distribution to stimulate customer sales
advertising attempts to stimulate sales by getting customers to ask retailers for the advertised product
production runs, supply side, packaging
price, product, promotion, place, customer service

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