logistics chapter 1

the immediate supply chain for an individual firm
vendors, transportation, warehousing, transportation, factory, transportation, warehousing, transportation, customers
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.
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.
integrated logistics management
1960- fragmentation
1980- evolving integration
2000- total integration
integrated supply chain
the art and science of integrating the flows of products, information, and financials through the entire supply pipeline from the supplier’s supplier to the customer’s customer.
the logistics/supply chain mission
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.
logistics/SC strategy
historical and contemporary views are now both important!
historical perspective of distribution
“the last frontier of cost economies”
the contemporary view of distribution
“distribution is a new frontier for demand generation- a competitive weapon”
critical customer service loop
customer order processing and transmittal
logistics cost are about ___ of sales w/o purchasing costs

most expensive to least:
inventory carrying
order entry
1/3 for inbound supply costs

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

• Logistics is an integral part of company strategy
− Generate revenue
− Improve profit

• Logistical lines are lengthening
− Local vs. long distance supply

• 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

effects of logistics on foreign sourcing
profit increases, logistics increases, labor increases
scope of supply chain for most firms
business logistics is broken into two categories:
physical supply and physical distribution
physical supply/materials management (firm’s internal supply chain)
inventory maintenance
order processing
protective packaging
materials handling
information maintenance
physical distribution (firm’s internal supply chain)
inventory maintenance
order processing
product scheduling
protective packaging
materials handing
information maintenance
key activities / processes
Primary and secondary/supporting
Primary processes
Setting customer service goals
Inventory management
secondary processes
Materials handling
Acquisition (purchasing)
Protective packaging
Product scheduling
Order processing
supply chain is multi-enterprise
acquire => convert => distribute

the scope in reality is that it is very narrow and is mainly focused on the company, suppliers and customers. if they widen their scope, they will see that there are missed opportunities such as the supplier’s supplier and end users.

multiple dimensions of SC
interorganizational coordination, interfunctional coordination, activity and process administration
the logistics strategy triangle
Inventory Strategy
Transportation strategy
Location strategy

-all three sides of this triangle center around Customer service goals

inventory strategy
• Forecasting
• Storage fundamentals
• Inventory decisions
• Purchasing and supply scheduling decisions
• Storage decisions
Transportation Strategy
• Transportation fundamentals
• Transportation decisions
Location Strategy
• Location decisions
• The network planning process
customer service goals
The product
Logistics service
Information system
relationships of logistics to marketing and production: internal supply chain
composed of production logistics interface, logistics, and marketing logistics interface
relationships of logistics to marketing
marketing: price, product, promotion, place
logistics: customer service levels, inventory carrying costs, lot quantity costs, order processing and information costs, warehousing costs, transport costs
relationships of logistics to production
Coordinates through scheduling and strategy— make-to-order or make-to-stock

An integral part of the supply chain
-Affects total response time for customers
-Shares activities such as inventory planning

Costs involve tradeoffs
-Production lot quantities affect inventory levels and transportation efficiency
-Production response affects transportation costs and customer service
-Production and warehouse locations are interrelated

logistics/SCM in diverse areas
Manufacturing—most common
Environment—causing restrictions
Service—emerging opportunities
Non-profits—little explored
Military—long history

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