LOGO
Supply Chain Management
A Logistics Approach
COURSE FACILITATOR
Muhammad Tariq Yousafzai
Assistant Professor
MS in Innovation and Business Creation
MBA Imsciences (Distinction Holder)
LOGO
Session Objectives
Understand the role and importance
Of logistics
Types of logistics utilities
Five types of Utility
Value added role of Logistics
Logistics and functional
departments interface
Role of
Logistics in
Supply
Chains
Approaches to Analyzing
logistics systems
LOGO
Logistics
(From Customer Perspective)
Getting the right product, to right customer, in
the right quantity, in right condition, at right
Place, at right time, & at right cost
Also called the “Seven Rs of Logistics”
LOGO
Logistics Defined
• “Logistics is the process of anticipating
customer needs and wants;
• Acquiring the capital, materials, people,
technologies, and information necessary
to meet these wants and needs;
• Optimizing the goods or serviceproducing network to fulfill customer
requests;
• And utilizing the network to fulfill customer
requests in a timely manner”
LOGO
Four Sub divisions of Logistics
Business logistics
(flow and storage of goods, service and related
information from point of origin to point of
consumption)
Military Logistics (support operation
capability such as in Operation Rah-eRast in Swat and Rah-e-Nijat)
(food, fuel, spare parts) as well as personnel and
ensure readiness, reliability, & efficiency)
LOGO
Event logistics:
 The network of activities, facilities, &
personnel required to organize, schedule, &
deploy the resources for an event to take
place & to efficient withdraw after the event
 Such as Huner Mela by SDC or IMS welcome
part last week or Valentine Day for Chocolate
candy industry and cut flowers
LOGO
Service Logistics
 The acquisition, scheduling, &
management of the facilities/assets,
personnel, & materials to support &
sustain a service operation or business.
LOGO
Value-Added Roles of Logistics
Five Types of Utilities add value to a
product or service
(1) Form Utility (Mftg or assembly process)
(2) Time Utility (Reducing lead time & JIT
inventory control)
(3) Place Utility (Primarily via transportation)
(4) Quantity Utility (Suzuki Mehran example)
(5) Possession Utility (created via marketing)
LOGO
Form Utility
• Manufacturing or assembly process
For example: Dell (change of form)
• Breaking bulk
• Place Utility:
• Logistics create place utility mainly
through transportation
LOGO
Time Utility
• Heavy advertising
• Reducing lead time (JIT)
• The time that elapses from when a
customer places an order until the
customer receives a satisfactory fulfillment
of orders.
• (Bad butter)
LOGO
Quantity Utility
• “When” and “ Where” should be
accompanied by “How much”
• Mehran Motors assembling 1000 cars in a
day, the tire supplier should provide 4000,
tires be delivered
• What if the supplier provides 200 tires
LOGO
Possession Utility
• AIDA concept (desire issue)
• The role of logistics in the economy
depends on the existence of possession
utility, for time, place and quantity utilities
make sense only if demand for the product
or service exists
LOGO
LOGO
Logistics Activities
(1) Transportation
(2) Warehousing and Storage
(3) Industrial Packaging
(4) Materials Handling
(5) Inventory Control
(6) Order Fulfillment
(7) Demand Forecasting
(8) Production Scheduling
LOGO
Logistics activities continued…
(9) Procurement
(10) Customer Service
(11) Facility-Location
(12) Return Goods Handling
(13) Parts and Service Support
(14) Salvage and Scrap Disposal
These activities and now explained one-on-one basis
LOGO
(1) TRANSPORTATION
• Important activity in logistics and often the
largest variable cost
• Global Transportation options are
-- OCEAN
Accounting for two thirds of all
international movements, low rates, long
transit times (slow speed), low
accessibility and higher potential for
shipment damage.
--
LOGO
OCEAN
• Normally, containers are used
• “FCL” stands for Full Container Load and
“LCL” stands for Less than Container Load
• FCL is door-to-door concept
• LCL is terminal-to-terminal concept
LOGO
AIR FREIGHT
• Fast Transit Time, High Rates
• Suitable for High value Low Density
For Example: Diamonds, Time sensitive
documents, spare parts etc
• Mostly “Belly Cargo”
• Less/Convenient Packaging
• Lower Insurance
LOGO
MOTOR
• If the transit distance is less than 1,000 km
using road freight is competitive compared
to rail and airfreight
• Widely used in the inland delivery of goods
to port of export
• The delivery charge is called the cartage
or trucking fee
LOGO
Continued…
• Oresund Bridge Between Sweden and
Denmark (Malmo –Copenham)
• 7,455 Meters Long
LOGO
RAIL
• Different track gauges in various countries
prevent long-distance shipments
• For example, a shipper using a land bridge
substitutes land transportation for part of
containers ocean voyage, taking several
days off the transit time and saving intransit inventory costs.
LOGO
Logistics Activities…
STORAGE
• Tradeoff relationship with transportation
• Involves two steps
(a) Inventory management and
(b) Warehousing (not a long term storage
facility anymore)
• Slow mode (higher inventory) and greater
warehousing space
LOGO
Packaging
• Depends on the goods to be sent,
method of dispatch and conditions at final
destination.
• Premium transportation reduces
packaging costs (oftentimes)
• If several transfers are involved?
• Breaking down heavy packages
LOGO
Packaging continued..
• Desiccants (drying agents)
• Waxed paper and
• Laminated foil may be required in areas
with high humidity levels
• Pallets are good for stackable items
• Standard Euro pallet 120X80 cm and US
Palllets have 120X100cm dimensions
LOGO
Materials Handling
• Important for warehouse design and
efficient warehouse operations
• Concerned with materials handling
equipment used for short-distance
movement and includes equipment
• Example: Conveyors, forklift trucks,
overhead cranes
• Minimize aisle space, reduce cost,
labor, and risk
LOGO
Automated Storage and Retrieval
Systems (ASRS)
LOGO
Inventory Control
• In warehouse and Manufacturing Facility
• Inventory has two dimensions
(a) Assuring adequate inventory levels
(b) Certifying inventory accuracy
Fixed order quantity approach (filling)
Two bin system
To find out whether or not adjustments are needed? These
impact order fulfillment (buffer stock)
• VMI
JIT and MRP are mostly used for dependent demand, and
EOQ for independent demand where demand is known
and no inventory is in transit
LOGO
•
•
•
•
•
Order fulfillment
Order fulfillment 8 days
Order processing 4 days
Order preparation 2 days
Transportation 2 days
Reduce activity 2 and use a slow mode of
transportation
• Front desk operations should be supported by
back end operations via coordination among,
inventory control, manufacturing, warehousing,
and transportation
LOGO
Forecasting
• Accurate forecasting of inventory
requirements and material components is
essential to inventory control,
manufacturing efficiency, and customer
satisfaction.
• JIT, and MRP
• The above two are used as demand is
depended on demand of something else.
LOGO
•
•
•
•
•
•
•
Production planning
Closely related to forecasting
Production managers
Multiple product line, product line?
Seasonality of business
NEW BUY
REBUY
MODIFIED BUY
LOGO
Procurement
• Transportation costs directly related to
procurement
• Total logistics costs (inventory and
transportation)
• Buying from china would have a lead time
of several weeks
• Premium mode of transportation needed
LOGO
Kraljics Matrix
• Its purpose is to help purchasers maximize
supply security and reduce costs, by
making the most of their purchasing
power.
• In doing so, procurement moves from
being a transactional activity to a strategic
activity – because, as Kraljic said,
"purchasing must become supply
management."
LOGO
LOGO
Non Criticals– Office supplies such as stationery
(Rethink)
Strategic Items– (Special branded clothes such as
Bonanza) who use their own fabric and do not sell
others (long Term)
Bottlenecks– Uranium for a nuclear plant (supplier will
provide what they sell not what you like but what they
sell)
Leverage Items
Leverage items- (Control) Low supplier with high
profile customer
LOGO
Facility location
• Plant and warehouse location
• A site change can alter time and place
relationships
• Such changes affects transportation costs
and service, inventory requirements
LOGO
Pipeline
Pipeline routes are practically unlimited as they can
be laid on land or under water. The longest gas
pipeline links Alberta to Sarnia (Canada), which is
2,911 km in length.
Pipeline construction costs vary according to the
diameter and increase proportionally with the
distance and with the viscosity of fluids (from gas, low
viscosity, to oil, high viscosity).
LOGO
Logistics interfaces with
operations
• Relates to the length of production runs
• Manufacturing economies concerned with long
production runs with infrequent manufacturing
line changeovers
• Tradeoffs between (High inventory costs
and Limited supplies of others)
Chocolate candy on valentine day
• A shift of responsibility from manufacturing to
logistics
LOGO
logistics Interface With
Marketing
• Logistics is sometimes referred to as other
half of marketing
• The several {Rs}
• Place dimension
• Organizations dealing with wholesalers probably have
less logistics problems
• Larger quantities, manage inventories periodically
• Retailers buy in small amounts, and do not allow for
sufficient lead time
• Manufacturers might need to buy a premium
transportation service
LOGO
P
Product
Size, Shape, Weight, Packaging and
other dimensions affect the ability of
logistics system to move and store
products
Logistics should offer input into NPD
Frequent refurbishing
The nature of the product can damage
rate,storage ability, pallets etc
IKEA transportation improvements
LOGO
Promotion
Your promotions affects demand and
demand affects manufacturing,
logistics and so on
LOGO