UMMC – Supply Chain Mgmt.
Course 3
Logistics & Distribution Concepts
Objectives
• Discuss a general overview of the
basics of logistics
• Gain an understanding of the
complexity of logistics and distribution
• Be a better inventory professional by
knowing what goes into the products
you use
Agenda
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Introduction to Logistics
Activity 1
Costs of logistics
Transportation
Activity 2
Distribution Concepts
Summary
What is Logistics?
Materials Management
Integrated Logistics Management
Logistics Management
Distribution
Physical Distribution Management
Business Logistics Management
Marketing Logistics
Industrial Logistics
Logistics Definitions
Common culture
Handling the details of an activity
Dictionary
The branch of military science having to do with procuring, maintaining,
and transporting material, personnel, and facilities
Business Logistics
The planning, implementation, & control
of the efficient & effective flow and
storage of goods, services, & related
information from point of origin to point of
use or consumption in order to meet
customer requirements
Council of Logistics Management Professionals
Product
Sourcing
Processes
Technologies
People
Supplier
Storage
Storage
Manufacture
Manufactur
er
Storage
Distributor
Retailer
Storage
Distributor
Customer
Customer
Order
Receipt
End User
Plan
So
ur
ce
Ma
ke
De
liv
er
Bu
y
Place Utility-(Where)
• Moving goods from production surplus
points to points where demand exists
• Extends physical boundaries of a
marketing area, adding value to goods
• Created primarily through transportation
Time Utility (When)
• Economic value added by having good
or service at a demand point at a
specific time
• Proper inventory maintenance, strategic
location of good/services, and
transportation
Quantity Utility (How Much)
• Delivering the proper quantities of the
item
• Done through production forecasting,
production scheduling and inventory
control
Cardinal Scorecard
September 2011
Overall, the average for the month was - 'True' fill 98.03%
w/Subs 99.53%.
Some top items of the unfilled lines for the month:
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H100-05 (IM# 006011 - Medical Action) – Inventory Issue (6.58% of unfilled
lines – 9/11-9/12)
176630 (IM# 800985 - United States Surgical) – Mfg backorder (5.76% of
unfilled lines – 9/13-9/30)
DVT10 (IM# 005336 - Sterilmed) – Forecast exceeded (3.91% of unfilled
Some Logistics Activities
Transportation
Warehousing & Storage
Materials Handling
Order fulfillment
Procurement
Forecasting
Customer Service
Return Goods Handling
Activity 1
• Read about you logistical activity
• Summarize it
• Tells us an example of this activity
within FV
• What utility could it be and why?
Utilities
Place: Moving goods from production surplus points to
points where demand exists, Extends physical boundaries
of a marketing area, Created primarily through
transportation
Time: Economic value added by having good or service at a
demand point at a specific time, Proper inventory
maintenance, strategic location of good/services, and
transportation
Quantity: Delivering the proper quantities of the item, Done
through production forecasting, production scheduling and
inventory control
Suppliers
Material Costs
Manufacturers
Transportation
Costs
Warehouses &
Distribution Centers
Transportation
Costs
Manufacturing Costs
Customers
Transportation
Inventory
Costs
Costs
Logistics Costs as a
Percentage of GDP
Price of a 2-slice toaster:
1980: $23 ($4.14)
2010: $24.88 ($1.99)
Global
Comparison
Logistics Cost %
of GDP
•Asia 13-20%
•China 15%
•Europe 12-14%
•India 13%
•Japan 11%
•Mexico 14%
Components of Logistical
Costs
Transportation Role
• Physical movement of people and
goods between origin and destination
• Critical link between organizations
• Allows for competition in global market
• Critical to demand fulfillment
• Services must be in line with customer
requirements
Challenges
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Complexity
Competing Goals
Changing customer demands
Limited information
Challenges
A typical cross-border shipment involves
the accurate completion and filing of 35
documents, interfacing with 25 parties
including customs, carriers and freight
forwarders, and complying with over 600
laws and 500 trade agreements that are
constantly changing.
Adrian Gonzalez, ARC Advisory Group
Modes of Transportation
Air
Pipeline
Water
Highway
Rail
Activity 2
• Each group will get a slide about their form
of transportation.
• Answer the following questions:
1. What is a strength of this form of
transportation?
2. What is a weakness of this form of
transportation?
• Give an example of a disruption to this
transportation process—real world example
Rail
Pipeline
Water
Air
Highway
Channel of Distribution Functions
Direct/Indirect
Accumulation
Assorting
Storage
Allocation
Information feedback
Warehousing
Buying
Products
Financing
Service Promotion
Contacts
New
Distribution
Pricing Risk
Taking Physical Possession
How Cardinal Does It?
2 Redistribution Centers
Other Medical
Distributors
U.S. CAH Factories- 10%
Asian CAH Factories- 7%
Custom
ers
*Includes sourced product
Mexican and Caribbean
CAH Factories- 3%
U.S. Branded- 80%
Jeopardy
Let the Games Begin!
Logistics
Transportation
/Costs
Distribution
$100
$100
$100
$200
$200
$200
$300
$300
$300
LOGISTICS
1. This term is most widely used by organizations like banks and
hospitals.
2. The planning, implementation, & control of the efficient &
effective flow and storage of goods, services, & related information
from point of origin to point of use or consumption in order to meet
customer requirements
3. This utility focuses on proper inventory maintenance, strategic
location of good/services, and transportation
TRANSPORTATION/COST
1. 63% of logistical costs of GDP
2. Slow, but dependable way to transport products
3.This ARC Advisory Group Director estimated that a typical crossborder shipment involves the accurate completion and filing of 35
documents, interfacing with 25 parties including customs, carriers
and freight forwarders, and complying with over 600 laws and 500
trade agreements that are constantly changing.
DISTRIBUTION
1.
Rail
• high fixed costs (land, tracks)
• low variable costs (operating costs, e.g., labor,
fuel)
• slow, but inexpensive way to transport heavy
freight that doesn’t require special handling, long
distances
Highway
• low fixed costs (government builds, maintains highways)
• medium-high variable costs (operating costs, e.g., labor,
fuel)
• most accessible mode (more highways than railroads,
waterways, pipelines); best for transporting medium to high
value products short to moderate distances
Water
• moderate fixed costs (ships and freight handling
equipment)
• low variable costs (operating costs, e.g., labor, fuel)
• very slow, but inexpensive way to transport large,
heavy freight over long distances (e.g., oceans, rivers,
inland waterways, lakes)
Air
• low fixed costs (aircraft and freight handling
equipment)
• highest variable costs (e.g., labor, fuel, maintenance)
• very fast; used for transporting high value and/or high
perishability product over short to medium distances.
Pipeline
• highest fixed costs (right of way & construction costs of
equipment)
• lowest variable costs (no significant labor or fuel costs)
• slow, but dependable (e.g., no weather, traffic disruptions);
no flexibility with regard to types of products that can be
transported – must be liquid (e.g., petroleum)