Introduction into Logistics
PhD Natasha Lutovinova
Logistics Lecturer
E-mail: Lutovinova.N@nhtv.nl
Room: G1.006
Handbook: Paul R. Murphy & Donald F. Wood,
Contemporary logistics (New Jersey 2011), 10th edition
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Introduction into Logistics Course Outline
12.05 Introduction
13.05 SCM Concept, Inventory
14.05 Demand Management, Warehousing Management
15.05 Transportation Management, International Logistics
16.05 Poster Session
CHAPTER 1
Logistics
and the
Supply Chain
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Learning Objectives
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•
•
To learn the definition of logistics (what it is)
To understand the economic importance of logistics
•
To gain an understanding of logistics practices within a
firm
Logistics and the Supply Chain
•
Logistics: what it is
– Council of Logistics Management definition:
• “Logistics is that part of the supply chain process
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.”
Source: clm1.org
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Figure 1-1: Control Over the Flow of Inbound and Outbound Movements
Logistics and the Supply Chain
Materials Management
Physical distribution
Business Logistics
Logistics Management
Industrial distribution
Supply Chain Management
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Logistics and the Supply Chain
(What it is)
The forward and reverse flow of product and info
– Logistics
– Reverse logistics
The importance of meeting customer requirements
– Mass logistics
– Tailored logistics
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Figure 1-2: The utilization of logistics service as a major selling point
Logistics and the Supply Chain
(the economic importance)
•
Economic impacts of logistics on Macro level (see table
1-1)
•
Economic impact on Micro level
Economic utility: value of product in
satisfying
the need of the customer
– Possession utility
– Form utility
– Place utility
– Time utility
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Table 1-1: The cost of the Business Logistics system in relation to Gross Domestic Product (GDP) in $ billion
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Year
Inventory
carrying costs
Transportation
costs
Administrative
costs
Total U.S.
\logistics
cost
Logistics as a
percentage of
GDP
1960
31
44
3
78
14.7
1965
38
64
4
106
14.7
1970
56
91
6
153
14.7
1975
97
116
9
222
13.5
1980
220
214
17
451
16.1
1985
227
274
20
521
12.4
1990
283
351
25
659
11.4
1995
302
441
30
773
10.4
2000
377
590
39
1,006
10.1
2001
320
609
37
966
9.5
2002
300
582
35
917
8.8
2003
304
607
36
947
8.6
2004
337
652
39
1028
8.8
2005
395
739
46
1180
9.5
2006
447
809
50
1306
9.9
2007
487
857
54
1398
10.1
Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001
Fig. 3.2 Logistics impact on ROI
Logistics and the bottom line
Customer
Service
Sales
revenue
Logistics
efficiency
Costs
Pipeline management
Cash-to-cash
cycle time
Just-in-time
logistics
Asset
deployment
and utilization
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Profit
Return on
investment
Cash
Accounts
receivable/payable
Inventory
Fixed assets
Capital
employed
Logistics and the Supply Chain
(logistical relationships within the
firm)
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•
The systems approach
“Company’s objectives can be recognized by the
mutual interdependence of the major functional area of
the firm, such as marketing, production, finance and
logistics”.
•
The total cost approach
“Cost trade-offs have to be made”.
Logistics and the Supply Chain
(logistical relationships within the firm)
•Finance
•Capital budgeting (SO&P)
•Inventory (asset valuation LIFO or FIFO)
•Cash flow associated with holding inventory
•Inventory cost versus inventory units
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Logistics and the Supply Chain
(logistical relationships within the
firm)
•Marketing (4 p’s)
•Place decisions
•Price decisions
Landed cost
Phantom freight
Freight absorption
•Product decisions
Stockouts
•Promotions decisions
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Figure 1-3: Phantom freight and freight absorption
The supply chain becomes the value chain
Human resource management
Technology development
Primary Activities
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Service
Marketing
& Sales
Outbound
Logistics
Procurement
Operations
Support
Activities
Inbound
Logistics
Fig. 1.7 The value chain
Firm infrastructure
Logistics and the Supply Chain
(logistical relationships within the
firm)
Production
Length of production runs
Postponement
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Customer Service (Ch. 7)
Costs of service
Logistics and the Supply Chain
(activities in the logistical channel)
0
Warehousing Management (Ch. 10)
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Service level
100%
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Logistics and the Supply Chain
(activities in the logistical channel)
Inventory Management (Ch. 8)
Cost of carrying product
Cost of ordering product
Cost of being out of stock
Order Management (Ch. 7)
Production scheduling
Returned products (Ch. 1)
(Reverse logistics)
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Logistics and the Supply Chain
(activities in the logistical channel)
Transportation (Ch. 12)
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Logistics and the Supply Chain
(Activities in the logistical channel)
Demand forecasting (Ch. 7)
Industrial packaging (Ch. 11)
Materials handling (Ch. 11)
Parts and service support
Procurement (Ch. 6)
Salvage and scrap disposal (Ch. 6)
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Fig. 10-1 Adding a Warehousing Facility: shorter-Haul Transporation
Logistics and the Supply Chain
(Activities in the logistical channel)
Producer
(Manufacturing)
Warehouse
facility
(Inventory)
Sales
Retailer A
Transportation
(Distribution)
Retailer B
Retailer C
Warehousing Management (Ch. 10)
Retailer A
Transportation
(Distribution)
(Volume
shipment)
Transportation
(Distribution)
Retailer B
Retailer C
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Next time:
Assignment
3 vacancies / advertising + short working paper 250
words about job of a logistics manager / warehouse
manager / transportation manager / Supply Chain
Manager
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