Chapter 1
Logistics Systems: Their
Development and Growth
What is LOGISTICS?
Making sure you have the RIGHT
product in the RIGHT place at the
RIGHT time, and at the RIGHT cost
Synonyms to “Logistics”
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Business Logistics
Physical Distribution
Materials Management
Distribution Engineering
Logistics Management
Supply-Chain Management
KEY TERMS
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Logistics
Inbound Logistics
Materials Management
Physical Distribution
Supply-Chain Management
KEY TERMS (continued)
• Integrated logistics
• Strategic logistics
• Leading-edge logistics
LOGISTICS
The entire process of materials and
products moving into, through, and
out of a firm
INBOUND LOGISTICS
The movement of materials received
from suppliers
MATERIALS
MANAGEMENT
The movement of materials and
components within a firm
PHYSICAL DISTRIBUTION
The movement of goods outward
from the end of the assembly line to
the customer
SUPPLY-CHAIN
MANAGEMENT
Consists of managing the flow of materials and
the relationships among channel intermediaries
from the origin of raw materials through to the
final consumer
Links logistics with user’s total
communications network and with the firm’s
engineering staff
INTEGRATED LOGISTICS
A system which moves inventory through
a constant and consecutive chain of
value-added steps with it arriving when
needed in the proper quantity and form
STRATEGIC LOGISTICS
Using logistical competency and channelwide partnership alliances to gain
competitive advantage
LEADING-EDGE
LOGISTICS
• Exhibited when organizations do the
following:
– Seek to use logistical competency to gain
and maintain competitive superiority
– Seek to add value to the products and
services they market
– Leverage assets by forming strategic
alliances with service suppliers
2 GOALS OF LOGISTICS
1 - Customer Service
2 - Conformity to Customer Requirements
History of Logistics
• Early 1800s Industrial Revolution
– emphasis PRODUCTION
• Early 1900s
– emphasis SALES
• Strategic use of logistics ignored until
recently
• “logistics” - first associated with
military
History (continued)
• 1950s - Recession
– Businesses began searching for more
effective cost control systems
– Businesses began studying and
coordinating physical distribution and
logistics
8 Trends that Increase Attention
on Logistics (1950 & after)
1 - Transportation costs rose rapidly
2 - Production efficiency reached a peak
3 - Fundamental change in inventory
philosophy
4 - Product lines proliferated
5 - Revolution in computer & communication
technology
8 Trends (continued)
6 - Increased use of computers throughout
business
7 - Increased public concern for the recycling
of products
8 - Growth of several mass merchandisers &
specialty stores (category killers) that have
large demands & sophisticated logistics
service
THE TOTAL-COST
APPROACH TO LOGISTICS
• Logistics = Systems Approach
• Systems Approach
– the company objectives can be realized by
recognizing the mutual interdependence of the
basic functional areas of the firm (marketing,
production, finance)
Physical Distribution System
Objective
• To minimize the costs involved in
physically moving and storing the product
from production point to delivery point
keeping a specified level of service to
customers
Inbound Logistics Management
Objective
• To meet the firm’s needs for those materials
in an orderly, efficient, and low-cost manner
TOTAL-COST APPROACH
• All relevant functions in moving and sorting
materials and products should be considered
as a whole, not individually
• KEY: all cost items are considered
simultaneously in attempting to meet a
specified service level
COST TRADE-OFFS
• Indicate that changing patterns or functions
of distribution cause some costs to increase
and others to decrease
Responsibilities of Logistic
Managers
• Logistic Managers =
– Technical expert + a generalist
• MANAGERS RESPONSIBLE FOR:
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Controlling large expenditures
Transportation
Order management
Logistics administration costs
LOGISTIC
PROFESSIONALISM
• Council of Logistic Management (CLM)
• Canadian Association of Logistic
Management (CALM)
• American Product & Inventory Control
Society (APICS)
• American Society of Transportation &
Logistics (AST&L)
LOGISTIC
PROFESSIONALISM
(continued)
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Delta Nu Alpha (DNA)
International Society of Logistics
Transportation Research Forum (TRF)
Warehousing & Education Research
Council (WERC)
END OF CHAPTER 1