Value and Supply Chain
Management
What is Logistics?
• The Institute of Logistics defines logistics as
the management of the flow of goods,
information and other resources, including
energy and people, between the point of
origin and the point of consumption in order
to meet the requirements of consumers. It
involves the integration of information,
transportation, inventory, warehousing,
material-handling, and packaging and
occasionally security.
What is Logistics?
• Logistics is a channel of the supply chain
which adds the value of time and place utility.
Today the complexity of production logistics
can be modeled, analyzed, visualized and
optimized by plant simulation software.
According Davies (2008:14) logistics is a
“science that deals with the procurement,
maintenance and transportation of materials,
personnel and facilities. It is the time-related
positioning of resources."
What is Logistics?
• According to Waters, D. (2003:4) logistics is
the function responsible for the transport and
storage of materials on their journey between
suppliers and customers. It is the function that
ensures the flow of materials from suppliers
into an organisation, through operations
within an organisation and then outward to
customers.
What is Logistics?
• Products can be either physical, tangible
goods or invisible services e.g. the Namibian
Diaries delivers tangible goods such as milk,
cheese and cream to the country. Cell One and
Telecom provide invisible services to their
customers or a combination of goods and
services.
Logistics management
• According to Baziotopoulos (2008:29), logistics
management is “that part of the supply chain
which 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
customer & legal requirements. A professional
working in the field of logistics management is
called a logistician.”
Operations defined
• Operations are the function in each
organisation that creates and deliver value
(products/services) to the customer.
Operations use inputs (raw materials,
components, equipment, information, money
and minerals) to process or manufacture the
required outputs. Operations include the
following activities: manufacturing, serving,
transporting, training, processing, designing.
Operations defined
• Goods and services produced by an
organisation in the operations process are
generally referred to as the value or offerings.
This is what they sell to their clients. Value is
what satiate the needs, choices, tastes and
preferences (demand) of your clients. It is
interesting to note that logistics is entirely
responsible for moving the materials from one
stage to the other, from source to end user.
Service Management
• Service Management is integrated into Supply
Chain Management as the joint between the
actual sales and the customer. The aim of high
performance Service Management is to
optimize the service-intensive supply chains,
which are usually more complex than the
typical finished-goods supply chain. Most
service-intensive supply chains require larger
inventories and tighter integration with field
service and third parties.
Service Management
• They also must accommodate inconsistent
and uncertain demand by establishing more
advanced information and product flows.
Service Management
• Moreover, all processes must be co-ordinated
across numerous service locations with large
numbers of parts and multiple levels in the
supply chain. Among typical manufacturers,
post-sale services (maintenance, repair and
parts) comprise about 25 percent of revenue.
But among the most innovative companies in
the service industry today, service
management activities often generate more
than 50 percent of their profits.
Service Management
• Traditionally overlooked as a ‘necessary evil’,
Service Management is moving to the
forefront as a business strategy. To maintain
growth and customer loyalty in a competitive
environment, leading companies are now
recognizing the need to improve Service and
Service Parts Management capabilities.
Benefits of Service Mgt & Logistics
• The main drivers for a company to establish or
optimize its Service Management & Logistics
practices are:
• High service costs can be reduced i.e. by integrating
the service and products supply chain.
• Inventory levels of service parts can be reduced and
therefore reduce total inventory costs.
• Customer service or parts/service quality can be
optimized.
• Increasing service revenue.
Benefits of Service Mgt & Logistics
• Reduce obsolescence costs of service parts
through improved forecasting.
• Improve customer satisfaction levels.
• Reduce expediting costs - with optimized
service parts inventory, there is no need to
rush orders to customers.
• Minimize technician visits - if they have the
right part in hand, they can fix the problem on
the first visit.
Components of Service
Management & Logistics
• Generally, Service Management and Logistics
comprises six different capabilities that
companies should consider for optimization:
• 1. Service strategy and service offerings:
– Service Strategy Definition
– Service Offerings Definition & Positioning
– Go-To-Market Strategy
– Service Portfolio Management
2. Spare parts
– Parts Supply Management
– Inventory Management
– Parts Demand Management
– Fulfillment Operations & Logistics
– Service Parts Management
3. Returns, repairs and warranties
– Warranty & Claims Management
– Reverse logistics
– Returns Processing
– Remanufacturing
4. Field Service Management or
Field force effectiveness
– Technician Enablement
– Mobility
– E-learning
– Activity Scheduling
– Service Billing
5. Customer management
– Order Management & Availability
– Channel & Partner Management
– Customer Insight
– Technical Documentation
6. Assets, Maintenance, Task
Scheduling, Event Management
– Remote Monitoring and Tracking
– Diagnostics & Testing
– Asset Management/Optimization
– Configuration Management
The Role of Logistics
• The role of logistics is to ensure the smooth
and efficient flow of materials from the point
of origin through the manufacturing process
(operations) right up to the end user. Moving
materials into the organisation from source
suppliers is the activity known as in-bound
logistics (inward logistics). Moving materials
within the organisation is the activity we call
materials management.
The Role of Logistics
• On the other hand, moving materials out to
customers is the activity known as out-bound
logistics (outward logistics). In practice,
logistics is used to move both tangible and
intangible products such as information,
messages, programmes transmission,
entertainment, finished products, work in
progress, people, paperwork, energy, money
and minerals.
The Role of Logistics
• The term materials is used to describe all of
the above put together. Waters, D. (2003:7)
assets that materials are all things that an
organisation moves to create its value
(products/services). The materials can be both
tangible and intangible.