At the end of this chapter, students should be able
to:
• Understand industrial logistics management
concept
• Describe the elements and role of logistics in
operations
• Explain achievement of competitive advantage
through logistics
• Definition of Logistics
• Logistics Management Concepts
• The Work / Element of Logistics
1.
2.
3.
4.
5.
6.
Order Processing
Inventory Management
Facility Network Design
Materials Handling and Packaging
Warehousing
Transportation
• Logistics and Competitive Advantage
Logical
Thinking
Statistics
Logistics
“the detailed coordination of a complex operation
involving many people, facilities or supplies”
[ New Oxford American Dictionary]
Definition
“part of supply chain management 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
customer requirements”
Objective
• The purpose of logistics management is to plan and coordinate all those activities necessary to achieve
desired levels of delivered service and quality at lowest
possible cost.
Scope
• From the total systems viewpoint, the scope
encompasses management of raw materials and other
inputs through the delivery of the final product in
order to satisfy a customer.
Logistics concept was introduced due to need for planning
and coordinating the materials flow from source to user as
an integrated system, rather than managing the flow of
goods as a series of independent activities.
Materials Flow
Suppliers
Procurement
Operations
Distribution
Information Flow
Customers
Inputs into
Logistics
Natural
resources
Human
Resources
Financial
Resources
Information
Resources
Outputs of
Logistics
Management Actions
Planning
Implementation
Control
Logistics Management
Suppliers
Raw
In-process
materials inventory
Finished
goods
Customers
Logistics Activities
Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support
Plant and warehouse selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Competitive
Advantage
Time and
Place Utility
Efficient
Movement
to Customer
Proprietary
Asset
The prime responsibility of logistics management people
• determines the number and type of facility (plants,
warehouses, cross-dock operations and retail stores)
required, their geographic locations and the work to be
performed
• determines the inventory type and the quantity to be
stocked at each facility and the assigning of customer
orders for shipment
• determines network of facilities including information
and transportation forms a structure from which
logistical operations such as processing of customer
orders, maintaining inventory and performed material
handling
• Forecasting and order management are 2 areas of
logistical work that depend on information
• Impact of information:
Deficiencies in quality of
information
Incorrect information with
respect to trends
•
•
May cause inventory shortage
Overcommitment
Incorrect information relating
to a specific customer’s
requirement
•
•
Processing of incorrect order creates
additional cost
Does not result in sales
While formulating an inventory management policy, the following factors
should be considered:
Inventory
Management
Customer
Segmentation
Products
Requirements
Transportation
Integration
Time-Based
Requirements
Competitive
Performance
• The logistical activities that are carried out in
warehousing are sorting, sequencing, order selection,
transportation consolidation and sometimes product
modification and assembly.
• Within the warehouse, products must be received,
moved, sorted and assembled to meet customer order
requirements and for these activities material handling
become significant
• There are 3 types of warehousing strategies available to
an organization:
Private
Public
Contract
• The direct labor and capital invested in materialhandling equipment represent a major part of logistics
cost
• Material handling operations are made efficient by using
a variety of mechanized and automated devices
• Logistics personnel must plan the best ways to load,
offload, move, sort and select products
• Need to work closely with industrial engineers to design
or select packaging materials that facilitate materials
handling
• One of the most visible elements of logistics operations –
mainly concerned with product movement and product
storage
• 3 important factors affecting transportation performance:
Transportation
Performance
Cost
Speed
Consistency
The success in the marketplace is based around the
triangular linkage of the company, customers and its
competitors.
Customers
Seek Benefits at Acceptable Cost
Value
Asset Utilization
Value
Cost
Differential
Asset Utilization
Commercial Success
Cost Advantage
Value Advantage
* Competitive advantage – the ability of an organization to differentiate itself in the eyes of
customer, from its competition, and to operate at a lower cost and hence greater profit.
• Logistics management provides for the flow and storage of
information and products between the firm and its suppliers
(inbound), the firm and its customers (outbound) and the various
plants, divisions and units of the firm.
• The objectives of logistics management is to provide customers with
their required service benefits at the lowest total logistics cost
• A complete logistics management system comprises 6 major
decision areas: facility network design, inventory management,
order management, transportation management, warehousing
management and packaging and materials handling management.
• Logistics has an important relationship to manufacturing,
marketing, finance and other areas of the organization.
• The cost of logistics systems can be affected by a number of major
factors, including competition in the market, the spatial relationship
of nodes and product characteristics.