OVERVIEW OF
BUSINESS
LOGISTICS AND
PLANNING
PL201
FUNDAMENTAL OF
LOGISTICS
MANAGEMENT
LECTURER : NOR HASLIZA BINTI MOHD FADZIL
Logistics
LOGISTICS involves those activities that focus on
getting the right amount of the right products, to the
right place, at the right time, at the lowest possible
cost.
The performance of these activities is LOGISTICS
MANAGEMENT which is the practice of organizing
the cost-effective flow of raw materials, in-process
inventory, finished goods, and related information
from point-of-origin to point-of-consumption to
satisfy customer requirements.
Logistics
 Logistics Usually Refers to Management of:
 Movement of Materials Within Factory
 Shipment of Incoming Materials From Suppliers
 Shipment of Outgoing Products to Customers
Movement of Materials within Factories
Typical Locations From/To Which Material Is Moved:
Incoming
Vehicles
Receiving
Dock
Quality
Control
Warehouse
Work
Center
Other Work
Centers
Packaging
Finished
Goods
Shipping
Shipping
Dock
Outgoing
Vehicles
Importance of business logistics
 The importance of logistics systems lies in the fact that it leads to ultimate
consummation of the sales contract. The buyer is not interested in the promises of
the seller that he can supply goods at competitive price but that he actually does
so. Delivery according to the contract is essential to fulfilling the commercial and
legal requirements. In the event of failure to comply with the stipulated supply of
period, the seller may not only get his sale amount back, but may also be legally
penalized, if the sales contract so specifies. There is no doubt that better delivery
schedule is a good promotional strategy when buyers are reluctant to invest in
warehousing and keeping higher level of inventories. Similarly, better and/or timely
delivery helps in getting repeat orders through creation of goodwill for the supplier.
 Thus, as effective logistics system contributes immensely to the achievements of
the business and marketing objectives of a firm. It creates time and place utilities in
the products and thereby helps in maximizing the value satisfaction to consumers.
By ensuring quick deliveries in minimum time and cost, it relieves the customers of
holding excess inventories. It also brings down the cost of carrying inventory,
material handling, transportation and other related activities of distribution. In
nutshell, an efficient system of physical distribution/logistics has a great potential
for improving customer service and reducing costs.
Components of
Logistics Management
Inputs into
logistics
Natural
resources
Human
resources
Financial
resources
Outputs of
logistics
Management actions
Planning
Competitive
advantage
Implementation Control
Logistics
management
Suppliers
Raw
In-process
Finished
materials inventory goods
Customers
Logistics activities
Customer service
Information Demand forecasting
Inventory management
resources
Logistics communications
Material handling
Order processing
Parts and service support
Plant & warehouse site
selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Time and
place utility
Efficient
movement
to customer
Proprietary
asset
Copyright © 2001 by The
McGraw-Hill Companies,
Inc. All rights reserved.
Supply Chain Management
Introduction
 Materials Are Any Commodities Used Directly or
Indirectly in Producing a Product or Service.
 Raw Materials, Component Parts, Assemblies, & Supplies
 A Supply Chain Is the Way Materials Flow Through
Different Organizations From Raw Material Supplier to
Finished Goods Consumer.
Supply Chain Management
 Supply Chain Management Includes All Management
Functions Related to Flow of Materials From Company’s
Direct Suppliers to Its Direct Customers.
 Includes Purchasing, Traffic, Production Control, Inventory
Control, Warehousing, & Shipping.
 Materials Management & Logistics Management
Includes All Decisions About Purchasing Materials and
Services, Inventories, Production Levels, Staffing
Patterns, Schedules, and Distribution.
Supply Chain Overview
Transportation
Warehousing
Transportation
Customers
Information
flows
Factory
Transportation
Vendors/plants/ports
Warehousing
CR (2004) Prentice Hall, Inc.
Transportation
1-2
Supply Chain Structure
SUPPLIER
Raw Materials
FACTORY
DC
RDC
RETAILER
Finished Goods
Information Flow
Typical Supply Chain Network
Suppliers
Plants
Distribution
Centers
Customers
Supply Chain Planning Processes
Material Requirement Planning
Component
Requirement
Supplier
Demand Forecasting
Demand Planning
Production
Plan
Plant
Warehouse Logistics
Order Management
Retailer
Inventory at Different Stocking Points
Raw
materials
Supplier
Figure 8.1
Work in
process
Finished
goods
Manufacturing plant
Distribution center
Retailer
Materials management
 Material management includes:




Administration of raw materials
Subassemblies
Manufactured parts
Packing materials
In-process inventory
Physical distribution
 Physical distribution, which means the whole
operations and activities assembly that assure
products availability for the firm;s clients, providing
quantity, time and place utilities, concording to the
bottom marketing channels’ expectations where the
organization is involved.
Physical distribution
performance cycle
Order processing
Order transmission
Customer order
Order selection
Order transportation
Order delivery
to the customer
Reverse logistics
Reverse logistics is the process of reclaiming
recyclable and reusable materials, returns, and
reworks from the point of consumption or use for
repair, remanufacturing or disposal. This practice
reduces waste in landfills and lowers company
operating costs.
THE ACTIVITY MIX
 The activities to be managed that make up business logistics (supply chain
management) vary from firm to firm, depending on a firm's particular
organizational structure, management's honest differences of opinion about
what constitutes logistics, and the importance of individual activities to its
operations. Follow along the supply chain as shown in Figure 1-1, and note
the important activities that take place.
 Again, according to the Council of Logistics Management, the components
of a typical logistics system are: customer service, demand forecasting,
distribution communications, inventory control, material handling, order
processing, parts and service support, plant and warehouse site selection
(location analysis), purchasing, packaging, return goods handling, salvage
and scrap disposal, traffic and transportation, and warehousing and
storage.6
 Figure 1-2 organizes these components, or activities, as to where they are
most likely to take place in the supply channel. The list is further divided into
key and support activities, along with some of the decisions associated with
each activity.
Figure 1-2
Corporate strategy
 Strategy is the process whereby plans are formulated for
positioning the firm to meet its objectives.
 Strategy formulation begins with defining a corporate strategy.
This involves:
a. Assessing needs, strengths, and weaknesses of the 4
major components:
 customers
 suppliers
 competitors
 the company itself
b. "Visioning" where counter -intuitive, unheard of, and
unconventional strategies are considered.
 Corporate strategies are converted to more specific strategies for
the various functional areas of the firm such as logistics.
Logistics planning
 The objectives of logistics strategy are:
Minimize cost
Minimize investment
Maximize customer service
 Levels of logistical planning:
Strategic
Tactical
Operational
 The 4 problem areas of supply chain planning
Customer service levels
Facility location
Inventory decisions
Transportation decisions
Logistics planning
 When to plan?
No distribution network currently exists.
There has been no re-evaluation in 5 years.
 When costs are changing rapidly, especially transport &
inventory.
When markets have shifted.
When current distribution economics encourage shifts.
 When there has been a major policy shift in logistics such
as in price, customer service, or investment level.
Strategic, Tactical, and
Operational Decision Making
Decision Area
Strategic
Tactical
Operational
Transportation
Mode selection
Seasonal equipment Dispatching
leasing
Inventories
Location, Control
policies
Safety stock levels
Order
processing
Order entry,
transmittal,
and processing
system
design
Purchasing
Development of
supplier buyer
relations
Contracting,
Forward buying
Expediting
Warehousing
Handling equipment
selection, Layout
design
Space utilization
Order picking
and restocking
Facility
Number, size, and
Order filling
Processing
orders, Filling
back orders
Questions & Answers