1-1
JAMES
R.
STOCK

STRATEGIC LOGISTICS
MANAGEMENT
DOUGLAS
M.
LAMBERT
FOURTH EDITION
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
CHAPTER 1
Logistics’ Role in the
Economy and the
Organization
Logistics Management Defined
1-3
That part of the supply chain process that plans,
implements, and controls the efficient, effective
flow and storage of goods, services, and related
information from the point-of-origin to the
point-of-consumption in order to meet
customers’ requirements.
Council of Logistics Management
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Components of
Logistics Management
Inputs into
logistics
Natural
resources
Human
resources Suppliers
Financial
resources
Information
resources
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Outputs of
logistics
Management actions
Planning
Implementation
Logistics management
Raw
In-process
materials inventory
Finished
goods
Control
Competitive
advantage
Time and
Customers place utility
Logistics activities
Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support
1-4
Plant & warehouse site selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Efficient
movement
to customer
Proprietary
asset
Copyright © 2001 by The
McGraw-Hill Companies, Inc.
All rights reserved.
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Marketing/Logistics
Management Concept
1-5
Customer satisfaction
•Suppliers
•Intermediate customers
•Final customers
Integrated effort
•Product
•Price
•Promotion
•Place (distribution)
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Company profit
•Maximize long-term
profitability
•Lowest total costs
given an acceptable
level of customer
service
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Cost Trade-offs in Marketing
and Logistics
Price
Order processing
and information
costs
MARKETING
Product
1-6
Place/customer
service levels
Inventory
carrying costs
Transportation
costs
Lot quantity costs
Warehousing costs
Order processing
and information
costs
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Relationship of Logistics
Activities to Logistics Costs
•
•
•
•
•
•
1-7
Customer service levels
Transportation costs
Warehousing costs
Order processing/information systems costs
Lot quantity costs
Inventory carrying costs
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Key Logistics Activities
• Customer service
• Demand forecasting
• Inventory
management
• Logistics
communications
• Material handling
• Order processing
• Packaging
McGraw-Hill/Irwin
1-8
• Parts and service
support
• Plant and warehouse
site selection
• Procurement
• Reverse logistics
• Traffic and
transportation
• Warehousing and
storage
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Flow through the Supply Chain
1-9
Customer
Carrier
Distribution
center
Supplier
Customer
Carrier
Customer
Carrier
Supplier
Carrier
Manufacturing
site
Customer
Carrier
Supplier
Carrier
Customer
Distribution
center
Customer
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Strategic Profit Model
Gross margin
Net profit
Net profit
margin
+
Financial
leverage
=
Return on
assets
x
%
Net profit Total assets x Net profit
=
Net worth
Net worth Total assets
Net profit
Net sales
Sales
Total expenses
x
Asset
turnover
Sales
Income taxes
$
Current assets
$
$
Fixed
expenses
$
+
Accounts
receivable
$
+
Fixed assets
$
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Variable
expenses
$
Total assets
$
Cost of
goods sold
Inventory
$
+
Net sales
Total assets
-
+
$
$
$
$
$
%
Return on
net worth
$
Sales 1-10
+
Other current
assets
$
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Future Challenges and Areas for
Performance Improvement
•
•
•
•
•
•
•
1-11a
1-11
Supply Chain Management
Strategic Planning
Total Quality Management
Just-in-Time
Quick Response
Efficient Consumer Response
Logistics as a Competitive Weapon
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Future Challenges and Areas for
Performance Improvement (cont.)
1-12b
1-11
•
•
•
•
•
•
Accounting for logistics costs
Logistics as a boundary-spanning activity
Global logistics
Increasing skill requirements
Logistics information systems
Strategic alliances, partnerships, and
outsourcing
• Green marketing and reverse logistics
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.