DIMENSIONS OF LOGISTICS Chapter 2

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Chapter 2: :

Chapter 2: Dimensions of Logistics

Dimensions of Logistics: Introduction:

Dimensions of Logistics: Introduction Logistics has come a long way since the 1960s. The big challenge is to manage the whole logistics system in such a way that order fulfillment meets or exceeds customer expectations. Focus of this chapter is upon the individual firm’s logistics system but also recognizing that no logistics system operates in a vacuum. Chapter 2 Management of Business Logistics, 7 th Ed. 2

Contemporary Supply Chain Pipeline:

Contemporary Supply Chain Pipeline Chapter 2 Management of Business Logistics, 7 th Ed. 3

What is Logistics?:

What is Logistics? Increased recognition through news media, corporate-owned trailer promotions, and television Increased sensitivity to service quality provided by logistics Chapter 2 Management of Business Logistics, 7 th Ed. 4

What is Logistics?:

What is Logistics? Popular logistics terms: Logistics Management Business Logistics Management Integrated Logistics Management Materials Management Physical Distribution Management Marketing Logistics Industrial Logistics Distribution Chapter 2 Management of Business Logistics, 7 th Ed. 5

What is Logistics?: 21st Century View of Logistics:

What is Logistics?: 21 st Century View of Logistics Business Logistics – supply chain process that plans, implements, and controls the efficient, effective flow of goods, services, and related information from the point of origin to the point of use or consumption in order to meet customer requirements. Military Logistics – design and integration of all aspects of support for the operational capacity of the military forces, and their equipment to ensure readiness, reliability, and efficiency. Chapter 2 Management of Business Logistics, 7 th Ed. 6

What is Logistics?: 21st Century View of Logistics:

What is Logistics?: 21 st Century View of Logistics Event Logistics – network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event. Service Logistics – acquisition, scheduling, and management of the facilities/assets, personnel, and materials to support and sustain a service operation or business. Chapter 2 Management of Business Logistics, 7 th Ed. 7

What is Logistics?: Value-Added Role of Logistics:

What is Logistics?: Value-Added Role of Logistics Most commonly referred to in terms of economic utilities: Form utility (what) Place utility (where) Time utility (when) Possession utility (why) Also referred to as the seven Rs --- R ight product, R ight quantity, R ight condition, R ight place, R ight time, R ight customer, and R ight cost. Chapter 2 Management of Business Logistics, 7 th Ed. 8

Figure 2-5 Fundamental Utility Creation in the Economy:

Figure 2-5 Fundamental Utility Creation in the Economy Chapter 2 Management of Business Logistics, 7 th Ed. 9

Logistics in the Firm: The Micro Dimension:

Logistics in the Firm: The Micro Dimension Logistics Interfaces with Operations/Manufacturing Logistics Interfaces with Marketing Logistics Interfaces with Other Areas Chapter 2 Management of Business Logistics, 7 th Ed. 10

Logistics in the Firm: Logistics Interfaces with Operations Manufacturing:

Logistics in the Firm: Logistics Interfaces with Operations Manufacturing Length of production runs Balance economies of long production runs against increased costs of high inventories. Seasonal demand Acceptance of seasonal inventory to balance lead production times. Chapter 2 Management of Business Logistics, 7 th Ed. 11

Logistics in the Firm: Logistics Interfaces with Operations/Manufacturing:

Logistics in the Firm: Logistics Interfaces with Operations/Manufacturing Supply-side interfaces Stocking adequate supplies to ensure uninterrupted production now a logistics function. Protective packaging Principal purpose is to protect the product from damage. Foreign & third party alternatives Some logistics functions are being outsourced. Chapter 2 Management of Business Logistics, 7 th Ed. 12

Logistics in the Firm: The Micro Dimension:

Logistics in the Firm: The Micro Dimension Logistics Interfaces with Marketing: The Marketing Mix – Four Ps Price Product Promotion Place Chapter 2 Management of Business Logistics, 7 th Ed. 13

Logistics in the Firm: Price :

Logistics in the Firm: Price Carrier pricing Generally, since the larger the shipment, the cheaper the transportation rate, shipment sizes should be tailored to the carrier’s vehicle capacity where possible. Matching schedules Quantity discounts should be tied to carrier quantity discounts. Volume relationships Volumes sold will affect inventory requirements. Chapter 2 Management of Business Logistics, 7 th Ed. 14

Logistics in the Firm: Product:

Logistics in the Firm: Product Consumer packaging Generally, since the size, shape, weight and other physical characteristics of the product impact on its storage, transportation and handling, the logistics managers should be included in any decisions regarding these product traits. A minor correction in any of the above could conceivably cost (or save) millions of dollars in logistical costs. Logistics costs are not necessarily paramount, but they need to be considered in the decision making process. Chapter 2 Management of Business Logistics, 7 th Ed. 15

Logistics in the Firm: Promotion:

Logistics in the Firm: Promotion Push versus pull The most important factor is that the logistics division is aware of any changes in demand patterns so that it can plan for any consequences. Pull strategies tend to be more erratic. Push strategies tend to more predictable. Channel competition The more popular a product, the easier it is to persuade channel members to promote your product. Chapter 2 Management of Business Logistics, 7 th Ed. 16

Logistics in the Firm: Place:

Logistics in the Firm: Place Wholesalers Generally, since wholesalers are combining purchases for multiple retailers, the shipment sizes tend to be larger and the number of transactions that have to be processed are fewer, with the result that logistics costs are smaller. Retailers With the exception of very large retailers who act more like wholesalers, smaller sales are the norm. These generally cost more for transportation and order processing. Chapter 2 Management of Business Logistics, 7 th Ed. 17

Logistics Interfaces with Other Areas:

Logistics Interfaces with Other Areas Manufacturing and marketing are probably the two most important internal, functional interfaces with logistics. Other important interfaces now include finance and accounting. Logistics can have a major impact on return on assets and return on investment. Logistics costs reported by cost systems measure supply chain trade-offs and performance. Chapter 2 Management of Business Logistics, 7 th Ed. 18

Logistics Activities:

Logistics Activities Transportation Storage Packaging Materials handling Order fulfillment Forecasting Chapter 2 Management of Business Logistics, 7 th Ed. 19 Production planning Purchasing Customer service Site location Other activities

Approaches to Analyzing Logistics Systems: Materials Management v. Physical Distribution:

Approaches to Analyzing Logistics Systems: Materials Management v. Physical Distribution Frequently the movement and storage of raw materials is far different from the movement and storage of finished goods. Four different classifications of logistics systems Balanced system - e.g., consumer products Heavy inbound - e.g., aircraft, construction Heavy outbound - e.g., chemicals Reverse systems - e.g., returnable products Chapter 2 Management of Business Logistics, 7 th Ed. 20

Approaches to Analyzing Logistics Systems:

Approaches to Analyzing Logistics Systems Cost Centers Treating logistics activities as cost centers makes it easier to study cost trade-offs between the centers. (see Tables 2-2 and 2-3) Nodes versus Links Nodes are spatial points (warehouses, plants, etc.); Links are the transportation network (rail, motor, air, pipe and water). (see Figure 2-6) Logistics Channel The network of intermediaries involved in the logistics system. (see Figures 2-7, 2-8, and 2-9) Chapter 2 Management of Business Logistics, 7 th Ed. 21

Figure 2-7 A Simple Logistics Channel:

Figure 2-7 A Simple Logistics Channel Chapter 2 Management of Business Logistics, 7 th Ed. 22

Figure 2-8 A Multi-Echelon Logistics Channel:

Figure 2-8 A Multi-Echelon Logistics Channel Chapter 2 Management of Business Logistics, 7 th Ed. 23

Figure 2-9 A Complex Logistics Channel:

Figure 2-9 A Complex Logistics Channel Chapter 2 Management of Business Logistics, 7 th Ed. 24

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