Objectives Discuss a general overview of the basics of logistics Gain an understanding of the complexity of logistics and distribution Be a better inventory professional by knowing what goes into the products you use
Agenda Introduction to Logistics Activity 1 Costs of logistics Transportation Activity 2 Distribution Concepts Summary
What is Logistics? Materials Management Integrated Logistics Management Logistics Management Distribution Physical Distribution Management Business Logistics Management Marketing Logistics Industrial Logistics
Logistics Definitions Common culture Handling the details of an activity Dictionary The branch of military science having to do with procuring, maintaining, and transporting material, personnel, and facilities
Business Logistics The planning, implementation, & control of the efficient & effective flow and storage of goods, services, & related information from point of origin to point of use or consumption in order to meet customer requirements Council of Logistics Management Professionals
Product Sourcing Manufacture Storage Distributor Retailer Customer Order Receipt SupplierStorageManufactur er StorageDistributorCustomerEnd User People Technologies Processes
Plan So ur ce Ma ke De liv er Bu y
Place Utility-(Where) Moving goods from production surplus points to points where demand exists Extends physical boundaries of a marketing area, adding value to goods Created primarily through transportation
Time Utility (When) Economic value added by having good or service at a demand point at a specific time Proper inventory maintenance, strategic location of good/services, and transportation
Quantity Utility (How Much) Delivering the proper quantities of the item Done through production forecasting, production scheduling and inventory control
Cardinal Scorecard September 2011 Overall, the average for the month was - 'True' fill 98.03% w/Subs 99.53%. Some top items of the unfilled lines for the month: H (IM# Medical Action) – Inventory Issue (6.58% of unfilled lines – 9/11-9/12) (IM# United States Surgical) – Mfg backorder (5.76% of unfilled lines – 9/13-9/30) DVT10 (IM# Sterilmed) – Forecast exceeded (3.91% of unfilled lines – 9/23-9/27)
Some Logistics Activities Transportation Warehousing & Storage Materials Handling Order fulfillment Procurement Forecasting Customer Service Return Goods Handling
Activity 1 Read about you logistical activity Summarize it Tells us an example of this activity within FV What utility could it be and why?
Utilities Place : Moving goods from production surplus points to points where demand exists, Extends physical boundaries of a marketing area, Created primarily through transportation Time : Economic value added by having good or service at a demand point at a specific time, Proper inventory maintenance, strategic location of good/services, and transportation Quantity : Delivering the proper quantities of the item, Done through production forecasting, production scheduling and inventory control
SuppliersManufacturersWarehouses & Distribution Centers Customers Material Costs Transportation Costs Transportation Costs Transportation Costs Inventory Costs Manufacturing Costs
Logistics Costs as a Percentage of GDP Price of a 2-slice toaster: 1980: $23 ($4.14) 2010: $24.88 ($1.99) Global Comparison Logistics Cost % of GDP Asia 13-20% China 15% Europe 12-14% India 13% Japan 11% Mexico 14%
Components of Logistical Costs
Transportation Role Physical movement of people and goods between origin and destination Critical link between organizations Allows for competition in global market Critical to demand fulfillment Services must be in line with customer requirements
Challenges Complexity Competing Goals Changing customer demands Limited information
Challenges A typical cross-border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight forwarders, and complying with over 600 laws and 500 trade agreements that are constantly changing. Adrian Gonzalez, ARC Advisory Group
Modes of Transportation Air Pipeline Water Highway Rail
Activity 2 Each group will get a slide about their form of transportation. Answer the following questions: 1. What is a strength of this form of transportation? 2. What is a weakness of this form of transportation? Give an example of a disruption to this transportation processreal world example
Channel of Distribution Functions Direct/Indirect Assorting Accumulation Storage Information feedback Warehousing Allocation Buying Contacts New Products Financing Distribution Service Promotion Pricing Risk Taking Physical Possession Sorting…………..
How Cardinal Does It? U.S. CAH Factories- 10% Asian CAH Factories- 7% *Includes sourced product Mexican and Caribbean CAH Factories- 3% 2 Redistribution Centers U.S. Branded- 80% Other Medical Distributors Custom ers
Jeopardy Let the Games Begin!
LogisticsTransportation /Costs Distribution $100 $200 $300
LOGISTICS 1. This term is most widely used by organizations like banks and hospitals. 2. The planning, implementation, & control of the efficient & effective flow and storage of goods, services, & related information from point of origin to point of use or consumption in order to meet customer requirements 3. This utility focuses on proper inventory maintenance, strategic location of good/services, and transportation TRANSPORTATION/COST 1. 63% of logistical costs of GDP 2. Slow, but dependable way to transport products 3.This ARC Advisory Group Director estimated that a typical cross- border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight forwarders, and complying with over 600 laws and 500 trade agreements that are constantly changing. DISTRIBUTION 1.
Rail high fixed costs (land, tracks) low variable costs (operating costs, e.g., labor, fuel) slow, but inexpensive way to transport heavy freight that doesnt require special handling, long distances
Highway low fixed costs (government builds, maintains highways) medium-high variable costs (operating costs, e.g., labor, fuel) most accessible mode (more highways than railroads, waterways, pipelines); best for transporting medium to high value products short to moderate distances
Water moderate fixed costs (ships and freight handling equipment) low variable costs (operating costs, e.g., labor, fuel) very slow, but inexpensive way to transport large, heavy freight over long distances (e.g., oceans, rivers, inland waterways, lakes)
Air low fixed costs (aircraft and freight handling equipment) highest variable costs (e.g., labor, fuel, maintenance) very fast; used for transporting high value and/or high perishability product over short to medium distances.
Pipeline highest fixed costs (right of way & construction costs of equipment) lowest variable costs (no significant labor or fuel costs) slow, but dependable (e.g., no weather, traffic disruptions); no flexibility with regard to types of products that can be transported – must be liquid (e.g., petroleum)