2Logistics Definition: Objective 1:13LogisticsDefinition:Consists of the planning, implementing, and controlling of the physical flows of materials and final goods/services from points of origin to points of use to meet customers’ needs/wants at a profit.
3Supply-Chain Management Objective 2:13Supply-Chain ManagementDefinition:Logistical perspective* that emphasizes close cooperation and comprehensive interorganizational management to integrate the logistical operations of the different firms within the channel.* substituted “perspective” for “systems”
4The Role of Logistics In essence… Objective 3:13The Role of LogisticsIn essence…Logistics is focused on the physical movement of product…In the right amount,Of the right product,To the right place, andAt the right time.
53rd Party Logistics Providers 133rd Party Logistics ProvidersSpecialize in performing most, if not all, of the logistical tasks that manufacturers or other channel members would normally perform themselves.Represent a growing industry because…Provide services at lower costs than the firms could do themselves
6& Its “Core” Components Objective 4 & 5:13The “Systems” Concept& Its “Core” ComponentsTransportationWarehousingMaterialsHandlingTheLogisticalSystemInventoryControlOrderProcessingPackaging
7The “Total Cost” Approach 13The “Total Cost” ApproachGiven customers’ desired service levels…The optimum combination of basic logistical components is sought while focusing on all the costs of logistics together, rather than the separate costs of the individual components together.Goal = minimize total costs rather than individual costs
8Logistical Component: 13Logistical Component:TransportationThe most fundamental & necessary component of logisticsAccounts for the highest percentage of the total costs of logisticsKey Issue(s):Choose the optimum mode of transportation that will meet the customers’ service demands at the lowest price possible.
9Logistical Component: 13Logistical Component:Materials HandlingConsists of all the activities and equipment involved in the placement and movement of products within storage areas.Key Issue(s):Choosing the correct mechanical equipmentMaking the best use of laborMinimizing the distances products are moved within the warehouse during the course of receiving, storage, and shipping.
10Logistical Component: 13Logistical Component:Order ProcessingThe task of filling customer ordersIts importance lies in its relationship with order cycle time, which is the time between when an order is placed & when it’s received by the customer.Key Issue(s):Developing an efficient order processing center so that order cycle time (and possibly other logistical costs) is minimized
11Logistical Component: 13Logistical Component:Inventory ControlSeeks to hold the least inventory as possible while still meeting customer demandKey Issue(s):Keeping inventory at its lowest possible level while simultaneously placing orders in large quantitiesDetermining one’s economic order quantity, which lies at the point where ICC plus ordering costs (i.e., total costs) are at their minimum.
12Logistical Component: 13Logistical Component:WarehousingConcerned with the holding of products until they’re ready to be sold.Key Issue(s):Locating warehouse facilitiesDetermining the number of warehouse unitsDetermining the size of each unitDesigning the unitsDetermining who should own the unit(s)Often one of the more complex components of logistics because…
13Logistical Component: 13Logistical Component:PackagingPackaging and its associated costs significantly affect the other components of the system.Key Issue(s):Designing packaging to enhance the efficiency and effectiveness of the logistical system beyond that of simply acting as a promotional or educational device for consumers.
14The Output of a Logistics System Objective 6:13The Outputof a Logistics SystemCustomer ServiceThe collection of activities performed in fulfilling orders and keeping customers happy or creating in the customer’s mind the perception of an organization that is easy to do business with.Enumerated or defined in terms ofone’s “Service Standards”
15Nine Common Categories of 13Nine Common Categories ofService StandardsTime from order receipt to order shipmentOrder size and assortment constraintsPercentage of items out of stockPercentage of orders filled accuratelyPercentage of orders filled within a given number of days from receipt of the orderPercentage of orders filledPercentage of customer orders that arrive in good conditionOrder cycle timeEase and flexibility of order placement
16Key Elements of Customer Service 13Key Elements of Customer ServiceProduct availabilityOrder cycle timeDistribution system flexibilityDistribution system informationDistribution system malfunctionPost-sale product support
17Logistics Management vs. Objective 7:13Logistics Management vs.Channel ManagementLogistics managementConcerned primarily with the product flow.Channel managementThe administration of all the major channel flows (ref. Ch. 1).
18Interfaces Between Logistics and Channel Management Objective 8:13Interfaces Between Logisticsand Channel ManagementInterface 1:Determining logistics' service standardsInterface 2:Evaluating whether the logistics program meets channel members’ service standardsInterface 3:Selling the logistics systemInterface 4:Monitoring the results of the logistics program
19Defining Logistics’ Service Standards 13Defining Logistics’ Service StandardsThe higher the service standards, the higher the total costs associated with logistics.Key Issue for Channel Manager:Determining accurately the types and levels of logistics service desired by channel members (including end-run customers).
20Evaluating the Logistics Program 13Evaluating the Logistics ProgramIf considered a major component of the channel manager’s approach to supporting channel members’ needs, the logistics program may be the key feature of a strategic alliance.Key Issue for Channel Manager:Ensuring that the program prepared is what the channel members want and need.
21Selling the Logistics Program 13Selling the Logistics ProgramOften a function of…Minimizing stock-out occurrencesReducing members’ inventory requirementsStrengthening relationship with membersKey Issue for Channel Manager:Extending superior logistics capabilities to help members improve their logistics and marketing capabilities.
22Monitoring the Logistics System 13Monitoring the Logistics SystemLogistics systems must be continually monitored, both in terms of how successful they perform for the channel manager as well as how they meet members’ changing needs.Key Issue for Channel Manager:Continually monitoring members’ reactions to the logistical programs in place (e.g., through audits and internal research)