Logistics

Overview of logistics Logistics of business is big and important The logistical value proposition The work of logistics Logistical operations Logistics integration objectives Logistical operating arrangements Flexible structure Supply chain synchronization

What is Logistics? Logistics is the design and administration of systems to control movement and geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost.

Logistics Logistics involves the management of order processing, inventory, transportation, and the combination of warehousing, materials handling, and packaging, all integrated throughout a network of facilities. The goal of logistics is to support procurement, manufacturing, and customer accommodation supply chain operational requirements.

Logistics To achieve lowest total cost means that financial and human assets committed to logistics must be held to an absolute minimum. It is also necessary to hold operational expenditures as low as possible. The combinations of resources, skills, and systems required to achieve superior logistics are challenging to integrate, but once achieved, such integrated competency is difficult for competitors to replicate.

Logistics will continue its renaissance in the future Information technologies will automate many of the traditionally manual logistical functions: Automated port and rail operations RFID tagging of materials Advanced technologies for warehousing and inventory operations Removal of trade barriers will continue to expand global trade and logistics

Logistical value Proposition Logistical value proposition consists of a commitment to key customer expectations and requirements at a minimum cost The two elements of this value proposition are Service and Cost Minimization Firms must make appropriate tradeoffs between service and cost for each of their key customers

Service benefits are created by logistical performance in 3 areas Availability involves having inventory to consistently meet customer material or product requirements Operational performance deals with the time required to deliver a customer’s order Key metrics for this area involve delivery speed and consistency Service reliability involves the quality attributes of logistics Key to quality is accurate measurement of availability and operational performance over time

Different perspectives on cost minimization Traditional Cost Logistics Model Total Cost Logistics Model Minimize order processing cost + Minimize inventory cost + Minimize transportation cost + Minimize warehousing, materials handling and packaging cost + Minimize facility cost _______________________ ___ Lowest logistics cost Minimize (order processing + inventory + transportation + warehousing, materials handling and packaging + facility) cost _______________________ __ Lowest total logistics cost

Malfunction is concerned with the probability of logistical performance failure, such as damaged products, incorrect assortment, or inaccurate documentation. When it happens, recovery time can measure a firm’s logistical competency. What is malfunction ?

Figure 2-1 Integrated Logistics

How is a sound inventory strategy? Core customer segmentation; Product profitability; Transportation integration; Time-based performance; Competitive performance. Pareto principle 2010年3月8日 双语教学PPT

transportation Three fundamental factors that influence transportation performance: cost, speed, consistency two kinds of costs: The payment for shipment; The expenses related to maintaining in-transit inventory. 双语教学PPT

Consistency of transportation Consistency of transportation refers to variations in time required to perform a specific movement over a number of shipments, which also reflects the dependability of transportation. Speed and consistency combine to create the quality aspect of transportation. Consistency of transportation

Logistical Operations

Figure 2-2 Logistical Integration 2010年3月8日 双语教学PPT

How to understand CA’s implication? CA is the movement of finished product to customers. CA aligns manufactures, wholesales, and retailers into supply chain arrangements to provide customers product availability. 双语教学PPT

Dealing with the varied aspects of customer accommodation is typically called customer relationship management. CRM

Manufacturing support The overall concern of manufacturing support is not how production occurs but rather what, when, and where products will be manufactured. 双语教学PPT

Logistical operating arrangements

Echelon-structured logistics

Either break-bulk or consolidation warehouses echelon Total cost analysis Either break-bulk or consolidation warehouses Utilize warehouses to create inventory assortments and achieve consolidation economies with large-volume transportation shipments Next page

Figure 2-4 Combined Echelon and Direct Delivery

  Nodes are facility locations. Forms of communications and transportation represent links between the nodes. Most logistical work takes place at nodes whereas links represent the interface among locations. Nodes represent network facilities where materials are processed and base inventories and safety stocks are maintained. Inventory that is in between nodes is called “in transit”. Compare and contrast a performance cycle node and a link. Give an example of each

Figure 2-5 Flexible Echelon and Direct Delivery

Supply chain synchronization Multifirm operational integration across a supply chain is referred to as supply chain synchronization At the heart of supply chain integration is the goal of leveraging member core competencies to achieve overall reduction of inventory dwell time.

Performance cycle structure It represents the elements of work necessary to complete the logistics related to customer accommodation, manufacturing, or procurement. It is the primary unit of analysis for logistical design and synchronization Performance cycle structure

Performance cycle structure Information and transportation must link all firms functioning in SC; The operational locations that are linked by information and transportation are referred to as nodes. Performance cycle structure

Performance cycle structure ⑴Nodes ⑵Links ⑶Inventory assets ⒈base stock (one-half of the average shipment size received) ⒉safety stock: exists to protect against variance in demand or operational lead time. Performance cycle structure

  Nodes are facility locations. Forms of communications and transportation represent links between the nodes. Most logistical work takes place at nodes whereas links represent the interface among locations. Nodes represent network facilities where materials are processed and base inventories and safety stocks are maintained. Inventory that is in between nodes is called “in transit”. Compare and contrast a performance cycle node and a link.

SC output is the level of performance expected from the combined logistical operations. SC efficiency is a measure of resource expenditure necessary to achieve such logistical effectiveness sc

The effectiveness and efficiencyof logistical performance cycles are key concerns in SCM. It is important to realize that transaction frequency and intensity will vary between performance cycles. A complicating fact is that any operation or facility in one supply chain may simultaneously be participating in a number of other arrangements. scm

Conclusions the logistics performance cycle is the basic unit of supply chain design and operational control, in essence, the performance cycle structure is the framework for implementation of integrated logistics across the supply chain. 双语教学PPT

Performance cycle uncertainty Major objective of logistics in all areas is to reduce performance cycle uncertainty Operational variance is randomly introduced during the cycle through The structure of the performance cycle itself Operating conditions The quality of logistical operations

Figure 2-6 Logistical Performance Cycles

  One of the major objectives of logistical management is to reduce the uncertainty in performance cycles. Since the performance cycles are made up of many activities, each with its own volatility or variance, variance over the entire cycle can significantly impede the logistics organization’s efficiency and effectiveness. To control variance, the firm must conform expected cycle time to actual cycle time. If cycle time is less than expected, the delivered product becomes inventory to be stored. If the cycle time is longer than expected, then the firm must rely on safety stocks to satisfy customer demand. In either case there are costs associated with variance. The ides is to eliminate variance by equating actual cycle time to the expected cycle time. This may require adjustments in product flows into or out of the organization. Discuss uncertainty as it relates to the overall logistical performance cycle. Discuss and illustrate how performance cycle variance can be controlled.