LOGISTICS OPERATION Industrial Logistics (BPT 3123) Industrial Technology Management Programme Faculty of Technology

Objectives / Outcomes At the end of this chapter, students should be able to: Understand industrial logistics management concept Describe the elements and role of logistics in operations Explain achievement of competitive advantage through logistics

Contents Definition of Logistics Logistics Management Concepts The Work / Element of Logistics Order Processing Inventory Management Facility Network Design Materials Handling and Packaging Warehousing Transportation Logistics and Competitive Advantage

Definition of Logistics Logical Thinking Statistics Logistics LOGISTICS “the detailed coordination of a complex operation involving many people, facilities or supplies” [ New Oxford American Dictionary]

Definition of Logistics

Logistics Management Definition “part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer requirements”

Logistics Management Objective Scope The purpose of logistics management is to plan and co-ordinate all those activities necessary to achieve desired levels of delivered service and quality at lowest possible cost. Scope From the total systems viewpoint, the scope encompasses management of raw materials and other inputs through the delivery of the final product in order to satisfy a customer.

Logistics Management Logistics concept was introduced due to need for planning and coordinating the materials flow from source to user as an integrated system, rather than managing the flow of goods as a series of independent activities. Suppliers Procurement Operations Distribution Customers Materials Flow Information Flow

Components of Logistics Management Inputs into Logistics Outputs of Logistics Management Actions Planning Implementation Control Natural resources Competitive Advantage Human Resources Time and Place Utility Logistics Management Customers Suppliers Finished goods Raw materials In-process inventory Financial Resources Efficient Movement to Customer Information Resources Logistics Activities Proprietary Asset Customer service Demand forecasting Inventory management Logistics communications Material handling Order processing Parts and service support Plant and warehouse selection Procurement Packaging Reverse logistics Traffic and transportation Warehousing and storage

Elements of Logistics

1. Network Design The prime responsibility of logistics management people determines the number and type of facility (plants, warehouses, cross-dock operations and retail stores) required, their geographic locations and the work to be performed determines the inventory type and the quantity to be stocked at each facility and the assigning of customer orders for shipment determines network of facilities including information and transportation forms a structure from which logistical operations such as processing of customer orders, maintaining inventory and performed material handling

2. Information / Order Processing Forecasting and order management are 2 areas of logistical work that depend on information Impact of information: Deficiencies in quality of information Incorrect information with respect to trends Incorrect information relating to a specific customer’s requirement May cause inventory shortage Overcommitment Processing of incorrect order creates additional cost Does not result in sales

3. Inventory Inventory Management Customer Segmentation Products Requirements Transportation Integration Time-Based Requirements Competitive Performance While formulating an inventory management policy, the following factors should be considered:

4. Warehouse The logistical activities that are carried out in warehousing are sorting, sequencing, order selection, transportation consolidation and sometimes product modification and assembly. Within the warehouse, products must be received, moved, sorted and assembled to meet customer order requirements and for these activities material handling become significant There are 3 types of warehousing strategies available to an organization: Private Public Contract

5. Material Handling & Packaging The direct labor and capital invested in material-handling equipment represent a major part of logistics cost Material handling operations are made efficient by using a variety of mechanized and automated devices Logistics personnel must plan the best ways to load, offload, move, sort and select products Need to work closely with industrial engineers to design or select packaging materials that facilitate materials handling

Transportation Performance One of the most visible elements of logistics operations – mainly concerned with product movement and product storage 3 important factors affecting transportation performance: Transportation Performance Cost Speed Consistency

Competitive Advantage Through Logistics The success in the marketplace is based around the triangular linkage of the company, customers and its competitors. Customers Seek Benefits at Acceptable Cost Value Value Cost Differential Asset Utilization Asset Utilization

Source of Competitive Advantage Commercial Success Cost Advantage Value Advantage * Competitive advantage – the ability of an organization to differentiate itself in the eyes of customer, from its competition, and to operate at a lower cost and hence greater profit.

Summary Logistics management provides for the flow and storage of information and products between the firm and its suppliers (inbound), the firm and its customers (outbound) and the various plants, divisions and units of the firm. The objectives of logistics management is to provide customers with their required service benefits at the lowest total logistics cost A complete logistics management system comprises 6 major decision areas: facility network design, inventory management, order management, transportation management, warehousing management and packaging and materials handling management. Logistics has an important relationship to manufacturing, marketing, finance and other areas of the organization. The cost of logistics systems can be affected by a number of major factors, including competition in the market, the spatial relationship of nodes and product characteristics.