Introduction into Logistics PhD Natasha Lutovinova Logistics Lecturer E-mail: Lutovinova.N@nhtv.nl Room: G1.006

Handbook: Paul R. Murphy & Donald F Handbook: Paul R. Murphy & Donald F. Wood, Contemporary logistics (New Jersey 2011), 10th edition 3

Introduction into Logistics Course Outline 13.05 SCM Concept, Inventory 14.05 Demand Management, Warehousing Management 15.05 Transportation Management, International Logistics 16.05 Poster Session

CHAPTER 1 Logistics and the Supply Chain 5

Learning Objectives To learn the definition of logistics (what it is) To understand the economic importance of logistics To gain an understanding of logistics practices within a firm 6

Logistics and the Supply Chain Logistics: what it is Council of Logistics Management definition: “Logistics is that part of the supply chain process 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 customers’ requirements.” Source: clm1.org 7

Figure 1-1: Control Over the Flow of Inbound and Outbound Movements 8

Logistics and the Supply Chain Materials Management Physical distribution Business Logistics Logistics Management Industrial distribution Supply Chain Management 9

Logistics and the Supply Chain (What it is) The forward and reverse flow of product and info Logistics Reverse logistics The importance of meeting customer requirements Mass logistics Tailored logistics 10

Figure 1-2: The utilization of logistics service as a major selling point 11

Logistics and the Supply Chain (the economic importance) Economic impacts of logistics on Macro level (see table 1-1) Economic impact on Micro level Economic utility: value of product in satisfying the need of the customer Possession utility Form utility Place utility Time utility 12

Year Inventory carrying costs Transportation costs Administrative costs Total U.S. \logistics cost Logistics as a percentage of GDP 1960 31 44 3 78 14.7 1965 38 64 4 106 1970 56 91 6 153 1975 97 116 9 222 13.5 1980 220 214 17 451 16.1 1985 227 274 20 521 12.4 1990 283 351 25 659 11.4 1995 302 441 30 773 10.4 2000 377 590 39 1,006 10.1 2001 320 609 37 966 9.5 2002 300 582 35 917 8.8 2003 304 607 36 947 8.6 2004 337 652 1028 2005 395 739 46 1180 2006 447 809 50 1306 9.9 2007 487 857 54 1398 Table 1-1: The cost of the Business Logistics system in relation to Gross Domestic Product (GDP) in $ billion 13 Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001

Fig. 3.2 Logistics impact on ROI Logistics and the bottom line Customer Service Sales revenue Profit Logistics efficiency Costs Return on investment Pipeline management Cash Fig. 3.2 Logistics impact on ROI Cash-to-cash cycle time Accounts receivable/payable Capital employed Just-in-time logistics Inventory Asset deployment and utilization Fixed assets 14

Logistics and the Supply Chain (logistical relationships within the firm) The systems approach “Company’s objectives can be recognized by the mutual interdependence of the major functional area of the firm, such as marketing, production, finance and logistics”. The total cost approach “Cost trade-offs have to be made”. 15

Logistics and the Supply Chain (logistical relationships within the firm) Finance Capital budgeting (SO&P) Inventory (asset valuation LIFO or FIFO) Cash flow associated with holding inventory Inventory cost versus inventory units 16

Logistics and the Supply Chain (logistical relationships within the firm) Marketing (4 p’s) Place decisions Price decisions Landed cost Phantom freight Freight absorption Product decisions Stockouts Promotions decisions 17

Figure 1-3: Phantom freight and freight absorption 18

The supply chain becomes the value chain Technology development Human resource management Firm infrastructure Procurement Inbound Logistics Operations Outbound Marketing & Sales Service Support Activities Fig. 1.7 The value chain Primary Activities 19

Logistics and the Supply Chain (logistical relationships within the firm) Production Length of production runs Postponement 20

Logistics and the Supply Chain (activities in the logistical channel) Customer Service (Ch. 7) Warehousing Management (Ch. 10) 21

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Logistics and the Supply Chain (activities in the logistical channel) Inventory Management (Ch. 8) Cost of carrying product Cost of ordering product Cost of being out of stock Order Management (Ch. 7) Production scheduling Returned products (Ch. 1) (Reverse logistics) 23

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Logistics and the Supply Chain (activities in the logistical channel) Transportation (Ch. 12) 25

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Logistics and the Supply Chain (Activities in the logistical channel) Demand forecasting (Ch. 7) Industrial packaging (Ch. 11) Materials handling (Ch. 11) Parts and service support Procurement (Ch. 6) Salvage and scrap disposal (Ch. 6) 27

Fig. 10-1 Adding a Warehousing Facility: shorter-Haul Transporation Logistics and the Supply Chain (Activities in the logistical channel) Producer (Manufacturing) Warehouse facility (Inventory) Sales Retailer A Transportation (Distribution) Retailer B Retailer C Warehousing Management (Ch. 10) Retailer A Transportation (Distribution) (Volume shipment) Transportation (Distribution) Retailer B Retailer C 28

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Next time: Assignment 3 vacancies / advertising + short working paper 250 words about job of a logistics manager / warehouse manager / transportation manager / Supply Chain Manager 30