2 Objectives / OutcomesAt the end of this chapter, students should be able to:Understand industrial logistics management conceptDescribe the elements and role of logistics in operationsExplain achievement of competitive advantage through logistics
3 Contents Definition of Logistics Logistics Management Concepts The Work / Element of LogisticsOrder ProcessingInventory ManagementFacility Network DesignMaterials Handling and PackagingWarehousingTransportationLogistics and Competitive Advantage
4 Definition of Logistics Logical ThinkingStatisticsLogisticsLOGISTICS“the detailed coordination of a complex operation involving many people, facilities or supplies”[ New Oxford American Dictionary]
6 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”
7 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.ScopeFrom 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.
8 Logistics ManagementLogistics 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.SuppliersProcurementOperationsDistributionCustomersMaterials FlowInformation Flow
9 Components of Logistics Management Inputs intoLogisticsOutputs ofLogisticsManagement ActionsPlanningImplementationControlNaturalresourcesCompetitiveAdvantageHumanResourcesTime andPlace UtilityLogistics ManagementCustomersSuppliersFinishedgoodsRawmaterialsIn-processinventoryFinancialResourcesEfficientMovementto CustomerInformationResourcesLogistics ActivitiesProprietaryAssetCustomer serviceDemand forecastingInventory managementLogistics communicationsMaterial handlingOrder processingParts and service supportPlant and warehouse selectionProcurementPackagingReverse logisticsTraffic and transportationWarehousing and storage
11 1. Network DesignThe prime responsibility of logistics management peopledetermines the number and type of facility (plants, warehouses, cross-dock operations and retail stores) required, their geographic locations and the work to be performeddetermines the inventory type and the quantity to be stocked at each facility and the assigning of customer orders for shipmentdetermines 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
12 2. Information / Order Processing Forecasting and order management are 2 areas of logistical work that depend on informationImpact of information:Deficiencies in quality of informationIncorrect information with respect to trendsIncorrect information relating to a specific customer’s requirementMay cause inventory shortageOvercommitmentProcessing of incorrect order createsadditional costDoes not result in sales
13 3. InventoryInventory ManagementCustomer SegmentationProducts RequirementsTransportation IntegrationTime-Based RequirementsCompetitive PerformanceWhile formulating an inventory management policy, the following factors should be considered:
14 4. WarehouseThe 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 significantThere are 3 types of warehousing strategies available to an organization:PrivatePublicContract
15 5. Material Handling & Packaging The direct labor and capital invested in material-handling equipment represent a major part of logistics costMaterial handling operations are made efficient by using a variety of mechanized and automated devicesLogistics personnel must plan the best ways to load, offload, move, sort and select productsNeed to work closely with industrial engineers to design or select packaging materials that facilitate materials handling
16 Transportation Performance One of the most visible elements of logistics operations – mainly concerned with product movement and product storage3 important factors affecting transportation performance:Transportation PerformanceCostSpeedConsistency
17 Competitive Advantage Through Logistics The success in the marketplace is based around the triangular linkage of the company, customers and its competitors.CustomersSeek Benefits at Acceptable CostValueValueCostDifferentialAsset UtilizationAsset Utilization
18 Source of Competitive Advantage Commercial SuccessCost AdvantageValue 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.
19 SummaryLogistics 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 costA 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.