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

2. 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

3. 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

4. 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]

5. Definition of Logistics

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.
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.

8. 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

9. 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

10. Elements of Logistics

11. 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

12. 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

13. 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:

14. 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

15. 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

16. 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

17. 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

18. 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.

19. 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.