2. Introduction into Logistics
PhD Natasha Lutovinova
Logistics Lecturer
Room: G1.006

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

4. 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

5. CHAPTER 1
Logistics
and the
Supply Chain 5

6. 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

7. 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

8. Figure 1-1: Control Over the Flow of Inbound and Outbound Movements8

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

10. 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

11. Figure 1-2: The utilization of logistics service as a major selling point11

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. Figure 1-3: Phantom freight and freight absorption18

19. 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

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

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

22. 22

23. 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

24. 24

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

26. 26

27. 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

28. 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

29. 29

30. 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