MS3121 Fundamentals of Business Logistics

1
MS3121 Fundamentals of Business Logistics
The supply chain is simply another way of saying
the whole process of business.
Topic 1 Introduction to Business Logistics
2
Learning Objectives

• Concept and scope of business logistics
• Relationship between logistics and supply chain
  management
• Importance of Logistics
• Objectives of business logistics
• Logistics strategy and planning

3
The Immediate Supply Chain for an Individual Firm
Transportation
Transportation
Customers
Warehousing
Factory
Product Payment Flows
Transportation
Vendors/plants/ports
Transportation
Warehousing
4
Logistics Defined
Supply Chain Management Defined
5
The Logistics/SC Mission
6
Scope of the Supply Chain for Most Firms
Internal supply chain
7
Key Activities/Processes
Primary


-

Customer service
-

Transportation
-

Inventory management
-

Information flow and order processing
Secondary, or supporting


-

Warehousing
-

Materials handling
-

Acquisition (purchasing)
-

Protective packaging
-

Product scheduling

Order processing
-
8
A Revised Strategy is Generating Great Top
Management Interest
Historical perspective of distribution The
last frontier of cost economies The
contemporary view Distribution is a new
frontier for demand generationa competitive
weapon.
Peter Drucker, 1962
Both views are now important!
9
Significance of Logistics
10
Case Study
Wal-Mart Wins with Logistics!

• Costs are lower than K-Mart or Target Stores
• CEO is a former logistician
• Wal-Mart is the largest retailer in the world!

11
Effect on Logistics Foreign Outsourcing
Domestic sourcing
Foreign sourcing
Increase
Profit
G A
Marketing
Increase
Logistics
Tariffs
Overhead
Materials
Reduction
Labor
12
The Multi-Dimensions of SC
13
Study Framework
The focus is here
14
Relationship of Logistics to Marketing and
Production
LOGISTICS
Sample
activities
MARKETING
PRODUCTION/

Transport
Interface
Sample
OPERATIONS

Inventory
Interface
activities
activities
Sample activities


Order
activities
Customer


Promotion
Quality control


processing
Product

service


Market
Detailed production

scheduling

standards

Materials

research

scheduling



Plant
Pricing
handling

Product


Equipment
maint
.


location
Packaging


mix
Capacity planning



Purchasing
Retail


Sales force
Work measurement

location

management

standards
Production-
Marketing-
logistics
logistics
interface
interface
Internal Supply Chain
1-21
15
Logistics Objective
Maximize return on logistics assets (ROLA)
Costs of logistics operations
Logistics contribution to sales
Investment in logistics assets
16
Contemporary Logistics Terms

• Value stream/logistics process
• Quick response and flexible manufacturing
• Mass customization
• Supply chain management/collaborative logistics
• Reverse logistics
• Service logistics
• Continuous replenishment
• Lean logistics
• Integrated logistics

17


The objectives of logistics strategy are
- Minimize cost
Logistics Strategy
- Minimize investment
- Maximize customer service
Use ROLA


Levels of logistical planning
- Strategic
- Tactical
- Operational


The 4 problem areas of supply chain planning
- Customer ser
vice levels
Recall the logistics strategy triangle
- Facility location
- Inventory decisions
- Transportation decisions


When to plan?
- No distribution network currently exists.
- There has been no re-evaluation in 5 years.
- When costs are changing rapidly, especially
transport
inventory.
- When markets have shifted.
- When current distribution economics encourage
shifts.
- When there has been a major policy shift in
logistics such as in price,
customer service, or investment level.
18
Level of Logistics Planning
Decision area
Strategic
Tactical
Operational
Transportation
Mode selection
Seasonal equip-
Dispatching
ment leasing
Inventories
Location, Control policies
Safety stock levels
Order filling
Order
Order entry, transmittal,
Processing
processing
and processing system
orders, Filling
design
back orders
Purchasing
Development of supplier-
Contracting,
Expediting
buyer relations
Forward buying
Warehousing
Handling equipment
Space utilization
Order picking
selection, Layout design
and restocking
Facility
Number, size, and
location
location of warehouses
19
Major Planning Areas
CR (2004) Prentice Hall, Inc.
20
Six Guidelines for Logistics Strategy Formulation
Total cost concept



Tradeoff conflicting costs at optimum

Differentiated distribution



Not all products should be provided the same
level of
customer service

Mixed strategy



A pure strategy has higher costs than a mixed
strategy

Postponement



Delay formati
on of the final product as long as possible

Shipment consolidation



Smaller shipment sizes have disproportionately
higher
transportation costs than larger ones

Product standardization



Avoid product variety since it adds to inventory

21
A Cost Conflict in Logistics
22
More Cost Conflicts
23
More Cost Conflicts
24
More Cost Conflicts
25
More Cost Conflicts
26
Choosing the Right Supply Chain Strategy
Low margin
High margin
27
Classification of Products
28
Choosing the Right Supply Chain Strategy
Supply-to-stock
Supply-to-order
29
Actions for Misclassified Products
30
Pure vs. Mixed Strategy