Title: MS3121 Fundamentals of Business Logistics
1MS3121 Fundamentals of Business Logistics
The supply chain is simply another way of saying
the whole process of business.
Topic 1 Introduction to Business Logistics
2Learning 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
3The Immediate Supply Chain for an Individual Firm
Transportation
Transportation
Customers
Warehousing
Factory
Product Payment Flows
Transportation
Vendors/plants/ports
Transportation
Warehousing
4Logistics Defined
Supply Chain Management Defined
5The Logistics/SC Mission
6Scope of the Supply Chain for Most Firms
Internal supply chain
7Key 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!
9Significance of Logistics
10Case 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!
11Effect on Logistics Foreign Outsourcing
Domestic sourcing
Foreign sourcing
Increase
Profit
G A
Marketing
Increase
Logistics
Tariffs
Overhead
Materials
Reduction
Labor
12The Multi-Dimensions of SC
13Study Framework
The focus is here
14Relationship 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
15Logistics Objective
Maximize return on logistics assets (ROLA)
Costs of logistics operations
Logistics contribution to sales
Investment in logistics assets
16Contemporary 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.
18Level 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
19Major Planning Areas
CR (2004) Prentice Hall, Inc.
20Six 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
21A Cost Conflict in Logistics
22More Cost Conflicts
23More Cost Conflicts
24More Cost Conflicts
25More Cost Conflicts
26Choosing the Right Supply Chain Strategy
Low margin
High margin
27Classification of Products
28Choosing the Right Supply Chain Strategy
Supply-to-stock
Supply-to-order
29Actions for Misclassified Products
30Pure vs. Mixed Strategy