Ballou 01

1-*Business Logistics/Supply ChainA Vital SubjectThe supply chain is simply another way of saying the whole process of business.Chapter 1CR (2004) Prentice Hall, Inc.

1-*What is Logistics?Popular logistics terms:Logistics ManagementBusiness Logistics ManagementIntegrated Logistics ManagementMaterials ManagementPhysical Distribution ManagementMarketing LogisticsIndustrial LogisticsDistribution

1-*What is Logistics?:Business Logistics supply chain process that plans, implements, and controls the efficient, effective flow of goods, services, and related information from the point of origin to the point of use or consumption in order to meet customer requirements.Military Logistics design and integration of all aspects of support for the operational capacity of the military forces, and their equipment to ensure readiness, reliability, and efficiency.

1-*What is Logistics?:

Event Logistics network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event.Service Logistics acquisition, scheduling, and management of the facilities/assets, personnel, and materials to support and sustain a service operation or business.

1-*Evolution of Supply Chain ManagementCR (2004) Prentice Hall, Inc.

1-* A Revised Strategy is Generating Great Top Management InterestHistorical perspective of distribution: The last frontier of cost economies

The contemporary view: Distribution is a new frontier for demand generationa competitive weapon.

Peter Drucker, 1962Both views are now important!CR (2004) Prentice Hall, Inc.

1-*History of Logistics and SCMPhysical Distribution Era (1960s 1970s)Integrated Logistics Management Era (1970s 1980s)Supply Chain Management Concept (1990s present)

1-*Supply Chain CharacteristicsVisibilityInventoryLanded costSharing riskAlliances

1-*Supply Chain ObjectivesRecognizing final customers requirementsDeveloping appropriate policies and procedures for managing the supply chain as a single entity

1-*Supply Chain CharacteristicsVisibilityInventoryLanded costSharing riskAlliances

1-*Logistics DefinedSupply Chain Management DefinedCR (2004) Prentice Hall, Inc.

Logistics is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements.

Council of Logistics Management

SCM is the integration of all activities associated with the flow and transformation of goods from raw materials through to end user, as well as information flows, through improved supply chain relationships, to achieve a sustainable competitive advantage.

Handfield and Nichols

1-*Significance of Logistics

Costs are high

About 10.5% of GDP domestically

About 12% of GDP internationally

A range of 4 to 30% of sales for individual firms, avg. about 10%

A high as 70-80% of sales if purchasing and production are included

Customers are more demanding of the supply chain

Desire for quick response

Desire for mass customization

An integral part of company strategy

Generate revenue

Improve profit

Logistics adds value

Time and place utilities

1-*Figure 2-2: Logistics Costs as a Percentage of GDP

Sheet:

1-*Figure 2-4: Inventory Sales Ratio

1-*Value-Added Role of LogisticsMost commonly referred to in terms of economic utilities:Form utility (what)Place utility (where)Time utility (when)Possession utility (why)

1-*Figure 2-5 Fundamental Utility Creation in the Economy

1-* Physical Distribution CostsAdd one-third for inbound supply costsSource: Herb Davis & CompanyLogistics cost are about 10% of sales w/o purchasing costsCR (2004) Prentice Hall, Inc.

CategoryPercent of sales$/cwt.Transportation3.34%$26.52Warehousing2.0218.06Order entry0.434.58Administration0.412.79Inventory carrying1.7222.25 Total 7.65%$67.71

Scope of the Supply Chain for Most FirmsFocus firms internal supply chainCR (2004) Prentice Hall, Inc.1-14

1-* Primary- Setting customer service goals- Transportation- Inventory management- Location Secondary, or supporting- Warehousing- Materials handling- Acquisition (purchasing)- Protective packaging- Product scheduling- Order processingKey Activities/ProcessesCR (2004) Prentice Hall, Inc.

1-*The Logistics Strategy TriangleCR (2004) Prentice Hall, Inc.

PRODUCTION/OPERATIONSSample activities: Quality control Detailed production scheduling Equipment maint. Capacity planning Work measurement & standardsLOGISTICSSampleactivities:Transport Inventory Order processing Materials handlingInterfaceactivities: Product scheduling Plant location PurchasingMARKETINGSampleactivities: Promotion Market research Product mix Sales force managementInterfaceactivities: Customer service standards Pricing Packaging Retail locationProduction-logisticsinterfaceMarketing-logisticsinterfaceRelationship of Logistics to Marketing and ProductionInternal Supply ChainCR (2004) Prentice Hall, Inc.1-21

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