Dimensions of Logistics-2- Supply Chain Management

7/27/2019 Dimensions of Logistics-2- Supply Chain Management

1/20

SUPPLY CHAIN MANAGEMENT

MODULE 7

DIMENSIONS OFLOGISTICS

1


2/20

INTRODUCTION

Peter Drucker1962 The Economys Dark Continent

Logistics is one of the most neglected but most promising

areas of business

Logistics originated in the military's need to supply itself with

arms, ammunition and rations as the army moved to different

locations

Gulf War in 1991, Afghanistan War in 21stcentury regarded assignificant logistical wars

2


3/20


4/20


5/20


6/20

MICRO DIMENSION OF LOGISTICS

Micro Dimension of logistics examines the relationshipsbetween logistics and other departments in an organization

Interfaces with Manufacturing:

Length of the Production Run - Balance economies of long

production runs against increased costs of high inventories

Supply interfaces - Stocking adequate supplies to ensure

uninterrupted production

Protective packaging - Principal purpose is to protect the

product from damage during transit

6


7/20

Interfaces with Sales and Marketing:

Sales forecastSales forecast will decide quantities estimated to betransported and stored

Product- Size, shape, weight, volume of the product impacts

storage, transportation and handling

PriceLarger shipments means cheaper transportation rate,therefore shipment sizes should be customized to the carriers vehiclecapacity

Promotion - Logistics function must be aware of any promotionalactivities so that it can plan accordingly

7

MICRO DIMENSION OF LOGISTICS CONTINUED


8/20

MICRO DIMENSION OF LOGISTICS CONTINUED

8

Interfaces with Sales and Marketing continued Place:

Wholesalers - Since wholesalers combine purchases for multipleretailers, the shipment sizes are larger and number oftransactions are fewer, resulting in smaller logistics costs

Retailers - With the exception of very large retailers who actmore like wholesalers, smaller shipment sizes are the standard.These generally cost more for transportation and orderprocessing

Interfaces with Finance and Accounting:

Logistics management can have a major impact on overall

Return on Investment


9/20

LOGISTICS ACTIVITIES

Transportation: Physical movement or flow of goods between different

locations

Storage: Inventory management and warehousing

Packaging: Affected by type of product and transportation

Materials handling:

Movement into, from and within a warehouse

9


10/20

LOGISTICS ACTIVITIES CONTINUED

Order fulfillment: Completing customer orders which affects lead time

Forecasting:

Predicting inventory necessary to fulfill customerdemand

Production planning: Product necessary to cover market

Purchasing: Procurement of supplies which affects transportation

10


11/20


12/20

APPROACHES TO ANALYZING LOGISTICS SYSTEMS CONTINUED

12

Materials Management v/s Physical Distribution continued Heavy Outbound:

e.g. Dow Chemicals - Inbound crude oil by-products, saltwater and other raw

materials flow from a limited number of sources and move in volumes over

relatively short distances. On the outbound side, a wide variety of complex

industrial and consumer chemicals are produced that need storage, packaging,

and transportation to the customer.

Reverse Systems:

e.g. HP, Samsung - These companies have frequent product returns on the

outbound side of their logistics systems due to exchange or repairs.

Nodes v/s Links: Nodes are places where goods stop for processing

e.g. Warehouses, Production plants, Stock points

Links are the means of transport connecting the nodes

e.g. Aircraft, Ship, Train, Truck etc.


13/20


14/20

APPROACHES TO ANALYZING LOGISTICS SYSTEMS CONTINUED

Logistics Channels: Network of intermediaries involved in the logistics system

14


15/20

LOGISTICS AND SYSTEMS ANALYSIS

Cost Perspective: The most efficient systems are not always comprised of each

component operating at its lowest possible cost

The significant concern is to have the entire system operating at

its lowest total cost

Optimization:

Deciding upon the best possible alternative in terms of locations

and transport options:

Constructing warehouse near to factory or near to customerlocation ?

Which mode of transport to be utilized ?

15


16/20

LOGISTICS AND SYSTEMS ANALYSIS CONTINUED

Levels of optimality: There are often constraints working which result in less than optimum

outcomes

Additionally, logistics systems must work in harmony with marketing,

finance, production etc.

16


17/20

TECHNIQUES OF LOGISTICS SYSTEM ANALYSIS

Short-Run/Static Analysis: Looks at short run situation and selects the system with the lowest overall

cost

Comprises of a matrix-like table which presents each of the logistics and

other relevant costs for two or more alternative logistics systems.

17


18/20

TECHNIQUES OF LOGISTICS SYSTEM ANALYSIS CONTINUED

Long-Run/Dynamic Analysis: Mathematically calculates the point of equality between two alternate logistics

systems over a longer time duration

Comprises of a graph of fixed and variable costs of the two systems

18


19/20

Competition through customer service: Order Cycle:

Shorter order cycle, less inventory required

Substitution:

More substitutable product, higher customer service level

required

Inventory Effect:

Increase inventory, reduce cost of lost sales

Transportation Effect:

Increase transportation, reduce cost of lost sales

19

FACTORS AFFECTING THE COST AND IMPORTANCE OF LOGISTICS


20/20

FACTORS AFFECTING THE COST AND IMPORTANCE OF LOGISTICS

CONTINUED

Product factors:

Value:

When product value increases, the cost of warehousing, transportationand inventory increases

Density:

Higher the density, more efficient use of warehouse and transportation

space

Damage:

Greater the risk of damage, higher the transportation and warehousingcost

Special Handling Requirements: Critical, Very Heavy and Very High Value raw materials/products

e.g. Aircrafts, Oil Rigs, Medical equipment

Distance FactorWarehouse near to factory or near customer?

20

Documents

Dimensions of Logistics-2- Supply Chain Management