Introducing Logistics & Supply Chain Management

Compiled by Rulzion Rattray

Logistics (Christopher, M. 1998)

• Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finishing inventory (and the related flows of information) through the organisation and its marketing channel in such a way that current & future profitability are maximised through the cost-effective fulfilment of orders.

The Resource EnvironmentThe Value Chain Michael Porter (1985)

Margin

Margin

Firm’s Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

Logistics

Operations Marketing

& Sales

Outbound

LogisticsService

Primary Activities

SecondaryActivities

Resource EnvironmentThe Value Chain Michael Porter (1985)

Firm’s Value chain

Supplier value chains

Channel value chains

Customer value chains

Supply Chain Management• The management of upstream and

downstream relationships with suppliers & customers to deliver superior customer value at less cost to the supply chain as a whole. (Christopher, M. 1998)

• A network of connected & interdependent organisations mutually & cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users. (Aitken, J., 1998)

Mission of Logistics Management

• Scope of logistics spans the organisation

Suppliers Operations Distribution CustomersProcurement

Material Flow

Requirements Flow

• Means by which customers are satisfied through coordination of material & information flow

Supply Chain and Performance

• Supply chain is the network of organisations that are involved through upstream or downstream linkages.

• Traditionally most organisations see themselves as separate entities

• Traditionally Logistics management has been concerned with flow within the organisation.

Achieving an Integrated Supply Chain

PurchasingMaterial Control Production Sales Distribution

Materialmanagement

Manufacturingmanagement

Distribution

Materialmanagement

Manufacturingmanagement

Distribution

Suppliers InternalSupply chain

Customers

Material Flow Customer Service

Material Flow Customer Service

Material Flow Customer Service

Material Flow Customer Service

Stage 1

Stage 2

Stage 3

Stage 4

Increasing Complexity

• At the end of the second world war there was a global shortage of manufactured goods.

• Today At the beginning of the third millennium there is an oversupply.

• Firms shop freely amongst the nations• In 1991, for the first time, companies spent

more money on computing and communications gear than the combined moneys spent on industrial, mining, farm, and construction equipment.

Organisational Integration

• Increasing requirement of integration will require generalists who can manage processes.

• Knowledge of systems theory and systems thinking will be a requirement for these generalist mangers.

• We are entering an era of supply chain competition

Rules of Competition

• Competitive advantage achieved by a combination of product excellence and process excellence.

• Responsiveness and agility• Reliability in logistics this will require

enhanced pipeline visibility• Relationships trend towards customers

seeking to reduce supplier base?

References• Aitken, J., “Supply Chain Integration within the Context of a

Supplier Association”, Cranfield University PHD Thesis, 1998. Cited in Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London.

• Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London

• Porter ME 1979, “How Competitive Forces Shape Strategy”, Harvard. Business Review March/April 1979.

• Porter ME 1985, Creating & Sustaining Superior Performance, Free Press.