Lecture 2 Introduction to Logistics

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Introducing Logistics

Introducing Logistics & Supply Chain ManagementCompiled 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)MarginMarginFirms InfrastructureHuman Resource ManagementTechnology DevelopmentProcurementInboundLogisticsOperationsMarketing & SalesOutboundLogisticsServicePrimary ActivitiesSecondaryActivities

Resource EnvironmentThe Value Chain Michael Porter (1985)Firms Value chainSupplier value chainsChannel value chainsCustomer value chains

Supply Chain ManagementThe 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 ManagementScope of logistics spans the organisationSuppliersOperationsDistributionCustomersProcurementMaterial FlowRequirements FlowMeans by which customers are satisfied through coordination of material & information flow

Supply Chain and PerformanceSupply chain is the network of organisations that are involved through upstream or downstream linkages.Traditionally most organisations see themselves as separate entitiesTraditionally Logistics management has been concerned with flow within the organisation.

Achieving an Integrated Supply ChainPurchasingMaterial ControlProductionSalesDistributionMaterialmanagementManufacturingmanagementDistributionMaterialmanagementManufacturingmanagementDistributionSuppliersInternalSupply chainCustomersMaterial FlowCustomer ServiceMaterial FlowCustomer ServiceMaterial FlowCustomer ServiceMaterial FlowCustomer ServiceStage 1Stage 2Stage 3Stage 4

Increasing ComplexityAt 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 nationsIn 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 IntegrationIncreasing 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 CompetitionCompetitive advantage achieved by a combination of product excellence and process excellence.Responsiveness and agilityReliability in logistics this will require enhanced pipeline visibilityRelationships trend towards customers seeking to reduce supplier base?

ReferencesAitken, 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, LondonPorter ME 1979, How Competitive Forces Shape Strategy, Harvard. Business Review March/April 1979.Porter ME 1985, Creating & Sustaining Superior Performance, Free Press.