11What is logistics management?

11

Logistics management is the process of

planning,implementing and controlling

the efficient, cost-effective forward and reverse flow of raw materials, in-process inventory, finished goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

Council of Logistics Management

Logistics Management

Logistics activities

Customer serviceDemand forecastingLogistics information systems

Inventory controlMaterial handlingOrder processingParts and service support

Plant and warehouse site selection

ProcurementPackagingReverse logistics Traffic and transportation

Warehousing and storage

The Five Rights of Logistics

Right Items, needed for consumption or production,

Right Place Right Time Right Condition Right Cost,

1 3

Military logistics developments Transportation deregulation Competitive pressures Information technology Channel power Profit leverage

Factors Impacting the Development of Logistics

Throughout the history ; wars have been won and lost through logistics

strengths and capabilities or the lack of them.

1.Military Logistics

1.Military Logistics

Following the World War II, logistics began to receive increased recognition and emphasis.

In the Persian Gulf War in 1990-1991, the ability to efficiently and effectively distribute and store supplies and personnel were key factors in the success of the US Armed Force.

2.Deregulation Deregulation of the transportation industry in

the late 1970s and early 1980s gave organizations many more options and increased the competition within and between transportation modes.

Carriers become more creative, flexible, customer-oriented, and comparative in order to succeed.

They can focus on negotiation of rates, terms, and services, with their overall attention directed toward getting the best transportation buy.

3. Competitive Pressures Globalization and competition With rising interest rates and increasing energy

costs during the 1970s, logistics received more attention as a cost driver-emphasis on cost control

WHY? Local firms versus overseas competitors Increased offshore buying and selling

activities, more complex and more costly global supply chains

4.Information Technology Information technology gave organizations the

ability to better monitor transactions intensive activities such as ordering, movement of goods...

Computerized quantitative models for controlling and optimization

MRP,MRP II,DRP,DRP II,JIT link material management from order processing to inventory management, forecasting and production.

5.Channel Power

Shifting channel power from manufacturers to retailers, wholesalers, and distributors has also had a profound impact on logistics.

Lower brand loyalty decreases a manufacturer’s power-increases retailer’s power

6. Profit Leverage

$1 saved in logistics costs has a much greater impact on the organization’s profitability than a $1 increase in sales.

There are costs associated with sales ( cost of goods sold…) ] $ 1 increase in sales does not result in $ 1 dolar increase in profit

Logistics Is Relevant to All Types of Organizations

The definition of logistics includes the flow of materials and services in both the manufacturing and service sector.

The service sector includes entities such as the government, hospitals, banks, retailers and wholesalers.

It is only in the recent past that business organizations have come to

recognize the vital impact that logistics management can have in

the achievement of competitive advantage.

Martin Christopher

Competitive Advantage

The source of competitive advantage is found ;– In the ability of the organization to differentiate

itself, in the eyes of the customer, from its competitors,

– By operating at a lower cost and hence at greater profit.

Christopher s.5

1 2 Components ofLogistics Management

Implementation ControlPlanning

Management actions

Competitiveadvantage

Efficientmovement

to customer

Timeand place

utility

Proprietaryasset

Outputs oflogisticsNatural

resources(land, facilities, and equipment)

Financialresources

Humanresources

Informationresources

Inputs into logistics

Logistics activities

• Customer service• Demand forecasting• Distribution

communications• Inventory control• Material handling• Order processing• Parts and service support

• Plant and warehouse site selection

• Procurement• Packaging• Reverse logistics• Traffic and transportation• Warehousing and storage

Rawmaterials

In-processinventory

FinishedgoodsSuppliers Customers

Logistics management

The Outputs of the Logistics System

The outputs of the logistics system arecompetitive advantage, time and place utility, efficient movement to the customer, andproviding a logistics service mix such that

logistics becomes a proprietary asset of the organization.

PETER DRUCKERS stated that:

Logistics is one of the last frontiers of opportunity for organizations wishing to

improve their corporate efficiency.