VTU MBA SCM Module 7

1. DIMENSIONS OF LOGISTICS
MODULE 7

2. Source: Center for Supply Chain Research, Penn State University
(2008).
CONTEMPORARY SUPPLY CHAIN PIPELINE
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3. • What is Logistics?
• Logistics management
• Business logistics management
• Integrated logistics management
• Materials management
• Physical distribution management
• Marketing logistics
• Industrial logistics
• Distribution
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4. LOGISTICS DEFINITION
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5. Logistics Definitions
• Inventory:
• Management of materials in motion and at rest
• Customer:
• Getting the right product, to the right customer, in the right
quantity, in the right condition, at the right place, at the right
time, and at the right cost (called the dictionary “seven Rs of
logistics”)
• International Society of Logistics:
• The branch of military science having to do with procuring,
maintaining, utility/ value and transporting material, personnel,
and facilities
Council of Supply Chain Management
• The art and science of management, engineering, and technical
activities concerned with requirements, design, and supplying and
maintaining resources to support objectives, plans, and operations
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6. Logistics Definitions
• Component support:
• Providing time and place utility/value of materials and products in
support of Functional management organization objectives
• Common culture:
• That part of the supply chain process that plans, implements, and
controls the efficient, effective flow and storage of goods, services, and
related information from point of origin to point of consumption in order
to meet customer requirements
• Supply management for the plant (inbound logistics) and distribution
• Management for the firm’s customers materials requirements,
purchasing, transportation, inventory management, warehousing,
materials handling, industrial packaging, facility location analysis,
distribution, return goods handling, information management, customer
service, and all other activities concerned with supporting the internal
customer (manufacturing) with materials and the external customer
(retail stores) with product
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7. Four Subdivisions of Logistics
• Business logistics:
• That part of the supply chain process that plans, implements, and controls
the efficient, effective flow and storage of goods, service, and related
information from point of use or consumption in order to meet customer
requirements.
• Military logistics:
• The design and integration of all aspects of support for the operational
capability of the military forces (deployed or in garrison) and their
equipment to ensure readiness, reliability, and efficiency.
• Event logistics:
• The 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:
• The acquisition, scheduling, and management of the facilities/assets,
personnel, and materials to support and sustain a service operation or
business.
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8. GENERAL DEFINITION OF LOGISTICS
LOGISTICS IS A PROCESS OF ANTICIPATING CUSTOMER NEEDS AND
WANTS; ACQUIRING THE CAPITAL, MATERIALS, PEOPLE, TECHNOLOGIES,
AND INFORMATION NECESSARY TO MEET THOSE NEEDS AND WANTS;
OPTIMIZING THE GOODS OR SERVICE PRODUCING AND UTILIZING
NETWORK TO FULFILL CUSTOMER REQUESTS.
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9. VALUE-ADDED ROLES OF LOGISTICS
• The five principal types of economic utility which add value
to a product or service are:
• Form Utility----WHAT
• It refers to value added to goods through a
manufacturing, production or assembly process. Ex:
raw materials combined to make a complete product.
• Time Utility----WHEN
• It is the economic value added to a good or service by
having it at a demand point at a specific point. Ex:
logistics creates time utility by having heavily
advertised products and sale merchandise available in
retail stores at precisely the time promised in the
advertisement copy
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10. VALUE-ADDED ROLES OF LOGISTICS
• Place Utility----WHERE
• It provides place utility by moving goods from
production surplus points to points where demand
exists. Logistics creates place utility primarily
through transportation. Ex: moving farm produce
by rail or truck from farm areas to market where
consumer need this produce creates place utility.
• Possession Utility----WHY
• It is primarily created through the basic marketing
activities related to the promotion of products and
services.
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11. Source: Center for Supply Chain Research, Penn State University
(2008).
PRODUCTION
FORM UTILITY
MARKETING
POSSESSION
UTILITY
LOGISTICS
PLACE UTILTY
TIME UTILITY
FUNDAMENTAL UTILITY CREATION IN THE ECONOMY
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12. LOGISTICS IN THE FIRM: THE MICRO
DIMENSION
• Logistics interface with Manufacturing/Operations
• Length of production runs: management should decide on
production economies whether short run or long run is
advantageous Or disadvantageous
• Seasonal demand: manager should look to minimize the effects
of seasonal demand for products.
• Supply side interfaces: logistics manager is responsible for
inbound movement and storage of raw materials fed to the
production line and ensure the availability of raw materials.
• Proactive packaging: another activity at the interface of
logistics and operations is packaging.
• Foreign and third-party alternatives: many firms today are
making arrangement for 3Pmanufacturers or co packers to
produce finished products.
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13. LOGISTICS IN THE FIRM: THE MICRO
DIMENSION
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• Logistics Interfaces with Marketing:
• Marketing Mix
• Matching Schedules
• Volume relationships
• Consumer Packaging
• Push Vs Pull
• Channel Competition
• Logistics Impact
• Wholesaler Vs Retailer

14. 8. Production
planning/scheduling
9. Procurement
10. Customer service
11. Facility location
12. Return goods handling
13. Parts and service
support
14. Salvage and scrap
disposal
1. Transportation
2. Warehousing and
storage
3. Industrial packaging
4. Materials handling
5. Inventory control
6. Order fulfillment
7. Demand forecasting
LOGISTICS ACTIVITIES
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15. SCOPE OF ACTIVITIES
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16. LOGISTICS IN THE FIRM: THE MICRO DIMENSION
• Another dimension of logistics is the micro perspective which examines the
relationships between logistics and other functional areas in an organization
• Marketing
• Marketing mix
• Carrier pricing- price
• Matching schedules
• Volume relationships
• Consumer packaging- product
• Push vs pull- promotion
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•Channel competition
•Pull strategy
•Push strategy
•Logistics impact
•Wholesalers vs retailers- place
•Customer service- recent trends

17. LOGISTICS INTERFACE WITH OTHER
AREAS
• ROA is defined as follows:
• ROA = Revenue - Expenses/Assets
Or
• ROA = Gross Profit/Assets
The impact that logistics can have upon return on assets
(ROA) or return on investment (ROI) is very significant
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18. RELATIONSHIP BETWEEN REQUIRED INVENTORY
AND ORDER CYCLE LENGTH FROM A CUSTOMER
PERSPECTIVE
ORDER CYCLES (DAYS)
UNITSOFINVENTORY
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19. THE GENERAL RELATIONSHIP OF THE COST OF LOST SALES TO
INVENTORY COST
COLS = Cost of lost sales
TC = Total cost
INV = Inventory cost
LOGISTICSCOST
FLOW
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20. THE GENERAL RELATIONSHIP OF THE COST OF LOST
SALES TO TRANSPORTATION COST
Improved transportation serviceFlow
TC = Total cost
Tr = Transportation cost
COLS = Cost of lost sales
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22. Weight density of productFlow
Tr = Transportation cost
Inv = Inventory cost (including
storage) Whse = Warehousing
cost
The General Relationship of Product Weight Density to Logistics Costs
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23. Susceptibility to loss and damageFlow
Pkg = Packaging cost
Tr = Transportation cost
Whse = Warehousing cost
The General Relationship of Product Susceptibility to
Loss and Damage to Logistics Cost
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24. SPATIAL RELATIONSHIPS:
Spatial Relationships are extremely significant to logistics is
spatial relationships, the location of fixed points in the
logistics system with respect to demand and supply points.
Spatial relationships are very important to transportation
costs, since these costs tend to increase with distance.
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25. LOGISTICS AND SPATIAL RELATIONS
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26. ANALYSIS OF TOTAL LOGISTICS COST WITH A CHANGE
TO A HIGHER COST MODE OF TRANSPORT
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27. TECHNIQUES OF LOGISTICS SYSTEM
ANALYSIS
Short-Run/Static Analysis
Long-Run/Dynamic Analysis
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28. • Nodes
• The nodes are fixed spatial points where
goods stop for storage or processing.
• Links
The links represent the transportation
network and connect the nodes in the
logistics system.
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29. DYNAMIC ANALYSIS
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30. ANALYSIS OF TOTAL LOGISTICS COST WITH A CHANGE
TO MORE WAREHOUSES
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31. NODES AND LINKS IN A LOGISTICS SYSTEMS
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32. A SIMPLE LOGISTICS CHANNEL
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33. A MULTI ECHELON LOGISTICS CHANNEL
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34. A COMPLEX LOGISTICS CHANNEL
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35. LEVELS OF OPPORTUNITY
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36. SUMMARY
• Logistics has developed as an important area or function of
business since World War II. It has gone through several
phases of development in achieving its present status.
• Logistics is a critical part of supply chain management. The
coordination and, perhaps, integration of the logistics
systems of all the organizations in a supply chain are
necessary requirements for successful management of the
supply chain.
• Logistics has a number of different definitions because of
the broad-based interest in its activities and the recognition
of its importance.
• Logistics is an area of management that has four
subdisciplines: business, military, service, and event.
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37. Summary (cont.)
• On a macro basis, logistics-related costs have been
decreasing on a relative basis, which has helped the U.S.
economy regain its competitive position on a global basis.
• Logistics adds place, time, and quantity utilities to products
and enhances the form and possession utilities added by
manufacturing and marketing.
• Logistics has an important relationship to manufacturing,
marketing, finance, and other areas of the organization.
• Logistics managers are responsible for a number of
important activities, including transportation, inventory,
warehousing, materials handling, industrial packaging,
customer service, forecasting, and others.
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38. Summary (cont.)
• Logistics systems can be viewed or approached in several
different ways for analysis purposes, including materials
management versus physical distribution, cost centers,
nodes versus links, and channels. All four approaches are
viable for different purposes.
• Logistics systems are frequently analyzed from a systems
approach, which emphasizes total cost and tradeoffs when
changes are proposed. Either a short- or long-run
perspective can be used.
• The cost of logistics systems can be affected by a number
of major factors, including competition in the market, the
spatial relationship of nodes, and product characteristics.
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