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"Contemporary Logistics" Ch. 1, 5, 7, 8, 10, 12, 14 Summary
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principles of logistics ch. 1,5,7,8,10,12
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“Contemporary Logistics”Summary
Chapters: 1, 5, 7, 8, 10, 12 & 14
Table of contents
,Chapter 1 An overview of logistics page 3
Chapter 5 The supply chain management concept page 6
Chapter 7 Demand management, order management and costumer service page 11
Chapter 8 Inventory management page 13
Chapter 10 Warehousing management page 16
Chapter 12 Transportation page 19
Chapter 14 International logistics page 20
Chapter 1: An overview of logistics
Economic impacts of logistics
2
,Economic utility (the value or usefulness of a product in fulfilling customer needs or
wants)
4 general types:
Possession utility the value or usefulness that comes from a customer being able to take
possession of a product
Form utility a product’s being in a form that can be used by the customer and is of value
to the customer(allocation; smaller quantities that are desired by customers)
Place utility having products available where they are needed by customers
Time utility having products available when they are needed by customers
What is logistics?
‘Logistics management is that part of Supply Chain Management that plans, implements,
and controls the efficient, effective forward and reverse flow and storage of goods,
services, and related information between the point of origin and the point of consumption
in order to meet customers’ requirements.’
Mass logistics: every customer gets the same type and levels of logistics service(then
some will be overserved/underserved)
Tailored logistics: groups of customers with similar logistical needs and wants are
provided with logistics service appropriate to these needs and wants
Increased importance of logistics by:
A reduction in economic regulation
Changes in consumer behavior
Technological advances
The growing power of retailers
Globalization of trade
The system and total cost approaches to logistics
Systems approach: indicates that a company’s objectives can be realized by recognizing
the mutual interdependence of the major functional areas(marketing, production, finance
and logistics) of the firm.
Stock-keeping units(SKUs): each different type or package size of a good is a different
SKU.
Materials management: movement and storage of materials into a firm.
Physical distribution: storage of finished product and movement to the customer.
Total cost approach: all relevant activities in moving and storing products should be
considered as a whole, not individually.
Logistical relationships within the firm
Production
Postponement: the delay of value-added activities such as assembly, production, and
packaging until the latest possible time.
3
,Marketing
- Place decisions
- Price decisions
- Landed costs: which refers to the price of a product at the source plus transportation
costs to its destination.
- Phantom freight
- Freight absorption
- Product decisions
- Promotion decisions
Stockout: being out of an item at the same time there is demand for it.
Marketing channels
‘a set of institutions necessary to transfer the title to goods and to move goods from the
point of production to the point of consumption and, as such, which consists of all the
institutions and all the marketing activities in the marketing process’.
- Ownership channel: covers movement of the title to the goods.
- Negotiations channel: the one in which buy and sell agreements are reached.
- Financing channel: payments for goods/ company’s credit
- Promotions channel: promoting a new or an existing product.
Sorting function ‘the discrepancy between the assortment of goods and services
generated by the producer and the assortment demanded by the consumer.’
Sorting out: A-eggs from different suppliers into a company’s storage > Storage only A-
eggs (is sorting a heterogeneous supply of products into stocks that are homogeneous)
Accumulating: bring together similar stocks from different sources
Allocating: breaking a homogeneous supply into smaller lots.
Assorting: building up assortments of goods for resale(to retail customers)
Activities in the logistical channel
Customer service: keeping existing customers happy
Demand forecasting: estimate product demand in a future time period.
Facility location decisions: location of the relevant warehousing and production facilities.
International logistics: the logistics activities associated with goods that are sold across
national boundaries.
Inventory management: stocks of goods that are maintained for a variety of purposes
Materials handling: the short- distance movement of products within the confines of a
facility(warehouse)
Order management: management of the activities that take place between the time a
customer places an order and the time it is received by the customer
Packaging: industrial(protective) packaging refers to packaging that prepares a product for
storage and transit.
4
,Procurement: raw materials, component parts, and supplies brought from outside
organizations to support a company’s operations.
Reverse logistics: products can be returned for various reasons, such as product recalls,
product damage, lack of demand, and customer dissatisfaction.
Transportation management: actual physical movement of goods or people from one
place to another, whereas transportation management refers to the management of
transportation activities by a particular organization.
Warehouse management: places where inventory can be stored for a particular period of
time.
5
,Chapter 5: The supply chain management concept
Supply chain management
‘SCM encompasses the planning and management of all activities involved in sourcing
and procurement, conversion, and all logistics management activities. Importantly, it
also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, 3rd party service providers and customers. In essence, SCM
integrates supply and demand management within and across companies.’
Evolution of supply chain management
Supply chain: all activities associated with the flow and transformation of goods from
the raw material stage(extraction), through to the end user, as well as the associated
information flows.
6
,3 SCM models
Supply Chain Operations Reference(SCOR) model:
• Plan
• Source
• Make
• Deliver
• Return
Global Supply Chain Forum(GSCF) model:
• Customer relationship management
• Customer service management
• Demand management
• Order fulfillment
• Manufacturing flow management
• Supplier relationship management
• Product development and commercialization
• Returns management
Process Classification Framework(PCF)
• Develop vision and strategy
• Develop and manage products and services
• Market and sell products and services
• Deliver products and services
• Manage customer service
• Develop and manage human capital
• Manage information technology
• Manage financial resources
• Acquire, construct and manage property
• Manage environmental health and safety (EHS)
• Manage external relationships
• Manage knowledge, improvement and change
The PCF and SCOR model provide open-source benchmarking data for the logistics
activities that are part of their established processes, while the GSCF model has an
assessment tool that includes logistics- related items.
7
, Attributes affecting SCM implementation
Customer power
Consumer has a greater access to information (e.g. internet) > become highly
knowledgeable about an organization and about competing organizations and its
products.
Goals:
- Fast supply chain: emphasizes a speed and time component.
- Agile supply chain: focuses on an organization’s ability to respond to changes in
demand with respect to volume and variety.
- Lean supply chain/legality: A lean supply chain defines how a well-designed supply
chain should operate, delivering products quickly to the end customer, with minimum
waste.
Long-term orientation
Long-term orientation > relational exchanges
Short-term orientation > transactional exchanges
Partnerships: long-term relationships between SC participants, are part and
parcel of a relational exchange.
Leveraging technology
Enhanced communication across organizations
The enhanced communication across organizations is dependent on both technological
capabilities and a willingness to share information(part of a long-term orientation)
Inventory control
1st aspect: move from a pattern of stops and starts to a continuous flow.
2nd aspect: a reduction in the amount of inventory in the supply chain. Reduced by:
- Smaller, more frequent orders
- Use of premium transportation
- Demand-pull, as opposed to supply-push
- Replenishment;
- Elimination or consolidation of slower-moving product.
Bullwhip effect: variability in demand orders among supply chain participants
Inter organizational collaboration
Supply chain collaboration: cooperative, supply chain relationships-formal or informal-
between manufacturing companies and their suppliers, business partners or customers,
developed to enhance the overall business performance of both sides.
Supply chain facilitators
3rd party logistics(3PL) also called: logistics outsourcing or contract logistics: one
company allows a specialist company to provide it with one or more logistics
functions. 3PL providers: FedEx SC services, Schenker logistics, UPS SC solutions.
Barriers to SCM implementation
8
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