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1 Prof. Anatoly Sachenko -Kontakt Zakład Informatyki i Ekonometrii ¦Budynek A, pokój 414 ¦ 1 Prof. Anatoly Sachenko -Kontakt Zakład Informatyki i Ekonometrii ¦Budynek A, pokój 414 ¦ ¦Instytut Ekonomii i Informatyki ¦Wydział Organizacji i Zarządzania ¦http: //dydaktyka. polsl. pl/roz 6/asachenko/default. aspx ¦[email protected] com or ¦ [email protected] org

2 Informatics in Logistics Management Lecture 1. Logistics Origin and Basics Lecturer: Prof. Anatoly 2 Informatics in Logistics Management Lecture 1. Logistics Origin and Basics Lecturer: Prof. Anatoly Sachenko

3 Lecture Overview ¦Definition and Origins ¦System Approach ¦Logistics Management ¦Logistics Perspective 3 Lecture Overview ¦Definition and Origins ¦System Approach ¦Logistics Management ¦Logistics Perspective

4 Definition of Logistics ¦ Logistics - “Planning implementing and controlling the physical flow 4 Definition of Logistics ¦ Logistics - “Planning implementing and controlling the physical flow of material and finished goods from point of origin to point of use to meet customer`s need at a profit” Philip Kotler ¦ Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. ¦ Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security ¦ Logistics is one of the main functions within a company

5 Origin of Logistics ¦The term logistics comes from the Greek logos (λόγος), meaning 5 Origin of Logistics ¦The term logistics comes from the Greek logos (λόγος), meaning "speech, reason, rationality, language, phrase", and ¦more specifically from the Greek word logistiki (λογιστική), meaning accounting and financial organization ¦The word logistics has its origin in the French verb loger to lodge or to quarter ¦Its original use was to describe the science of movement, supplying & maintenance of military forces in the field ¦Later on it was used to describe the management of materials flow through an organization

6 Main Logistics Targets and Fields ¦ Its main targets are divided into performance 6 Main Logistics Targets and Fields ¦ Its main targets are divided into performance related and cost related ¦ They are high due date reliability, short delivery times, low inventory level and high capacity utilization ¦ But when decisions need to be made, there is always a trade off between these targets ¦ It’s making a logistician challenging and interesting ¦ Main Logistics fields: ¦ Procurement Logistics ¦ Production Logistics ¦ Distribution Logistics ¦ After sales Logistics ¦ Disposal Logistics

7 Logistics Viewpoints ¦Inbound logistics is one of the primary processes and ¦it concentrates 7 Logistics Viewpoints ¦Inbound logistics is one of the primary processes and ¦it concentrates on purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to: ¦ manufacturing or assembly plants, warehouses or retail stores ¦Outbound logistics is the process related to the storage and movement of the final product and the related information flows from ¦the end of the production line to the end user

8 Scope of Logistic ¦It is a critical importance for organization how it delivers 8 Scope of Logistic ¦It is a critical importance for organization how it delivers tangible or intangible products & services to the customer ¦Effective physical movement of the tangible product will speak of intangible services associated with the product and the delivered organization ¦In Case of intangible product, the delivery of tangibles at the right place & right time will speak about its quality ¦On the macro level infrastructure it’s contributing to a large extent in the physical movement of produced goods

9 Scope of Logistic ¦ This speed & reliability in distribution of products & 9 Scope of Logistic ¦ This speed & reliability in distribution of products & services contribute to a great extent in the growth of a country`s domestic & international trade ¦ Logistic cost as a percentage of GDP across the world is shown in the following table Country Logistic cost as a percentage of GDP Korea 16 China 15 Japan 14 India 13 France 12 UK 11 USA 10

10 Logistics –A system approach ¦ Logistics recognizes that all the activities of material 10 Logistics –A system approach ¦ Logistics recognizes that all the activities of material movement across the business process are interdependent and needs close coordination and these are to be maintained as a system ¦ Logistics System is an adaptive system including following functional Areas: Order Processing Information Flow Warehousing Inventory control Packaging Transportation

11 Order Processing ¦Order checking for any deviation in agreed on negotiated term ¦Technical 11 Order Processing ¦Order checking for any deviation in agreed on negotiated term ¦Technical details; price; delivery period; payment terms; taxes etc. ¦Checking the availability of material in stock (material requisition) ¦Production & material scheduling for shortage. ¦Acknowledging the order, indicating deviation if any It is routine operation but require great deal of planning training of people involved and investment to bring about efficiency & accuracy

12 Information Flow ¦It is basically info based activity of inventory movement across the 12 Information Flow ¦It is basically info based activity of inventory movement across the supply chain ¦Hence role of info system plays a vital role in delivering superior customer service ¦This function is required to facilitate the following info needs ¦ Order registration ¦ Order checking & editing ¦Order processing ¦Coordination - means to integrate the total supply chain of the company with info needs as to time, quantity, value

13 Warehousing ¦A storage place wherein finished goods are stored till they are sold. 13 Warehousing ¦A storage place wherein finished goods are stored till they are sold. ¦Effectiveness of an organization`s marketing strategy depends on making the right decision regarding warehouse ¦Warehouse are treated as switching facilities rather than storage place ¦Major decision of warehouse are as follows: ¦ Location , Size & Number of warehousing facilities ¦ Warehouse layout ¦ Design of building ¦ Ownership of the warehouse

14 Modern Warehouse 14 Modern Warehouse

15 Packaging ¦It is also a critical element in physical distribution of the product, 15 Packaging ¦It is also a critical element in physical distribution of the product, ¦which influences the efficiency of the logistic system this is done with the view of following: ¦ For handling and damage prevention ¦ For communications ¦ For inter modal transportation ¦ Storage space economy Thus to reduce packaging cost

16 Transportation For goods movement of a transportation is the most fundamental and important 16 Transportation For goods movement of a transportation is the most fundamental and important component of logistic ¦ E. g. for low unit value products the transportation cost component is 20% of the product cost ¦ In logistic cost its share varies up to 65 -70% ¦There are the few decision involved in transportation ¦ Mode of transportation ( Cost & time factor) ¦ Own fleet or Outsourcing ¦ Route Planning ¦ Vehicle scheduling ¦

17 Logistics Management ¦ Logistics Management is that part of Supply Chain Management ¦ 17 Logistics Management ¦ 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 ¦ From a traditional point of a view a goal of any firm is to produce competitive products and increase its volume ¦ In this case management can boil down to a General Manager + minor staff-see next slide

18 Logistics Management – Traditional Structure Person’s Decision Making Process (Chief Manager) Supplier Production 18 Logistics Management – Traditional Structure Person’s Decision Making Process (Chief Manager) Supplier Production Material flow Information flow Customer

19 Logistics Management – Traditional Structure ¦ Both terms Flaw and Inventory are the 19 Logistics Management – Traditional Structure ¦ Both terms Flaw and Inventory are the main categories of Logistics ¦ In Logistics Management are diffeation Flows- see previous and next slides ¦ Material Flow red the Material and Informis the description of the transportation of raw materials, prefabricates, parts, components, integrated objects and finally products as a flow of entities ¦ Logistics operations with Information Flow include acquisition, storing, processing and transfer of info ¦ In next slide is shown a contemporary structure of Logistics Management

20 Logistics Management – Contemporary Structure 20 Logistics Management – Contemporary Structure

21 Logistics' perspective: Three Forces ¦Three Forces which have change the perspective of logistics: 21 Logistics' perspective: Three Forces ¦Three Forces which have change the perspective of logistics: ¦Globalization ¦Focus on Supply Chain Management ¦Outsourcing of Non Core Competency Functional Area

22 Globalization ¦The entire world has become a global village for marketers because of 22 Globalization ¦The entire world has become a global village for marketers because of the liberalization of economics of most countries, and ¦the emergence of World Trade Organization which is forcing business organizations to supply products beyond the national boundaries wherever there is a market opportunity ¦However in such conditions the role of LOGISTICS will be ¦to provide time and place utility of the product to the customer

23 Focus on Supply Chain Management ¦Business the world over are striving for competitiveness 23 Focus on Supply Chain Management ¦Business the world over are striving for competitiveness ¦In their struggle for survival their focus has shifted to the supply chain i. e. ¦Integrating the process of Procurement , processing & distributing to deliver value for money to the customer ¦Two key roles logistics planning & support are ¦Value delivery process ¦Success of Supply Chain Management

24 Outsourcing of Non Core Competency Functional Area ¦ Outsourcing is a acceptable trend 24 Outsourcing of Non Core Competency Functional Area ¦ Outsourcing is a acceptable trend in business ¦ Corporation have realized that doing everything by themselves does not result in effective & efficient use of scare resources available to them ¦ It is better to outsource functional area to experts who can do job at the lowest cost and that to efficiently & Effectively ¦ LOGISTICS is one such area where most of business org. do not have enough expertise thus needs to be outsourced ¦ Thus Logistics have shaped into different service industry offering complete & customized logistics solutions