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Lection 1 “logistics and its main components” • 1. logistics and its main components. Lection 1 “logistics and its main components” • 1. logistics and its main components. • 2. Definition of logistics Management. • 3. levels of integration. • 4. logistics strategy

1. logistics and its main components. • 1. Products = Goods + Services • 1. logistics and its main components. • 1. Products = Goods + Services • 2. Operations create and deliver products • Operations • variety of inputs doing operations creating outputs (the raw materials, • • (the manufacture, serving, people, equipment, information, money, …) transport, selling, training, . . . ) (the products that it passes to customers)

 • 3. Materials are everything that the organization uses • Materials Tangible • • 3. Materials are everything that the organization uses • Materials Tangible • (raw materials, finished goods, knowledge, etc) • spare parts, etc) Intangible (information, money,

 • A supply chain is the series of activities and organizations that materials • A supply chain is the series of activities and organizations that materials – both tangible and intangible – move through on their journeys from initial suppliers to final customers • Logistics is the function responsible for moving materials through their supply chains

2. Definition of logistics Management. • Logistics has been called by many names, including 2. Definition of logistics Management. • Logistics has been called by many names, including the following: ь ь ь ь ь Business logistics; Channel management; Distribution; Industrial logistics; Logistical management Materials management; Physical distribution Quick-response systems; Supply chain management Supply management

 • Logistics management is the process of planning, implementing and controlling the efficient, • Logistics management is the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

The role of logistics in the Economy. Logistics costs • 1 role. L. is The role of logistics in the Economy. Logistics costs • 1 role. L. is one of the major costs for businesses, therebly affecting and being affected by other economic activities. • Logistics generally account for 15 -20 per cent of costs. • The gross domestic product (GDP) of the United States is $12 trillion a year, so $ 2, 4 trillion might be spent on logistics, with half of this for transport. • Logistics accounted for 32, 5 per cent of the UK GDP

 • 2 role. L. supports the movement and flow of many economic transactions. • 2 role. L. supports the movement and flow of many economic transactions. If goods do not arrive in the proper place (condition), no sale can be made. Thus, all economic activity throughout the supply chain will suffer

3. levels of integration. • 1 level. The usual organizations have 2 separate logistics 3. levels of integration. • 1 level. The usual organizations have 2 separate logistics functions: • 1) materials management, aligned with production and concerned with the inward flow of raw materials and their movement through operations • 2) physical distribution, aligned with marketing and concerned with the outward flow of finished goods.

 • 2 level. Internal integration consist of combining the two into a single • 2 level. Internal integration consist of combining the two into a single function responsible for all material movement into, through and out of the organization • 3 level. External integration. All Organization along a particular supply chain share the same objective – which is satisfied final customers – and they should cooperate to achieve this aim. • So the aim of an integrated supply chain is to improve overall efficiency and reduce overall costs – rather than have each organization working independently.

4. logistics strategy • 1. “Lean” strategy aims for the lowest possible costs with 4. logistics strategy • 1. “Lean” strategy aims for the lowest possible costs with efficient flows of materials that eliminate waste, minimize stocks, reduce lead time, use fewer resources, employ fewer people, remove duplicated effort, eliminate non-value-adding operations, and so on. (for example, lower transport costs allow organizations to work over a wide geographical area) • Although this seems a sensible approach, lean logistics can put too much emphasis on costs, and not have the flexibility to deal with rapidly changing condition.

 • 2. “Agile” strategy stresses customer • • satisfaction by responding quickly to • 2. “Agile” strategy stresses customer • • satisfaction by responding quickly to changing condition – perhaps triggered by increasing competition, more sophisticated customers, changing customer requirements, variable demand, unforeseen conditions, natural disasters, or many other factors. 3. Other strategies for logistics: 1) time-based strategies (which deliver products quickly to customers); 2) high-productivity strategies (which use resources fully); 3) value-added strategies (which maximize added customer value)

 • 4) diversification or specialization strategies (which define the width of product ranges); • 4) diversification or specialization strategies (which define the width of product ranges); • 5) growth strategies (which aim for economies of scale); • 6) globalization strategies (which buy, store and move materials in a single, worldwide market); • 7) environmental protection strategies (which focus in sustainable operations, renewable resources, recycling, etc) • 8) other strategies