Chapter 1 Logistics Systems Their Development and Growth

Chapter 1 Logistics Systems: Their Development and Growth

What is LOGISTICS? Making sure you have the RIGHT product in the RIGHT place at the RIGHT time, and at the RIGHT cost

Synonyms to “Logistics” • • • Business Logistics Physical Distribution Materials Management Distribution Engineering Logistics Management Supply-Chain Management

KEY TERMS • • • Logistics Inbound Logistics Materials Management Physical Distribution Supply-Chain Management

KEY TERMS (continued) • Integrated logistics • Strategic logistics • Leading-edge logistics

LOGISTICS The entire process of materials and products moving into, through, and out of a firm

INBOUND LOGISTICS The movement of materials received from suppliers

MATERIALS MANAGEMENT The movement of materials and components within a firm

PHYSICAL DISTRIBUTION The movement of goods outward from the end of the assembly line to the customer

SUPPLY-CHAIN MANAGEMENT Consists of managing the flow of materials and the relationships among channel intermediaries from the origin of raw materials through to the final consumer Links logistics with user’s total communications network and with the firm’s engineering staff

INTEGRATED LOGISTICS A system which moves inventory through a constant and consecutive chain of valueadded steps with it arriving when needed in the proper quantity and form

STRATEGIC LOGISTICS Using logistical competency and channelwide partnership alliances to gain competitive advantage

LEADING-EDGE LOGISTICS • Exhibited when organizations do the following: – Seek to use logistical competency to gain and maintain competitive superiority – Seek to add value to the products and services they market – Leverage assets by forming strategic alliances with service suppliers

2 GOALS OF LOGISTICS 1 - Customer Service 2 - Conformity to Customer Requirements

History of Logistics • Early 1800 s Industrial Revolution – emphasis PRODUCTION • Early 1900 s – emphasis SALES • Strategic use of logistics ignored until recently • “logistics” - first associated with military

History (continued) • 1950 s - Recession – Businesses began searching for more effective cost control systems – Businesses began studying and coordinating physical distribution and logistics

8 Trends that Increase Attention on Logistics (1950 & after) 1 - Transportation costs rose rapidly 2 - Production efficiency reached a peak 3 - Fundamental change in inventory philosophy 4 - Product lines proliferated 5 - Revolution in computer & communication technology

8 Trends (continued) 6 - Increased use of computers throughout business 7 - Increased public concern for the recycling of products 8 - Growth of several mass merchandisers & specialty stores (category killers) that have large demands & sophisticated logistics service

THE TOTAL-COST APPROACH TO LOGISTICS • Logistics = Systems Approach • Systems Approach – the company objectives can be realized by recognizing the mutual interdependence of the basic functional areas of the firm (marketing, production, finance)

Physical Distribution System Objective • To minimize the costs involved in physically moving and storing the product from production point to delivery point keeping a specified level of service to customers

Inbound Logistics Management Objective • To meet the firm’s needs for those materials in an orderly, efficient, and low-cost manner

TOTAL-COST APPROACH • All relevant functions in moving and sorting materials and products should be considered as a whole, not individually • KEY: all cost items are considered simultaneously in attempting to meet a specified service level

COST TRADE-OFFS • Indicate that changing patterns or functions of distribution cause some costs to increase and others to decrease

Responsibilities of Logistic Managers • Logistic Managers = – Technical expert + a generalist • MANAGERS RESPONSIBLE FOR: – Controlling large expenditures – Transportation – Order management – Logistics administration costs

LOGISTIC PROFESSIONALISM • Council of Logistic Management (CLM) • Canadian Association of Logistic Management (CALM) • American Product & Inventory Control Society (APICS) • American Society of Transportation & Logistics (AST&L)

LOGISTIC PROFESSIONALISM (continued) • • Delta Nu Alpha (DNA) International Society of Logistics Transportation Research Forum (TRF) Warehousing & Education Research Council (WERC)

END OF CHAPTER 1