Introducing Logistics & Supply Chain Management Prof. Costas Panou Lecture #2 in M.Sc New Technologies in Shipping and Transportation

Logistics (Christopher, M. 1998) Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finishing inventory (and the related flows of information) through the organisation and its marketing channel in such a way that current & future profitability are maximised through the cost- effective fulfilment of orders.

Cooperate with marketing to set customer service levels, facility location decisions, transportation activities (eg. transportation mode selection, vehicle scheduling, carrier routing), inventory management (inventory short -term forecasting, planning and control, cooperate with production to calculate EOQ, sequence and time production ), information collection and flows and order processing, warehousing and materials handling, packaging and packing. Main logistics activities and decisions

The Resource Environment The Value Chain Michael Porter (1985) Margin Firm’s Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Marketing & Sales Outbound Logistics Service Primary Activities Secondary Activities

Resource Environment The Value Chain Michael Porter (1985) Firm’s Value chain Supplier value chains Channel value chains Customer value chains

Supply Chain Management The management of upstream and downstream relationships with suppliers & customers to deliver superior customer value at less cost to the supply chain as a whole. (Christopher, M. 1998) A network of connected & interdependent organisations mutually & cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users. (Aitken, J., 1998)

Mission of Logistics Management Scope of logistics spans the organisation SuppliersOperations Distribution CustomersProcurement Material Flow Requirements Flow Means by which customers are satisfied through coordination of material & information flow

Supply Chain and Performance Supply chain is the network of organisations that are involved through upstream or downstream linkages. Traditionally most organisations see themselves as separate entities Traditionally Logistics management has been concerned with flow within the organisation.

Achieving an Integrated Supply Chain Purchasing Material Control Production Sales Distribution Material management Manufacturing management Distribution Material management Manufacturing management Distribution Suppliers Internal Supply chain Customers Material FlowCustomer Service Material FlowCustomer Service Material FlowCustomer Service Material FlowCustomer Service Stage 1 Stage 2 Stage 3 Stage 4

Increasing Complexity At the end of the second world war there was a global shortage of manufactured goods. Today At the beginning of the third millennium there is an oversupply. Firms shop freely amongst the nations In 1991, for the first time, companies spent more money on computing and communications gear than the combined moneys spent on industrial, mining, farm, and construction equipment.

Organisational Integration Increasing requirement of integration will require generalists who can manage processes. Knowledge of systems theory and systems thinking will be a requirement for these generalist mangers. We are entering an era of supply chain competition

Rules of Competition Competitive advantage achieved by a combination of product excellence and process excellence. Responsiveness and agility Reliability in logistics this will require enhanced pipeline visibility Relationships trend towards customers seeking to reduce supplier base?

Facility location factors A.Weber, Polander, Thunen classical theories Labour cost, land cost, transportation cost Aviability and cost of materials, energy, water Socio- economic factors (taxes, political stability, import and export restrictions, enviromental regulations, quality of life, etc.)

Analytical techniques for facility location decisions: Heuristic approach (e.g. factor rating by weights reflecting the importance of each factor) Simulation models Cost- benefit analisis Center of gravity technique

Center of gravity (to find single location that minimizes of transportation cost)

How to calculate the coordinates for CX and CY the new facility location? (Ballu, p.487) Parameters: Vi – volume at point i Ri – transportation rate to or from point i Xi and Yi – coordinates of existing locations ∑ Vi Ri Xi ∑ Vi Ri Yi CX = CY= ∑ Vi Ri ∑Vi Ri

Assumptions (disadvantages) of center of gravity technique Transportation rate is a linear function of transported volume (units, tons, etc.) and the traveling distance, It doese’t consider real traveling distance which is depended on the roads availability

References Aitken, J., “Supply Chain Integration within the Context of a Supplier Association”, Cranfield University PHD Thesis, Cited in Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London. Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London Porter ME 1979, “How Competitive Forces Shape Strategy”, Harvard. Business Review March/April Porter ME 1985, Creating & Sustaining Superior Performance, Free Press.