CHAPTER 1 Overview of Logistics

Key Terms Big-box retailer Co-branding Container Cost trade-offs Disintermediation Economic utility Form utility Humanitarian logistics Landed costs Logistics Marketing channels Materials management Physical distribution

Key Terms Place utility Possession utility Postponement Sorting function Stock-keeping units (SKUs) Stockouts Sustainable products Systems approach Tailored logistics Time utility Total cost approach

Learning Objectives To discuss the economic impacts of logistics To define what logistics is To analyze the increased importance of logistics To discuss the systems and total cost approaches to logistics

Learning Objectives To expose you to logistical relationships within the firm To introduce you to marketing channels To provide a brief overview of activities in the logistics channel To familiarize you with logistics careers Marketing concept

Economic Impacts of Logistics Macroeconomic Impacts Economic Utility Possession utility Form utility Place utility Time utility Ownership of products/payment conditions From bulk, big quantities, up to customer/consumer quantities Where products are nedeed The right/nedeed time

Better logistics systems and infrastructure – lower costs Table 1-1: The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product (GDP) Better logistics systems and infrastructure – lower costs

Logistics: What It Is Council of Logistics Management definition: “Logistics is that part of the supply chain process 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.” Source: www.cscmp.org

The Increased Importance of Logistics And actual situation? A Reduction in Economic Regulation Changes in Consumer Behavior Technological Advances The Growing Power of Retailers Globalization of Trade Global – regional – local levels Global products/local products Customization of products E-shopping Positives/negatives

The Systems and Total Cost Approaches to Logistics Systems Approach Interdependence of company and logistics goals and objectives Interdependence of functional areas Stock-keeping units (SKUs) Interdependence of logistics activities or Intrafunctional logistics......integrated logistics....SCM

Figure 1-1: Control Over the Flow of Inbound and Outbound Movements Outbound logistics Inbound logistics

The Systems and Total Cost Approaches to Logistics Cost trade-offs: changes to one activity cause some costs to increase and others to decrease Total Logistics Concept: integration of all activities into a unified whole that seeks to minimize distribution costs in a manner that supports an organization’s customer service objectives Level of costs againts customer service level

Logistical Relationships within the Firm Financial capital – working capital, costs, cash-flow, efficiency Finance Production Marketing Continuous manufacturing - inputs, pressure on costs, standard quality level, stock buffers.... Market requirements – customization, pro-active marketing, good level of customer service..... Different priorities.....???

Logistical Relationships within the Firm Marketing Place Decisions Price Decisions Landed costs Product Decisions Stockouts Sustainable products Promotion Decisions Target markets – customer convenience Availability of products

Marketing Channels Channel members “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.” Channel members Manufacturers Wholesalers Retailers

Marketing Channels/Key Functions Ownership channel Covers movement of the title to the goods Negotiations channel Buy and sell agreements are reached Financing channel Payments for goods Promotions channel Promoting a new or existing product Logistics channel Moving and storing product throughout the channel

Channel Intermediaries/Facilitators Ownership channel Banks, finance companies Negotiations channel Brokers Financing channel Banks, insurance companies, finance companies Promotions channel Advertising agencies, public relations agencies Logistics channel Freight forwarders

Activities in the Logistical Channel Customer service Facility location decisions Inventory management Order management Procurement Transportation management Demand forecasting International logistics Materials handling Packaging Reverse logistics Warehousing management

Logistics Careers Logisticians need to be both a generalist and a specialist As a generalist, the logistician must understand the relationship between logistics and other corporate functions, both within and outside the firm. As a specialist, the logistician must understand the relationships between various logistics activities and must have some technical knowledge for various activities.

Logistics Careers “Logistician” highlighted as one on the 50 best careers for the year 2010 and suggested that logistics employment should increase by 20% through 2018.

Logistics Careers Examples of Logistics-related jobs include: Logistics analyst Consultant Customer service manager Purchasing manager Transportation manager Warehouse operations manager Source: www.cscmp.org