1. Topic 6 – Logistics and Supply Chain Management
A – Logistics and Value Chains
B – Distribution Facilities
C – Distribution Systems

2. A – The Role and Function of Logistics
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3. Is there a difference between logistics and supply chain management?
Yes and no…
A wide set of activities dedicated to the transformation and distribution of goods, from raw material sourcing to final market distribution as well as the related information flows.
Physical distribution
Activities involved in the movement of goods from points of production to final points of sale and consumption.
Materials management
Activities involved in the manufacturing of commodities in all their stages of production along a supply chain.

4. The Concept of Logistics
Derived Demand
Logistics
Materials Management
Physical Distribution
Manufacturing
Sourcing
Inventory
Packaging
Recycling/Reusing
Transportation
Warehousing
Wholesale
Retail
Induced Demand
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5. Logistics Goals and Operations
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Fulfillment (Goals)
Order
Right product
Right quantity
Delivery
Right location
Right time
Quality
Right condition
Cost
Right price
Demand (Operations)
Transportation
Handling
Packaging
Stock Management
Production scheduling
Warehousing
Orders Processing
Sales
Purchase

6. The Supply Chain and its Cycles
Customer
Customer Order Cycle
Retailer
Inventory
Time
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier

7. A Simple Distribution between a Supplier and a Customer…
Source: P.O. Roberts (2003) Supply Chain Management: New Directions for Developing Economies, PSD Professionals’ Forum.

8. … can Generate a Large Amount of Logistics Activity
Source: P.O. Roberts (2003) Supply Chain Management: New Directions for Developing Economies, PSD Professionals’ Forum.

9. Value Added by Logistics
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Production Costs
Improved efficiency of manufacturing with appropriate shipment size, packaging and inventory levels.
Location
Taking better advantage of various locations, implying access to expanded markets (more customers) and lower distribution costs.
Time
Having goods and services available when required along the supply chain.
Control Better marketing and demand response.

10. Supply Chain Differentiation: Selective Performance Preferences
Explain how logistics adds value and how supply chains are differentiated.
Costs
Stability of the cost structure.
Dependent on the cargo being carried.
Time
Influence inventory carrying costs and inventory cycle time.
Routing options in relation to value / perishability.
Reliability
Stability of the distribution schedule.
Reliability can mitigate time.
Risk Level of confidence that the shipment will reach its final destination within expected costs, time and reliability considerations.

11. Logistical Improvements, Manufacturing Sector, 1960s to 2010s
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Source: Logistics Management & Distribution,
Cycle time: The amount of time required from receipt of an order from a customer to shipment of the completed goods.

12. Logistic Performance Index, 2016
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13. Worldwide Logistics Costs, 2002
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What are the main components of logistics costs and what do they mean?
Source: Adapted from P.O Roberts, Supply Chain Management: New Directions for Developing Economies,
Warehousing costs: fixed costs of owning or leasing warehousing space. They vary according to the number and the size of facilities and are irrespective of the amount of inventory being handled. Inventory carrying costs: variable costs of maintaining inventory in a warehouse (utilities, insurance, taxes, labor costs). It varies according to the volume handled.

14. Logistics Costs and Economic Development
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Source: World Bank for GDP data (in current dollars). Various sources for logistics costs.

15. Logistics Costs, United States, 1980-2017 (in billions of $)
Source: Council of Supply Chain Management Professionals, State of Logistics Report, (after 2012). Logistics Management & Distribution Report (before 2012).

16. From Push to Pull Logistics
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Push
Pull
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Freight flow
Manufacturer
Manufacturer
3PL
Distributor
Returns / Recycling
Distributor
Customer
Point-of-sale data
Customer

17. Main Actors of the Logistics Chain
Cargo owners
Carriers
Logistics service providers
Lead logistics providers & consultants

18. Layers to Logistics Services
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Actors
Services
1PL
2PL
3PL
4PL
Cargo owners
Manufacturing, Retailing
Carriers
Transportation
Logistics service providers
Service integration
Logistics
Lead logistics providers & consultants
Supply chain management
Supply chain integration

19. Value Chains Definition
Functionally integrated network of production, trade and service activities.
Covers all the stages in a supply chain:
Transformation of raw materials.
Intermediate manufacturing stages.
Delivery of a finished good to a market.
A series of nodes, linked by transactions, such as sales and intra firm transfers.
Each successive node involves the acquisition or organization of inputs for the purpose of added value.

20. The Commodity Chain (or Value Chain)
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Stages
Market
1- Commodities
2- Intermediate Goods
3- Final Goods
Distribution center
Raw
materials
Manufacturing
and assembly
Distribution
Storage
Warehouse
Attributable to climatic (agricultural products, forestry products) or geological (ores and fossil fuels) conditions.
Transformation that confers added value. Materials and parts used to make other goods.
Goods shipped to large consumption markets (cities). Flow and inventory management.
Flows
Market
Bulk shipping
Unit shipping
LTL shipping
Transport Chain
High volumes
Low frequency
Average volumes
High frequency
Low volumes
High frequency
Explain the three main stages of a value chain

21. Benefits of Improved Freight Transportation on Value Chains
Direct
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Cost reductions to carriers and shippers.
Reduced transit times.
Increased reliability of shipments.
Indirect
Source: adapted from ICF Consulting (2002) Economic Effects of Transportation: The Freight Story.
Improvements in logistics and sourcing.
Lower inventory levels and costs.
Induced
Lower costs for suppliers and customers.
Improved diversity of parts and goods.

22. Value Chains and Types of Transported Freight
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Raw materials
Semi-finished products
Manufactured goods
Extraction
Intra-industrial linkages
Distribution
Transfer
Processing
Manufacturing
Retailing

23. Commodity Chains and Added Value
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High
R&D
Fabrication
Sales / Services
Design / Branding
Marketing
Added Value
Source: Adapted from the Stan Shih “Smile Curve” concept.
Procurement
Distribution
Manufacturing
Concept
Logistics
Low
Value Chain
Pre-Production
(Intangible)
Production
(Tangible Activities)
Post-Production
(Intangible)
Global value chains involves competition over three main dimensions. What are they?

24. Short Assignment: Logistics Goals and Operations
Logistics has several goals. Explain what they are and how they are achieved.