1. Logistics Strategy & Implementation
Chapter 2

2. THE DEFINITION OF LOGISTICS
Logistics has come a long way since the 1960s.
Logistics is the flow of material, information, and money between consumers and suppliers.
The big challenge is to manage the whole logistics system in such a way that order fulfillment meets or exceeds customer expectations.

3. Contemporary Supply Chain Pipeline

4. Logistics Costs as a Percentage of GDP

5. Inventory Sales Ratio

6. Value-Added Role of Logistics
Referred to as the seven Rs --- Right product, Right quantity, Right condition, Right place, Right time, Right customer, and Right cost.

7. Fundamental Utility Creation in the Economy

8. Logistics in the Firm: The Micro Dimension
Logistics Interfaces with Operations/Manufacturing
Logistics Interfaces with Marketing
Logistics Interfaces with Other Areas

9. Length of production runs
Logistics in the Firm: Logistics Interfaces with Operations Manufacturing
Length of production runs
Balance economies of long production runs against increased costs of high inventories.
Seasonal demand
Acceptance of seasonal inventory to balance lead production times.

10. Supply-side interfaces
Stocking adequate supplies to ensure uninterrupted production now a logistics function.
Protective packaging
Principal purpose is to protect the product from damage.
Foreign & third party alternatives
Some logistics functions are being outsourced.

11. Logistics Interfaces with Marketing: The Marketing Mix – Four Ps
Price
Product
Promotion
Place

12. Price Carrier pricing Matching schedules Volume relationships
Generally, since the larger the shipment, the cheaper the transportation rate, shipment sizes should be tailored to the carrier’s vehicle capacity where possible.
Matching schedules
Quantity discounts should be tied to carrier quantity discounts.
Volume relationships
Volumes sold will affect inventory requirements

13. Product Consumer packaging
Generally, since the size, shape, weight and other physical characteristics of the product impact on its storage, transportation and handling, the logistics managers should be included in any decisions regarding these product traits.

14. Promotion Push versus pull
The most important factor is that the logistics division is aware of any changes in demand patterns so that it can plan for any consequences.

15. Place Wholesalers & Retailers
Generally, since wholesalers are combining purchases for multiple retailers, the shipment sizes tend to be larger and the number of transactions that have to be processed are fewer, with the result that logistics costs are smaller.

16. Logistics Interfaces with Other Areas
Other important interfaces now include finance and accounting.
Logistics can have a major impact on return on assets and return on investment.
Logistics costs reported by cost systems measure supply chain trade-offs and performance.

17. The five phases of logistics development
Workplace Logistics
Facility Logistics
Corporate Logistics
Supply Chain Logistics
Global Logistics

18. Workplace Logistics
Workplace logistics is the flow of material at a single workstation.
The objective of workplace logistics is to streamline the movements of an individual working at a machine or along an assembly line.

19. Source: Bertlesmann

20. Facility Logistic
Facility logistics is the flow of material between workstations within the four walls of a facility (that is, interworkstation and intrafacility).
The facility could be a factory, terminal, warehouse, or distribution center.

21. Corporate Logistics
Corporate logistics is the flow of material and information between the facilities and processes of a corporation (inter-workstation, inter-facility, and intra-corporate).
For a manufacturer, logistics activities occur between its factories and warehouses; for a wholesaler, between its distribution centers; and for a retailer, between its distribution centers and retail stores.

23. Supply Chain Logistics
Supply chain logistics is the flow of material, information, and money between corporations (interworkstation, interfacility, intercorporate, and intrachain).

24. Global Logistics
Global logistics is the flow of material, information, and money between countries.

26. LOGISTICS ACTIVITIES Customer Response
Inventory Planning and Management
Supply
Transportation
Warehousing

28. Customer Response
The logistics of customer response includes the activities of:
Developing and maintaining a customer service policy
Monitoring customer satisfaction
Order Entry (OE)
Order Processing (OP)
Invoicing and collections

29. Inventory Planning and Management (IP & M)
The logistics of inventory planning an management includes
Forecasting
Order quantity engineering
Service level optimization
Replenishment planning
Inventory deployment

30. Supply The logistics of supply include:
Developing and maintaining a Supplier Service Policy (SSP)
Sourcing
Supplier integration
Purchase order processing
Buying and payment

31. Transportation The logistics of transportation includes
Network design and optimization
Shipment management
Fleet and container management
Carrier management
Freight management

32. Warehousing The logistics of warehousing includes Receiving Put away
Storage
Order picking
Shipping

33. Approaches to Analyzing Logistics Systems
Cost Centers
Treating logistics activities as cost centers makes it easier to study cost trade-offs between the centers.
Nodes versus Links
Nodes are spatial points (warehouses, plants, etc.);
Links are the transportation network (rail, motor, air, pipe and water).
Logistics Channel
The network of intermediaries involved in the logistics system.

34. Analysis of Total Logistics Cost with a Change to Higher Cost Mode of Transport

35. Analysis of Total Logistics Cost with a Change to More Warehouses

36. Nodes and Links in a Logistics System

37. A Simple Logistics Channel

38. A Multi-Echelon Logistics Channel

39. LOGISTICS OPTIMIZATION
Additionally, logistics systems must work in harmony with marketing, finance, production, etc.--- this may also result in sub-optimal logistics performance.
The optimization process tends to focuses a project team’s attention on the solution that maximizes total corporate performance.

41. Short-Run/Static Analysis
Comprised a matrix-like table which presents each of the logistics and other relevant costs for two or more alternative logistics systems.

42. Static Analysis of C & B Chemical Company (50,000 pounds of output)

43. Long-Run/Dynamic Analysis
Comprised a graph of the fixed and variable costs of at least two alternative logistics systems.

45. System 1
Total Cost = Fixed Costs + Variable Cost/unit x number of units
y = $ x
System 2
y = $ x
Trade-off Point
System 1 Total Costs = System 2 Total Costs
$ x = $ x
0.0085x = $600
x = 70,588 pounds