Definitions, Functions & Goals

Introduction to Logistics and Supply Chain Management

Dr. Stanislav Chankov

Distinguished Lecturer in Supply Chain Management

School of Business, Social & Decision Sciences

Constructor University

Fall 2024
Introduction to Logistics and SCM –
Course Overview – 4 Main Modules
Module 1

… Definitions, …
Procurement
… Functions and …
Logistics
… Goals …

… …
Production Distribution
… …
Logistics Logistics
… …

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 2

That’s Logistics

https://www.youtube.com/watch?v=VCh6HnXHKRc

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 DHL 2015 3
That’s also Logistics

Porsche (2008)

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 4

Supply Chain – Basic Example

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 [AIMS Education] 5
Supply Chain – Networked Example

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 [AIMS Education] 6
Definition of Supply Chain

Definition
“The Supply chain (SC) is the network of organizations that are involved, through
upstream and downstream linkages, in the different processes and services that
produce value in the form of products and services in the hands of the ultimate
consumer.”
acc to [Christopher, Peck: Building the resilient supply chain, International Journal of Logistics Management, Vol. 15, No. 2]

source make deliver consume

 Despite of the term “supply” a SC will be more often driven by demand than
supply.
 Despite of the term “chain“ a SC most often represents a network of
companies, not a linear chain.

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 7

Example: Tennis

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 8

Example: Tennis

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 9

Group Task: Supply Chain Example

Group Task
 Identify the supply chain of one
product / company

Ideas

 Car  Football
 Airplane  Pen
 Chocolate  Toilet paper
 Cheese  Toothpaste

8 minutes, go!

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 10

Learning Goals

 understand the framework conditions of

production and retail companies
 compare definitions of logistics and
supply chain management (SCM)
 understand the main processes,
functions and targets of logistics and
SCM
 analyze the impact of logistics and SCM
on the economic success of a company
 discuss the main future trends and
challenges of logistic systems

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 11

Agenda

1 Framework Conditions of Production and Retail Companies

2 Definitions, Goals and Processes

3 Impact on Corporate Success

4 Future Trends and Challenges

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 12

Global trends impact framework conditions and force
companies to develop new products and services

Framework conditions for production New products and services

How do companies produce? What do companies produce?

Globali- Resource Climate Social

sation shortages change Media
Risk of
Dynamic Indivi-
instability
product duality
(e.g. terror
New life cycles
Know- attacks) Life
I&C and
ledge/ quality /
production Mobility
learning growing
techno-
society markets
logies Demo-
graphic
change

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Abele et al., 2009 13
Complexity due to Disturbances in Logistics

probability p to proceed to
1234 next machine

(1 – p) p (1 – p) p (1 – p) p

machine 1 machine 2 machine 3

continuous
steady probability (1 – p) to remain
inflow on current machine

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 14

Complexity due to Disturbances in Logistics

12 machines p = 0.9 (1 – p) = 0.1

40%

30%
frequency

20% frequency distribution

10%

0%
Even simple
12 processes
13 14produce
15fluctuating
16 output.
17 18 19 20
These fluctuations
μ = 13.33 σ = 1.48 require non-equilibrium thinking.
throughput time
Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 15
Complexity in Production – Example Daimler

textiles

1.6 million variants

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Daimler, 2007 16
Variant Explosion in Car Production

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 17

Complexity in Retail Industry – Example Metro

> 1 Mio. different articles

> 8.000 suppliers
> 50 Mio. supplier orders per year
 flexibility of assortments non-food
food assortment
 heterogenous products assortment
dry foods and suppliers bundled goods (on
dairy + sausage products  forecasting problems palets)
 shop availability bulky and fragile goods
meat + fish products
 marketing actions and hanging textiles
fruits + vegetables season articles
frozen foods  few indirect areas in
stores
 internationality

> 50 Mio. supplier shipments per year

> 2,243 stores / 32 countries / 283.000 employees
< 1.500 qm to > 50.000 qm sales areas / from „green field “ to „inner city“

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 18

Complexity in the Supply Chain:
Example Tennis Ball

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 19

Agenda

1 Framework Conditions of Production and Retail Companies

2 Definitions, Goals and Processes

3 Impact on Corporate Success

4 Future Trends and Challenges

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 20

Three Steps of Creating Value in Industrial Production

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Klinkner 21
Definition of Logistics
Processes

Logistics…
Definition

is the integrated planning, control, realization, and monitoring of all

internal and cross-company material-, part- and product flows as well as
the accompanying information flows to meet customers’ requirements. The
goal of logistics is to deliver the right objects in the right quantity to the
right place at the right time in the right quality for the right costs.
Challenge

Cost pressure and competitive intensity, product and service complexity,

production in small batch sizes, customer requirements regarding quality and
lead time, service level requirements, sustainability and risk management.

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Council of Logistics Management, Plowman 22
Definition of Supply Chain Management

Raw Parts components OEM whole- customer

material supplier supplier saler
supplier Here is the main difference.

Supply Chain Management covers the integrated planning and control

of all the goods, information and monetary flows along the complete
value-added chain (and product life cycle) from the supplier’s supplier
to the customer’s customer.

Targets of Supply Chain Management

 to fulfil the customers demands
 to increase the availability of the products and the flexibility
of the supply chain
 to synchronise and harmonise capacities within the supply
chain
 to decrease the costs of the value creation – across company
borders and taking in mind the entire supply chain

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 23

Supply Chain Management (SCM) and Logistics
are often used as Synonyms

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Halserson 2004 24
Logistic Elements

Logistics Services
Enterprise logistics
External Internal External
Logistics Logistics Logistics

Procurement Production Distribution

Production Logistics Logistics Logistics

Market
Market

Disposal
Disposal Logistics Logistics

Recycling
Distribution Recycling Redistribution
Logistics Logistics Logistics

After sales
Logistics
Logistics Services

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 25

Industry-specific Logistics Focus

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 26

Different Perspectives on Logistics

Inbound Logistics Outbound Logistics

Inbound logistics is one of the primary The process related to the storage and
processes and it concentrates on purchasing movement of the final product and the
and arranging inbound movement of related information flows from the end of the
materials, parts and/or finished inventory production line out of the company to the
from suppliers to manufacturing or assembly external customer.
plants, warehouses or retail stores.

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Bowersox, Bhristopher, Porter 27
Logistics Processes with Inbound and/or
Outbound Character

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Ballou 2004 28
Strategic, Tactical and Operational
Decision Making in Logistics – Examples

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Ballou 2004 29
Agenda

1 Framework Conditions of Production and Retail Companies

2 Definitions, Goals and Processes

3 Impact on Corporate Success

4 Future Trends and Challenges

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 30

How Logistics Impacts Market Success

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Gläßner 31
Logistics means taking in a System Perspective

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Wittek 2012 32
System Thinking means Total Cost Orientation

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Pfohl 2004 33
Typical Conflicting Decisions in Logistics Systems

Choice of transport carriers Choice of number of distribution centers

 Truck, rail or air transport?  Fewer or more warehouses?

 Think about transport cost and  Think about transport costs and
inventory costs inventory costs

Choice of safety stock Choice of production lot size

 More or less inventory?  Small or large lot size?

 Think about inventory cost and  Think about inventory cost and
shortage costs setup costs

Group Task: 8 minutes, go!

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Source: Pfohl (2004), p. 33 34
Typical Conflicting Decisions in Logistics Systems

Choice of transport carriers Choice of number of distribution centers

inventory and transport costs

costs costs to supply distribution centers

total costs total costs

transport costs

inventory costs transport costs for

(incl. costs for delivery
transit materials)

rail road air

carrier velocity number of distribution centers

Choice of safety stock Choice of production lot size

costs
costs

total costs
total cost

inventory costs inventory cost

shortage costs
set up costs

inventory level production lot size

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 Source: Pfohl (2004), p. 33 35
Agenda

1 Framework Conditions of Production and Retail Companies

2 Definitions, Goals and Processes

3 Impact on Corporate Success

4 Future Trends and Challenges

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 36

Assessment helps to Identify Social and Business
Trends as well as Technology Trends

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 DHL 2015 37
DHL Logistics Trend Radar
Reading Provided on Moodle

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 DHL 2024 38
One Trend is Prevailing at the Moment: AI

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 DHL 2024 39
Sharing Economy Logistics – Crowdshipping

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 [Botsman 2015] 40
Sharing Economy Logistics – Our Research:
How can crowdsourcing innovate the logistics industry?

Customer Perspective vs. Deliverer Perspective

Research Goal
 Identify what are the implementation possibilities, the benefits and the limitations of using crowdsourcing for
last-mile deliveries

Course of Research
 Business Model Analysis – classifying existing crowdshipping business models and evaluating their success
 Empirical Survey - understanding the people’s appeal towards the crowdshipping concept both from customer
and deliverer perspective
 Agent Based Modeling and Simulation – investigating the performance of the crowdsourced last-mile delivery
with regard to service level and assets utilization.

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 41

Crowdshipping:
Agent Based Modeling and Simulation

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 42

Do E-commerce Customers Consider Sustainability
when Choosing a Last-Mile Delivery?

I. Survey
Design
1 Chosen Sustainability 2 Survey Questions
Factors
Qa Level 1

Social
Level
Carrier drivers’ Qb 2.1
benefits

Economic Level
Environmental Qc 2.2
Cost
Time
CO2 emissions
Location

Qd
Level 3

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 (Ignat & Chankov 2024) 43
Do E-commerce Customers Consider Sustainability
when Choosing a Last-Mile Delivery?

I. Survey II. Survey

Design Results

Delivery methods chosen by the Likelihood of choosing the

survey participants more sustainable delivery

Before the After the

Question Additional information Less sustainable More sustainable
information information

a N/A 238 10 4% N/A

b Environmental impact 85 163 4% 66%

c Social impact 66 182 4% 74%

Environmental
d 59 189 4% 76%
and social impacts

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 (Ignat & Chankov 2024) 44
Do E-commerce Customers Consider Sustainability
when Choosing a Last-Mile Delivery?

I. Survey II. Survey III. Study

Design Questions Conclusions

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 (Ignat & Chankov 2024) 45
Future Trends in Logistics:
Deutche Post DHL Study

https://www.youtube.com/watch?v=VE0lPTfsBoI

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 DHL 2015 46
Important Terms – German

English terms German terms

availability die Verfügbarkeit
bottleneck der Engpass
capacity die Kapazität
capacity utilization die Kapazitätsauslastung
capital das Kapital
challenges die Herausforderungen (pl.)
consumer der Konsument/ der Verbraucher
costs die Kosten
customer der Kunde
customer demand der Kundenbedarf
decision-making die Entscheidungsfindung
delivery time die Lieferzeit
digitization die Digitalisierung

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 47

Important Terms – German
English terms German terms
distributor der Vertreiber
nachgelagert (-er Prozess)
downstream (process)
(english term can be used)
due date reliability die Termintreue
forecast die Voraussage / die Vorhersage
globalization die Globalisierung
inventory level der Lagerbestand / die
Lagerbestände
lot-size die Losgröße / die Auftragsgröße
manufacturer Der Hersteller
network Das Netzwerk /Die Vernetzung
order processing die Auftragsabwicklung
producer der Produzent
product life cycle der Produktlebenszyklus
retailer Der Händler / Der Einzelhändler
Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 48
Important Terms – German

English terms German terms

sales der Ab-/Umsatz
shortage der Fehlbestand / der Mangel
stockholding costs die Lagerhaltungskosten (pl.)
supply chain die Lieferkette
das Lieferkettenmanagement
supply chain management
(english term can be used)
sustainability die Nachhaltigkeit
target das Ziel / das Soll
technology die Technologie / die Technik
throughput time / lead time die Durchlaufzeit
transportation das Transportwesen
trends die Trends (pl.)
vorgelagert (-er Prozess)
upstream (process)
(english term can be used)

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 49

Important Terms – German

English terms German terms

utilization die Auslastung
warehousing die Lagerhaltung / die Lagerabwicklung
work in progress (WIP) der Umlaufbestand

Dr. Stanislav Chankov – Introduction to Logistics and SCM – Fall 2024 50