Business Logistics/Supply
Chain—A Vital Subject
The supply chain is simply another way of
saying “the whole process of business.”
Chapter 1
CR (2004) Prentice Hall, Inc.
The Immediate Supply Chain for an Individual Firm
Transportation Transportation Customers
Warehousing
Information
flows
Factory
Transportation
Vendors/plants/ports
Warehousing Transportation
CR (2004) Prentice Hall, Inc. 1-2
Logistics Defined
Logistics is the process of planning, implementing and
controlling the efficient, cost-effective flow and storage
of raw materials, in-process inventory, finished goods
and related information from the point of origin to point
of consumption for the purpose of conforming to
customer requirements.
Council of Logistics Management
Supply Chain Management Defined
SCM is the integration of all activities associated with the
flow and transformation of goods from raw materials
through to end user, as well as information flows, through
improved supply chain relationships, to achieve a
sustainable competitive advantage.
Handfield and Nichols
CR (2004) Prentice Hall, Inc.
Logistics Supply Chain
The Logistics/SC Mission
Getting
Getting thethe right
right goods
goods oror services
services
to
to the
the right
right place,
place, at
at the
the right
right time,
time,
and
and inin the
the desired
desired condition
condition at at the
the
lowest
lowest cost
cost and
and highest
highest return
return onon
investment.
investment.
CR (2004) Prentice Hall, Inc.
Critical Customer Service
Loop
C ustom er o rder processing (an d
tran sm ittal)
T ran spo rtatio n
C ustom e rs
Inventory
or sup ply so urce
CR (2004) Prentice Hall, Inc.
Scope of the Supply Chain for Most Firms
Business logistics
Physical supply Physical distribution
(Materials management)
Sources of Plants/
Customers
supply operations
• Transportation • Transportation
• Inventory maintenance • Inventory maintenance
• Order processing • Order processing
• Acquisition • Product scheduling
• Protective packaging • Protective packaging
• Warehousing • Warehousing
• Materials handling • Materials handling
• Information maintenance • Information maintenance
Focus firm’s internal supply chain 1-14
CR (2004) Prentice Hall, Inc.
The Physical supply channel: refers to
the time & space gap between a firm’s
immediate material sources and its
processing points.
The Physical distribution channel:
refers to the time & space gap between
the firm’s processing points and its
customers.
Scope of the Supply Chain for
Most Firms
Key Logistics Activities:
- Highly affect the total cost of logistics
- Must exist in every supply chain
Support Logistics Activities:
- Do not highly affect the total cost of
logistics
- Might not exist in some supply chains
Key & Support Logistics
Activities
Key & Support Logistics Activities
Key Activities
- Customer Service
- Transportation
- Inventory management
- Order Processing
Support Activities
- Warehousing
- Materials handling
- Acquisition (purchasing)
- Packaging
- Information Maintenance
CR (2004) Prentice Hall, Inc.
Significance of Logistics
Costs are significant
For the firm, logistics costs ranged from 4% to over 30% of sales.
Customers increasingly want quick customized response
Desire for quick response
Desire for mass customization
Logistics is important to strategy
Generate revenue
Improve profit
Supply and distribution lines are lengthening
Local vs. long distance supply
Logistics adds significant customer value
Time and place utilities
Relationship of Logistics to
Marketing and Production
LOGISTICS
Sample
activities: MARKETING
PRODUCTION/ Transport Interface Sample
OPERATIONS Inventory
Interface activities: activities:
Sample activities: Order Customer
Quality control activities: Promotion
Product processing service Market
Detailed production
scheduling Materials standards research
scheduling Plant Pricing
Equipment maint. handling Product
location Packaging
Capacity planning mix
Purchasing Retail Sales force
Work measurement
location management
& standards
Production-
logistics Marketing-
interface logistics
interface
Internal Supply Chain
CR (2004) Prentice Hall, Inc. 1-21
Relationship of Logistics to Production
Coordinates through scheduling and strategy—
make-to-order or make-to-stock
An integral part of the the supply chain
Affects total response time for customers
Shares activities such as inventory planning
Costs are in tradeoff
Production lot quantities affect inventory
levels and transportation efficiency
Production response affects transportation
costs and customer service
Production and warehouse location are
interrelated
CR (2004) Prentice Hall, Inc.
