MANAGING SUPPLY CHAINS

A LOGISTICS APPROACH
9e
COYLE | LANGLEY | NOVACK | GIBSON

LOGISTICS III

CHAPTER 2
ROLE OF LOGISTICS IN SUPPLY CHAINS

PRESENTED BY DR. MICHAEL BOAKYE YIADOM

 Learning Objectives
After reading this chapter, you should be able to do the following:
• Understand the role and importance of logistics in private
and public organizations.

• Discuss the impact of logistics on the economy and how

effective logistics management contributes to the vitality
of the economy.

• Understand the value-added roles of logistics on both a

macro and micro level.

• Explain logistics systems from several perspectives.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning Objectives, continued

• Understand the relationship between logistics

and other important functional areas in an
organization, including manufacturing, marketing,
and finance.

• Discuss the importance of management

activities in the logistics function.

• Analyze logistics systems from several different

perspectives to meet different objectives.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?
BASIS FOR COMPARISON LOGISTICS SUPPLY CHAIN MANAGEMENT

The process of integrating the The coordination and management of the

Meaning movement and maintenance of goods supply chain activities are known as
in and out the organisation is Logistics. Supply Chain Management.

Objective Customer Satisfaction Competitive Advantage

The concept of Logistics has been Supply Chain Management is a modern

Evolution
evolved earlier. concept.

How many organisations are Multiple

Single
involved?

Logistics Management is a fraction of Supply Chain Management is the

One in another
Supply Chain Management. management of the Chain of supplies.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?
Definition of Logistics: The
management process which
integrates the movement of goods,
services, related information and
capital, right from the sourcing of raw
material (Point A), till it reaches its
end consumer (Point B) is known as
Logistics Management.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?
The logistic activities are divided into two broad categories they
are:
Inbound Logistics: The activities which are concerned with
procurement of material, handling, storage and transportation
(Materials Management).

Outbound Logistics: The activities which are concerned with the

collection, maintenance and distribution or delivery to the final
consumer (Physical Distribution).

Apart from these, other activities are warehousing, protective

packing, order-fulfillment, stock control, maintaining equilibrium
between demand and supply and stock management. This will
result in savings in cost and time, high quality products etc.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?

The 5 RIGHTS OF LOGISTICS

The objective behind this process is to

provide the right product with the
right quality at the right time in the
right place at the right price to the
ultimate customer.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?
The birth of Logistics can be traced back to ancient war times of
Greek and Roman empires when military officers titled as 'Logistikas'
were assigned the duties of providing services related to supply and
distribution of resources.

This was done to enable the soldiers to move from their base position
to a new forward position efficiently, which could be a crucial factor in
determining the outcome of wars. This also involved inflicting damage
to the supply locations of the enemy and safeguarding one's own
supply locations.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Logistics?
During the Second World War (1939-1945), Logistics evolved greatly.
The army logistics of United States and counterparts proved to be
more than the German army could handle. The supply locations of
German armed forces were inflicted with serious damages and
Germany was not able to wreak the same havoc on its enemy.

The United States military ensured that the services and supplies
were provided at the right time and at the right place. It also tried to
provide these services when and wherever required, in the most
optimal and economical manner. The best available options to do the
task were developed. This also gave birth to several military logistics
techniques which are still in use, albeit in a more advanced form

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Four Subdivisions of Logistics
• Business logistics:
• That part of the supply chain process that plans, implements,
and controls the efficient, effective flow and storage of goods,
service, and related information from point of use or
consumption in order to meet customer requirements.
 Four Subdivisions of Logistics
• Military logistics:
• The design and integration of all aspects of support for the operational
capability of the military forces (deployed or in garrison) and their
equipment to ensure readiness, reliability, and efficiency.
 Four Subdivisions of Logistics
• Event logistics:
• The network of activities, facilities, and personnel required to organize,
schedule, and deploy the resources for an event to take place and to
efficiently withdraw after the event.
 Four Subdivisions of Logistics
• Event logistics:
• The network of activities, facilities, and personnel required to organize,
schedule, and deploy the resources for an event to take place and to
efficiently withdraw after the event.
 Four Subdivisions of Logistics
• Service logistics:
• The acquisition, scheduling, and management of the facilities/assets,
personnel, and materials to support and sustain a service operation or
business.
 Value-Added Roles of Logistics
• The five principal types of economic utility which add value to a
product or service are:
• Form
▪ When someone makes something, they assemble a product
from parts and you can use it.
▪ Marketers use research to make sure that the form and shape of
the product fits the expectations of the customer.
▪ For example, the form, when applied to a clothing item, can be
the shape of the garment and the range of sizes and the
selection of fabric. So the "utility" of the marketer, is that they
assemble various fabrics together into a garment that you can
wear, instead of you gathering all the component parts yourself
and making it yourself.
 Value-Added Roles of Logistics
• The five principal types of economic utility which add value to a
product or service are:
• Task
▪ In the context of providing a service, when someone does
something for you, like
▪ cut your hair because you can't, or don't want to do
▪ does something for you that you don't have time to do, like cut
your grass
▪ performs a skill on you that you don't have competency in, like
extract a tooth,
▪ we refer to that as the "task" utility - usually these are services,
and like services they are intangible and cannot be "stored" or
replicated exactly.
 Value-Added Roles of Logistics
• The five principal types of economic utility which add value to a product or
service are:
• Time
▪ customers in the current marketing climate are quite impatient to
take possession of the product once they have made the final
decision to buy.
▪ It is important, in a competitive environment, to use every opportunity to
streamline your supply chain and distribution channels to allow a
customer to physically obtain the chosen product as quickly as possible.
▪ In the case of food service items, you can't have the burger ready and
have the customers wait many minutes for the fries, they just won't
come to your drive-through next time.
▪ This is one of the reasons why (say some fast food experts) that
McDonald's fries are skinnier and smaller. Designed to cook faster so
McDonald's can serve customers faster
 Value-Added Roles of Logistics
• The five principal types of economic utility which add value to a
product or service are:
• Place
▪ The utility of place refers to having the product exist in a
location that is easily accessible to the buyer at the moment
in time when their payment transaction is concluded.
▪ If you are selling products in a huge warehouse style store, the
utility of "place utility" can be as simple as having the product in
boxes on pallets ready to be picked up and the customer can
simply walk directly to the cashier to make payment.
 Value-Added Roles of Logistics
• The five principal types of economic utility which add value to a
product or service are:
• Possession
• When someone buys a good/product, and they finally get to
use it or enjoy it, that is called possession utility.
• This happens every day, eg. Food, clothes, technology, transport
• Even services, eg. Haircut, hospitality, lectures
• It is possible to have negative Possession utility
Figure 2-2
Fundamental Utility Creation in the Economy

Source: Center for Supply Chain Research, Penn State University (2008).
 Logistics Interfaces with Marketing

• Logistics is often referred to as the other half of

marketing and plays an important role through the
physical movement and storage of goods in selling
a product.
 Logistics Interfaces with Marketing

• Product: Another decision frequently made in the

marketing area concerns products, particularly their
physical attributes.
 Logistics Interfaces with Marketing

• Price: From a logistics perspective, adjusting quantity

prices to conform to shipment sizes appropriate for
transportation organizations might be quite important.
 Logistics Activities
• Place: The place decision refers to the distribution
channels decision, and thus involves both
transactional and physical distribution channel
decisions
 Logistics Activities
• Promotion: Firms often spend millions of dollars on
national advertising campaigns and other promotional
practices to improve sales. An organization making a
promotional effort to stimulate sales should inform its
logistics manager so that sufficient quantities of
inventory will be available for distribution to the
customer.