OVERVIEW OF LOGISTICS MANAGEMENT Marketing

● Contemporary marketing places a heavy emphasis on

According to CSCMP, Council of Supply Chain Management customer satisfaction
Professionals, Logistics Management is that part of supply ● Logistics strategies facilitates customer satisfaction by
chain management that: reducing the cost of products
● Plans, implements, and controls the efficient, effective ● Lower cost of products = lower prices and broader
forward and reverse flow and storage of goods, services, variety of choices closer to where the customer wishes to
and related information between the point of origin and buy or use the product
point of consumption in order to meet customers’
requirements 4Ps of Marketing (Place, Price, Product, and Promotion)
Logistics Place Decisions - logistics decisions concerns the most
● Part of supply chain management effective way to move and store the product from where it is
● Part of a bigger picture, focuses on coordination among produced to where it is sold
business functions (marketing, production, and finance)
within and across organizations Price Decisions - A key price-related decision for marketers,
● Can affect how well or poorly an individual firm and its how a product’s transportation costs should be reflected in
associated supply chain(s) can achieve goals and its selling price, this has proved to be a particularly vexing
objectives issue for some online merchants

Increased Importance of Logistics Product Decisions - marketers often prefer to carry higher
2nd half of 20th Century quantities of particular items because this reduces the
● Existence of formal study of business logistics, traffic likelihood of stockouts
management, and physical distribution However, from a logistics perspective, higher quantities of
1950 to 1980 inventory:
● Limited appreciation was shown for the importance 1. Necessitate additional storage space
of logistics discipline 2. Increase inventory carrying costs
Since 1980 Product Design - often the purview of marketers and also
● Increasing recognition has been given to business have important implications for logistical effectiveness and
logistics because of tremendous and rapid changes in efficiency. e.g: long-necked glass beverage and aluminum
the discipline cans

The Systems and Total Cost Approaches to Logistics Promotion Decisions - many promotional decisions require
Materials Management close coordination between marketing and logistics
● Movement into and storage of materials in a firm One important situation concerns the availability of highly
Physical Distribution advertised products, particularly when a company is running
● Storage of finished product and movement to the pricing campaigns that lower the price of certain items
customer Few things are more damaging to a firm’s goodwill than
being stocked out of items that are heavily promoted in a
Logistical Relationships within the Firm sales campaign
Finance
● Finance staff is often charged with the responsibility ACTIVITIES IN THE LOGISTICAL CHANNEL
of allocating the firm’s funds to projects Customer Service
● Finance department is often instrumental in ● “Keeping existing customers happy”
approving capital budgeting decisions that affect ● Involves making sure that the right person receives the
logistics; right product at the right place, time, condition, and cost
1. Acquisition of materials handling equipment
2. Packaging equipment Demand Forecasting
3. Decides between purchasing or leasing the ● Refers to efforts to estimate product demand in a future
relevant equipment time period
Production ● Growing popularity of supply chain prompted increasing
● Most common interfaces of production and logistics collaboration among supply chain partners with respect
is the length of production runs to demand forecasting
● Production people favor long production runs of ● Collaboration can enhance efficiency by reducing overall
individual products because relevant fixed costs inventory levels in a supply chain
spread over more units = lower production cost/unit
● Long production runs generate large amounts of Facility Location Decisions
inventory ● It is said that the success of a retail store depends on its
● Logistician’s responsibility is to store and track location and on the location of relevant warehousing and
inventory production facilities
Postponement Concept ● Important as the configuration of logistics systems is
● The delay of value-added activities (assembly, altered due to the impacts of multinational trade
production, and packaging) also influences the interface agreements
between production and logistics International Logistics
● More of those are now performed in warehousing ● Logistics activities associated with goods that are sold
facilities across national boundaries, is much more costly and
challenging than domestic logistics
Inventory Management INTEGRATED LOGISTICS
● Refers to stock of goods that are maintained for a variety is defined as:
of purposes; resale to others and support manufacturing ● The process of anticipating customer needs and wants
or assembling processes ● Acquiring the capital, materials, people, technologies and
● When managing inventory, it is need to simultaneously information necessary to meet those needs
consider the cost of carrying (holding) product, ordering
● Optimizing the goods or service
product, and cost of being out of stock
● Producing a network to fulfill customer requests and
Materials Handling ● Utilizing the network to fulfill customer requirements in a
● The short-distance movement of products within the timely manner
confines of a facility e.g: plant, warehouse, etc.

Order Management
● Management of activities that take place between the
time a customer places an order and time it is received
● A logistics activity with a high degree of visibility to
customers

Packaging Integrated Logistics Management

● Can have both a marketing (consumer) and logistical ● To integrate the following logistical operations
(industrial) dimension Inventory Flow - moving inventory when and where needed
● Industrial (protective) prepares a product for storage and
Physical Distribution - movement of finished goods to a
transit e.g: boxes, crates.
● Has an important interfaces with the materials handling customer
and warehousing activities Manufacturing Support - managing work-in-progress
inventory
Procurement Procurement - purchasing and arranging inbound movement
● Raw materials, component parts, and supplies brought of materials
from outside organizations to support a company’s
Information Flow - to integrate the 3 operating areas of
operations
physical distribution, manufacturing support and
Reverse Logistics procurement
● Products can be returned for various reasons; product
recalls, damage, lack of demand, and customer Role of Information in ILM
dissatisfaction ● It is effected through the proper flow of information
● Challenges associated can be complicated the fact that ● Key concerns of information flow are:
returned products often move in small quantities and
- Getting the right information
may move outside forward distribution channels
- Keeping the information accurate
Transportation Management - Communicating the information effectively
● The actual physical movement of goods or people from ● Logistical information flow can broadly be divided into
one place to another the following two types
● The management of transportation activities by a - Planning and coordinating flows
particular organization - Operational flows
● Transportation can account for up to 50% of a firm’s total
logistics costs and represents the most costly logistics
activity in many organizations

Warehousing Management
● Warehousing is the place where inventory can be stored
for a particular period of time
Objectives of Integrated Logistics Management
Logistics and Supply Chain Careers
1. Logistics (Supply Chain) Analyst ● Rapid response
2. Consultant ● Minimum variance
3. Customer Service Manager ● Minimum inventory
4. Fulfillment Supervisor ● Movement consolidation
5. International Logistics Manager
6. Supply Chain Software Manager Operations Involved in Integrated Logistics
7. Purchasing Manager
Inbound Logistics - activities of receiving, storing, and
8. Transportation Manager
9. Warehouse Operations Manager disseminating incoming goods or material for use
Growing importance of logistics and supply chain Outbound Logistics - movement of material associated with
management, a number of professional organizations are storing, transporting, and distributing goods to its customers
dedicated to advancing the professional knowledge of their
members
Organizing Logistics within the Firm DATA AND INFORMATION
● The organization of logistics activities within a firm Data are simply facts, recorded as measures of certain
depends on a number of factors, including the number phenomena. Information is a body of facts in a format
suitable for decision making
and location of customers, as well as an organization’s
size, among others Office Automation Systems
Organizational Structure for Logistics ● Provide effective ways to process personal and
● Focuses on how work role and administrative organizational business data, to perform calculations,
mechanisms are allocated in an effort to integrate and to create documents
and control work ● Include general software packages word processing,
1. Fragmented Logistics Structure spreadsheet, presentation, and database management
applications
● Logistics activities are managed in multiple
● Spreadsheet is the most relevant general software
departments throughout an organization package for logisticians
● E.g: a company might assign outbound
transportation, demand forecasting, warehousing Communication Systems
management, and customer service to the marketing ● Help various stakeholders—employees, suppliers,
department and procurement, inbound customers—work together by interacting and sharing
transportation, packaging, and materials handling information in many different forms
● Electronic data interchange, or EDI was viewed by many
might be in the manufacturing department
experts as the measuring stick for logistics information
● Problem: because logistics activities are scattered, technology in the 1990s
they like remain subservient to the objectives of the ● By contrast, wireless communication emerged as the
department measuring stick during the first decade of the 21st
2. Unified Logistics Structure century
● Multiple logistics activities are combined into, and
managed as, a single department
● Can be further classified based on the number and
type of activities assigned to the department
● Its basic structure might have responsibility for Global Positioning Systems (GPS)
transportation, inventory management, and ● Network of satellites that transmits signals that pinpoint
warehousing the exact location of an object
● A more progressive structure would include basic ● Have become quite valuable to the transportation
component of logistics because of high fuel costs and the
activities + several additional logistics activities
relentless pressure to improve efficiency and productivity
(order management & customer service) Transaction Processing Systems (TPS)
● Its advanced structure would include both basic and ● Collects and stores information about transactions and
progressive activities, along with several other may also control some aspects of transactions
activities (demand forecasting & procurement) ● Its primary objective is the efficient processing of
transaction, by this, organizations can choose to do batch
CENTRALIZED VS DECENTRALIZED or real-time processing
1. Batch Processing - data are collected and stored for
● A Centralized Logistics Organization the company
processing at a later time (based on schedule)
maintains a single logistics department that administers
- e.g: process every 6 hours or volume,
the related activities for the entire company from the
process once 25 transactions have
home office
accumulated
● A Decentralized Logistics Organization, in contrast,
2. Real-time Processing - transactions are processed as
means that logistics-related decisions are made
they are received
separately at the divisional or product group level and
Although batch processing might be somewhat out of step
often in different geographic regions
with the speed and time reduction, it can be quite effective
Primary advantage of centralization; relative efficiency,
when real-time processing is not necessary.
whereas a primary advantage of decentralization; customer
Moreover, in comparison with real-time systems, batch
responsiveness
processing tends to be less costly and easier for employees to
learn.
The effective and efficient utilization of information can be
quite beneficial to logistics and supply chain management
Management Information Systems (MIS) and Executive
Information Systems (EIS)
● Greater knowledge and visibility across the supply chain,
● These convert TPS data into information for monitoring
which makes it possible to replace inventory with
performance and managing an organization
information
● Its objective is providing managers and executives with
● Greater awareness of customer demand via point-of-sale
the information they really need
data, which can help improve planning and reduce
Logistics Information System (LIS)
variability in the supply chain
● The people, equipment, and procedures to gather, sort,
● Better condition of manufacturing, marketing, and
analyze, evaluate, and distribute needed, timely, and
distribution through ERP systems
accurate information to logistics decision makers
● Streamlined order processing and reduced lead times
enabled by coordinated logistics information systems
 Knowledge Transfer Capability
● The limited capability to transfer experiences and
knowledge from one employee to another or from one
functional area to another

SUPPLY CHAIN MANAGEMENT AND PROCUREMENT

Decision Support System Supply Chain
● Help managers make decisions by providing information, ● Combination of processes, functions, activities,
models, or analysis tools, and they can be widely applied relationships, and pathways
and used by logisticians ● Along which products, services, information, and
● Its specific uses include but are not limited to, vehicle financial transactions move in and between enterprises
routing issues, inventory control decisions, developing from original producer to ultimate end-user or consumer
automatic order picking systems, and optimization
models for buyer-seller negotiations
Simulation
● A technique that models a real-world system
● Typical uses mathematical equations to represent the
relationships among the system’s components
● Its reliability is achieved by making the model as akin to Complex Supply Chains
the real world as possible ● May include “specialist” companies, such as third-party
● A poorly constructed stimulation involving bad data or logistics (3PL) providers, to facilitate coordination among
inaccurate assumptions about the relationships among various supply chain parties
variables can deliver suboptimal or unworkable solutions ● Customers are an integral component in supply chains,
to logistics problems regardless of their complexity
Data Mining The Council of Supply Chain Management Professionals
● The application of mathematical tools to large bodies of (CSCMP) views logistics activities as being part of managing
data in order to extract correlations and rules one’s supply chain.
● A DSS technique that has grown in popularity in recent
years ENABLERS OF SCM IMPLEMENTATION
● Utilizes sophisticated quantitative techniques to find A variety of enablers can influence a firm’s ability to
“hidden” patterns in large volumes of data; allowing implement SCM, including
manager to improve their decision-making abilities and 1. Managerial understanding of the implications of
enhance organization’s competitive advantage increased customer power
Machine Learning 2. Establishing appropriate relationship structures
● An emerging technology that can assist logistics 3. Leveraging technology for enhanced visibility
managers in using the increasing amount of available 4. The use of supply chain facilitators
data Greater access to information largely enabled by the
● This computer-based discipline leverages algorithms that internet, allows the consumer to become highly
can “learn” from data knowledgeable about an individual organization and its
● These algorithms use data to build and constantly update products as well as becoming aware of competing
their prediction models for activities such as forecasting organizations and their products
● Has been used as an early warning system for potential This increased power of customers has important
machine downtime implications for the design and management of supply chains
● Has potential to support logistics decision making from
both supply and demand side Fast Supply Chain
Enterprise Systems ● Emphasizes a speed and time component, whereas an
● Create and maintain consistent data processing methods agile supply chain focuses on an organization’s ability to
and an integrated database across multiple business respond to changes in demand with respect to volume
functions and variety
● Most prominent example is Enterprise Resource Failure to be fast and agile can result in:
Planning (ERP) systems, which automates and integrates 1. Decreased market share
the majority of business processes, share common data 2. Reduced profitability
and practices, produce and access information in a 3. Lower stock price
real-time environment 4. Dissatisfied customers for supply chain member
Lean Supply Chain
BARRIERS TO LOGISTICS INTEGRATION ● Established when customer demand is relatively stable
Organizational Structure and the need for variety is low
● Organizations are typically structured to divide authority ● Focused on eliminating all waste, including time, and
and responsibility according to functional work ensuring a level schedule
Measurement Systems
● May not be aligned as per the changed organizational ESTABLISHING APPROPRIATE RELATIONSHIP STRUCTURE
needs, thus there may be little integration ● Well-run supply chains improve the long-term
Inventory Ownership performance of the individual companies and supply
● Incorrectly located/obsolete inventory poses a big barrier chain as whole
to ILM ● This perspective suggests that companies should
Information Technology consider employing a long-term than short-term
● Traditional information storage capabilities have been a orientation with key members of their supply chain
barrier to ILM
 ● A long-term orientation tends to be predicted on Incompatible Corporate Cultures
relational exchanges, where short-term tends to focus ● It is important that parties must be comfortable with the
on transactional exchanges companies they will be working with
Supply Chain Collaboration ● Corporate culture refers to “how we do things around
● Cooperative relationships between members of a supply here” and reflects an organization’s vision, values, and
chain (formal or informal) between companies and their strategic plans
suppliers/customers ● Organizations should identify potential differences that
● Established to enhance the overall business performance could negatively affect supply chain effectiveness and
of all parties efficiency
Globalization Challenges
LEVERAGING TECHNOLOGY FOR ENHANCED VISIBILITY AND ● Supply chains are becoming increasingly global in nature
COMMUNICATION ● Reasons of increased globalization of SC:
● Technology has been at the center of changes that affect 1. Lower-priced materials and labor
the supply chain, two factors: computing power and the 2. Global perspective of companies in a SC
internet have sparked much of this change 3. Development of global competition
● Internet can allow one supply chain party to have ● SC integration can be challenging domestically, but
virtually instantaneous visibility to the same data as challenges are greater in global SC due to cultural,
other parties in the SC economic, technological, political, spatial, and logistical
● Such instantaneous visibility offers the opportunity for differences
supply chains to become more proactive, which can
translate into lower inventories and improved
profitability
Because supply chains depend on huge quantities of
real-time information, it is essential that this information can
be seamlessly transmitted across organizations

USE OF SUPPLY CHAIN FACILITATORS

Logistics Outsourcing/Contract Logistics
● Third-party logistics, continues to be one of the most
misunderstood terms in logistics and SCM
● 3PL arrangements involve a long-term perspective
between buyer and seller
● The parties have relationship, as opposed to
transactional, perspective

BARRIERS TO SCM IMPLEMENTATION

Regulatory and Political Considerations
● Long-term commitments may restrain competition to the
extent that they make it more difficult for others to enter
particular markets
● It would be wise to seek sound legal advice before
entering into future supply chain arrangements
● War and governmental stability can also be a barrier to
SCM
Lack of Top Management Commitment
● An important component when individual companies
attempt to initiate and implement new initiatives,
programs, and product introductions
● Because of SCM’s interorganizational focus, this is
absolutely essential if SC efforts are to have any chance
of success
● Has the ability to allocate the necessary resources for SC
endeavors and power to structure, or restructure,
corporate incentive policies to focus on achieving
objectives
Reluctance to Share, or Use, Relevant Information
● Some organizations are reluctant to share information,
particularly those that might be considered proprietary in
nature
● However, this reluctance can contribute to SC problems,
members may decide base on erroneous data or
assumptions
Incompatible Information Systems
● 20 years ago, a major barrier to interorganizational
collaboration was incompatible compute hardware;
today, by contrast, software compatibility is likely the
more pressing issue