Transcript Slide 1
At the end of this chapter, students should be able to: • Understand industrial logistics management concept • Describe the elements and role of logistics in operations • Explain achievement of competitive advantage through logistics • Definition of Logistics • Logistics Management Concepts • The Work / Element of Logistics 1. 2. 3. 4. 5. 6. Order Processing Inventory Management Facility Network Design Materials Handling and Packaging Warehousing Transportation • Logistics and Competitive Advantage Logical Thinking Statistics Logistics “the detailed coordination of a complex operation involving many people, facilities or supplies” [ New Oxford American Dictionary] Definition “part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer requirements” Objective • The purpose of logistics management is to plan and coordinate all those activities necessary to achieve desired levels of delivered service and quality at lowest possible cost. Scope • From the total systems viewpoint, the scope encompasses management of raw materials and other inputs through the delivery of the final product in order to satisfy a customer. Logistics concept was introduced due to need for planning and coordinating the materials flow from source to user as an integrated system, rather than managing the flow of goods as a series of independent activities. Materials Flow Suppliers Procurement Operations Distribution Information Flow Customers Inputs into Logistics Natural resources Human Resources Financial Resources Information Resources Outputs of Logistics Management Actions Planning Implementation Control Logistics Management Suppliers Raw In-process materials inventory Finished goods Customers Logistics Activities Customer service Demand forecasting Inventory management Logistics communications Material handling Order processing Parts and service support Plant and warehouse selection Procurement Packaging Reverse logistics Traffic and transportation Warehousing and storage Competitive Advantage Time and Place Utility Efficient Movement to Customer Proprietary Asset The prime responsibility of logistics management people • determines the number and type of facility (plants, warehouses, cross-dock operations and retail stores) required, their geographic locations and the work to be performed • determines the inventory type and the quantity to be stocked at each facility and the assigning of customer orders for shipment • determines network of facilities including information and transportation forms a structure from which logistical operations such as processing of customer orders, maintaining inventory and performed material handling • Forecasting and order management are 2 areas of logistical work that depend on information • Impact of information: Deficiencies in quality of information Incorrect information with respect to trends • • May cause inventory shortage Overcommitment Incorrect information relating to a specific customer’s requirement • • Processing of incorrect order creates additional cost Does not result in sales While formulating an inventory management policy, the following factors should be considered: Inventory Management Customer Segmentation Products Requirements Transportation Integration Time-Based Requirements Competitive Performance • The logistical activities that are carried out in warehousing are sorting, sequencing, order selection, transportation consolidation and sometimes product modification and assembly. • Within the warehouse, products must be received, moved, sorted and assembled to meet customer order requirements and for these activities material handling become significant • There are 3 types of warehousing strategies available to an organization: Private Public Contract • The direct labor and capital invested in materialhandling equipment represent a major part of logistics cost • Material handling operations are made efficient by using a variety of mechanized and automated devices • Logistics personnel must plan the best ways to load, offload, move, sort and select products • Need to work closely with industrial engineers to design or select packaging materials that facilitate materials handling • One of the most visible elements of logistics operations – mainly concerned with product movement and product storage • 3 important factors affecting transportation performance: Transportation Performance Cost Speed Consistency The success in the marketplace is based around the triangular linkage of the company, customers and its competitors. Customers Seek Benefits at Acceptable Cost Value Asset Utilization Value Cost Differential Asset Utilization Commercial Success Cost Advantage Value Advantage * Competitive advantage – the ability of an organization to differentiate itself in the eyes of customer, from its competition, and to operate at a lower cost and hence greater profit. • Logistics management provides for the flow and storage of information and products between the firm and its suppliers (inbound), the firm and its customers (outbound) and the various plants, divisions and units of the firm. • The objectives of logistics management is to provide customers with their required service benefits at the lowest total logistics cost • A complete logistics management system comprises 6 major decision areas: facility network design, inventory management, order management, transportation management, warehousing management and packaging and materials handling management. • Logistics has an important relationship to manufacturing, marketing, finance and other areas of the organization. • The cost of logistics systems can be affected by a number of major factors, including competition in the market, the spatial relationship of nodes and product characteristics.