Logistics Lecture Notes

Definition of Logistics

• Logistics: Art and Science of obtaining, producing, and distributing materials and products in the proper place and quantity.
• Logistics Management: Part of Supply Chain Management that plans, implements, and controls the flow of goods, services, and related information from origin to consumption to meet customer requirements.

Difference Between Supply Chain and Logistics

• Supply Chain: Involves transforming raw materials into products and delivering them to customers.
• Logistics: Refers specifically to the movement of materials within the supply chain.

The Seven R’s of Logistics

• Key concept in logistics management:
  • Right product
  • Right quantity
  • Right condition
  • Right place
  • Right time
  • Right customer
  • Right price

Key Logistics Functions

1. Transportation:

   • Various modes (air, rail, road, water, pipeline) play a role in moving goods through supply chains.
   • Importance of selecting efficient combinations to enhance customer value.

2. Warehousing:

   • Activities related to receiving, storing, and shipping materials.
   • Important when inventory is not in transit.

3. Third and Fourth-Party Logistics:

   • Third-Party Logistics (3PL): Providers manage one or more logistics services.
   • Fourth-Party Logistics (4PL): Specialists who manage the entire logistics function for an organization.

4. Reverse Logistics:

   • Handling returns, reuse, recycling, or disposal of products moving from customer to supplier.

Logistics Value Proposition

• Balancing logistics costs against the level of customer service.
• Integrated efforts aimed at customer satisfaction at the lowest total cost.
• Key elements: Service and cost minimization.

Logistics Goals and Strategies

• Share the goal of meeting customer requirements.
• Common goals:
  • Respond rapidly to market changes.
  • Minimize variances in logistics service.
  • Reduce inventory to lower costs.
  • Consolidate product movement.
  • Maintain high quality.
  • Engage in continuous improvement.
  • Support entire product lifecycle, including reverse logistics.

Effective Logistics Strategy Tactics

1. Coordination of Functions:

   • Transportation management and integration of the supply chain.

2. Substituting Information for Inventory:

   • Reduces costs by providing accurate demand tracking and goods location.

Steps to Design Effective Logistics Network

1. Locate in Right Countries: Analyze locations for efficiency.
2. Develop Export/Import Strategy: Assess import/export volumes and inventory placement.
3. Select Warehouse Locations: Determine number and placement for efficiency.
4. Select Transportation Modes and Carriers: Choose the best mix for connectivity.
5. Select Right Number of Partners: Minimize partners to reduce costs and complexity.
6. Develop High-Tech Information Systems: Improve tracking and reduce costs.

Substituting Information for Inventory Techniques

• Improve communication with suppliers.
• Collaborate and share observations.
• Use GPS and barcode systems for precise tracking.
• Keep inventory in transit to reduce costs.
• Use postponement centers for assembly based on actual orders.
• Mix shipments to better match customer needs.
• Reduce customs wait times by pre-clearing freight.

Reducing Supply Chain Partners

• Fewer partners lead to lower management costs and quicker cycle times.
• Consider eliminating entire echelons in the supply chain for efficiency.

Pooling Risks

• Common inventory components can buffer against demand variability, reducing storage costs and stockout risks.

Flow of Goods and Information

• Essential for internal process integration and collaboration across functions.
• Customer information flows include orders, sales activities, and forecasts.
• Goods flow begins with procurement of products and materials.