Logistics Overview

• Definition of Logistics

  • The Art and Science of obtaining, producing, and distributing material and products.

• Logistics Management

  • Part of Supply Chain Management.
  • Plans, implements, and controls flow and storage of goods, services, and information from origin to consumption.
  • Aims to meet customer requirements.

Difference Between Supply Chain and Logistics

• Supply Chain: Transforming raw materials into products and delivering them to customers.
• Logistics: Movement of materials within the supply chain.

The Seven Rs of Logistics

• Concept:
  • Getting the right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer, at the right price.

Functions of Logistics Management

1. Transportation
   • Various modes: air, rail, road, water, pipeline.
   • Selecting efficient combinations improves customer value.
2. Warehousing
   • Storing and shipping materials when not in transit.
   • Activities related to receiving, storing, and shipping goods.
3. Third-Party and Fourth-Party Logistics
   • Third-Party: Manage logistics services.
   • Fourth-Party: Logistics Specialists that manage entire logistics functions.
4. Reverse Logistics
   • Handling returns, reuse, recycling, or disposal of products.

Logistics Value Proposition

• Managers must balance logistics costs with customer service levels.
• Integrated efforts are essential for customer satisfaction at the lowest total cost.
• Key Elements: Service and cost minimization.

Logistics Goals and Strategies

• Rapid response to market changes.
• Minimize variances in service.
• Reduce inventory to lower costs.
• Consolidate product movement.
• Maintain high quality and continuous improvement.
• Support entire product life cycle, including reverse logistics.

Tactics for Effective Logistics Strategy

1. Coordinating Functions: Transportation management is key.
2. Integrating the Supply Chain: Collaboration across functions.
3. Substituting Information for Inventory: Improve efficiency.
4. Reducing Partners: Streamlines operations.
5. Pooling Risks: Consolidate inventory to manage demand variability.

Steps to Construct Logistics Network

1. Location Analysis: Identify geographical locations for efficiency.
2. Export/Import Strategy: Determine freight volume and strategic inventory placement.
3. Warehouse Location: Calculate optimal distances and placements.
4. Transportation Modes: Determine efficient connections for the supply chain.
5. Select Partners: Choose a minimal number of logistics partners.
6. Develop Information Systems: Track demand and goods location accurately.

Strategies to Substitute Information for Inventory

• Improve communication with suppliers.
• Collaborate regularly and use continuous improvement tools.
• Track inventory using technology (GPS, barcodes).
• Keep inventory in transit to reduce costs (cross-docking).
• Set up postponement centers for product assembly until an order is received.
• Mix shipments to match customer needs.
• Reduce customs delays by clearing freight in transit.

Reducing Supply Chain Partners

• Fewer partners lead to lower costs and simplified management.
• Consider entire echelons and focus on eliminating redundant partners.

Risk Pooling Strategy

• Consolidate inventory for product families to buffer demand variability.
• Reduces storage costs and stockout risks.

Flow of Goods and Information

• Internal process integration is essential.
• Customer information flows through orders, sales, and forecasts.
• Goods flow begins with procurement.