Introduction into Logistics

PhD Natasha Lutovinova

Logistics Lecturer
E-mail: Lutovinova.N@nhtv.nl
Room: G1.006

Handbook: Paul R. Murphy & Donald F. Wood,

Contemporary logistics (New Jersey 2011), 10th edition

Introduction into Logistics Course Outline

12.05 Introduction
13.05 SCM Concept, Inventory
14.05 Demand Management, Warehousing Management
15.05 Transportation Management, International Logistics
16.05 Poster Session

CHAPTER 1

Logistics
and the
Supply Chain

Learning Objectives

To learn the definition of logistics (what it is)

To understand the economic importance of logistics

To gain an understanding of logistics practices within a

firm

Logistics and the Supply Chain

Logistics: what it is

Council of Logistics Management definition:

Logistics is that part of the supply chain process
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 customers requirements.

Source: clm1.org

Figure 1-1: Control Over the Flow of Inbound and Outbound Movements

Logistics and the Supply Chain

Logistics and the Supply Chain

(What it is)
The forward and reverse flow of product and info

Logistics
Reverse logistics
The importance of meeting customer requirements

Mass logistics
Tailored logistics

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Figure 1-2: The utilization of logistics service as a major selling point

Logistics and the Supply Chain

(the economic

importance)

Economic impacts of logistics on Macro level (see table 1-1)

Economic impact on Micro level

Economic utility: value of product in satisfying

the need of the customer
Possession utility
Form utility
Place utility
Time utility

12

Table 1-1: The cost of the Business Logistics system in relation to Gross Domestic Product (GDP) in $ billion
13

Year

Inventory
carrying costs

Transportation
costs

Administrative
costs

Total U.S.
\logistics
cost

Logistics as a
percentage of
GDP

1960

31

44

78

14.7

1965

38

64

106

14.7

1970

56

91

153

14.7

1975

97

116

222

13.5

1980

220

214

17

451

16.1

1985

227

274

20

521

12.4

1990

283

351

25

659

11.4

1995

302

441

30

773

10.4

2000

377

590

39

1,006

10.1

2001

320

609

37

966

9.5

2002

300

582

35

917

8.8

2003

304

607

36

947

8.6

2004

337

652

39

1028

8.8

2005

395

739

46

1180

9.5

2006

447

809

50

1306

9.9

2007

487

857

54

1398

10.1

Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001

Fig. 3.2 Logistics impact on ROI

Logistics and the bottom line

Customer
Service

Sales
revenue

Logistics
efficiency

Costs

Pipeline management
Cash-to-cash
cycle time
Just-in-time
logistics
Asset
deployment
and utilization

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Profit

Return on
investment

Cash
Accounts
receivable/payable
Inventory

Fixed assets

Capital
employed

Logistics and the Supply Chain

(logistical relationships within the
firm)

15

The systems approach

Companys objectives can be recognized by the
mutual interdependence of the major functional area of
the firm, such as marketing, production, finance and
logistics.

The total cost approach

Cost trade-offs have to be made.

Logistics and the Supply Chain

(logistical relationships within the firm)

Finance
Capital budgeting (SO&P)
Inventory (asset valuation LIFO or FIFO)
Cash flow associated with holding inventory
Inventory cost versus inventory units

16

Logistics and the Supply Chain

(logistical relationships within the
firm)
Marketing (4 ps)
Place decisions
Price decisions
Landed cost
Phantom freight
Freight absorption
Product decisions
Stockouts
Promotions decisions

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Figure 1-3: Phantom freight and freight absorption

The supply chain becomes the value chain

Human resource management

Technology development

Primary Activities
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Service

Marketing
& Sales

Outbound
Logistics

Procurement
Operations

Support
Activities

Inbound
Logistics

Fig. 1.7 The value chain

Firm infrastructure

Logistics and the Supply Chain

(logistical relationships within the
firm)
Production
Length of production runs
Postponement

20

Logistics and the Supply Chain

(activities in the logistical channel)
Customer Service (Ch. 7)

Warehousing Management (Ch. 10)

21

22

Logistics and the Supply Chain

(activities in the logistical channel)
Inventory Management (Ch. 8)
Cost of carrying product
Cost of ordering product
Cost of being out of stock
Order Management (Ch. 7)
Production scheduling
Returned products (Ch. 1)
(Reverse logistics)

23

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Logistics and the Supply Chain

(activities in the logistical channel)

Transportation (Ch. 12)

25

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Logistics and the Supply Chain

(Activities in the logistical channel)
Demand forecasting (Ch. 7)
Industrial packaging (Ch. 11)
Materials handling (Ch. 11)
Parts and service support
Procurement (Ch. 6)
Salvage and scrap disposal (Ch. 6)

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Fig. 10-1 Adding a Warehousing Facility: shorter-Haul Transporation

Logistics and the Supply Chain

(Activities in the logistical channel)
Producer
(Manufacturing)

Warehouse
facility
(Inventory)

Sales
Retailer A

Transportation
(Distribution)

Retailer B

Retailer C

Warehousing Management (Ch. 10)

Retailer A
Transportation
(Distribution)
(Volume
shipment)

Transportation
(Distribution)

Retailer B

Retailer C

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Next time:

Assignment
3 vacancies / advertising + short working paper 250
words about job of a logistics manager / warehouse
manager / transportation manager / Supply Chain
Manager

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