Logistics processes

Topic 2 Logistics Processes

Outline
1.1

Customer Service

1.2

Demand Forecasting

1.3

Inventory Management

1.4

Logistics Communications

1.5

Materials Handling

1.6

Order Processing

Topic 2 Logistics Processes

Outline (cont)
1.7

Packaging

1.8

Parts & Service Support

1.9

Plant & Warehouse Site Selection

1.10

Procurement

Topic 2 Logistics Processes

Outline (cont)
1.11

Reverse Logistics

1.12

Traffic & Transportation

1.13

Warehousing & Storage

1.14

Integration of Logistics Activities

1.1

Customer Service

The logistics function is the final phase of the buyer-seller

sales transaction - the one involving the physical transfer of
goods.
-- There is no value to a product until it is in the hands of the
customer or consumer.
Coyle, Bardi and Langley (1992) dichotomized logistics into (i)
supply chain logistics and (ii) service response logistics.
-- While supply chain logistics is the traditional process
associated with the acquisition and distribution of goods,
service response logistics is the process of coordinating nonmaterial activities necessary to the fulfillment of the service in
a cost and customer-service-effective way.

1.1 Customer Service

Good logistical customer service is contingent
upon
a) Cycle time
b) Dependability - of lead-time (time spent to
serve), safe delivery and correct orders
c) Communication
d) Convenience - flexibility

1.2 Demand Forecasting

Demand forecasting involves determining the quantity of product

and accompanying service that customers will require at some
point in the future.

Such forecasts determine:

a. Production schedules
b. Purchasing & acquisition strategies
c. In-plant inventory
d. Finished goods inventory positioning
e. Allocation of resources to logistics activities in order to service
forecasted demand

1.3 Inventory Management

Inventory management involves trading off the level of inventory

held to achieve high customer service levels with the cost of
holding inventory, including capital tied up in inventory,
warehousing and obsolescence.

Main categories of inventory:

a. Raw materials
b. Work-in-process
c. Finished goods

Inventory consumes physical space, personnel time and capital

significant opportunity costs

1.4 Logistics Communications

Effective communication must take place among:

a. An organization, its suppliers and its customers
b. Major functions within an organization such as logistics and
engineering,
c. All the individual logistics activities
d. Various aspects within each logistics activity, e.g. coordinating
warehousing of materials, work-in-process and finished goods
e. Various members of the supply chain, including those not
directly linked to the organization, e.g. intermediaries and
secondary customers or suppliers

Accurate and timely communication is fundamental to successful

logistics management

1.5 Materials Handling

Materials handling covers every aspect of the movement or flow of

raw materials, in-process inventory and finished goods within a
plant or warehouse.

Effective logistics management strives to minimize the amount of

handling performed on an item since handling adds no value to a
product.

Objectives to support this:

a.

Eliminate handling wherever possible

b.

Minimize travel distance

c.

Minimize work-in-process

d.

Provide uniform flow that is free of bottlenecks

e.

Minimize losses from waste, breakage, spoilage and theft

1.6 Order Processing

Components of order processing:

a.

Operational elements order entry/editing, scheduling,

shipping, invoicing, etc.

b.

Communication elements order modification, order status

enquiries, tracing & expediting and product information
requests, etc.

c.

Credit & collection elements credit checking, accounts

receivables processing/collection, etc.

Speed and accuracy of order processing have a big impact on

customers perception of an organizations service level because it is
a key area of a customers interaction with the organization.

1.7 Packaging

Packaging performs 2 basic functions:

a.

Marketing the packages size, weight, colour and printed

information acts as a form of communication or advertising

b.

Logistics the package performs 2 roles:

i.

Protects the product from damage while being stored or

transported

ii.

Makes it easier to store and move products, and therefore

reduce handling costs

Packaging requirements for export are more stringent than those

for domestic markets because of longer distances travelled and
more physical handling.

1.8 Parts & Service Support

Logistics responsibility does not end when the product is

delivered to the customer.

An organizations product offering includes providing

customers with after-sales service involving repair and parts
replacement.

Logistics is responsible for making sure that spare (extra)

and replacement parts are available:
a. When and where the customer needs them.
b. When and where the repair process needs them.

Overall objective is to reduce equipment downtime for customers

1.9 Plant & Warehouse Site Selection

Plant & warehouse selection affects logistics ability to effectively

manage inbound movement and storage of materials and products,
as well as outbound flows.

Considerations in site selection:

a.

Location of target markets

b.

Location of raw materials, component parts and subassemblies

c.

Availability & cost of land

d.

Availability & cost of labour

e.

Availability of transportation services and links

f.

Security

g.

Local taxes, legal concerns and regulations, e.g. environmental

issues

1.10 Procurement

Procurement is the process of acquiring materials and services to

ensure the operating effectiveness of an organizations
manufacturing and logistics processes.

Includes:
a.

selection of suppliers

b.

timing of purchases

c.

pricing

d.

transportation modes and carriers

e.

packaging

f.

quality control

1.11 Reverse Logistics

Reverse logistics covers:

a.

Handling of return goods

b.

Salvage & scrap disposal for return goods

c.

Removal and disposal of waste materials from the

production, distribution and packaging processes

d.

Transportation of reusable or recyclable materials to

remanufacturing or reprocessing locations

Product can be returned from customers due to defects, overages,

shipping errors and trade-ins etc.

Logistics must have effective procedures for collection,

transportation, handling, sorting, storage and disposal of returned
products and waste materials.

1.12 Traffic & Transportation

Traffic and transportation covers the movement or flow of goods

from point-of-origin to point-of-consumption, and includes the
return flow as well.

Involves:

a.

Movement of products

b.

Selection of shipment method air, rail, sea, truck, pipeline,

intermodal

c.

Routing choosing a specific path for the movement

d.

Ensuring compliance with local, national and international

transportation regulations

Often the single largest cost item in logistics

1.13 Warehousing & Storage

Warehousing and storage involves the management of the space

needed to hold or maintain inventories

Activities include:
a.

Decisions on whether storage facilities should be owned,

leased or rented

b.

Layout and design of storage facilities

c.

Decisions on what products should be stored where

d.

Operating procedures for handling and moving products

within the warehouse

e.

Safety and maintenance procedures

f.

Personnel training

g.

Productivity measurement

1.14 Integration of Logistics Activities

Integrated
logistics
management
refers
to
the
administration of various logistics processes as an
integrated system.

The objective of integrating logistics activities is to

achieve an orderly flow of materials, personnel and
information within an organization, and among the
organization, its customers, suppliers and service
providers.

1.14 Integration of Logistics Activities

Critical Business Interfaces

Integration is crucial at the following business interfaces
in order to prevent inventory buildup.
a. Supplier-Purchasing
b. Purchasing-Production
c. Production-Marketing
d. Marketing-Distribution
e. Distribution-Intermediary (wholesaler and/or retailer)
f.

Intermediary-Customer

Summary
and
Conclusion

1. Logistics is network of related processes and

activities.
2. Integration of these processes and activities improves
customer service for an organization while reducing
overall logistics costs.