Mgt 49 - Logistics & Supply Chain Mgt.

Chapter 2: Logistics
by: Bowersox

Prepared by: Prof. Lyra V. Reyes

 Chapter 2: Logistics
 Logistics – involves the management of order processing,
inventory, transportation, and the combination of warehousing,
materials handling and packaging, all integrated throughout a
network of facilities.

 Logistics is the leadership responsibility to design and

administer systems to control movement and geographical
positioning of raw materials, work-in-process and finished
inventories at the lowest total cost.
 Elements of Logistic Value Proposition
1. Service Benefits
a. Availability – the probability of having inventory to consistently meet
customer material or product requirements
b. Operational Performance – deals with the time required to deliver a
customer’s order. It involves delivery speed and consistency.
c. Service Reliability – involves the quality attributes of logistics. To achieve
service reliability, it is essential to identify and implement inventory
availability and operational performance measurement.
2. Cost Minimization – understanding total cost opened the door to examining
how functional costs interrelate and impact each other.
However, the implementation of effective logistical process costing
remains a 21st –century challenge.
 Work of Logistics
1. Order Processing
2. Inventory
3. Transportation
4. Warehousing, Materials Handling and packaging
5. Facility Network

Logistical Integration Objectives:

1. Responsiveness 4. Shipment Consolidation
2. Variance Reduction 5. Quality
3. Inventory Reduction 6. Life Cycle Support
 Interrelated Flows of Logistical Process
1. Inventory Flow – concerned with movement and storage of
inventory in the form of raw materials, work-in-process and
finished products.
a. CRM
b. Manufacturing
c. Procurement
2. Information Flow – identifies specific locations within a
logistical system that have requirements.
 Logistical Operating Arrangements
1. Echelon Structure – means that the flow of products
typically proceeds through an established
arrangement of firms as it moves from origin to final
destination.
 Logistical Operating Arrangements
 2. Direct – shipped products direct to customer’s destination from
one or a limited number of centrally located inventories.
 Logistical Operating Arrangements

 3. Combined Echelon & Direct Structure

 Logistics Operations
 Flexible Structured Operations – are preplanned
contingency strategies to prevent logistical failures.
 Cross-docking – operation involves shipments from
multiple suppliers arriving at a designated time at the
handling facility.
Cross-docking
 Supply Chain Synchronization
1. Performance Cycle Structure – represents the elements of work
necessary to complete the logistics related to customer accommodation,
manufacturing, or procurement.
*Nodes – the operational locations that are linked by
information and transportation.
*Base Stock – is inventory held at a node and is typically
one-half of the average shipment size received.
*Safety Stock – exists to protect against variance in demand
or operational lead time.
* Supply chain output – is the level of performance expected
from the combined logistical operations.
* Supply chain effectiveness – operational requirements are
satisfied in accomplishing mission through logistical
performance cycle structure
 Supply Chain Synchronization
1. Performance Cycle Structure
* Supply chain Efficiency – is a measure of resource
expenditure necessary to achieve logistical effectiveness.
* Supply chain relevancy – is the extent to which the basic
services are customized to meet the needs of specific
customers.
*Supply chain sustainability – reflects the ability of desired
performance to be maintained overtime.

Logistics performance cycle – is the basic unit of supply chain

design and operational control.
Performance cycle structure – is the framework for implementation
of integrated logistics across the supply chain.
 Supply Chain Synchronization

2. Performance Cycle Uncertainty

Operational Variances In terms of:
a. Specific tasks – the variance results from the nature of the
work involved.
b. Order Processing – variance results from workload, degree of
automation and policies related to credit approval.
Thank You!!!