Logistics and Supply Chain Management

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Logistics and Supply Chain Management
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Logistics

• The Oxford English Dictionary defines logistics
  as "the branch of military science having to do
  with procuring, maintaining and transporting
  materiel, personnel and facilities."
• Logistics Management defines as Application of
  management principles to logistics operations for
  efficient and cost effective movement of goods
  and personnel.

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• Involves entire supply chain
• Increasing importance of logistics
• effective logistics is becoming a key to winning
  and keeping customers.
• logistics is a major cost element for most
  companies.
• the explosion in product variety has created a
  need for improved logistics management.
• information technology has created opportunities
  for major gains in distribution efficiency.

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Goals of Logistics system

• Provide a Targeted Level of Customer Service at
  the Least Cost.
• Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher Customer
Service Levels
Lower Distribution Costs/ Lower Customer Service
Levels
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Logistics Functions

• Order Processing
• Warehousing
• Inventory Management
• Transportation
• Design system to minimize costs of attaining
  objectives

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Transportation Modes
Rail Nations largest carrier, cost-effective
for shipping bulk products, piggyback
Truck Flexible in routing time schedules,
efficient for short-hauls of high value goods
Water Low cost for shipping bulky, low-value
goods, slowest form
Pipeline Ship petroleum, natural gas, and
chemicals from sources to markets
Air High cost, ideal when speed is needed or to
ship high-value, low-bulk items
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Supply Chain Management

• According to the Council of Supply Chain
  Management Professionals (CSCMP), Supply chain
  management encompasses the planning and
  management of all activities involved in
  sourcing, procurement, conversion, and logistics
  management.
• it also includes the crucial components of
  coordination and collaboration with channel
  partners, which can be suppliers, intermediaries,
  third-party service providers, and customers.

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WHAT IS SUPPLY CHAIN MANAGEMENT
Leads to Business Process Integration
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• SUPPLY CHAIN INCLUDES
• MATERIAL FLOWS
• INFORMATION FLOWS
• FINANCIAL FLOWS

• A set of approaches used to efficiently integrate
• Suppliers
• Manufacturers
• Warehouses
• Distribution centers
• So that the product is produced and distributed
• In the right quantities
• To the right locations
• And at the right time
• System-wide costs are minimized and
• Service level requirements are satisfied

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Supply Chain Structure
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Relationship between Facilities and Functions
along the Wal-Mart Supply Chain
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The steps involved

• Step1- Designing the supply chain
• Determine the supply chain network
• Identify the levels of service required

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• Step 2 - Optimizing the supply chain
• Determine pathways from suppliers to the end
  customer
• Customer markets to Distribution centers
• Distribution centers to production plants
• Raw material sources to production plants
• Identify constraints at vendors, plants and
  distribution centers
• Get the big picture
• Plan the procurement, production and
  distribution of product groups rather than
  individual products in large time periods-
  quarters or years

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• Step 3- Material flow planning
• Determine the exact flow and timing of materials
• Arrive at decisions by working back from the
  projected demand through the supply chain to the
  raw material resources
• Techniques
• ERP

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• Step 4 - Transaction processing and
• short term scheduling
• Customer orders arrive at random
• This is a day to day accounting system which
  tracks and schedules every order to meet customer
  demand
• Order entry, order fulfillment and physical
  replenishment

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Global Supply Chain

• To compete globally requires an effective supply
  chain
• Information technology is an enabler of global
  trade
• Nations form trading groups
• No tariffs or duties