Logistics BMI 3 C Logistics The process of

Logistics BMI 3 C

Logistics • The process of designing and managing a supply chain – All of the activities involved in getting goods and services from the original source to the ultimate consumer

Logistics • Involves: – Purchasing – Manufacturing – Storage – Transportation

Transportation • Logistics managers consider the following: – Destination • The distance something has to travel affects the cost of transportation – Volume • Heavier items = more $ – Volume • Bulkier items = more $, possibility for containerization – Type of Goods • Special handling or containers may be necessary

Free On Board • F. O. B. • The point at which responsibility for shipped goods changes hands • Affects who arranges transportation, and who is responsible if something happens – Ex: “F. O. B. destination” or “F. O. B. source”

Types of Transportation • • • Trucks Trains Planes Ships Pipelines

Which mode(s) of transport? • • 10, 000 flatscreen TVs from China to Future Shops across Canada 20 tonnes of grain from Regina to the Weston Bakery in Toronto 10 lbs of Otoro (tuna) from Tokyo to MHK Sushi in Ottawa 10 cases of maple syrup bottles from Gatineau to Montreal

Inventory Management • Controlling the goods within a business • Integral part of the supply chain – Determines how much of a product a business needs and when they need it • Controls: – Overstocks – Out-of-stocks – Shrinkage – Turnover

Overstock • When you have more stock than you can sell in a reasonable period of time • Storing inventory – Costs money – Uses up space – Ties up capital • Old stock can quickly depreciate • It’s often worth reducing the price on old stock in order to get rid of it

Out-of-Stock • Running out of inventory means you lose sales • It also might make customers angry, costing you future sales

Which is worse? • Over-stock, or Out-of-Stock? • Why?

Shrinkage • No… not that kind of shrinkage

Shrinkage • Inventory that is lost due to: – Breakage – Damage – Theft • Effective inventory management – Prevents these things from happening – Records when they do happen • Use security, shipping receivers, inventory counts

Turnover • The number of times a business sells its inventory in one year • Shows how fast inventory is moving • Different industries have standard turnover rates • Formula: Cost of inventory Sold in 12 months Average Inventory Investment for 12 months = Turnover