OVERVIEW OF BUSINESS LOGISTICS AND PLANNING PL 201

OVERVIEW OF BUSINESS LOGISTICS AND PLANNING PL 201 FUNDAMENTAL OF LOGISTICS MANAGEMENT LECTURER : NOR HASLIZA BINTI MOHD FADZIL

Logistics LOGISTICS involves those activities that focus on getting the right amount of the right products, to the right place, at the right time, at the lowest possible cost. The performance of these activities is LOGISTICS MANAGEMENT which is the practice of organizing the cost effective flow of raw materials, in process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

Logistics v Logistics Usually Refers to Management of: § Movement of Materials Within Factory § Shipment of Incoming Materials From Suppliers § Shipment of Outgoing Products to Customers

Movement of Materials within Factories Typical Locations From/To Which Material Is Moved: Incoming Vehicles Receiving Dock Quality Control Warehouse Work Center Other Work Centers Packaging Finished Goods Shipping Dock Outgoing Vehicles

Importance of business logistics v The importance of logistics systems lies in the fact that it leads to ultimate consummation of the sales contract. The buyer is not interested in the promises of the seller that he can supply goods at competitive price but that he actually does so. Delivery according to the contract is essential to fulfilling the commercial and legal requirements. In the event of failure to comply with the stipulated supply of period, the seller may not only get his sale amount back, but may also be legally penalized, if the sales contract so specifies. There is no doubt that better delivery schedule is a good promotional strategy when buyers are reluctant to invest in warehousing and keeping higher level of inventories. Similarly, better and/or timely delivery helps in getting repeat orders through creation of goodwill for the supplier. v Thus, as effective logistics system contributes immensely to the achievements of the business and marketing objectives of a firm. It creates time and place utilities in the products and thereby helps in maximizing the value satisfaction to consumers. By ensuring quick deliveries in minimum time and cost, it relieves the customers of holding excess inventories. It also brings down the cost of carrying inventory, material handling, transportation and other related activities of distribution. In nutshell, an efficient system of physical distribution/logistics has a great potential for improving customer service and reducing costs.

Components of Logistics Management Inputs into logistics Natural resources Human resources Financial resources Outputs of logistics Management actions Planning Competitive advantage Implementation Control Logistics management Suppliers Raw In-process Finished materials inventorygoods Customers Logistics activities Customer service Information Demand forecasting Inventory management resources Logistics communications Material handling Order processing Parts and service support Plant & warehouse site selection Procurement Packaging Reverse logistics Traffic and transportation Warehousing and storage Time and place utility Efficient movement to customer Proprietary asset Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Supply Chain Management

Introduction v Materials Are Any Commodities Used Directly or Indirectly in Producing a Product or Service. § Raw Materials, Component Parts, Assemblies, & Supplies v A Supply Chain Is the Way Materials Flow Through Different Organizations From Raw Material Supplier to Finished Goods Consumer.

Supply Chain Management v Supply Chain Management Includes All Management Functions Related to Flow of Materials From Company’s Direct Suppliers to Its Direct Customers. § Includes Purchasing, Traffic, Production Control, Inventory Control, Warehousing, & Shipping. v Materials Management & Logistics Management Includes All Decisions About Purchasing Materials and Services, Inventories, Production Levels, Staffing Patterns, Schedules, and Distribution.

Supply Chain Overview Transportation Factory Warehousing Transportation Customers Information flows Transportation Vendors/plants/ports Warehousing CR (2004) Prentice Hall, Inc. Transportation 1 -2

Supply Chain Structure SUPPLIER Raw Materials FACTORY DC RETAILER Finished Goods Information Flow

Typical Supply Chain Network Suppliers Plants Distribution Centers Customers

Supply Chain Planning Processes Material Requirement Planning Component Requirement Supplier Demand Forecasting Demand Planning Production Plant Warehouse Logistics Order Management Retailer

Inventory at Different Stocking Points Raw materials Supplier Figure 8. 1 Work in process Finished goods Manufacturing plant Distribution center Retailer

Materials management v Material management includes: § § § Administration of raw materials Subassemblies Manufactured parts Packing materials In process inventory

Physical distribution v Physical distribution, which means the whole operations and activities assembly that assure products availability for the firm; s clients, providing quantity, time and place utilities, concording to the bottom marketing channels’ expectations where the organization is involved.

Physical distribution performance cycle Order processing Order transmission Customer order Order selection Order transportation Order delivery to the customer

Reverse logistics v Reverse logistics is the process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing or disposal. This practice reduces waste in landfills and lowers company operating costs.

THE ACTIVITY MIX v The activities to be managed that make up business logistics (supply chain management) vary from firm to firm, depending on a firm's particular organizational structure, management's honest differences of opinion about what constitutes logistics, and the importance of individual activities to its operations. Follow along the supply chain as shown in Figure 1 1, and note the important activities that take place. v Again, according to the Council of Logistics Management, the components of a typical logistics system are: customer service, demand fore casting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap dis posal, traffic and transportation, and warehousing and storage. 6 v Figure 1 2 organizes these components, or activities, as to where they are most likely to take place in the supply channel. The list is further divided into key and support activ ities, along with some of the decisions associated with each activity.

Figure 1 -2

Corporate strategy v Strategy is the process whereby plans are formulated for positioning the firm to meet its objectives. v Strategy formulation begins with defining a corporate strategy. This involves: a. Assessing needs, strengths, and weaknesses of the 4 major components: § customers § suppliers § competitors § the company itself b. "Visioning" where counter intuitive, unheard of, and unconventional strategies are considered. v Corporate strategies are converted to more specific strategies for the various functional areas of the firm such as logistics.

Logistics planning v The objectives of logistics strategy are: §Minimize cost §Minimize investment §Maximize customer service v Levels of logistical planning: §Strategic §Tactical §Operational v The 4 problem areas of supply chain planning §Customer service levels §Facility location §Inventory decisions §Transportation decisions

Logistics planning v When to plan? §No distribution network currently exists. §There has been no re evaluation in 5 years. § When costs are changing rapidly, especially transport & inventory. §When markets have shifted. §When current distribution economics encourage shifts. § When there has been a major policy shift in logistics such as in price, customer service, or investment level.

Strategic, Tactical, and Operational Decision Making Decision Area Strategic Tactical Operational Transportation Mode selection Seasonal equipment Dispatching leasing Inventories Location, Control policies Safety stock levels Order processing Order entry, transmittal, and processing system design Purchasing Development of supplier buyer relations Contracting, Forward buying Expediting Warehousing Handling equipment selection, Layout design Space utilization Order picking and restocking Facility Number, size, and Order filling Processing orders, Filling back orders

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