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Chapter 02: Logistics

Prepared by: Shah Ridwan chowdhury

Logistics Defined
The process of moving and positioning inventory to meet customer requirements at the lowest possible total landed cost.
Time and Place Positioning Least Total Cost Asset Minimization Supply Chain Connectivity and Visibility
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The Logistical Value proposition

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Logistics Value Proposition


Configure in a customer relevant way while simultaneously increasing quality, productivity and operational excellence.

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Logistics Value Proposition


Configure in a customer relevant way while simultaneously increasing quality, productivity and operational excellence.
Service Excellence Effectiveness Cost Minimization and Avoidance Efficiency Customer Value Generation Relevancy

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The Logistical Value proposition


The elements of value proposition: Service benefits a) Availability b) Operational performance c) Service reliability Cost minimization

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THE WORK OF LOGISTICS


It is this interrelation of functions that challenges the successful implementation of integrated logistical management. Integrated work related to these these functional areas creates the capabilities needed toachieve logistical value. The five areas of logistical work: Order Processing Inventory Transportation Warehousing,Materials Handling, and Packaging Facility Network Design

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The work of Logistics


Facility Network

Warehousing Material Handling Packaging

Integrative Process Management

Order Management

Transportation

Inventory

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Order Processing
The important of accurate information to achieving superior logistical performance has historically been underappreciated. While many aspects of information are critical to logistics operations, the processing of orders is of primary importance. Failure to fully comprehend this importance resulted from not fully understanding how distortion and operational failures in order processing impact logistical operations. Current information technology is capable of handling the most demanding customer requirements. When desired, order information can be exchanged between trading partners.

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Inventory
A sound inventory strategy is based on a combination of five aspects of selective deployment: (1)core customer segmantation, (2) product profitability, (3) transportation integration, (4) time-basedperformance, and (5) Competitive performance

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Transportation
From the logistical system viewpoint, three factors are fundamental to transportation performance: (1) cost, (2) speed, (3) consistency.

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Warehousing,Materials Handling, and Packaging


The fourth functionality of logistics warehousing, materials handling, and packaging also represents an integral part of a logistics operating Solution . Finally, individual products are most efficiently handled when packaged together into shipping cartons or other unit loads

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Facility Network Design


Facility network design is a primary responsibility of logistical management, since a firms facility structure is used to ship products and materials to customers. Typical logistics facilities are manufacturing plants, warehouses, cross-dock operations, and retail stores

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LOGISTICAL OPERATIONS
Information from and about customers flows through the enterprise in the form of sales activity, forecasts, and orders. Vital information is refined into specific manufacturing, merchandising, and purchasing actions. As products and materials are procured, a value-added inventory flow is initiated, which ultimately results in ownership transfer of finished products to

To be continued

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LOGISTICAL OPERATIONS
customers.Thus, the logistical process is viewed in terms of two interrelated flows: inventory and information.While internal process integration is important to success, the firm must also align and integrate across the supply chain. To be fully effective in todays competitive environment, firms must extend their enterprise integration to incorporate customers and suppliers. This extension reflects the position of logistics in the broader perspective of supply chain management.

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Logistical Integration
Inventory Flow

Enterprise

Customers

Market Distribution

Manufacturing Support

Procurement

Suppliers

Information Flow

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Inventory Flow
To support manufacturing, work-in-process inventory must be properly positioned. The cost of each component and its movement becomes part of the value-added process. For better understanding, it is useful to divide logistical operations into three areas: (1) customer accommodation, (2) Manufacturing support, and (3) procurement.

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Information Flow
Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. Within individual logistics areas, different movementn requirements exist with respect to size of order, availability of inventory, and urgency. The primary objective of information flow management is to reconcile these differantials to improve overall supply chain performance. It is important to stress that information requirements parallel the actual work performed in customer accommondation, manufacturing support, and procurement.

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LOGISTICAL OPERATIONS ARRANGEMENT


First, they are designed to manage inventory. Second, the range of logistics alternatives is limited by available technology. These two characteristisc tend to create commonly observed operating arrangements. Three widely utilized structures are echelon, direct, and combined.

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Echelon
Echelon systems utilize warehouses to create inventory assortments and achieve consolidation economies associated with largevolume transportation shipments.

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Echeloned Structured Logistics


INFORMATION FLOWS

Supplier

Industrial Distribution or Consolidation Warehouse

Manufacturer

Wholesaler or Distribution Center

Retailer

Customer

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Direct
Direct distribution typically uses the expedited services of premium transport combined with information technology to rapidly process customer orders and achieve delivery performance. This combination of capabilities, designed into the order delivery cycle, reduces time delays and overcomes geographical separation from customers.

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Combined
The ideal logistical arrangement is a situation wherein the inherent benefits of echeloned and direct logistics structures are combined. Inventory strategies often position fast-moving products or materials in forward warehouses, whileother, more risky or costly items, are stocked at a central location for direct deliery to customers. The basic service commitment and order size economics determine the most desirable and economical structure to service a specific customer. To illusrate, automobile replacement parts are typically distributed to customers by utilizing a combined logistics strategy.

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Combined Echeloned & Direct Delivery


INFORMATION FLOWS Industrial Distribution or Consolidation Warehouse Wholesaler or Distribution Center

Supplier

Manufacturer

Retailer

Customer

Support for Direct Delivery

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