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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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Order Management
Transportation
Inventory
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.
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
Transportation
From the logistical system viewpoint, three factors are fundamental to transportation performance: (1) cost, (2) speed, (3) consistency.
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
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.
Logistical Integration
Inventory Flow
Enterprise
Customers
Market Distribution
Manufacturing Support
Procurement
Suppliers
Information Flow
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.
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.
Echelon
Echelon systems utilize warehouses to create inventory assortments and achieve consolidation economies associated with largevolume transportation shipments.
Supplier
Manufacturer
Retailer
Customer
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.
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.
Supplier
Manufacturer
Retailer
Customer