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Course Objectives
Understand the definitions Logistics and Supply Chain
Understand the concept and key points of Supply Chain
Management.
Understand how to manage Supply Chain and Logistics in
real companies.
Apply to a group project.
Chapter 1
Fundamentals of Logistics
Learning Objectives
DEFINE logistics and associated terms
1. Basics Definition
All organizations move materials.
what is products?
- People
- Buildings
- Raw materials
- Equipment
- Information
- Investment
etc. . .
OUTPUT
- Manufacture
- Serve
- Supply
- Transport
- Sell
- Train
etc
- Goods
- Services
- Profit
- Waste
- Wages
etc
Link:
http://www.youtube.com/watch?v=V4JRH3e4xrg&featur
e=related
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3. ACTIVITIES OF LOGISTICS
Procurement or purchasing.
Inward transport or traffic management
Receiving
Warehousing or stores
Stock control, Order picking and Materials handling.
Outward transport
Physical distribution management
Recycling, returns and waste disposal
Location and Communication
Logistics is the process of planning, implementing and controlling the
efficient, cost-effective flow and storage of raw materials, in-process
inventory, finished goods and related information from point of origin to
point of consumption for the purpose of conforming to customer
requirements (Council of Logistics Management (CLM) http://cscmp.org/default.asp)
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Case Study
NIKE logistics center
http://www.youtube.com/watch?v=NkfHVYv5nUo&feature=
related
How UPS Cargo Containers Work
http://www.youtube.com/watch?v=MyeqlieHhi4
Simulation
http://www.youtube.com/watch?v=_0UJ0lKnn_o&feature=r
elated
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Organizing Logistics
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4. Aims of logistics
When you buy an item, what kind of contents will be take
Aims of Logistics
Logistics is responsible for the ow of materials through a
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Importance of Logistics
profits earned
Return on Assets=
assets employed
Stocks,
money etc.
Property,
Equipment,
Plant, etc.
Current Assets
Assets
Fixed Assets
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Sales
Operating
Costs
Profit
Margin
Product
Features
Price
Profit
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Example:
ABC currently has sales of $ 20 mil. a year, with a stock level of 35% of
sales. Annual holding cost for the stock is 20% of value. Operating
costs are $8 mil./ year and other assets are valued at $15 mil. What is
the current return on assets? How does this change if stock levels are
reduced to 25% of sales?
Solution: Taking costs over a year, the current position is:
Cost of stock = stock holding cost = (20 0.35) 0.2 = 1.4 mil./year
Total costs = operating cost + cost of stock = 8 + 1.4 = 9.4 mil./year
Profit = sales total costs = 20 9.4 = 10.6 mil. /year
Total assets = other assets + stock = 15 + (20 0.35) = 22 mil.
Return on assets = profit / total assets = 10.6 / 22 = 0.4818 (48.18%)
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Example (cont.):
The new position with stock reduced to 25% of sales has: ???
Cost of stocks = 20 0.25 0.2 = 1 mil. /year
Total costs = 8 + 1 = 9 mil. /year
Profit = 20 9 = 11 mil./year
Total assets = 15 + (20 0.25) = 20 mil.
Return on assets = 11 / 20 = 0.55 or 55%
Reducing stocks gives lower operating costs, higher profit
and a significant increase in Return on Asset (ROA).
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Development of logistics
pressures to the use of logistics
Changes of Customers.
Changes of Competition
Other changes in retail markets
International trade continues to grow.
Organizations become to outsource peripheral activities and
Current trends
Improving communication
Electronic data interchange (EDI)
Electronic point-of-sales data (EPOS)
e-purchasing of e-procurement
Support of EDI:
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Current trends
Improving customer service
Lower lead-times
synchronized material movement
mass customization
Other significant tendencies
Globalization
Reduced number of suppliers
Concentration of ownership
Outsourcing.
Make or Buy.
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Current trends
Other significant tendencies
Cross-docking
Direct delivery
Stock reduction methods
Increasing environmental concerns
More collaboration along the supply chain
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Current themes
LEAN Logistics
faster deliveries, reduce stock levels, reduce handling, lower
costs, reduce waste etc.
AGILE Logistics
flexible and responsive, customized service, respond quickly
to a changing demand.
INTEGRATION Logistics
co-operate with other organizations
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Summary
Every organization creates products to satisfy customer demand.
The operations that create these products need an effective and
efficient flow of materials. In this sense, materials are all the goods
and services needed to create products.
Logistics is the function that is responsible for the flow of materials
into, through and out of an organization.
Materials move through a series of related activities and
organizations between initial suppliers and final customers. These
form a supply chain. Each product has its own supply chain.
There are many possible structures for supply chains, but the
simplest view has materials converging on an organization through
tiers of suppliers, and products diverging through tiers of
customers.
Logistics consists of a series of related activities. These range from
procurement at the beginning of operations, through to physical
distribution at the end.
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Summary (cont.)
An overall aim for logistics is to achieve high customer
satisfaction or perceived product value. This must be achieved
with acceptable costs.
Every organization depends on the movement of materials, and
the way this is done affects costs, profits, relations with suppliers
and customers, customer service, and virtually every other
measure of performance.
There are a lot of pressures for improving logistics. Current
trends are: Improving communication, Improving customer service,
some other significant tendencies.
Current themes:
LEAN logistics, AGILE logistics, INTEGRATION logistics.
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Quiz 01
Prob.01
ABC currently has sales of $ 20 mil. a year, with a stock
level of 35% of sales. Annual holding cost for the stock is
20% of value. Operating costs are $8 mil./ year and
other assets are valued at $15 mil. What is the current
return on assets? How does this change if stock levels are
reduced to 25% of sales?
Prob.02
Draw a Supply Chain for Bottle of water
Homework 01
(Due: next class)
5. The cost of logistics varies widely from organization to
and costs?
Customers
Manufacturers
Suppliers
Transportation
Material
Transportation
Transportation
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