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Definition:
Logistics management is a process of planning, executing, and
controlling the efficient, effective, flow and storage of goods and
services, and related information from point of origin to point of
consumption for the purpose of conforming to customer
requirement.
Objectives:
1. Make available the right quantity of right quality products
at the right place and time in the right condition.
2. Reduce costs of operations:
• Cost reduction (variable costs)
• Capital reduction (investment, fixed costs)
3. Service Improvement
Components of
logistics management : Management actions
Outputs of
Planning Implementation Control logistics
Inputs into logistics
Marketing
Natural Logistics management orientation
resources (land, Suppliers (competitive
Raw In-process Finished Customers
facilities, and advantage)
materials inventory goods
equipments)
Time and
Human place utility
Logistics Activities
resources
Customer Service Plant and warehouse Efficient
Financial Demand forecasting site selection movement to
resources Distribution Procurement customer
Information communications Packaging
resources Inventory control Return goods handling
Material handling Salvage and scrap Proprietary
Order Processing disposal asset
Parts and service Traffic and
support transportation
Warehousing and
storage
Three categories:
Production
Storage
Transportation
Inputs: resources.
Focus: Best way to overcome space and time that separates acquisition
and consumption.
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Systems Strategic Product Process
Decisions Design Design
Decisions Decisions
Engineering
Measurement Systems
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Decisions
Product
Decisions
Reward
Decisions Price
Decisions
Promotion
Decisions
Marketing
Systems
Place (How,
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where, how
much)
Production
Inventory Capacity
Decisions Decisions
Transportation
rate and contract negotiation Customer Service
mode and service selection
routing and scheduling
determining customer wants
Inventories determining customer response
finished goods policies to service changes
supply scheduling Materials Handling
short term forecasting equipment selection
Warehousing equipment replacement
private vs. public order picking procedures
space determination Packaging design
warehouse configuration Order Processing
Stock layout and dock design order procedure determination
stock placement
Cross-docking Production Scheduling
Facility Location aggregate production quantities
sequencing and timing of
determining location, number
and size of facilities
production runs
allocating demand to facilities
Logistics Planning
Decide what, when, how in three levels:
Strategic – long range > 1 year
Tactical - < 1 year horizon
Operational – frequently on hourly or daily basis
Examples of Decisions
Type Strategic Tactical Operational
Where?, How
many? What size?
Allocation?
Transport Fundamentals
Most important component of logistics cost.
Usually 1/3 - 2/3 of total cost.
Transport involves
equipment (trucks, planes, trains, boats, pipeline),
people (drivers, loaders & un-loaders), and
decisions (routing, timing, quantities, equipment size,
transport mode).
When deciding the transport mode for a given product
there are several things to consider:
Mode price
Transit time and variability (reliability)
Potential for loss or damage.
Air plane
air terminal
Goods at
shippers Container
sea terminal May Freight
vessel forwarder
sea bulk goods change
Freight mid-stream transpor- warehouse
pier
forwarder tation
land barge
warehouse modes
land
railway
Goods at
consignees
truck
Single-mode Service Choices and Issues
Air
•Rapidly growing segment of transportation industry
•Lightweight, small items [Products: Perishable and time sensitive
goods: Flowers, produce, electronics, mail, emergency shipments,
documents, etc.]
•Quick, reliable, expensive
•Often combined with trucking operations
Rail
•Low cost, high-volume [Products: Heavy industry, minerals, chemicals,
agricultural products, autos, etc.]
•Improving flexibility
•intermodal service
Truck
•Most used mode
•Flexible, small loads [Products: Medium and light manufacturing, food,
clothing, all retail goods]
•Trucks can go door-to-door as opposed to planes and trains.
Single-mode Service Choices and Issues (Contd.)
Water
•One of oldest means of transport
•Low-cost, high-volume, slow
•Bulky, heavy and/or large items (Products: Nonperishable
bulk cargo - Liquids, minerals, grain, petroleum, lumber,
etc )]
•Standardized shipping containers improve service
•Combined with trucking & rail for complete systems
•International trade
Pipeline
•Primarily for oil & refined oil products
•Slurry lines carry coal or kaolin
•High capital investment
•Low operating costs
•Can cross difficult terrain
•Highly reliable; Low product losses
Transport Cost Characteristics
Fixed costs:
Terminal facilities
Transport equipment
Carrier administration
Labor
Equipment maintenance