CHAPTER 1 An Overview of LogisticsLearning ObjectivesLogistics and the Supply ChainSlide 4Economic Impacts of LogisticsTable 1-1: The Cost of the Business Logistics System in Relation to GDP (US) (in $ Billion)The Cost of the Business Logistics System in Relation to a Country’s GDP (2009)Importance of LogisticsFigure 1-2: The Utilization of Logistics Service as a Major Selling PointSlide 10Slide 11Other Economic Impacts of LogisticsLogistics: What It Is?Slide 14Logistics: Key ObservationsTraditional Logistics FunctionsTraditional Logistics ManagementIntegrated Logistics ManagementKey ConceptsThe Systems and Total Cost Approaches to LogisticsSlide 21Forward LogisticsReverse LogisticsFigure 1-1: Control Over the Flow of Inbound and Outbound MovementsThe Increased Importance of LogisticsLogistical Relationships within the FirmLogistical Relationships within the FirmFigure 1-3: Phantom Freight and Freight AbsorptionSlide 29Slide 30Slide 31Marketing ChannelsSlide 33Channel Intermediaries/ FacilitatorsActivities in the Logistical ChannelResponsibilities of Logistics ManagersLogistics CareersLogistics ProfessionalismCase 1-1 Kiddiland & the Super GymSlide 40Slide 41Slide 42PowerPoint PresentationSlide 44CHAPTER 1An Overview of LogisticsLearning Objectives•To understand the economic impacts of logistics•To learn what logistics is•To learn about the increased importance of logistics•To understand the systems and total cost approaches to logistics•To expose you to logistical relationships within the firm•To learn about marketing channels•To provide a brief overview of activities in the logistics channel•To familiarize you with logistics careers© 2008 Prentice Hall 1-2Logistics and the Supply Chain•Key Terms–Cost trade-offs–Disintermediation–Economic utility–Form utility–Landed costs–Logistics–Marketing channels•Key Terms–Mass logistics–Materials management–Physical distribution–Place utility –Possession utility–Postponement–Power retailer© 2008 Prentice Hall 1-3Logistics and the Supply Chain•Key Terms–Sorting function–Stock-keeping units (SKUs)–Stockouts–Sustainable products•Key Terms–Systems approach–Tailored logistics–Time utility–Total cost approach© 2008 Prentice Hall 1-4Economic Impacts of Logistics•Macroeconomic Impacts© 2008 Prentice Hall 1-5Table 1-1: The Cost of the Business Logistics System in Relation to GDP (US)(in $ Billion)Year Inventory Carrying CostsTransp. CostsAdm. CostsTotal U.S. Logistics CostLogistics As a % of GDP1960 31 44 3 78 14.71965 38 64 4 106 14.71970 56 91 6 153 14.71975 97 116 9 222 13.51980 220 214 17 451 16.11985 227 274 20 521 12.41990 283 351 25 659 11.41995 302 441 30 773 10.42000 377 590 39 1,006 10.12005 393 744 46 1,183 9.51-6Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001The Cost of the Business Logistics System in Relation to a Country’s GDP (2009)Country Logistics As a % of GDPU.S. 9.4Brazil 12.6India 13.0S. Africa 15.9Thailand 19.0Finland 19.8People’s Republic of China 21.6Vietnam 22.51-7Source: The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product (GDP)Importance of Logistics•Size of Market – It Is Big•Strategic Advantage – It Can Drive Strategy–Manufacturing is becoming more efficient –SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart)–Increased use of logistics outsourcing –(3PLs, WH) •Globalization – It Covers The World–Requires greater coordination of production & distribution–Increased risk of supply chain interruption–Increases need for robust and flexible supply chains© 2008 Prentice Hall 1-8Figure 1-2: The Utilization of Logistics Service as a Major Selling Point© 2008 Prentice Hall 1-9Salt Should Only be an Ingredient.Not a Worry.Too much. Too little. Too late. Those are common worries you can have about your salt orders.But with Cargill Salt, you can stop worrying. A carefully coordinated transportation system insures the dependable delivery of salt. Not headaches.Importance of LogisticsAt the company level, logistics impacts:•COST - For many products, 20% to 40% of total product costs are controllable logistics costs.•SERVICE - For many products, performance factors such as inventory availability and speed of delivery are critical to customer satisfaction.© 2008 Prentice Hall 1-10Importance of LogisticsLogistics involves intelligent trade-offs:–Purchase discounts <> Raw Materials Inventory–Production efficiency <> Finished Goods Inventory–Freight discounts <> Finished Good Inventory–Lower planned cost <> More stable costs© 2008 Prentice Hall 1-11Other Economic Impacts of Logistics•Economic Utility–Possession utility–Form utility–Place utility–Time utility© 2008 Prentice Hall 1-12Logistics: What It Is?•CSCMP (Council of Supply Chain Management Professionals) definition:“Logistics is that part of the Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”© 2008 Prentice Hall 1-13Source: clm1.orgLogistics: What It Is?•Supply Chain Management . . . “encompasses every effort involved in producing and delivering a final product or service, from the supplier's supplier to the customer's customer. Supply Chain Management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.”–The Supply-Chain Council© 2008 Prentice Hall 1-14Logistics: Key Observations•Integrated activity–X-functions, X-divisions, X-companies, etc.–Coordination of conflicting goals, metrics, etc.•Responsible for multiple flows:–Information (orders, status, contracts)–Physical (finished goods, raw materials, WIP)–Financial (payment, credits, etc.)•Most analysis involves trade-offs–Across different entities–Across metrics: Cost, Service, Time, Risk, etc.© 2008 Prentice Hall 1-15Traditional Logistics Functions•Purchasing / Procurement•Inventory Control•Warehousing•Materials Handling•Order Processing•Transportation•Customer Service •Facility Location / Network Design© 2008 Prentice Hall
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