Logistics Logistics is that part of the supply chain process 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 Logistics includes the following components Logistics management Marketing logistics Physical distribution Supply chain management Topic 1 Definitions Business Logistics Distribution Industrial distribution Logistics Logistics impacts in Macro Economics Logistics makes up 8 20 of a country s GDP Poor transportation infrastructure and high levels of inventory are key drawbacks in a country s expansions Economic utility the value or usefulness of a product in fulfilling customer needs or wants Possession utility the value or usefulness that comes from a customer being able to take possession of a product Form utility a product s being in a form that 1 can be used by the customer and 2 is of value to the customer Place utility refers to having products available where they are needed by customers products are moved from points of lesser value to points of greater value Time utility having products available when they are needed by customers Basic Logistics Facts More than 1 trillion is spent on logistics in the US each year The field of logistics is the nation s second largest employer healthcare is the largest Logistics costs represent 5 40 of the total landed cost of typical products OSU is ranked very highly in Logistics Increased Importance of Logistics A reduction in Economic regulation o Deregulation in the US airfreight railroad and trucking industries allowed individual carriers flexibility in pricing and service Flexibility allows companies to implements a tailored logistics approach service levels and prices Changes in consumer behavior o Market demassification flexibility and options o o Changing family roles creates convenience for both working parents Rising customer expectations Technological advances i e Internet Amazon helicopter example disintermediation The growing power of retailers consumers o o o o Companies such as Wal Mart and Home Depot wield greater power than the companies that supply them Globalization of trade Rising standards of living and multi country trade alliances have contributed to the growth of global trade Power Retailers Wield greater power than the companies that supply them Wal Mart Home Depot Best Buy Disintermediation the removal of intermediaries between producer and consumer Systems approach indicates that a company s objectives can be realized by recognizing the mutual interdependence of the major functional areas of the firm such as marketing finance and logistics Stock keeping units SKUs line items of inventory each different type or package size of a good is a different SKU offered for sale by many companies Materials Management movement and storage of materials into a firm Physical Distribution storage of finished product and movement to the customer Landed costs refers to the price of a product at the source plus transportation costs to its destination Stockouts being out of an item at the same time there is a demand for it Sustainable products products that meet present needs without compromising the ability of future generation to meet their needs can also impact logistical decisions Bait and switch tactics enticing customers with the promises of a low priced product only to find that it is unavailable but that a higher priced substitute product is readily available Marketing channels a set of institutions necessary to transfer the title to goods and to move goods from the point of production to the point of consumption and as such which consists of all the institutions and all the marketing activities in the marketing process Ownership channel covers movement of the title to the goods The goods themselves might not be physically present or even exist Negotiations channel is one in which buy and sell agreements are reached This could include transactions face to face or by phone email or any form of communication Financing channel handles payments for goods More importantly it handles the company s credit Promotions channel concerned with promoting a new or existing product and can be related to the financing channel because monetary allowances are often part of the promotion effort Logistics channel the most significant contribution that the logistics channel makes to the overall channel process is the sorting function Sorting function bridges the discrepancy between the assortment of goods and services generated by the producer and the assortment demanded by the consumer Sorting out sorting a heterogeneous supply of products into stocks that are homogeneous Accumulating bringing together similar stocks from different sources Allocating breaking a homogeneous supply into smaller lots Assorting building up assortments of goods for resale usually to retail customers International logistics logistics activities associated with goods that are sold across national boundaries is much more costly and challenging than domestic goods Materials handling refers to the short distance movement of products within the confines of a facility e g plant warehouse Procurement the raw materials component parts and supplies bought from outside organizations to support a company s operations Reverse logistics Products can be returned for various reasons such as product recalls product damage lack of demand and customer dissatisfaction Topic 2 Definitions Demand management the creation across the supply chain and its markets of a coordinated flow of demand Time series forecasting future demand is solely dependent on past demand Judgmental Qualitative Cause and effect associative looks at related factors to determine anticipates sales for an item Demand sales forecasting refers to an effort to project future demand is a key component in demand management and is also helpful in managing all forms of supply chain strategy Demand Forecasting Issues Selection of forecasting technique s depends on many factors Selecting an inappropriate technique will reduce forecast accuracy Forecast accuracy can have important logistical implications Computer forecasting software is unable to completely eliminate forecast errors Product Lifecycle Plays a vital part in forecasting and type of model used Is tied to the product growth matrix Product s life stage and accurate demand