Chapter 11 Logistics Management

What is logistics management?
Movement and storage of materials to meet customer needs and organizational objectives (includes inventory management, order processing, transportation management, warehouse management, network design, and material handling and packaging)
What are the 7 rights of logistics?
Getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost
What are the strategic logistics activities?
*Facilities Network Design
*Facility Layout
What are the operational logistics activities?
*Order Processing
*Transportation Management
*Packaging & Materials Handling
What are the logistics cost minimization and trade offs?
*Cost-to-Service Trade Off: increase in service levels = increase in costs
*Cost-to-Cost Trade Off: increase cost of one activity à decrease cost of another activity
*Total Landed Cost: sum of all product and logistics related costs (country costs of manufacturing, cost in transit to country of sale, cost within country of sale)
How is transportation regulated?
*Economic Regulation: aims at making transportation equally accessible and economical to all without discrimination
-Entry regulation, rates, services, etc.
*Safety (and Social) Regulation: takes measures to protect public safety and environment
-Labor standards, hazardous materials, vehicle maintenance, insurance, public safety, etc.
What are the economics of transportation?
*Economy of Scale: the cost per unit of weight decreases as the size of the shipment increases
-Cost decreases because the fixed cost of the carrier is allocated over a larger weight of shipment
*Economy of Distance: the cost per unit of distance decreases as distance increases
-Tapering Principle – longer distances allow fixed cost of the carrier to be spread over more miles, lowering the per mile charge
How does consolidation reduce cost?
Consolidation: combining small orders or shipments into one large shipment to take advantage of transportation economies
What are the three basic consolidation strategies?
*Market Area: combine several small shipments from one shipper going to the same area
*Pooled Delivery: combine small shipments from different shippers going to the same area
*Scheduled Delivery: delivery at specific times
What are the different modes of transportation?
*Rail: heavy bulk commodities | high fixed costs
*Motor: medium and light manufacturing (wholesale and retail distribution) | most universal
*Water: bulk, commodities, cement, agricultural products | river and ocean methods
*Pipeline: petroleum, natural gas, slurry | for liquids
*Air: small shipments, emergency shipments | not as common
What is value density?
Its the ratio of value to weight, often determines the type of carrier used
*Common: provide service to the public with published rates
*Contract: provide service only to select contracted customers
*Private: firm owns its own equipment
What are the various transportation trends and issues?
*Variability in fuel prices
*Growth in intermodal transportation
* Driver shortage, hours of service, etc.
*Increased outsourcing of transportation services
*Advances in transportation technology (more efficient equipment), use of IT systems
*Environmental issues (sustainability)
*Increased security requirements (more inspections, delays, etc.)
What are the functions of warehouses and distribution centers?
*Stockpiling – The storage of inventories in warehouses to protect against seasonality either in supply or demand.
*Production Support Warehouse – A warehouse dedicated to storing parts and components needed to support a plant’s operations.
*Break-bulk – Splitting a large shipment into individual orders and arranging for local delivery to customers.
*Warehouse Consolidation – Combining shipments from a number of sources into one larger shipment going to a single location.
*Cross-docking – Combines breakbulk and consolidation warehouse activities.
*Reverse Logistics Support – the logistics needed to send products or packaging materials back to disassembly, reclamation, or disposal sites.
*Value-Added Services – Any work that creates greater value for customers.
What are material handling and packaging important?
*Material Handling
-Materials handling costs can be substantial, and improved labor and equipment productivities can significantly improve profits.
-Materials handling is usually the number one cause of product damage and loss in logistics.
-Containerization or Unitization – Creating one large container out of several smaller units. Reduces overall handling costs
-Packages also contain information about the products they contain (useful when sorting products and processing orders)
What factors influence the logistics network design decisions?
*Network design determines the number and location of facilities.
*Facility Location Influences
-Labor (availability and cost)
-Proximity of suppliers
-Proximity of customers
-Construction costs
-Land costs
-Incentive packages
-Transportation infrastructure
-Quality of life for employees
*Number of Facilities Influences
-Transportation Cost
-Inventory Cost
-Total Network Cost
What are integrated service providers?
Integrated Service Providers (ISPs) – Companies that provide a range of logistics services.
What are 3PLs?
Third-Party Logistics Service Providers (3PLs) – A common term used in the industry to describe ISPs.