Logistics Management

What is logistics?
the process of planning, implementing and controlling the efficient, 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.
What is the difference between the Council of Logistics Management’s definition of logistics and the CSCMP’s definition?
The CSCMP’s definition covers reverse logistics as well.
What is logistics management?
an integrating function,which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance, and information technology. (CSCMP, 2004)
What is supply chain?
A structured manufacturing process where raw materials are transformed into finished goods, then delivered to end customers (Beamon B. 1998)
What is supply chain management?
Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all
logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management
within and across companies.
A supply chain consists of the flow of product and services from:
– Raw materials manufacturers
– Intermediate products manufacturers
– End product manufacturers
– Wholesalers and distributors and
– Retailers
What are the 5 reasons for the increased importance of logistics?
– A Reduction in Economic Regulation
• Changes in Consumer Behavior
• Technological Advances
• The Growing Power of Retailers
• Globalization of Trade
What are the seven R’s?
Right product, Right quantity, Right condition, Right place, Right time, Right customer, and Right cost.
In regards to utility, logistics is:
Place utility and Time utility
In regards to utility, marketing is:
Possession utility
In regards to utility, production is:
form utility
Describe the timeline of the development of logistics
Fragmentation (1960) – Evolving Integration (1980) – Total Integration (2000)
What are the two most important interfaces with logistics?
Manufacturing and marketing
Describe the total cost approach
Cost trade-offs: changes to one activity
cause some costs to increase and others
to decrease
Describe the short run/static analysis model
– a matrix-like table which presents each of the
logistics and other relevant costs for two or more alternative logistics systems
-The major downside to the model is that it presents a solution which is not necessarily the correct one at all possible volume levels.
Describe the long run/ dynamic analysis model
– Comprised a graph of the fixed and variable costs of at least two alternative logistics systems.
• The graph may have at least one indifference point,
but may have multiple points of indifference.
What is customer service?
the process of identifying and implementing services
elements which enhance customer satisfaction and
maximize supply chain profits
What are the three main elements of customer service?
1. Pre-Transaction
2. Transaction
3. Post- Transaction
What are the components of pre-transaction elements?
1. written customer service policy
2. accessibility
3. organization structure
4. system flexibility
What are the components of transaction elements?
1. order cycle time
2. inventory availability
3. order fill rate
4. order status information
What are the components of post-transaction elements?
1. availability of spares
2. call-out time
3. product tracing/warranty
4. customer complaints, claim, etc.
what are the Methods of Establishing a Customer Service Strategy?
– Determining channel service levels based on knowledge of consumer reactions to stockouts
• Analyzing cost/revenue trade-offs
• Using ABC analysis of customer service
• Conducting a customer service audit
What is the 80/20 rule?
80 per cent of the profits of the business
come from 20 per cent of the customers. 80 per cent of the total costs to serve will be generated from 20 per cent from the customers (but probably not the same 20 per cent!).
What are the four factors to measure and control customer service?
1. Time
2. Dependability
3. Communication
4. Convenience
What are the four stages of an audit?
1. External customer service audit
2. Internal customer service audit
3. Identifying opportunities and methods for improvement
4. Establishing customer service levels
Define Purchasing
A functional group (i.e., a formal entity on the organization chart) as well as a functional activity (i.e., buying goods and services, the process of ordering and receiving goods and services)
Define Procurement
All activities that are required in order to get the product from the supplier to its final destination.
What are the benefits of having one supplier?
• Greater responsiveness
• Higher quality
• Improved/faster product design
• Greater economies of scale
• Reduced inspection costs
• Reduced administrative costs
• Asset specificity dictates
What are the benefits of having multiple suppliers?
– Competition leads to . . .
. . . lower prices
. . . better service
• Reduced risk of shortages
• Meet local content rules
• Hedge technological risk
• Learn from different suppliers
What are the factors influencing the decision for suppliers?
– Purchasing philosophy of the buyer
• Technological sophistication of item
• Characteristics of the market
• Supplier capabilities
Kraljic‟s (1983) product portfolio based on what two variables:
1. Purchasing’s impact on the bottom line
the profit impact of a given supply item measured against criteria such as cost of materials, total cost, volume purchased
2. Supply risk measured against criteria such as short-term and long term availability, number of potential suppliers, structure of supply markets
What are the objectives of good Inventory management?
-Provide desired customer service level
-Provide for cost-efficient operations
-Minimum inventory investments
What are the symptoms of poor inventory management?
– Increasing numbers of back orders.
• Increasing investment in inventory with back orders
remaining constant.
• High customer turnover rate.
• Increasing number of orders canceled.
• Periodic lack of sufficient storage space.
• Wide variance in turnover of major inventory items between
distribution centers.
• Deteriorating relationship with intermediaries, as typified by
dealer cancellations and declining orders.
• Large quantities of obsolete items.
Define Lead time
Lead time is the amount of time it takes to
reorder inventory
What are materials management activities?
1. Anticipating materials requirements
2. Sourcing and obtaining materials
3. Introducing materials into the organization
4. Monitoring the status of materials as a current
asset
what are the basic elements of TQM?
– Top management commitment and support
• Maintaining a customer focus in product, service, and process performance
• Integrated operations within and between organization
• Commitment to continuous improvement
what are the 4 costs associated with quality management processes?
– Appraisal costs result from inspections used to assess quality levels
– Internal failure costs results from quality failures that are found prior to shipment to customers
– External failure costs result from failures that are
identified only after products reach customers
– Prevention costs result from efforts to prevent failures and from efforts to reduce both failure and appraisal costs
What is the kanban philosophy?
Parts and materials should be supplied at the very moment they are needed in the factory production process
What are the problems associated with JIT?
– Production scheduling at plant(s)
– Supplier production schedules
– Supplier locations
– Lack of system support, organizational resistance, lack of planning
what are the benefits of JIT?
– Productivity improvements and greater control
between various production stages
• Diminished raw materials, work-in-process, and
finished goods inventories
• Reduction in manufacturing cycle times
• Improved inventory turnover rates
• Better customer service
• Decreased warehouse space
• Improved response time