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Introduction to Logistics
Position in supply chain
Customer Service
A view of Business logistics in a firm

Physical supply Physical distribution

Materials Management Outbound Logistics
Inbound Logistics
Source : Center for supply chain research , Penn State University
The art and science of obtaining , producing and distributing material and product in the proper place and in
proper quantities

- APICS dictionary 13th Edition

In its broader definition :

its about getting the right product in the right quantity and right conditions at the right place at the right time
for the right customer at the right price

Logistics goals and strategies

Respond rapidly to changes in the market or customer orders

Minimize variances in logistics service

Minimize inventory to reduce costs

Consolidate product movement by grouping shipments

Maintain high quality and engage in continuous improvement

Support entire product life cycle and reverse logistics supply chain
Logistics activities
One of largest variable cost
Major focus on physical movement of goods and on network that moves the product

A tradeoff relationship with Transportation ( Lower transportation speed , may require higher storage space )
Involves two separate but closely related activities : Inventory management & Warehousing
Decision on how much inventory , how many warehouses etc.

Logistics activities
Industrial packaging protects the product during transportation and storage
Transportation mode affects packaging requirements
Packaging requirements aligned to insurance requirements
. (Additional packaging for ocean transport & reduced packaging costs )

Logistics activities
Material Handling
Important activity as part of Warehouse design and efficient warehouse operation
Material handling during receiving , put away , pickup , packing , shipping , cross dock
Conveyors , Forklift , overhead cranes , AS/RS etc.

Inventory control
Inventory can be found in both warehouses and manufacturing facilities ( Raw , WIP , FG )
Two dimensions of inventory control Assuring adequate inventory levels and certifying inventory accuracy

Logistics activities
Order fulfillment
Activities involved with receiving, filling and shipping customer orders

Accurate forecasting of inventory requirements , materials and components is
essential for inventory control , Manufacturing efficiency and customer satisfaction

Logistics activities
Transportation cost directly related to purchase of raw materials and components
Procurement decisions need to be in consideration with the Total logistics cost

Customer Service
Two dimension of customer service important to logistics :
Process of interacting directly with the customer to influence or take order
Level of service an organization offers to customers order fill rate / Service level / On time delivery rates

Facility Location
Plant and warehouse site location Decision could alter time and place relationship between facilities and markets or
between supply points and facilities

Logistical operation

Logistical operation objectives

Variance reduction

Shipment consolidation


Lifecycle support

Customer Service

Availability Having inventory to consistently meet customer material / product requirements
Stock out frequency
Fill rate / Service Level
Orders shipped complete

Operational performance Time required to deliver a customers order

o Speed
o Consistency
o Flexibility
o Malfunction recovery

Service reliability- Quality attributed of logistics achieved through availability and operational
The Perfect order
Elements and measurement of customer service
Element Definition Typical Metrics
Product availability Usually defined as a percent of times product is Order fill rate
available to fill first request orders Case fill rate
Order Cycle time Activities and time that elapses between when an order Order cycle time in days
is placed and when the shipment is received % orders received within x days
On time delivery
Logistics operations Ability of supply chain to meet special customer Response time to special request ( hours , days )
responsiveness requests Time required ( days ) to respond x% increase in
Ability of supply chain to adapt to sudden changes in anticipated demand
Logistics system Ability of an information system to supply timely and Response time ( hours , days ) to request for
information accurate information information
% Compliance to EDI standards
Post Sale product Ability to provide customer support after product Response time to service request
support delivery , including technical information , spare parts or Cost to return product
product return Spare part availability

Source : Adapted from The distribution handbook by James F Robeson and Robert G house