Module 7

Logistics in SCM

MOD-7 Dimension of Logistics

Introduction: A macro and micro dimension. Logistics interfaces with other areas. Approach to analyzing logistics system Logistics and system analysis Techniques of logistics system analysis Factors affecting the cost and importance of logistics

Macro Perspective

Logistics impacts and has relationship with economy Cost of business logistics increasing Percentage of GDP decreasing Transportation largest percentage of logistics costs (rising due to inventory management practices)

Macro Perspective

Logistics adds value to a product Place utility - moving goods to points where demand exists Time utility - moving goods to points at a specific time Allows for economic development and specialization Affects land values due to increased accessibility

Micro Perspective

Interfaces with production in determining the length of the production run Interfaces with marketing in selling the product

price - size, quantity product - dimensions, packaging promotion - inventory, channels customer service

Relationship with all areas of a company

Approaches to Analyzing Logistics Systems

Materials Management versus Physical Distribution

Balanced System Heavy Inbound Ex Boeing aircraft Heavy Outbound Ex Crude oil Reverse Systems Ex Ink catridges in HP printers Trade offs

Cost centers

Approaches to Analyzing Logistics Systems

Nodes versus links nodes - points where goods stop for processing links - transportation connecting nodes Logistics Channels - network of intermediaries that contribute to efficient flow of goods

Logistics and Systems Analysis

System - is a set of interacting elements, variables, parts or objects that are functionally related to one another and that form a coherent group. Optimization always the best alternative (water transportation example) Level 1: organization Contain marketing, finance, production Level 2 supply chain Contain customers and other channel partners Level 3: Environment Contain social ,political and economic

Factors Affecting the Cost and Importance of Logistics

Competition via customer service

Order Cycle

shorter order cycle, less inventory required more substitutable product, higher customer service level required increase inventory, reduce cost of lost sales increase transportation costs, reduce cost of lost sales

Substitution

Inventory Effect

Transportation Effect

Factors Affecting the Cost and Importance of Logistics

Product factors Dollar Value - product value increases, cost of warehousing, transportation and inventory increases Density- higher the density, more efficient use of warehouse and transportation space Damage -greater the risk of damage, higher the transportation and warehousing cost Special Handling Requirments

Factors Affecting the Cost and Importance of Logistics

Spatial Relationships Distance Factor