Dimensions of Logistics
Dimensions of Logistics:
Introduction
Figure 2-4:
Inventory Sales Ratio
Chapter 2
Chapter 2
Chapter 2
What is Logistics?:
21st Century View of Logistics
Chapter 2
What is Logistics?:
21st Century View of Logistics
Chapter 2
What is Logistics?:
Value-Added Role of Logistics
Chapter 2
Chapter 2
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11
Supply-side interfaces
Stocking adequate supplies to ensure
uninterrupted production now a
logistics function.
Protective packaging
Principal purpose is to protect the
product from damage.
Foreign & third party alternatives
Some logistics functions are being
outsourced.
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13
Carrier pricing
Generally, since the larger the shipment, the
cheaper the transportation rate, shipment sizes
should be tailored to the carriers vehicle
capacity where possible.
Matching schedules
Quantity discounts should be tied to carrier
quantity discounts.
Volume relationships
Volumes sold will affect inventory requirements.
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Consumer packaging
Generally, since the size, shape, weight and
other physical characteristics of the product
impact on its storage, transportation and
handling, the logistics managers should be
included in any decisions regarding these
product traits.
A minor correction in any of the above could
conceivably cost (or save) millions of dollars
in logistical costs.
Logistics costs are not necessarily
paramount, but they need to be considered in
the decision making process.
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Wholesalers
Generally, since wholesalers are combining
purchases for multiple retailers, the shipment
sizes tend to be larger and the number of
transactions that have to be processed are
fewer, with the result that logistics costs are
smaller.
Retailers
With the exception of very large retailers who
act more like wholesalers, smaller sales are
the norm. These generally cost more for
transportation and order processing.
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Approaches to Analyzing
Logistics Systems
Cost Centers
Treating logistics activities as cost centers
makes it easier to study cost trade-offs
between the centers. (see Tables 2-2 and 2-3)
Nodes versus Links
Nodes are spatial points (warehouses, plants,
etc.);
Links are the transportation network (rail,
motor, air, pipe and water). (see Figure 2-6)
Logistics Channel
The network of intermediaries involved in the
logistics system. (see Figures 2-7, 2-8, and 2-9)
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Rail
Motor
$ 3.00
$ 4.20
Inventory
5.00
3.75
Packaging
4.50
3.20
Warehousing
1.50
.75
Cost of Lost
Sales
2.00
1.00
Transportation
Total Cost
Chapter 2
$ 15.00
$ 13.00
21
System 1
System 2
Three
Warehouses
Five
Warehouses
850,000
500,000
1,500,000
2,000,000
Warehousing
600,000
1,000,000
Cost of Lost
Sales
350,000
100,000
Total Cost
Chapter 2
$ 3,300,000
$ 3,600,000
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23
Figure 2-7
A Simple Logistics Channel
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Figure 2-8
A Multi-Echelon Logistics
Channel
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Figure 2-9
A Complex Logistics Channel
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Figure 2-11
Dynamic Analysis
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Dynamic Analysis
System 1
Total Cost = Fixed Costs + Variable Cost/unit x number
of units
y = $4200
+
0.0315x
System 2
Total Cost = Fixed Costs + Variable Cost/unit x number
of units
y = $4800
+
0.0230x
Trade-off Point
System 1 Total Costs = System 2 Total Costs
$4200 + 0.0315x
=
$4800 + 0.0230x
0.0085x
=
$600
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Management of Business Logistics, 7 Ed.
31
x
=
70,588 pounds
th
Competitive Relationships
Inventory/order cycle length see Figure 2-12.
Inventory/lost sales effect see Figure 2-13.
Transportation/lost sales effect - see Figure 2-14.
Product Relationships
Product dollar value/logistics costs see Figure 2-15.
Weight density/logistics costs see Figure 2-16.
Susceptibility to loss & damage/logistics costs see
Figure 2-17.
Spatial Relationships
Examine Figure 2-18.
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Figure 2-14
The General Relationship of the Cost
of Lost Sales to Transportation Cost
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Figure 2-15
The General Relationship of Product
Dollar Value to Various Logistics
Costs
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Figure 2-18
Logistics and Spatial
Relations
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Chapter 2:
Summary and Review Questions
Students should review their knowledge of the
chapter by checking out the Summary and
Study Questions for Chapter 2.
This is the last slide for
Chapter 2