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1-1

JAMES
R.
STOCK

STRATEGIC LOGISTICS

MANAGEMENT
FOURTH EDITION
DOUGLAS
M.
LAMBERT

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
CHAPTER 1
Logistics’ Role in the
Economy and the
Organization
Logistics Management Defined 1-3

That part of the supply chain process that plans,


implements, and controls the efficient, effective
flow and storage of goods, services, and related
information from the point-of-origin to the
point-of-consumption in order to meet
customers’ requirements.
Council of Logistics Management

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Components of 1-4

Logistics Management
Outputs of
Inputs into
logistics
logistics Management actions
Natural Planning Implementation Control Competitive
resources advantage
Logistics
Time and
Human management
resources Suppliers
Raw In-process Finished Customers place utility
materials inventory goods
Efficient
Financial movement
resources to customer
Logistics activities
Customer service Plant & warehouse site selection Proprietary
Information Demand forecasting Procurement
Inventory management asset
resources Packaging
Logistics communications Reverse logistics
Material handling Traffic and transportation Copyright © 2001 by The
Order processing Warehousing and storage McGraw-Hill Companies, Inc.
All rights reserved.
Parts and service support
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Marketing/Logistics 1-5

Management Concept
Customer satisfaction
•Suppliers
•Intermediate customers
•Final customers

Integrated effort Company profit


•Maximize long-term
•Product
profitability
•Price
•Lowest total costs
•Promotion
given an acceptable
•Place (distribution)
level of customer
service

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Cost Trade-offs in Marketing 1-6

and Logistics
Product

MARKETING
Order processing
Price and information
costs

Place/customer
service levels
Inventory
LOGISTICS

Transportation
carrying costs
costs

Lot quantity costs Warehousing costs


Order processing
and information
costs
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Relationship of Logistics 1-7

Activities to Logistics Costs

• Customer service levels


• Transportation costs
• Warehousing costs
• Order processing/information systems costs
• Lot quantity costs
• Inventory carrying costs

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Key Logistics Activities 1-8

• Customer service • Parts and service


• Demand forecasting support
• Inventory • Plant and warehouse
management site selection
• Logistics • Procurement
communications • Reverse logistics
• Material handling • Traffic and
• Order processing transportation
• Packaging • Warehousing and
storage

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Flow through the Supply Chain 1-9

Customer
Carrier
Distribution
center Customer

Supplier Carrier
Customer
Carrier
Carrier
Manufacturing Customer
Supplier site

Carrier
Carrier Customer
Distribution
Supplier center
Customer
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Strategic Profit Model
Sales 1-10
$
Gross margin
-
Cost of
goods sold
Net profit $
$
Net profit $ Variable
margin - expenses
+
% Sales Total expenses $
Return on Financial Net profit $ +
net worth leverage
Return on $ Fixed
assets Net sales expenses
-
= x % x Income taxes $
Sales
Inventory
Net profit Total assets x Net profit Asset $
= turnover
Net worth Net worth Total assets $ $
+ Current assets +
Accounts
Total assets receivable
Net sales $
Total assets $ $
+ +
Fixed assets Other current
assets
$ $
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Future Challenges and Areas for 1-11a
1-11

Performance Improvement

• Supply Chain Management


• Strategic Planning
• Total Quality Management
• Just-in-Time
• Quick Response
• Efficient Consumer Response
• Logistics as a Competitive Weapon

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Future Challenges and Areas for 1-12b
1-11

Performance Improvement (cont.)


• Accounting for logistics costs
• Logistics as a boundary-spanning activity
• Global logistics
• Increasing skill requirements
• Logistics information systems
• Strategic alliances, partnerships, and
outsourcing
• Green marketing and reverse logistics
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.