Logistics and Supply Chain Management

• Logistics predates supply chain management; procurement became vital in the 1930s
• Supply chain management emerged in the 1990s, stemming from logistics and supply management within companies
• Porter's value chain theory highlighted logistics' key role in business, creating primary and secondary functions to support product flow

Megatrends

• Forces reshaping business and the world, include globalisation, empowered consumers shifts in economic power, demographic changes, rising technology use, pandemics and climate change/resource scarcity
• Businesses must adapt to these external opportunities and threats to survive
• The Covid-19 pandemic exposed global supply chain vulnerabilities, necessitating more flexible strategies

Globalisation

• Businesses operate in a intensely competitive global arena
• The Covid-19 pandemic revealed the risks of global supply chains, requiring agile risk mitigation strategies

Empowered Consumer

• They demand competitive prices, customization, convenience, and flexibility, increasing pressure on logistics and supply chains

Shift In Global Economic Power

• Economic power is shifting from West to BRICS countries (Brazil, Russia, India, China)
• BRICS countries are becoming exporters of innovation, capital, and talent

Demographic Shifts

• Demographic shifts can cause resource scarcity and changes in social norms
• Population growth in some areas may affect business models and increase pressure to create jobs

Rise In Technology

• Makes information accessible and creates collaboration opportunities for firms
• It has created new industries and markets, impacting the manufacturing and service sectors
• Firms are dealing with how technology will impact business models, customer expectations, and interactions

COVID-19 Pandemic

• The pandemic disrupted conventional supply chain practices and forecasting
• It highlighted the need for global cooperation in humanitarian supply chains

Climate Change And Resource Scarcity

• This can lead to conflict and tension over scarce resources, affecting supply markets

Defining Logistics

• Logistics is a tool for managing the impact of megatrends

Military Logistics

• Focuses on providing support to the military, including rations, equipment, and medical services

Engineering Logistics

• Engineering logistics includes concepts like integrated logistics support and maintenance management

Business Logistics

• Involves raw material supply and finished goods demand
• The Council of Supply Chain Management Professionals (https://cscmp.org) defines logistics management as planning, implementing, and controlling the flow and storage of goods, services, and information to meet customer requirements
• Logistics management activities include transportation, warehousing, order fulfillment, network design, and inventory management
• Logistics integrates activities with marketing, sales, manufacturing, finance, and IT at all planning and execution levels

Production Logistics

• Production logistics occurs between raw materials and finished products, interfacing with material and distribution requirements planning

Reverse Logistics

• Includes handling returns, disposing of waste, and recycling materials to retain resources within the economic cycle, aligning with the concept of the circular economy

Construction Logistics

• Construction logistics focuses on delivering construction materials and removing waste, affecting infrastructure and traffic

City Logistics

• City logistics seeks cost-effective freight movement within a city through integrated transport modes and freight terminals

Humanitarian Logistics

• Humanitarian logistics aims to alleviate suffering, requiring specific responses due to the scale and number of stakeholders

Supply Chain Management Definition

• Involves managing relationships with suppliers and customers, which promotes collaboration and competition

Supply Chain Management Scope

• Supply chains meet the needs of customers and stakeholders, acquiring resources from other firms
• Supply chain management was first used by Oliver and Webber (1982) and replicated by Houlihan (1984)
• Competition occurs between supply chains rather than individual firms

Broader Perspective

• Supply chain management includes inter- and intra-firm processes to deliver goods and services
• Supply chain management depends on the survival of global firms since supply chains compete
• Supply chain management focuses on a complex network of relationships
• Gattorna and Ellis (2020: 189) suggest that most organisations operate today within a complex network of flows and relationships rather than a neat linear arrangement

Key Differences

• Supply chain management includes information system integration and coordination
• Logistics focuses on material flow within a firm, while supply chain management integrates beyond organizational borders
• The supply chain integrates sourcing, manufacturing, and delivery from origin to consumption

Logistics Customer Value

• Created through efficacy, efficiency, and/or differentiation

Supply chain management

• Aims to enhance value for the end customer
• Aims to deliver orders completely, on time, and damage-free

CSCMP Definition

• Supply chain management includes sourcing, procurement, conversion, and logistics, collaborating with suppliers, intermediaries, and customers
• Also includes business processes and integration of activities

Lambert (2008: 10) identifies is the following supply chain management processes:

• Customer relationship management
• Customer service management
• Demand management
• Order fulfilment
• Manufacturing flow management
• Supplier relationship management
• Product development and commercialisation
• Returns management

Conclusion

• Christopher (2016: 2-3) suggests logistics is a planning orientation, while supply chain management links processes between entities

Third-Party Logistics

• Using outside logistics providers to handle activities between suppliers and customers, also known as contract logistics or outsourcing

Services

• Services provided include transportation, warehousing, packaging, IT, and financial services
• Third-party logistics types include transportation-based, warehouse-based, forwarder-based, shipper-based, finance-based, and information-based

Fourth-Party Logistics

• Accenture trademarked concept involving outsourcing entire supply chain management
• Integrates systems, transport, order, and inventory management, allowing clients to focus on core business

Fourth-Party Logistics Characteristics

• The 4PL is a separate entity, acting as a single interface and managing all supply chain aspects

Models to operate on:

• Industry solution model for distribution operations
• Supply chain partner’s model for managing supply chains

Benefits of 4PL

• It Addresses strategic, financial, and operational failures of 3PL services
• Also realizes revenue opportunities and improves accountability

Historical Development of Logistics

• In the 1950s/60s, distribution systems were unplanned
• In the 1960s/70s, physical distribution concepts formed
• In the 1970s, companies included distribution in management
• In the 1980s, professionalism increased with centralized distribution, reduced stock, and computerization
• In the 1990s, there was supply chain alignment, internet use, and increased logistics
• The 2000s saw mobile technology facilitating growth
• 2010's volatility caused supply chain resilience, cloud computing, and AI use
• By 2020, rapid manufacturing and supply chain digitization are in place focus is on risk management and sustainable development goals

Logistics Performance in South Africa

• Logistics costs were 11.2% of GDP
• The United States had 7.6% of GDP in 2019
• Poor performance confirms the need for improvement

Supply Chain Planning Framework

• A framework for logistics and supply chain management planning

Stock and Lambert (2001: 702–704) Framework

• Planning hierarchy from strategic to operational levels
• Starts with customer requirements, then network design, channel strategy, and logistics elements like inventory and transport

Added Freight Forwarding

• manages freight from origin to destination

Importance

• Provides a logical approach to improve the supply chain and benefit the customer

Porter’s Value Chain & Competitive Advantage

• A business management concept described by Michael Porter

Value Chain

• understood only by looking at a firm as a whole, including primary and secondary activities

Primary Activities

• Inbound logistics, operations, outbound logistics, marketing and sales, and service

Support Activities

• Administrative infrastructure management, human resource management, research and development, and procurement
• The goal is to maximize value while minimizing costs

Primary Activities Explained

• Inbound includes receiving and storing inputs
• Operations includes machining and packaging
• Outbound includes order processing and distribution
• Marketing convinces buyers to purchase products
• Service maintains the product after sale

Secondary Activities Expained

• Procurement purchases raw materials and negotiates contracts
• Technology development involves R&D and product improvements
• Human resource management includes recruitment and education
• The firm's infrastructure is in charge of management and quality control
• Margin reflects the reward for risks run

Analysing Competitive Advantage

• the value chain separates activities into detailed areas
• Customer value includes product differentiation, cost reduction, and responsiveness
• Primary activities are directly involved in creating products/services
• Support activities support the firm as a whole

Value Chain Benefit

• The value chain highlights customer value and assessment
• Provides direction for firm assessment
• everything in an organization improves ability to create value.

Christopher (2016: 4) states Porter raised the importance of competitive relativities

• Logistics play an important role in both primary activities (inbound logistics, operations, outbound logistics, marketing and sales, services) and support activities (infrastructure, human resource management, technology development, procurement)
• Supply chains compete through activities within the value chain
• Raw materials are used and distributed to users
• Logistics and supply chain management facilitate value creation

Role of Logistics

The role of logistics is to gain a competitive advantage

• Logistics and supply chain management satisfy customer needs through materials and information flow
• A competitive advantage offers something different and valuable to customers
• Supply chain management integrates transport, inventory, procurement, and warehousing
• The total logistics cost perspective is crucial for example, deciding the amount of depots

Information Management

Plays a transparent role in the supply chain

• Transparent information reduces inventory

Conclusion:

• Logistics provides competitive advantage by optimizing elements from a supply chain perspective
• The historical changes in logistics were also discussed
• Statistics were provided that indicate comparative logistics performance in South Africa
• The supply chain planning framework was suggested as an approach for addressing the challenges identified
• The firm has to rethink strategies and actions in relation to logistics and the supply chain as a whole