Logistics and Supply Chain Management Overview

Logistics and Supply Chain Management

• Four Types of Logistics and Their Objectives:

  • Procurement logistics: securing inexpensive, high-quality goods.
  • Production logistics: matching production with market demands and business goals.
  • Distribution logistics: delivering the right goods at the right time, quantity, and place at optimal cost.
  • Disposal logistics: improving efficiency and reducing expenses by following ecological, environmental, and legal guidelines.

• Importance of Procurement and Purchasing Management (Electronics OEM):

  • Economies of scale: getting the right amount of goods to lower costs.
  • Quality assurance: using high-quality components by managing suppliers carefully.
  • Supply chain resilience: avoiding disruptions by having diverse suppliers and contingencies.

• Profit Margin Calculation and Material Cost Savings:

  • Profit margin (R): calculated as Profit / Sales, typically expressed as a percentage.
  • Material cost ratio (Mc): material cost as a percentage of sales.
  • Material cost reduction (E): percentage reduction in material costs.
  • Assuming Pc = 20%, Mc = 50%, E = 2%, a 2% reduction in material costs has the same effect on profit as a 16% increase in sales.

Supply Chain Definition and Activities

• Supply Chain Definition: A global network for delivering products/services, encompassing raw materials, information flow, physical distribution, and payment. Often includes disposal/recycling.

• Three Supply Chain Activities:

  • Design
  • Planning
  • Operations

Supply Chain Management Objectives

• Supply Chain Management: A network of interconnected companies cooperating to control and improve material and information flow from suppliers to end users.

• Objectives of Supply Chain Management:

  • Establishing a competitive infrastructure.
  • Value generation from global supply chains.
  • Synchronizing supply and demand.
  • Measuring performance globally.

SCOR Model Levels

• SCOR Model: A guideline for standardization of supply chains, combining business process optimization, performance indicator comparison, and business practices.

• Three Hierarchical Process Levels in the SCOR Model:

  • Level 1: Statement of supply chain numbers and performance measurement.
  • Level 2: Definition of planning and implementation process sequences for material flows.
  • Level 3: Determination of business processes, orders, redeliveries, and marketing forecasts.

Offshoring and Backshoring Reasons

• Offshoring Reasons (Production, Research & Development):

  • Lower personnel costs.
  • Proximity to markets.
  • Developing core competencies.
  • Capacity utilization.

• Backshoring Reasons:

  • Redeveloping core competencies.
  • Having R&D close to production.
  • Avoiding issues like delays, increased costs (customs, materials), and quality problems associated with external suppliers.

Conflicts in Logistics Goals

• Conflicts of Goals in Logistics: Various departments (production, purchasing, quality, warehouse, distribution, sales, controlling) have conflicting goals. For example, high inventory and availability versus lower costs.

Logistics Function in a Company

• Factors Influencing Logistics Function Position:
  • Product structure
  • Core competencies of the company
  • Contribution of logistics to company profit
  • Influence of logistics management within business management.

Additional Key Concepts (from 6 R's and more)

• 6 R's: right quantity, right product, right quality, right costs, right time, and right location.