Logistics and Supply Chain Management Overview

Study Notes

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: 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: 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: 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 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 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.

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.