Logistics Mgt.-Lesson 1 PDF

BATAAN PENINSULA STATE UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY Balanga, Campus Balanga City, Bataan SUBJECT:...

BATAAN PENINSULA STATE UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY Balanga, Campus Balanga City, Bataan SUBJECT: LOGISTICS MANAGEMENT SUBJECT CODE: OMPR0113 CHAPTER 1 Topic: Introduction to Logistics Management I. Learning Outcomes 1. Understand what are the different types of logistics 2. Learn what are the different types of logistics management 3. Understand about what logistics management II. Introduction Logistics management is a supply chain management component that is used to meet customer demands through the planning, control and implementation of the effective movement and storage of related information, goods and services from origin to destination. Logistics management helps companies reduce expenses and enhance customer service. The logistics management process begins with raw material accumulation to the final stage of delivering goods to the destination. By adhering to customer needs and industry standards, logistics management facilitates process strategy, planning and implementation. In logistics management, unwise decisions create multiple issues. For example, deliveries that fail or are delayed lead to buyer dissatisfaction. Damage of goods due to careless transportation is another potential issue. Poor logistics planning gradually increases expenses, and issues may arise from the implementation of ineffective logistics software. Most of these problems occur due to improper decisions related to outsourcing, such as selecting the wrong vendor or carrying out delivery tasks without sufficient resources. III. Content Supply Chain: It is a network of activities which transforms raw materials into Finished Goods Logistics: Movement of materials in Supply Chain Definitions of Logistics It is a process of Planning, Implementing, and Controlling the efficient and effective flow of goods/services and related information from the point of origin to point of consumption conforming to customer requirements. “Logistics is a process of implementing 7R’s to achieve Customer satisfaction” (Shine Babu). It is the Page 1 of 7  procurement, maintenance, distribution and replacement of personnel and materiel” (Webster’s Dictionary) Word LOGISTICS derived from 1. Logistikos (Greek) - means calculation using Mathematical standards 2. Logisticus (Latin) - same meaning 3. Logistique (French) - work related to army or military (movement of men and materials in the war) Phases in Logistics 1) Inbound Logistics: Movement of materials from the point of origin to point of production. Other names are physical supply and upstream. 2) Outbound Logistics: Movement of finished goods from the point of production to the point of consumption. Other names are physical distribution and downstream. 3) Reverse Logistics: Movement of damaged, expired, unsold products from the point of consumption to the point of production. Purchasing or buying Transport Warehouse Factory Transport Warehouse Customer Consumer Note: Here, the customer is wholesaler, distributor or retailer Types of Logistics 1) Business Logistics - is the blend of Greek mission plus French operations. Application of Logistics techniques or principle in business or a commercial management. 2) Military Logistics - is the planning and movement of military force, arms and ammunitions in a disciplined order. 3) Event Logistics - is the science of planning, controlling and managing the transfer, storage and other tangible and intangible operations performed in the process of event planning and management. 4) Service Logistics - the management of activities which respond to customers on an individual basis. It provides guiding concepts to central service response logistics. Objective of Logistics 1. Cost Minimization 8. Low cost delivery 2. Increasing the profit 9. Speedy delivery or quick response 3. Customer satisfaction 10. Right condition or reduce damage 4. Reducing DLT 11. Provide best service 5. Cash Spin 12. Reliability 6. Cash to Cash convertion 13. Repeated Business 7. Generate Business 14. Inventory Reduction * LT Lead Time * DLT Deliver Lead Time (this is the gap between order placement and order receipt) Demand Forecasting: it is the art of determining future market conditions Page 2 of 7 Erratic Customer Order In order to overcome this problem there are several methods used: 1. MTO: Make To Order 2. MTS: Make To Stock 3. A.O.: Assemble to Order 4. E.O.: Engineer To Order 5. JIT: Just In Time LOGISTICS PRINCIPLE 1) when the service level increase the cost will also increase 2) when the service level reduces the customer satisfaction will also reduce 3) achieve desired level of customer satisfaction at reasonable cost What should a Manufacturer DO 1. Right Quantity Purchase 2. Reliable/Right Product 3. Reasonable Storage 4. Right Quantity Production 5. Right Time Delivery 6. Customer Satisfaction 7. Product Quality 8. Best Service Provider Different Types of Service Providers 1. Fleet Operator (Truck) 10. C&F 2. Rail Operator 11. Freight Forwarders 3. Water (ship + inland) 12. Cargo Consolidators 4. Shipping Lines 13. Ship Brokers 5. Warehouse Operators 14. Logistics Companies 6. Terminal (CFS, PORT) 15. 4PL 7. 3PL 16. Container Leasing Company 8. Brokers 17. Container Manufacturing Company 9. Customs House Agents 18. Container Repairing Company Mainly Two Types of Service Providers a) Asset Based b) Non-asset Based * VOCC - Vessel Operating Common Carriers * NVOCC - Non-Vessel Operating Common Carriers Participants in Transportation 1. Seller - who sells the product 2. Buyer - who buys the product 3. Service Provider - who makes the facilitation to sell the product 4. IT Service Provider - who provides technical services such as computer, internet, phone etc. 5. Government - who controls the entire activities 6. Public - who is getting all merits and de-merits of all this activity Stuffing - loading into the container Page 3 of 7  Destuffing - unloading from the container MRO - Maintenance Repair and Operating MTO - Multi Model Transport Operator FTL - Full Truck Load LTL - Less than a Truck Load LCL - Less than a Container Load FCL - Full Container Load INVENTORY - Asset or resources of a company kept for own use or for sale. Raw materials, Finished Goods, Work in Progress, MRO, Sub-assemblies Consolidation - Means combining or grouping of cargos to achieve an economic Freight The Four Types of Logistics: 1. Supply Management and Logistics Supply management involves the planning and coordination of materials that are needed in a certain location at a specific time to support production or activity (as in the case with military supply). Supply logistics must include transportation of the materials and storage as well as a means for evaluating the level of supply at different stages of the process to make sure the flow of materials matches needed. This can involve getting all of the construction materials to a construction site or parts that are needed in a manufacturing plant. 2. Distribution and Material Movement Distribution involves managing how a supplied and stored material is then dispersed to the locations it is needed. This involves issues of material movement (loading, unloading, and transportation), tracking of stock and accountability of use (recording how the supply is used and by whom). This can involve moving supplies from a central warehouse to the shelves of a retail store. 3. Production Logistics and Management Production logistics manages the stages of combining distributed supplies into a product. This can involve the coordination required in a manufacturing or assembling process and in the case of applications such as military production, the logistics of coordinating space and areas of production to occur. In construction as well, production logistics will include the staging of material at the right time to coordinate with the phase of building taking place. 4. Reverse Logistics and Product Return Reverse logistics involves the reclamation of material and supplies from a production or assembly process. For instance, in the logistics management of a construction project, reverse logistics plans for the removal of excess material and re- absorption of the material into a stock supply. In military applications, it is commonly used for exit strategy planning and coordinating the transfer of material and equipment back to a storage base from an area where military exercises were performed. It can also apply to the return of unwanted but unused products from an end customer seeking a refund. There is a whole industry that has been created in recent years Page 4 of 7 to handle customer returns, including testing, refurbishment and adding items back to inventory. A customer might order something online like a printer or children’s toy that they never used. Before it can be resold, it should go to a process to ensure that it will be suitable to be sold to another customer. Supply Chain Best Practices and Their Benefits 10 Best Practices that companies in the retail industry (and any industry) need to ensure that their supply chain management is as effective as possible and contributing as much as possible to the company’s bottom line. 1. Identify supply chain stakeholders and establish a committee to engage stakeholders in supply chain issues and establish a workgroup comprised of departments. 2. Make sure the supply chain itself has appropriate staffing. 3. Technology is your friend. 4. Establish synergistic relationships with key suppliers. 5. Engage in collaborative strategic sourcing. 6. Don’t just consider price when making supply chain decisions. Consider the “total cost of ownership.” 7. Supply chain leaders should have some contribution and control with contracts. 8. Inventory optimization is essential. 9. Establish appropriate controls throughout the supply chain system to minimize risk. 10. Keep the supply chain sustainable with social responsibility and green initiatives. 7 R’S IN LOGISTICS MANAGEMENT SERVICES 1. Right Product A company who offers this kind of service must first know the kind of products that they are going to handle and transport. Having the right knowledge will give you an advantage to properly and efficiently manage both your time and resources. 2. Right Place The right product must be delivered to the right place. Courier services provided by an LMS company must have knowledgeable drivers as well as a systematic delivery system and tracking. Both customer and the provider must have a synchronized location tracking to ensure that the products are delivered to the right place. 3. Right Price Pricing is very essential and all products and services. They must have an appropriate price value in order to track the company income and expenses. A good system for storing and updating the right prices ensures success in LMS. 4. Right Customer Every LMS Provider must know their target market to identify the right customers. If they will offer their services to the right market, they have more chances of gaining leads and customers that will most likely to avail them. Some uses the traditional marketing while others use digital marketing to reach more customers around the globe. Page 5 of 7  5. Right Condition Every product or goods that are to be entrusted by the customers to LMS providers must be stored and delivered with the right condition. This is where the specifications must be referred to in order to place it on required facilities to maintain its quality. 6. Right Time Time is very important when it comes to logistics, clients are more concern on the time of delivery. That is why every service provider must know the right time to deliver the products and in a very efficient way. Every system has a tracking functionality to monitor all deliveries and making sure that they arrive on time. 7. Right Quantity Knowing and specifying the right quantity is also one of the key in a successful LMS. Since most of the providers are third party, companies that relies on their service must be careful in sending the right amount or quantity of goods to be delivered. Thanks to our modern technological developments that 3PLs can now manage all quantities of goods to ship/deliver. 5P’s of Logistics Management 1. Production - Production of right material with right raw material availability. 2. Price - The right produced product can be more competitive by using more competitive and effective logistics operation. 3. Product - The right product can be produced by using best collaboration between marketing and logistics. So that the packing and size of the product should be feasible. 4. Promotion - Logistics should work closely with marketing to decide which strategy of distribution either push or pull will be followed. 5. Place - It refers to the distribution channel’s decision, whether warehouse, the type of transportation and so on. 7Ps Page 6 of 7 IV. Summary Logistics management provides for the flow and storage of information and products between the firm and its suppliers (inbound), the firm and its customers (outbound) and the various plants, divisions and units of the firm. The objectives of logistics management is to provide customers with heir required service benefits at the lowest total logistics cost. A complete logistics management system comprises 6 major decisions areas: facility network design, inventory management, order management, transportation management, warehousing management and packaging and materials handling management. Logistics has an important relationship to manufacturing, marketing, finance and other areas of the organization. The cost of logistics systems can be affected by a number of major factors, including competition in the market, the spatial relationship of nodes and product characteristics. V. Learning Task Answer the question below. Is Logistics the same as Supply Chain Management? Explain your answer. VI. Reference 1. Pereda, Pedrito R. (2014). Logistics Management (Practical Approach to Purchasing and Inventory Management) 2. Jacobs, Robert F. (2014) Operations and Supply Chain Management, 14th edition 3. Wisner, Joel D.; Tan, Keah-Choon and Leong, Keong, (2013), SUPPLY CHAIN MANAGEMENT, 3rd edition 4. Schroeder, Roger G. (2013) Operations Management in the Supply Chain 5. Boyer, Ken and Verma, Rohit, (2012). LOGISTICS MANAGEMENT Prepared by MELINDA M. ABERIN, MACE CBA Faculty Page 7 of 7