Intro to Logistics Mgt

8/13/2019 Intro to Logistics Mgt

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LOGISTICSMANAGEMENT

Mr. Julius S. KabilingCourse Instructor



Logistics?

management of the flow of goods, information

and other resources, including energy and

people, between the point of origin and the point

of consumption in order to meet therequirements of consumers (wikipedia)

The alignment of upstream and downstream

capabilities of supply chain partners to deliver

superior value to the end customer at less costto the supply chain as a whole



Logistics…

Strategically managing…

- Procurement

- Movement and storage of materials

- Parts and finished products

- Inventory and information flow

… through the organization and itsmarketing channels to maximizeprofitability through cost effective fulfilmentof orders



Tasks of Logistics…

**Material Flow: flow of physical goods fromsuppliers through the distribution centers tostores

**Information Flow: Flow of demand data fromthe consumer back to purchasing and tosuppliers so that material flow can be accuratelyplanned and controlled.

** These are the key parts of the overall task ofthe “Supply Chain Management”



Logistics and Supply Chain



Logistics…

Logistics is a planning orientation and

framework

Creates a single plan for the flow of product

and information through a business

Logistics can be seen as part of the overall

supply chain

Logistics is a subset of supply chain

management



Supply Chain…

Supply Chain builds upon logistics framework andseeks to achieve linkages and co-ordination

between the processes of other entities in the

pipeline

The management of upstream and downstreamrelationships with suppliers and customers to deliver

superior customer value at less cost

A network of connected and interdependent

organizations mutually and co-operatively working

together to control, manage, and improve the flow of

materials and information from suppliers to end

users.



Subsuming self interest for the benefit of

the CHAIN as a whole

The focus – management of

RELATIONSHIPS



3 Main Functions of Supply Chain

1. Distribution

2. Network and Capacity Planning

3. Supply Chain Development



The Supply Chain Network

THEFIRM



Logistics Management and

Competitive Advantage

Effective management of logistics and supply

chain can be a competitive advantage

Differentiate one‟s self in the eyes of the

customer

Lower cost at a greater profit

Products do not sell themselves

Today‟s success may not be as successful

tomorrow



The 3-way Relationships

Needs seeking benefits

at acceptable prices

Assets andUtilization

Assets andUtilization

Customers

Company Competitor



Bases of Success

Cost Advantage

Value Advantage

Most profitable competitor

The one who is the lowest cost producer

The one provides a product with the greatestperceived differentiated value, or

COMBINATION OF BOTH



Cost Advantage

Normally, will have the greatest sales

volume

Economies of Scale

The impact of the “Experience Curve”

“All costs would decline at a given rate as

volume increased” – Bruce Henderson

Founder, Boston Consulting Group



Value Advantage

“Customers don‟t buy products, they buy

benefits”

What the product “will deliver”

Benefits may be intangible (image or service)

No distinguishing factor = COMMODITY

Customer decision = WHO‟S THE

CHEAPEST?

“What can I get from you as against the

others?”



How to Gain Value Advantage?

Better segmentation of the market

Differentiated appeals to specific segments

Service sensitivity

Augmented offers (delivery, after-sales,

technical support, etc.)



The Success Matrix

ServiceLeader

Cost andServiceLeader

CommodityMarket

CostLeader

V a l u e A d v a n

t a g e

Cost Advantage



The greatest challenge to logistics and

supply chain management…

Achieve a relatively differentiatedproduct/services at the lowest cost

possible.

Superior customer value at less cost

Provide distinct offers on the value they

deliver and cost competitive



Philosophy Behind Logistics

and Supply ChainPlanning and Coordinating materials flow

from source to user as an integrated

system

Link the marketplace, the distribution

network, the manufacturing process, and

procurement

The customers being serviced at higher

levels at lower cost



Supply Chain as the Value

ChainCredited to Michael Porter (Harvard Business

School professor)

Each discrete activities a firm performs

(design, production, marketing, delivery,support group, etc.) can add value to the

finish product

Breaking down strategically relevant activitiesto understand the behavior of costs and the

existing potential sources of differentiation



Value Chain Activities

Primary Activities

Inbound logistics

OperationsOutbound logistics

Marketing and sales

Service

Support Activities

Infrastructure

HRIT / D&D

Procurement



Competitive advantage is achieved by

performing these activities more efficientlythan competitors, or uniquely to create

greater differentiation

Assess each activity if you have REALcompetitive advantage in the activity

If not, consider outsourcing to a partner who

can provide that cost or value advantageValue and cost is created by ALL entities

connected to each other.



Logistics Management‟s Mission

The scope of logistics spans the organization, fromthe management of raw materials through the

delivery of the final product

Logistics is the link between the marketplace and

the supply baseNeeds of the customers are satisfied through

coordination of materials and information flows

extending from the marketplace, through the firm, to

suppliers.

To come up with a “One Plan Mentality” within the

business, replacing conventional stand-alone

planning and decision-making



The Logistics Management Process

Suppliers CustomersDistributionOperationsProcurement

Materials Flow

Requirements Information Flow



Some Major Improvements inManufacturing related to Logistics

Flexible Manufacturing System (FMS)Materials Requirement Planning (MRP)

Just-in-Time (JIT)

Total Quality Management (TQM)



The Supply Chain and

Competitive PerformanceFrom “Survival of the Fittest”

Unwillingness to cooperate in order to compete

Supply Chain Integration

Upstream and Downstream cooperation

Vertical Integration vs focusing on core business

Outsourcing

The irony of transferring cost upstream ordownstream



Changes in the Competitive

EnvironmentMost pressing challenges in logistics

today:

1. New Rules of Competition

2. Globalization of Industry

3. Down Pressure on Price

4. Customers taking control



New Rules of Competition

From “stand alone” to the need to create

value delivery system responsive to fast-

changing markets

From strong branding and large advertisingbudgets and selling to competing with one‟s

own capabilities and competencies

Think not of WHAT we do but more on HOWwe do it.

Service-based rather than product-based



Globalization

Adopt to a wider supply chain perspective

Excellent management of complex relationships

and flows within the supply chain

Materials and components sources worldwide,products manufactured offshore, and sold in

different countries

With local customizationSeek to achieve competitive advantage by

identifying world markets for the product and

develop manufacturing and logistics strategy



Downward Pressure on Price

More markets are more price competitive today

Factors affecting downward pattern on prices:

1. New global competitors with low-cost manufacturingbases

2. Removal of barriers to trade

3. Deregulation

4. Internet (easy to compare prices, )

In order to maintain profitability, find ways to bring down

costs to match the fall in prices.



Customers Taking Control

Customers are ever more demanding, not just of

product quality, but also of service

Prime source of added value is through

customer serviceOn-time delivery, after sales support

Companies achieving service excellence

prioritized their logistics managementWell-thought strategy for service + develop

appropriate delivery systems + commitment from

ALL members of the team



Managing your 4Rs

1. Responsiveness1. Agility

2. More Demand-driven than forecast-driven

2. Reliability

1. Re-engineering of process that impact performance2. Enhanced pipeline visibility

3. Resilience

1. Ability to respond with unexpected disturbances

2. Recognition of where supply chain is most vulnerable

4. Relationships

1. Relationships based on partnership

2. Better partnership leads to barriers to competitors

Intro to Logistics Mgt

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