Purchase and Logistics Lecture 6 Flashcards
Learning Objectives:
● What is logistics (versus the supply chain)?
● What is logistics’ role in the organization?
● Why is it important and how does it relate to purchasing?
What is logistics and its role in organizations
Logistics -> the movement of materials in the supply chain
Supply Chain- -> transforming raw materials into (end-) products & distributing to end-consumer
Logistics systems are frequently analyzed from a systems approach, which emphasizes total cost and trade-offs when changes are proposed. Either a short- or long-run perspective can be used.
What is logistics and its role in organizations
Logistics systems can be viewed or approached in several different ways for analytical purposes, including:
(1) materials management versus physical distribution
(2) cost centers
(3) nodes versus links
(4) channels
(5) All four approaches are viable for different purposes
Four Subdivisions of Logistics
(1) Business logistics:
* That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, service, and related information from point of use or consumption in order to meet customer requirements.
2) Military logistics:
* The design and integration of all aspects of support for the operational capability of the military forces (deployed or in garrison) and their equipment to ensure readiness, reliability, and efficiency.
(3) Event logistics:
* The network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event.
(4) Service logistics:
* The acquisition, scheduling, and management of the
facilities/assets, personnel, and materials to support and sustain a service operation or business.
Value-Added Roles of Logistics
The five types of economic utility, which add
value to a product/service are:
- Form
- Time
- Place
- Quantity
- Possession
The 7 R’s of Logistics
- Right Product
- Right Quantity
- Right condition
- Right Place
- Right Time
- Right Customer
- Right Price
Logistics activities
Customer service
Demand forecasting
Distribution
communications
Inventory control
Material handling
Order processing
Parts and service support
Plant and warehouse site selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage
Logistics Is Relevant to All Types of
Organizations meaning
The definition of logistics includes the flow of
materials and services in the manufacturing and
service sector.
The service sector includes entities such as the
government, hospitals, banks, retailers and wholesalers.
Supply management definition
At its core, logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet customers’ requirements.
System Approach of Logistics meaning
Logistics is a system; a network of related activities with
the purpose of managing the orderly flow of goods,
information and service with the logistics channel.
The Logistics ‘systems approach’ simply states that all
functions or activities need to be understood in terms of
how they affect, and are affected by, other elements and
activities with which they interact.
How do Marketing / Logistics
interact? Management Concept
see slide 19,20,21
The outputs of the logistics system are
competitive advantage
time
place utility
efficient movement to the customer (end-consumer)
providing a logistics service mix such that logistics becomes a proprietary asset of the organisation
Customer service
*Good customer service supports customer satisfaction
● Customer service is the ouput of the logistics system
● It involves getting the right product, to the right customer at the right place, in the right condition, at the right time and at the lowest total cost possible
● The key trade off of customer service: cost of lost sales
● Dissatisfied customer tells to average of nine other potential (lost) customers
Demand forecasting
There are many types of demand forecasting such as;
● Marketing forecasts
○ Customer demand based on promotions, pricing, competition etc..
● Manufacturing forecasts
○ Production requirement based on marketing sales demand forecasts and current inventory levels
Logistics usually becomes involved in forecasting in terms of how much should be ordered from its
suppliers and how much of finished product should be transported or held in each market that the
organization serves
Inventory management
Inventory management involves: trading off the level of inventory held to achieve high customer service levels with the cost of holding inventory, including capital tied up in inventory, variable storage costs and obsolesence
