CHAPTER 1

Overview of Logistics
Instructor
Art Yagci

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Macroeconomic Impacts of Logistics

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 Economic Impacts of Logistics
Besides macroeconomic impacts, the economic impact of logistics effect individual
consumers

Economic Utility Concept (measurement of usefulness that consumer obtains from any
goods or services)
• Possession utility
– value consumers put on purchasing a product and having the freedom to
use the product – credit card, lease automobile.
• Form utility
– value a consumer sees in a finished product – furniture, electronics, diet-
cola
• Place utility
– having products available where they are needed by customers –
warehouse vs retail shop
• Time utility
– having products available when they are needed by customers – late
delivery of perishable items

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 Economic Impacts of Logistics
Simultaneously archiving possession, form, place, and time
utility not always guaranteeing customer satisfaction.

“You placed an online order of Valentine's Day flowers for

your out-of-state girlfriend. The seller facilitated possession
utility by allowing you to pay by credit card, and a
arrangement of correct bouquet (form utility). And it is
arrived at your girlfriends house on Valentine’s Day (place and
time utility). Although seller provided possession, from, place,
and time utility, you won’t be satisfied if the greeting card
that you sent with the flowers had a wrong name for your
girlfriend.”

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 Logistics: What It Is
Council of Supply Chain Management
Professionals definition:
“Logistics is that part of the supply chain process
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 in order to meet
customers’ requirements.”
Source: www.cscmp.org

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 The Increased Importance of Logistics
Since 1980, logistic gain importance in business.
Key reasons:
• A Reduction in Economic Regulation (e.g., rates & fares,
entry & exit, mergers acquisitions)
• Changes in Consumer Behavior (e.g., customized
customer, chaining family roles, rising customer
expectation)
• Technological Advances (e.g., ordering directly from
producer’s website, shipment tracking)
• The Growing Power of Retailers (e.g., big-box-retailers)
• Globalization of Trade (e.g., using shipping containers)

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 The Systems and Total Cost
Approaches to Logistics
Systems Approach to business problems
• Interdependence of major functional areas
– Marketing, production, finance, and logistics
• Implementation of system approach
– Overall objectives should be compatible
– Decision made one functional area should considered
another functional area i.e., Stock-keeping units (SKUs)
– Logistic activities should be coordinated within logistic
process i.e., inbound logistic, material management,
physical distribution

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 Figure 1-1: Control Over the Flow of Inbound
and Outbound Movements

Logistic activities made up:

• inbound logistics
• materials management
• physical distribution

Logistics management
coordinates them in a cost-
efficient manner while
supporting organization’s
customer service
objectives.

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 The Systems and Total Cost
Approaches to Logistics
Total Cost Approach to logistics
• Used to coordinate logistics
activities
• Cost trade-offs: changes to
one activity cause some costs
to increase and others to
decrease

Total Logistics Concept

• seeks to minimize total
logistics costs in a manner that
supports an organization’s
customer service objectives

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Logistical Relationships within the Firm
System and total cost approach requires understanding of logistics and its
relationship with other functional areas
• Finance
– capital budgeting decisions – purchase or lease forklift, shrink-
wrap
– inventory measuring approach – in terms of unit value vs units
• Production
– length of production lines – long vs short production run
• Marketing
– customer satisfaction – product availability, reducing the cost of
product
– interaction between marketing and logistics focus on the
marketing mix (4Ps)

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Logistical Relationships within the Firm
Marketing Mix (4P’s): the set of controllable, tactical marketing tools
that a company uses to produce a desired response from its target
market.
• Place Decisions
– Effectively move and store product
• Price Decisions
– Include/exclude Landed-cost (price of product plus transportation
cost) in selling price
• Product Decisions
– High inventory reduces stock-outs, require additional storage space
and increase inventory carrying cost
– Packaging types increase/degrease logistical effectiveness and
efficiency – glass bottles vs aluminum cans
• Promotion Decisions
– Require close coordination – availability of highly advertised products

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 Marketing Channels
“A set of institutions necessary to transfer the title to goods
and to move goods from the point of production to the
point of consumption and, as such, which consists of all the
institutions and all the marketing activities in the marketing
process.” Source: American Marketing Association Dictionary, www.marketingpower.com

Major Channel Members/Participants

• Manufacturer/Producer
• Wholesaler
• Retailer
• Consumer

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Marketing Channels Arrangements
• Ownership channel
– Covers movement of the title to the goods, and the goods
themselves might not be physically present or even exit (i.e.,
commercial airplanes)
• Negotiations channel
– Refers buy and sell agreements; covers how activities in the
channels are handled (i.e., face-to-face, telephone, email,
electronic data interchange, auctions)
• Financing channel
– Handles payment of goods (i.e., consignment , putting up cash in
advance)
• Promotions channel
– Concerns promoting a new or existing product; often related with
financing and logistics channels – extra discount, special labeling,
geographic area,
• Logistics channel
– Handles the physical flow of the product - sorting function

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Channel Intermediaries/Facilitators
• Ownership channel • Promotions channel
– Banks, finance companies
– Advertising agencies,
– temporary or partial
ownership of goods - loans public relations agencies
funds – handle marketing
• Negotiations channel activities
– Brokers – arrange truck • Logistics channel
transportation
– Freight forwarders –
• Financing channel assemble small
– Banks, finance, and shipments to larger
insurance companies,–
provide credits shipments

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 Activities in the Logistical Channel
Successfully apply system approach and total cost approach to
logistics, it is essential to understand the various of logistics
activities
• Customer service
• Demand forecasting
• Facility location decisions
• Inventory management
• Materials handling
• Order management
• Procurement
• Transportation management
• Warehousing management
• Reverse logistics
• Packaging
• International logistics

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 Logistics Careers
• Logisticians need to be both a generalist and a
specialist
– As a generalist, the logistician must understand the
relationship between logistics and other corporate
functions, both within and outside the firm.
– As a specialist, the logistician must understand the
relationships between various logistics activities and must
have some technical knowledge for various activities.

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 Logistics Careers
“Logistician” highlighted as #17 in Best Business
Jobs for the year 2018 and the Bureau of Labor
Statistics estimates that employment will
increase 7% between 2016 and 2026, with
10,300 new jobs added.”
Source: https://money.usnews.com/careers/best-jobs/logistician (as of
1/20/2018)

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 Logistics Careers
Examples of Logistics-related jobs include:
• Logistics analyst
• Consultant
• Customer service manager
• Purchasing manager
• Transportation manager
• Warehouse operations manager
Source: www.cscmp.org

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 Logistics Careers
How Much Does a Logistician Make?
• The median annual salary for logisticians was
$74,590 in 2018, with the lowest-paid 10 percent
earning $45,380 and the highest-paid 10 percent
earning $117,310.

Source: https://money.usnews.com/careers/best-jobs/logistician

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 Logistics Professionalism
Professional Organizations Dedicated to Advancing the
Professional Knowledge of their members:
• APICS – The Association for Operations Management (www.apics.org)
• American Society of Transportation and Logistics (AST&L) (www.astl.org)
• Council of Supply Chain Management Professionals (www.cscmp.org)
• Delta Nu Alpha (DNA) (www.deltanualpha.org)
• International Society of Logistics (SOLE) (www.sole.org)
• Supply Chain & Logistics Association Canada (SCL) (www.sclcanada.org)
• The Chartered Institute of Logistics and Transport in the UK – CILT (UK)
(www.ciltuk.org.uk)
• Warehousing Education and Research Council (WERC) (www.werc.org)

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 Copyright Notice

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