IE483 Supply Chain Management and Logistics

Logistics Management

Copyright © 2019 Pearson Education, Ltd.

Logistics

• It is the planning, implementation and control of the movement and storage of

materials, services and information flow in both directions from the starting
point to the end point where the product is consumed.

Council of Supply Chain Management Professionals (CSCMP)

(Formerly known as Council of Logistics Management)

 Transportation  Insurance
 Storage  Return
 Packaging  Inventory Control
 External Trade
 Customs
Logistics - The Importance

• Today's economies have an environment where global competition is

increasing.
• In this environment, the increasingly competitive conditions make companies
look for ways to reduce their costs.
• This search has enabled logistics to be one of the most important
components of business operations, which was previously recognized in the
military field.
• Logistics, which is a part of business activities after the 1960s, is an
increasingly important activity for businesses, individuals / consumers and
governments.
Logistics - The Importance
Fruit Logistics

22 21 17 Total distance : 360.291 km

Average distance : 6.004 km
New York,
Mushroom, Average day : 4-5 days
217 km, 1 day Italy, Chestnut,
7.748 km, 14
days
Turkey, Orange,
8.085 km, 14
days
Vietnam, Pitaya,
8.970 km, 1-2 days

Chile, Cherry,
9.237 km, 7-10
days
South Africa,
New Zealand, Ananas, 14.435
Apricot and Kiwi, km, 12 days
14.234 km, 1-2 days
The Importance of Logistics in terms of Cost
Home Appliance Industry
Profit
6% 17% 25% Retailer share On average, logistics expenses
Logistics constitute between 4 and 20% of
20% 20% Management the sales price of a product.
12% Manufacturing
Material
Logistics and Marketing
Logistics and Profit
Marketing Taxes
Management
Raw material
22% R&D 10%
7%
53% 7% Profit
Warranty 68%
6% Manufacturing 14%
6%
5%
Electronics Industry Petroleum Industry
The Importance of Logistics in terms of Cost
BASIC LOGISTICS COSTS

4
PACKAGING

6,2
ORDER PROCESS

13,9
MANAGEMENT

35,1
TRANSPORTATION

40,8
STORAGE
The Importance of Logistics in terms of Cost

%12,2

Vietnam 20,8
Thailand 10,7
China 15,4
Europe 9,2
America 8,6
World 11,7

Share of Logistics in Gross National Product, 2016

The Importance of Logistics in terms of Employment

Total Employment : 400.000

2023 Employment Target: 1.5 million

%14 %86
Stages of Logistics
Production

Customer
Supplier

Purchasing Manufacturing Sales

Inbound Logistic Manufacturing Outbound Logistic

Supply Stage of Raw Logistic Distribution of
Material Production Stage Emerging Products
Development of Logistics Activities
Activities until the 1960s
(Fragmentation Period)
Demand Forecast
Purchasing Activities from 1960 to 2000
Materials Requirement (Merging Period)
Purchasing
Production planning and material
management
WIP inventory mngmt

Storage After 2000 (Total

Logistics Integration)
Handling

Packaging
Supply chain
Final product inventory
Physical management
Distribution planning distribution
Order management

Transportation

Customer relations

Strategic planning

Information Systems
Marketing and Sales

Finance
Logistics Management

• Logistics management;

 The management of logistics elements,

 In accordance with the basic principles of logistics

 the principles of management science.

Logistics Management
The Main Aim of Logistics Management
 The purpose of logistics management,
To satisfy
Right Product / Service
To the Right
In the right conditions
Customer

In right Amount In the right place

At the right time At the right cost

Logistics Management Strategies
 Reducing variable costs  Capital spending can
related to transportation be reduced by
and inventory. adopting a just-in-
 To minimize costs and time procurement
Logistics
increase profit so that the approach or by
Management
level of service remains Strategies
outsourcing instead
the same. of holding stocks.

 Although costs increase rapidly with increasing

logistics customer service level, increasing revenues
cover high costs.
 Service strategy should be developed in order to be
more effective and provide competitive advantage.
Objectives of Logistics Management
1
Reducing Costs (Transport, Storage, Inventory, etc.)

2
Increasing On Time Delivery Rate

3
Reducing Lead Time

4
Increasing Flexibility, Increasing Solutions

5
Increasing Data Reliability and Rapid Access Rate

6
Reducing Information / Document Deficiency
7
Ensuring Focus on Core Competency

8 Reducing Distortion / Damage / Loss Rate

Objectives of Logistics Management
9
Reducing Total Inventories in the Supply Chain

10
Increasing the Efficiency and Efficiency Rates of Logistics Activities

11
Improving Customer Relations / Increasing Customer Focus

12
Fair Sharing of Risk and Profit

13
Converting Fixed Costs into Variable Costs

14
Reducing Logistics Management Expenses
Principles of Logistics Management
Efficiency Standardization

Reliability

Affordability

Simplicity Traceability

Coordination Collaboration

Transparency

Flexibility Authority

Priority Qualifications
Principles of Logistics Management
• Eliminating activities that do not create value in the
Efficiency process

Affordability • Providing logistics at optimum cost

• It should be taken into account in all areas of logistics,

Simplicity both in planning and execution.

• Coordination must be ensured between logistics

Coordination planners, performers and customers.

• The logistics organization should be in a structure that

Flexibility can adapt to changing situations.

• To know which units, goods or services are a priority

Priority prevents time loss.
Principles of Logistics Management
• International standards are complied with in materials, services
Standardization and procedures, while time is also saved.
• Many unnecessary efforts occur, particularly in the presence of
Reliability excessive safety stock in environments where the system is not
trusted.
• With the use of information technology, it is possible to track the
Traceability operations in terms of quantity, status, time and place.

• In addition to the business, there should be cooperation between

Collaboration all parties of the supply chain.

• Activities are visible at least for situations that are not in violation
Transparency of the principle that they should know.

• Powers should be clearly defined, and situations such as

Authority excessive authority or non-authorization should be prevented.

• Adequate support is required for logistics operations. Sustainability and

Qualifications affordability are also essential.
Managed Logistics Activities
Identification and allocation of resources
Identification of requirements Initial Stage
of Logistics
Logistics project management Maintenance
1 Logistics
Order process
4
Inventory and material management

Demand forecasting
Customer service Business
2 Activities of
Supply management Logistics Logistics 5
Purchasing management Transportation
Quality control activities
Coding activities
Facility selection
Physical security Logistics 3 6
Facility
Environmental impacts Logistics
Informatics
Waste management
Managed Logistics Activities
Storage
Initial Stage Packaging
of Logistics Shipment
1 Maintenance
Logistics Handling
4 Reverse Logistics
Maintenance
Renovation

Business Transport activities

2 Activities of Mode selection
Logistics Logistics 5
Transportation Transport support plan
Fleet management / Vehicle
tracking
Tools / Equipment selection
Logistics Information
3 6 Logistics
Facility technologies
Informatics
Software
Mathematical models
Outsourcing
Outsourcing, in its simplest form, is the outsourcing of a good or service that
was previously produced within the company (insourcing).

 It was used as a concept in 1980.

 It was used as a management strategy in 1990.

 The expression
 The word
"outsourcing" was used
"outsourcing"
in the literature for the
appeared for the first
first time in an article
time in 1979.
published in 1981.
Outsourced Business Processes
 When outsourcing first emerged, it was perceived as a tool used by
companies to reduce the total number of employees and create cost
advantages.
 However, today this approach has become a strategic way of doing business,
used not only for cost reduction but also to increase functional efficiency.
 Generally, outsourcing is done for business processes with the following
features; Processes requiring expensive investment due to rapidly
changing technology

Services requiring expertise, processes subject to

rapidly changing market conditions, jobs with high
employment costs

Services with high working and investment

capital
Decision Model in Outsourcing
Is the capability for the logistics activity considered
sufficient for competitive advantage?

Consider outsourcing
Stay within the company and
Is there a competitive supply market?
develop your talent

Carefully consider the balance between the potential

benefits and risks of outsourcing this market. If the internal
solution is cumbersome, consider outsourcing. Consider outsourcing

To what extent is the logistics activity active?

High Medium Low

Opt for outsourcing and develop a Go for outsourcing and get short-
Stay inside
bilateral contract. term contracts.
Areas Where Companies Outsource

Software
Education
Accounting Handling

Human Resource Management Packaging

Insurance Custom

Web Design Advertising

Warehousing Transportation
Cleaning Catering
Outsourcing in Logistics
 Activities of companies such as distribution, storage, handling, customs
clearance and inventory control impose an additional cost when covered by
the units they create within the company.
 Moreover, considering the fact that logistics greatly affects competitiveness
today, the decrease in the quality of the actual product to be produced is one
of the worst situations encountered.
 When a business whose main business is production attempts to specialize in
each logistics activity, its concentration on its own business will gradually
deteriorate and the increase in logistics costs will reduce profitability.
 Outsourcing in logistics occurs through logistics providers.
Logistics Providers
 Logistics provider is the business responsible for the management of the
material flow from the source point to the destination point in terms of logistics
activities.
 The logistics provider is usually responsible for transportation, inventory,
warehousing, packaging, security and insurance.
 5 types of logistics providers, Fourth Fifth Party
Third Party Party Logistics
Logistics Logistics Provider
Second Party Provider
Provider
First Party Logistics
Logistics Provider
Provider
First Party Logistic Provider
 It is the company that carries out transportation (cargo, etc.) activities
between two points (received and delivered) or is responsible for
handling/storage operations within the business.
 This company may be a logistics company, or it may be a company that has
its own logistics activities carried out by its own logistics department.
 Although it mostly covers the internal transportation operations of companies,
it is the logistics provider with the narrowest scope of providers.
 Transport companies, port operators and warehouse companies can be given
as examples.

1PLP Firm Outsourced Company Logistics Activities

Second Party Logistic Provider
 Second party logistics providers have a wider geographical area than 1PLP.
 2PLPs own trucks, trailers, planes, trains or ships and use them in their
transportation and storage operations.
 Railway, maritime or national/international road companies can be given as
examples.

2PLP Firm

Outsourced Company Customer

Third Party Logistic Provider
 Third party logistics providers are companies that undertake the customer's logistics
activities, primarily transportation and storage.
 These companies handle international shipping, warehousing, inventory control,
packaging, labelling, shipping, distribution, etc. They are companies that specialize in
this field of their business and undertake the design and management of the entire
chain with the necessary facilities, equipment or personnel.

3PLP Firm

Supplier Outsourced
Company Customer
Fourth Party Logistic Provider
• 3PL companies are no longer able to meet the complex logistics needs of
businesses and institutions that focus on certain areas such as transportation and
storage.
• In order to close this gap, 4PL provides expert service on solutions to the complex
logistics chain.
• While third-party logistics mainly focus on application and execution-based issues,
4PL managers and consultants focus on strategic and technology-supported issues.
• 4PL companies actually act as supply chain management consultants.
• They also provide services in purchasing, demand forecasting and inventory
management, which are among the activities of supply chain management.
Fourth Party Logistic Provider

4PLP Firm

3PLP Firm 3PLP Firm

3PLP Firm

Supplier Outsoured Customer

Company
Fifth Party Logistic Provider
• Fifth party logistics bridges the gaps left by traditional third and fourth party logistics
providers.
• The goal of fifth party logistics is; to eliminate the need for third-party logistics
providers and fourth-party logistics providers and quickly transform it into a
confidential supply chain.
• Fifth party logistics can be expressed as a step in the transition to zero party
logistics.
• 5PL companies aim to benefit from 3PL and 4PL companies with maximum
efficiency.
• To achieve this, it uses information technologies and e-business applications.
Logistics Providers

 Ensuring that 5PLP / 3PLP and 4PLP companies

work more effectively with e-business methods
 4PLP / Coordination and supply chain management
consultancy of different 3PLP companies
 3PLP / Performing multiple logistics activities
(storage, transportation, handling, etc.)
 2PLP / National/international transportation
with different modes
 1PLP / Simple cargo operations within and
outside the company