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Chapter 1A: Logistics Management

Lecturer: M.A. Nguyen Le Dong Xuan
Faculty of Economics, HCMC University of Economics and Finance

LEARNING OUTCOMES

1. Discuss the economic impacts of logistics

2. Understand about logistics and logistics management
3. Analyze the increased importance of logistics
4. Dicuss the systems and total cost approaches to logistics
5. Expose logistical relationships within the firm
6. Understand about logistics activities

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Agenda Economic impacts of Logistics

Definition of Logistics & Logistics Management

The increased importance of logistics

The systems and total cost approaches to Logistics

Logistical relationships within the firm

Logistics activities

ECONOMIC IMPACTS OF LOGISTICS

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ECONOMIC IMPACTS OF LOGISTICS

Connection

Support Competition

Logistics

Market/
Service economic
integration

ECONOMIC IMPACTS OF LOGISTICS

Economic
Logistics growth

Economic
utility

Possession
Form utility Place utility Time utility
utility

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ECONOMIC IMPACTS OF LOGISTICS

Economic utility

Possession
Form utility Place utility Time utility
utility

Products are
The value or Product’s being available where
usefulness that in a form that (1) they are needed Products are
comes from a can be used by by the customer; available when
customer being the customer products are they are
able to take and (2) is of moved from needed by
possession of value to the points of lesser customers.
a product. customer. value to points of
greater value.

LOGISTICS – PLACE UTILITY & TIME UTILITY

- Move products from the point of
origin to the point of consumption
(by transportation activities)
Place utility - Expand the scope of market
- Increase added value for
products

Logistics - Increase added value for

products by transporting these
products to where they are needed
and when they are needed by
Time Utility customer.
- Delivery time is shorten (by
transportation activities)
- Manage inventory by Just In
Time method (JIT)

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LOGISTICS & PLACE UTILITY

5.000 VND

25.000 VND

40.000 VND

LOGISTICS & TIME UTILITY

Mooncakes are bought in Rose flowers and

Products usually are
the Mid-Autumn Festival chocolates are bought in
used in Tet holiday
Valentine’s Day

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ROLE OF LOGISTICS
- Process
- Productivity
Production
- Technology

- Time
- Trade openness
- Cost
Logistics Trade - Trade promotion
- Effectiveness
- Efficiency

DEFINITION OF LOGISTICS &

LOGISTICS MANAGEMENT

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HISTORICAL ORIGIN OF LOGISTICS

• The word “logistics” originates from the Greek “logos”.

• The Byzant emperor Leontos VI. (886 – 911), the Swiss general
Antoine – Henri Jomini (book “The Art of War”, Paris 1837)
connected logistics with military tasks.
• During World War II logistics received special attention when
American troops had to be supplied with the right quantity of
material, at the right time and at the right place.
• The term is now used widly in the civil sector.

LOGISTICS DEFINITION

“Logistics is the function responsible for

the flow of materials from suppliers into
an organization, through operations
within the organization, and then out to
customers”.
(Waters, C. D. J. (2003). Logistics: An
introduction to supply chain management.
Palgrave Macmillan, page 5)

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(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan)

(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan)

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Logistics đầu vào Logistics đầu ra

(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan)

EXERCISE 1:
Students are required to watch the video clip at link:
https://www.youtube.com/watch?v=kT_toh5NbxE
After watching the video clip, students answer 3 questions as follows:
1. Describe the movement of material in the table manufacturing example?
2. List 7’R in logistics?
3. Present the definition of logistics management?

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LOGISTICS MANAGEMENT
DEFINITION

“Logistics management is that 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 point of consumption in order to
meet customers’ requirements”.
(The Council of Supply Chain
Management Professionals – CSCMP)

COMPONENTS OF LOGISTICS MANAGEMENT

Management actions

Inputs into Planning Implementation Control Outputs into

logistics logistics

Natural resources Marketing orientation

(land, facilities, (competitive advantage)
equipment) Logistics management Time and
Human resources Raw In-process Finished Place Utility
materials inventory goods
Efficient movement
Financial resources to customer
Information resources Proprietary asset

Logistics activities
Customer service Plant and warehouse site selection
Demand forecasting Procurement (Lambert, Douglas M.,
Distribution communications Packaging James R. Stock, and Lisa
Inventory control Return goods handling M. Ellram (1998).
Material handling Salvage and scrap disposal Fundamentals of Logistics
Management. Boston:
Order processing Traffic and transportation
Irwin/McGraw-Hill, ©1998.
Parts and service support Warehousing and storage Page 5)

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THE INCREASED IMPORTANCE

OF LOGISTICS

5 TRENDS AFFECT TO
THE INCREASED IMPORTANCE OF LOGISTICS

1. A reduction in economic regulation

2. Changes in consumer behavior

3. Technological Advances

4. The growing power of retailers

5. Globalization of Trade

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THE INCREASED IMPORTANCE OF LOGISTICS

• A Reduction in Economic Regulation: Reduce in economic regulation in the

airfreight, railload, trucking industries allowed carriers flexibility in pricing and service.
• Changes in Consumer Behavior:
– Customized customer: The customer desires a product offering that is highly
tailored to the customer’s exact preferences. The customer will not accept a “one
size fits all” approach.
– Changing family roles: The role of women in the workforce => emphasize on
convenience associated with a family’s grocery shopping experience (24/24
openning, home delivery, ready-to-eat/ready-to-cook foods).
– Customer expectations: Customer expectations tend to increase through time.

THE INCREASED IMPORTANCE OF LOGISTICS

• Technological Advances:
– have influenced chanel design by allowing companies to offer an alternative
distribution channel, this alternative channel is direct because the final
customer orders directly from the producer rather than through an intermediary.
The removal of intermediaries between producer and consumer – called
disintermediation.
– Improve the productivity of the order picking process through using radio
frequency (RF) devices, voice-directed picking, and robotic picking.
– Global Positioning Systems (GPS) can provide real-time location information
about a shipment.

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THE INCREASED IMPORTANCE OF LOGISTICS

• The Growing Power of Retailers: The retailers’ power will increase in the future.
Retailers are Walmart, Costco, Dick’s Sporting Goods – called Big-box retailers –
store with large amounts of both floor space and products for sale. Their
logistical practices are often viewed as a barometer for emerging logistics trends.

• Globalization of Trade: Rising standards of living and multicountry trade alliances

have contributed to the growth of global trade. Logistics has played a key role. The
shiping container – a uniform sealed reusable metal box in which goods are
shipped – is often championed as an important catalyst for the growth in global trade.

THE SYSTEM AND TOTAL COST

APPROACHES TO LOGISTICS

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THE SYSTEM AND TOTAL COST APPROACHES TO LOGISTICS

- Company’s objectives can be realized by
recognizing the mutual interdependence of the
major functional areas of the
firm (marketing, production, finance, and logistics).
System - One logistics system does not fit all
approach companies.
- The logistics system of an organization that
emphasizes customer satisfaction is different
from the logistics system of an organization that
emphasizes cost minimization.
Logistics
- Cost trade-offs: changes to one activity cause
some costs to increase and others to decrease.
Total cost - Total cost approach: Integration of all activities
approach into a unified whole that seeks to minimize
distribution costs in a manner that supports an
organization’s customer service objectives.

THE SYSTEM APPROACHES TO LOGISTICS

(Murphy, P. R., & Knemeyer, A. M. (2018). Contemporary logistics.

Pearson Education. ISBN 978-0-13-451925-8. Page 26)

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THE SYSTEM APPROACHES TO LOGISTICS

Movement and storage of materials

Materials management
and components within a firm.

Storage of finished product and

Physical distribution
movement to the customer.

 Intrafunctional logistics – coordinating materials management and

physical distribution in a cost-efficient manner that supports an
organization’s customer service objectives.

Customer service levels

Total cost • Customer service
• Parts and service support
Cost trade-off
• Return goods handling

Inventory carrying costs Transportation costs

• Inventory management • Traffic and transportation
• Packaging
• Reverse Logistics

Warehousing costs
Lot quantity costs • Warehousing and storage
• Materials handling • Plant and warehouse site
• Procurement selection

Order processing and

information costs
• Order processing
• Logistics communication
• Demand forecasting/
Demand planning
(Lambert, Douglas M., James R.
Stock, and Lisa M. Ellram (1998).
Fundamentals of Logistics
Management. Boston:
Irwin/McGraw-Hill, ©1998. Page 16)

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LOGISTICAL RELATIONSHIPS WITHIN THE FIRM

LOGISTICS RELATIONSHIPS WITHIN THE FIRM

• Logistics vs Finance:
– The finance department is often instrumental in approving capital budgeting
decisions that affect logistics.
– Logistics tend to measure inventory in terms of units whereas the finance
department often measures inventory in terms of its cost or value in dollars.

• Logistics vs Production:
– The most common interface between production and logistics involve the length of
production lines. Long production runs result in a lower production cost per unit, but
generate large amounts of inventory.

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LOGISTICS RELATIONSHIPS WITHIN THE FIRM

• Logistics vs Marketing:
– Place Decisions
– Price Decisions
• Landed costs: the price of a product + transportation costs
– Product Decisions
• Stockouts: being out of an item at the same time there is
demand for it
• Sustainable products: products that meet present needs without
compromising the ability of future generation to meet their needs
– Promotion Decisions

LOGISTICS ACTIVITIES

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LOGISTICS ACTIVITIES
STT Logistics activities STT Logistics activities

1 Customer service 8 Parts and service support

2 Demand forecasting/planning 9 Plant and warehouse site selection

3 Inventory management 10 Procurement

4 Logistics communications 11 Return goods handling

5 Materials handling 12 Reverse logistics

6 Order processing 13 Traffic and Transporatation

7 Packaging 14 Warehousing and storage

LOGISTICS ACTIVITIES
GROUP WORK
From page 33 – 35 in your compulsory textbook, please
discuss with your partners about:
1. Main tasks in each logistics activity?
2. The primary aim of each logistics activity?

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No. Activity
1 Customer Service
2 Demand Forecasting
Inventory Management/
3
Stock Control
4 Logistics Communications
No. Activity
5 Materials Handling
6 Order processing
7 Packaging
8 Parts and service support
Plant and warehouse site
9  To find the best locations for activities of logistics
selection
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Main tasks
• Make sure that the right person receives the right product in
the right quantity at the right place at the right time in the
right condition and at the right price
• Estimate product demand in a future time period
 To reduce inventory levels in a supply chain
• Consider the materials to store, overall investment, customer service,
stock levels, order sizes, order timing
• Three costs that logisticians should consider: (i) the cost of carrying
product, (ii) the cost of ordering product, (iii) the cost of being out of stock
 To set the policies for inventory
• Link all parts of the supply chain
• Pass information about products, customer demands, materials to be
moved, timing, stock levels, availability, problems, costs, service levels,…
 To combine the physical flow of materials and flow of information
Main tasks
• Move materials through the operations within an organization
• Use appropriate equipment with little damage
• Use special packaging and handling where needed
 To give efficient movements, with short journeys
• Control process from getting orders from customers  checking on the
status of orders  notify to customer about them  filling the order 
making it available to the customer.
• Ensure 2 objectives: (1) Marketing and (2) Product protection.
• Packaging must be suitable for (1) movement and storage and
(2) material handling equipment.
• Providing after-sale service support
• Delivery of repair parts to dealers, stocking adequate spares, picking up
defective or malfunctioning products from customers, and responding
quickly to demands for repair.
• Move stocks of finished goods nearby warehouses
• Put into stores nearer to customers
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No. Activity Main tasks

• Find suitable suppliers
• Negotiate terms & conditions
• Organize delivery
10 Procurement
• Arrange insurance & payment
• Link importantly with upstream activities
 To get materials into the organization
• Return goods take place because of a problem with the performance of
11 Return goods handling
the item/Customer changed his/her mind.
• Pallets, delivery boxes, containers are returned to suppliers for reusing
12 Reverse logistics
• Metals, glass, paper, plastics, oils are returned to suppliers for recycling
• Provide for the movement of materials and goods from point of origin 
point of consumption  point of disposal
13 Traffic and Transporatation • Select mode of transportation (air, rail, water, truck, pipeline)
• Select carrier, transportation route
• The largest cost among logistics activities
• Store special materials (frozen food, drugs, alcohol, chemicals, animals,
dangerous goods)
14 Warehousing and storage • Store materials in the right conditions, treatment and packaging
 To keep materials in good condition & make sure that materials can
be available quickly

THE AIM OF LOGISTICS

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THE AIM OF LOGISTICS

- The overall aim of logistics is to

achieve high customer
satisfaction.

- It must provide a high quality

service with low – or acceptable
– costs.

THE AIM OF LOGISTICS

7 R’s of Logistics

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ESSENTIAL AND EXPENSIVE

• Logistics is essential for every organization. Without logistics, no

materials move, no operations can be done, no products are delivered
and no customers are served.

• Not only is logistics essential, but it is also expensive.

• The cost of logistics varies widely between different industries.

• Logistics costs are 15 – 20% of turnover. And haft of this spent on

transport & storage.

VALUE OF LOGISTICS IN SUPPLY CHAIN

VALUE OF LOGISTICS IN SUPPLY CHAIN

Ensuring the
smooth Increasing
Releasing of
operation of overall Net cost
labor
all parts of customer reduction
resources
the supply satisfaction
chain

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CHAPTER SUMMARY
• There are 4 types of economic utility; however, logistics contributes to the place and
time utility;
• Logistics is the function responsible for the flow of materials from suppliers into an
organization, through operations within the organization, and then out to customers.
• Logistics management is that 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 point of
consumption in order to meet customers’ requirements.
• 5 trends affect to the increased importance of logistics includes:
 A reduction in economic regulation
 Changes in consumer behavior
 Technological Advances
 The growing power of retailers
 Globalization of Trade

CHAPTER SUMMARY
• Company should care about 2 approaches in logistics:
 The Systems approach
 Total cost approach
• There are 14 logistics activities include customer service, demand forecasting/planning,
inventory management, logistics communications, materials handling, order processing,
packaging, parts and service support, plant and warehouse site selection, procurement,
return goods handling, traffic and transporatation, warehousing and storage.
• The overall aim of logistics is to achieve high customer satisfaction. It must provide a
high quality service with low – or acceptable – costs.
• 7’Rs in Logistics include right product, right quantity, right condition, right place, right time,
right customer, right price.
• Logistics costs are 15 – 20% of turnover. And haft of this spent on transport & storage.

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CASE STUDY

Nguồn: Armstrong & Associates 6/3/2020

GROUPWORK
Logistics costs in Vietnam account for 16.8% of GDP (higher than the world
average of 10.7%). Students are required answer the questions as follows:

1. Find out at least 3 causes of increasing logistics costs in Vietnam?

2. Propose 3 solutions to help reduce logistics costs in Vietnam? (Note that:

Solutions could be deal with the causes you have mentioned above)

Please note that, the answer will not exceed A4 paper.

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