Overview of Logistics

and Supply Chain

Management
PHẠM THỊ TRANG, PH.D
Learning objectives
• To describe Logistics and Supply Chain Management.

• To discuss the economic impacts of logistics.

• To analyze the increased importance of logistics.

• To discuss the systems and total cost approaches to logistics.

• To consider potential barriers to supply chain management

implementation

• To understand optional approaches for supply chain integration

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 Key Terms

– Big-box retailer – Humanitarian logistics

– Co-branding – Landed costs
– Container – Logistics
– Cost trade-offs – Marketing channels
– Disintermediation – Logistics
– Economic utility – Marketing channels
– Form utility – Materials management

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 Key Terms
– Physical – Stockouts
distribution – Sustainable products
– Place utility – Systems approach
– Possession utility – Tailored logistics
– Postponement – Time utility
– Sorting function – Total cost approach
Stock-keeping units
(SKUs)

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Contents

Logistics
• Definition
• Economic utility in Logistics
• The Systems and Total Cost Approaches to Logistics
• Types of logistics
Supply Chain Management
• Definition
• Flows in supply chain
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1. Getting Started—What Is Logistics?

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 “Soldiers win battles, logistics wins wars”

The relief of hunger in Africa Truong Son matching Second World War

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Farm to Plate

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1. What Is Logistics?
Council of Logistics Management
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.”

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 Inlogistics, if yougoanhour without a screw-up, you’vehada great day.
—Gus Pagoni

Right quantity
Right product
Right
condition/quality
7Rs in Logistics

Right place Right cost/price

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Right time Right people
 Mass logistics and Tailored logistics

When companies use one logistics Mass logistics

approach to target ALL their customers.

When companies use various logistics approaches

to target various groups of their customers. Tailored logistics

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Example: Different product ranges have different logistics performance
objectives

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What Is Logistics?

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Figure 1.1 The key components of distribution and logistics, showing a few
of the associated detailed elements

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Conduct research on logistics activities related to importing a
particular product into Vietnam and estimate how long it takes? (the
more detailed, the better).
1. BMW cars from Germany
2. Chicken breast from USA
3. Fertilizer from China

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One of the key relationships can be described as follows:
Logistics = Materials Management + Distribution
where ‘materials management’ represents the activities concerning materials
going into and through the production process and ‘distribution’ represents the
process of making a product available to the consumer or business that needs it.
An extension to this idea helps to illustrate that the supply chain covers an even
broader scope of the business area. This includes the supply of raw materials and
components as well as the delivery of products to the final customer. Thus:
Supply Chain = Suppliers + Logistics + Customers

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Reverse Logistics https://www.youtube.com/watch?v=66qOop6J8Q8

Suppliers Customers

• Return of goods by customers

• Return of unsold goods by distribution partners due to
contract terms
• Re-use
• Refurbishment of goods
• Repairs and maintenance as per guarantee agreements
• Re-manufacturing of goods from returned or defective
items
• Selling of goods to a secondary market in response to
returns or overstocking
• Recycling and disposal of end-of-life goods

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MOTIVATIONS FOR REVERSE LOGISTICS

 Government policy and legislation

 Economic considerations
 Environmental considerations
 Shift towards buying sets of services

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Reverse Logistics

A closed‐loop reverse logistics system An open‐loop reverse logistics system

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Discussion
Design and implement a reverse logistics process for your firm,
what are the key factors you would consider for implementation,
and why? (chose one of these business to discussing with your
group)
1. Cosmetics
2. Furniture
3. Fashion
4. Home applicant

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2. Economic Impacts of Logistics
Figure 1.2 Logistics costs as a percentage of GDP for selected countries

In Vietnam, logistics costs account for

about 25% of GDP

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 2. Economic impacts of logistics
 Microeconomic Impacts
A product’s being in a form that can be used by the customer and is
Form utility
Economic utility

of value to the customer

Having products available where they are needed by customers;

Place utility products are moved from points of lesser value to points of greater
value

Time utility Having products available when they are needed by customers

Possession The value or usefulness that comes from a customer being able to
utility take possession of a product

DO THI THU HA, MSC. 22

3. The Increased Important of Logistics
1. Economic deregulation
• Relaxed government control of
carriers’ rates and fares, entry
and exit, mergers and
acquisitions, and more.
2. Changes in consumer behavior
• Customized customer
• Changing family roles
• Rising customer expectations
mass logistics cannot be used
3. Technological advances
• Disintermediation
• Reduction of paper works
• Shipment tracking
increase the effectiveness and
efficiency
4. The growing power of
retailers
• big-box retailers
• Omnichannel retailing
5. Globalization of trade
• Shipping container
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4. The Systems and Total Cost
Approaches to Logistics
• Systems Approach: company’s objectives can be realized by recognizing
the mutual interdependence of the major functional areas of the firm.
– Interdependence of company and logistics goals and objectives
– Interdependence of functional areas
• One logistics system does not fit all companies
• Stock-keeping units (SKUs)
– Interdependence of logistics activities or
Intrafunctional logistics: coordinating materials management, and
physical distribution.

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

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 4. The Systems and Total Cost Approaches to
Logistics
• Total Cost Approach: all relevant activities
should be considered as a whole, not individually.
– Cost trade-offs: changes to one activity cause
some costs to increase and others to decrease
– Total Logistics Concept: integration of all
activities into a unified whole that seeks to
minimize distribution costs in a manner that
supports an organization’s customer service
objectives
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4. The Systems and Total Cost Approaches
to Logistics
• Logistics involves intelligent trade-offs:

Purchase discounts <> Raw Materials Inventory

Production efficiency <> Finished Goods Inventory
Freight discounts <> Finished Good Inventory
Lower planned cost <> More stable costs

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5. Logistical Relationships within the Firm
 Logistics vs. Finance
• Purchasing or leasing
• Terms of cost/value or terms of units
 Logistics vs. Production
• The length of production lines.
 Logistics vs. Marketing

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5. Logistical Relationships within the Firm
Marketing Mix (4 P’s):
o Place Decisions: networks – logistics & the marketing channel
o Price Decisions
- Landed costs
o Product Decisions
- Stockouts
- Sustainable products
oPromotion Decisions

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6. Key Features involved in Logistics Management

•Customer service •Demand forecasting

•Facility location decisions •International logistics
•Inventory management •Materials handling
•Order management •Packaging
•Procurement •Reverse logistics
•Transportation •Warehousing
management management

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Types of Logistic Operators
1PL 2PL 3PL 4PL 5PL
Depending on the
amount and level
of integration of
the services they
provide, Logistic
Operators can
range from first-
party to fifth-
party logistics
providers

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6. Types of Logistics
Type Description
Event Logistics The resources (facilities, people,
and infrastructures) used to
organize, deliver and execute an
event from initial schedule
through teardown and clean up.
Passenger Logistics Moving people
Military Logistics Moving groups of people and
supplies, setting up camps,
replenishing supplies and people,
breaking camp down again and
moving it out.
Service Logistics All the people, facilities and
supplies in place to effectively
deliver services to customers.
Humanitarian Logistics Planning the effective flow and
storage of goods as well as the
exchange of information to
alleviate the suffering of people.
Examples
•Halong Festival
•Lunar New Year in Hanoi, Vietnam
•Seagame Games
•Scheduled or private airplane
flights, bus rides, highway travel
• Vietnamese People's Army
operation to liberation South
Vietnam
•Hair salon
•Hospital operations
•Red Cross assistance to people of
Haiti in the aftermath of the 2010
earthquake.
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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
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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 Multiple Choice Questions
1.___________ utility refers to the value or usefulness that comes from a customer being able
to take possession of a product.
a. Time
b. Place
c. Form
d. Possession
2. All of the following are types of economic utility, except:
a. Time
b. Production
c. Place
d. Possession
e. All of the above are types of economic utility

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Multiple Choice Questions
3. “How well a company does what it says it’s going to do” represents ___________.
a. efficiency
b. Productivity
c. leading edge logistics
d. effectiveness

4. What concept refers to “how well company resources are used to achieve what a company
promises it can do?”
a. Efficiency
b. Productivity
c. Reengineering
d. Effectiveness

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 Multiple Choice Questions
5. Every customer getting the same type and level of logistics service refers to ___________.
a. tailored logistics
b. mass logistics
c. effectiveness
d. efficiency

6. The ____ concept suggests that the customer desires a product offering that is highly tailored to the
customer’s exact preferences.
a. market demassification
b. relationship marketing
c. customized customer
d. niche marketing

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 Multiple Choice Questions
7. Which concept refers to the storage of finished product and movement to the customer?
a. supply chain management
b. business logistics
c. physical distribution
d. materials management

8. Logistics managers use the ____ approach to coordinate materials management and physical
distribution in a cost-efficient manner.
a. total cost
b. supply chain
c. interfunctional logistics
d. intrafunctional logistics

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 Multiple Choice Questions
9. The four basic components of the marketing mix include all of the following except:
a. price
b. production
c. place
d. promotion

10. The ____ department often measures inventory in terms of its cost or value in dollars, whereas ____
tends to measure inventory in terms of units.
a. marketing; logistics
b. finance; production
c. marketing; production
d. finance; logistics
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11. The movement and storage of materials into a firm refers to:
a. physical distribution
b. materials management
c. supply chain management
d. materials handling
12. ____ refers to the removal of intermediaries between producer and consumer.
a. direct channels
b. market demassification
c. consolidation
d. disintermediation

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13. ____ are stores with large amounts of both floor space and product for sale.
a. mass merchandisers
b. power retailers
c. big-box retailers
d. do-it-yourself (DIY) retailers
14. A cost trade-off is a situation where:
a. all costs react according to their individual degrees of inflation in the economy
b. all costs are reflected as a percentage variation from standard costs
c. some costs increase and some costs decrease
d. some costs are eliminated by efficient management controls

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15. ____ refers to being out of an item at the same time there is demand for it.
a. intensive distribution
b. tailored logistics
c. stockout
d. supplier indifference
True-False Questions
16. Logistics is only concerned with forward flows, that is, those directed towards the point of
consumption.
17. The purpose of logistics is to maximize customer service.
18. Disintermediation refers the removal of intermediaries between producer and consumer.
19. Humanitarian logistics represents an emerging application of logistics to not-for-profit
organizations.
20. Logistics has played a minor role in the growth of global trade.

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The Supply Chain Management Concept
 To learn about supply chains and how the network of inter-
organizational relationships is managed
 To understand differences between prevalent supply chain process
frameworks
 To consider potential enablers of supply chain management
implementation
 To consider potential barriers to supply chain management
implementation
 To understand optional approaches for supply chain integration

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SCM is Logistics taken to a higher level of sophistication

The Evolution of Supply Chain Management

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What is a Supply Chain?
A supply chain can be liberally viewed as a combination of
processes, functions, activities, relationships, and pathways
along which products, services, information, and financial
transactions move in and between enterprises from original
producer to ultimate end-user or consumer.1
1John Gattorna, “Supply Chains Are the Business,” Supply Chain Management Review 10, no. 6 (2006): 42–49.

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Evolution of Supply Chain Management

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Example: Stages of the detergent supply chain
Paper Packaging
Wood
supplier supplier

P&G &other Coop Mart or

Coop Mart Customers
Production Distributions

Chemical Plastic
supplier supplier

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Practice
Describe and draw a supply chain for a bicycle
repair shop, and list the important supply chain
members

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 The basic stages of a supply chain

Supplier Manufacturer Warehouse Retailers Consumer

Distributor

Buy Make Move Sell Serve

things things things things things
Procurement Production Transportation
or Purchasing Inventory belong to
Warehousing
Marketing
Distribution
belong to management
Operations
management Logistics
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 Logistics Versus Supply Chain Management
• Logistics activities are part of managing one’s supply chain
• logistics refers to the movement, storage, and flow of goods,
services and information within the overall supply chain.
• Supply chain management is a way to link major business
processes within and across companies into a high-performance
business model that drives competitive advantage.

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 Logistics Versus Supply Chain Management
• The main focus of supply chain is a competitive
advantage, while the main focus of logistics is meeting
customer requirements.
• SCM is inclusive of logistics management activities
• Logistics managers can contribute to the success and
benefit from involvement in SCM
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SCM Process Frameworks

Supply Chain Operations Reference (SCOR) Model

• Focused on the logistics, operations, and procurement
functions

Global Supply Chain Forum (GSCF) Model

• All business functions

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Six Processes in the Supply Chain Operations
Reference (SCOR) Model

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Eight Processes in the Global Supply Chain
Forum (GSCF) Model

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Key Attributes of Supply Chain Management
 Customer power

 Long-Term Orientation

 Leveraging technology

 Supply chain facilitators

 Inventory Control
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 Customer Power
Information is power
 Customer has gained tremendous power over buying decisions
 Internet allows the consumer to become highly knowledgeable
about:
◦ An individual organization and its
◦ Competing organizations and their products
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Customer Power
Customer needs and wants changes quickly
 Fast supply chain
 Agile supply chain
 Perfect orders

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Customer Power
Traditional supply chains
◦ Factory-driven, push oriented
◦ Focused on internal cost metrics (measures) such as labor costs and
freight costs

Customer-centric supply chains

◦ Pull-oriented
◦ Concerned with metrics that take a more holistic perspective
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Long-Term Orientation

Relational Transactional
exchanges – exchanges –
“What's in if for “What's in it for
us?”. me?”

Partnerships – also called strategic alliances, third-party

arrangements, and contract logistics, are positive, long-term
relationships between supply chain participants, are part and parcel of
a relational exchange.
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Relationship Structures

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 Leveraging Technology
Computing Power and Internet – allows fast, low-cost mathematical solutions to
complex supply chain issues
◦ Allows a supply chain party to have virtually instantaneous visibility to the same
data as other parties in the supply chain.
◦ Offers the opportunity for supply chains to become more proactive and less
reactive.
◦ Can translate into lower inventories and improved profitability throughout the
supply chain.
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Enhanced Communication across Organizations
POS (Point of Sale) information – example: retail point-of-sale
information can be transmitted directly to suppliers and translated into
orders for replenishment of products.

Vendors may allow customers to query vendor inventory records to

determine what products are in stock and where the stocks are located

.
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Barriers to Supply Chain Management
Regulatory and political considerations
Lack of top management commitment
Reluctance to share, or use, relevant data
Incompatible information systems
Incompatible corporate cultures
Globalization

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Supply Chain Integration
Long-term, mutually beneficial agreements
◦ Partnerships
◦ Strategic alliances
◦ Third-party arrangements
◦ Contract logistics
Methods used to integrate
◦ Vertical integration
◦ Formal contracts
◦ Informal agreements

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