DIMENSION OF

LOGISTICS
MODULE 7
INTRODUCTION
 Origins date back to the military around WWII
– Gulf War regarded as a ‘logistics war;
 Emphasis on Quality and meeting customer

requirements

 order fulfillment
 Competitive advantage.
 Profitability.
Definition
 Logistics is the process of anticipating
customers needs and wants, acquiring the
capital, materials, people, technologies and
information necessary to meet those needs
and wants, optimizing the goods- or service-
producing network to fulfill customer request
and utilizing the network to fulfill customer
requests in a timely way.
Dimensions
 Macro dimensions
 Micro dimensions
Macro Dimension
 Logistics impacts and its relationship with
economy
 Cost associated with logistics
 GDP
 Rate of growth in the economy.
LOGISTICS COSTS
 CARRYING COSTS
Interest
Taxes, depreciation, insurance
Warehousing
 TRANSPORTATION COST

Motor carriers
Truck
Other carriers
Rail roads, water ,oil pipelines
Air
Forwarders
 LOGISTICS ADMINISTRATION
VALUE ADDED ROLE OF LOGISTICS
 Four principal types of economic utility add
value to product or services.
 FORM UTILITY
 PLACE UTILITY
 TIME UTILITYTIME UTILITY
 POSSESSION UTILITY
MICRO DIMENSIONS
 LOGISTICS INTERFACES WITH OPERATIONS/
MANUFACTURING
 LOGISTICS INTERFACE WITH MARKETING
 LOGISTICS INTERFACE WITH OTHER AREAS.
LOGISTICS INTERFACES WITH OPERATIONS/
MANUFACTURING

 Length of production runs

 Seasonal demand
 Supply-side interface
 Protective packaging
 Foreign and third party alternatives
LOGISTICS INTERFACE WITH MARKETING

 Marketing mix
 PRICE
 Carrier pricing
 Matching schedules
 PRODUCT
 Consumer packaging
 PROMOTION
 Push versus pull
 Channel competition
 PLACE
 Wholesalers versus retailers
LOGISTICAL ACTIVITIES
 Traffic and transportation
 Warehousing and storage
 Industrial packaging
 Material handling
 Inventory control
 Order fulfillment
 Demand forecasting
 Production planning
 Purchasing
 Customer service levels
 Plant and warehouse site location
 Return good handling
 Parts and service support
 Salvage and scrap disposal
 Transportation - physical movement or flow of
goods
 Storage - inventory management and warehousing
 Packaging - affected by product and
transportation
 Materials handling - movement in, from, and
within a warehouse
 Order fulfillment - completing customer orders,
affects lead time
 Forecasting - predicting inventory necessary to
fulfill customer demand
 Production planning - product necessary to cover
market
 Purchasing - procurement of supplies, affects
transportation
APPROACHES TO ANALYZING
LOGISTICS SYSTEM
 MaterialsManagement versus Physical
Distribution
◦ Balanced System
◦ Heavy Inbound
◦ Heavy Outbound
◦ Reverse Systems
 Cost centers
◦ Trade offs
Approaches to Analyzing Logistics
Systems
 Nodes versus links
◦ nodes - points where goods stop for
processing
◦ links - transportation connecting
nodes
 Logistics Channels - network of

intermediaries that contribute to

efficient flow of goods
LOGISTICS AND SYSTEM ANALYSIS
 System - is a set of interacting elements,
variables, parts or objects that are
functionally related to one another and that
form a coherent group.
 Optimization –always the best alternative

(water transportation example)

Logistics System Analysis
 Levels of optimality
◦ Delivery timeframes
 Functional relationships
◦ Interdepartmental cooperation
 Constraints
TECHNIQUES OF LOGISTICS SYSTEM
ANALYSIS
 Short-Run/Static Analysis
◦ Look at short run situation and select the system
with the lowest overall cost.
 Long-Run/Dynamic Analysis
◦ Mathematically calculate the point of equality
between the two systems
FACTORS AFFECTING THE COST AND
IMPORTANCE OF LOGISTICS
 COMPETITIVE RELATIONSHIPS
 PRODUCT RELATIONSHIPS
 SPATIAL RELATIONSHIPS
COMPETITIVE RELATIONSHIPS
 LENGTH OF ORDER CYCLE
 NATURE OF PRODUCT
 RELATIONSHIP TO LOST SALES
 RELATIONSHIP TO TRANSPORTATION
PRODUCT RELATIONSHIP
 Dollar Value - product value increases, cost
of warehousing, transportation and inventory
increases
 Density- higher the density, more efficient
use of warehouse and transportation space
 Damage -greater the risk of damage, higher
the transportation and warehousing cost
 Special Handling Requirements
Spatial Relationships
Distance Factor