CH 01 Overview of Logistics

Contemporary Logistics
Eleventh Edition
Chapter 01
Overview of Logistics
Copyright©©2015,
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2012,2009
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Key Terms (1 of 2)
• 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
Copyright © 2015, 2012, 2009 Pearson Education, Inc. All Rights Reserved 2
Key Terms (2 of 2)
• Physical distribution • Stockouts
• Place utility • Sustainable products
• Possession utility • Systems approach
• Postponement • Tailored logistics
• Sorting function Stock- • Time utility
keeping units (SKUs)
• Total cost approach
Learning Objectives
• To discuss the economic impacts of logistics
• To define what logistics is
• To analyze the increased importance of logistics
• To discuss the systems and total cost approaches to logistics
• To expose you to logistical relationships within the firm
• To introduce you to marketing channels
• To provide a brief overview of activities in the logistics
channel
• To familiarize you with logistics careers
Economic Impacts of Logistics
• Macroeconomic Impacts
• Economic Utility
• Possession utility
• Form utility
• Place utility
• Time utility
Table 1-1: The Cost of the Business Logistics System in
Relation to a Country’s Gross Domestic Product (GDP)
(1 of 2)
Country Logistics as a Percentage of GDP

United States 8.5
South Africa 12.7
India 13.0
Thailand 15.2
Brazil 15.4
People’s Republic of China 17.8
Finland 19.0
Vietnam 12.5
Table 1-1: The Cost of the Business Logistics System in
Relation to a Country’s Gross Domestic Product (GDP)
(2 of 2)
• Sources: “South Africa: Logistics costs as percentage of GDP
improves,” TradeMark SA;
http://siteresources.worldbank.org/BRAZILINPOREXTN/Resource
s/3817166-1323121030855/FreightLogistics.pdf?resourceurlname
=FreightLogistics.pdf
; “Heavy logistics costs weigh on China’s economy: report-
Xinhua,” English.news.cn; Autocar Professional; “Logistics cost to
GDP declines,” The Nation; “Vietnam high logistics costs lower
businesses’ competitiveness,” TalkVietnam;
http://www.panostaja.fi/index.php?id=150; 24th Annual State of
Logistics Report, Council of Supply Chain Management
Professionals, 2013.
Logistics: What It Is
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.”
• Source: www.cscmp.org
The Increased Importance of Logistics
• A Reduction in Economic Regulation
• Changes in Consumer Behavior
• Technological Advances
• The Growing Power of Retailers
• Globalization of Trade
The Systems and Total Cost
Approaches to Logistics (1 of 2)
• Systems Approach
• Interdependence of company and logistics goals and
objectives
• Interdependence of functional areas
• Stock-keeping units (SKUs)
• Interdependence of logistics activities or
Intrafunctional logistics
Figure 1.1 Control Over the Flow of Inbound and
Outbound Movements
In this drawing, the circles represent buildings where inventories are stored, and the lines
with arrows represent movement performed by carriers, a stop-and-start process. Current
thought deals more with flows, possibly in different volumes and at different speeds, but
without the inventory standing still. The supply chain extends to both the left and right of this
diagram and includes the suppliers’ suppliers and the customers’ customers.
The Systems and Total Cost
Approaches to Logistics (2 of 2)
Total Cost Approach
• 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
Logistical Relationships within the Firm
(1 of 2)
• Finance
• Production
• Marketing
Logistical Relationships within the Firm
(2 of 2)
• Marketing
• Place Decisions
• Price Decisions
• Landed costs
• Product Decisions
• Stockouts
• Sustainable products
• Promotion Decisions
Marketing Channels (1 of 3)
• “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
• Channel members
• Manufacturers
• Wholesalers
• Retailers
• Ownership channel
• Covers movement of the title to the goods
• Negotiations channel
• Buy and sell agreements are reached
• Financing channel
• Payments for goods
• Promotions channel
• Promoting a new or existing product
• Logistics channel
• Moving and storing product throughout the channel
Channel Intermediaries/Facilitators
(1 of 2)
• Ownership channel
• Banks, finance companies
• Negotiations channel
• Brokers
• Financing channel
• Banks, insurance companies, finance companies
Channel Intermediaries/Facilitators
(2 of 2)
• Promotions channel
• Advertising agencies, public relations agencies
• Logistics channel
• Freight forwarders
Activities in the Logistical Channel
• Customer service • Demand forecasting
• Facility location decisions • International logistics
• Inventory management • Materials handling
• Order management • Packaging
• Procurement • Reverse logistics
• Transportation management • Warehousing management
Logistics Careers (1 of 3)
• 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.
• “Logistician” highlighted as one on the 50 best careers
for the year 2010 and suggested that logistics
employment should increase by 20% through 2018.
• Source: Liz Wolgemuth, “The 50 Best Careers of 2010”,
U.S. News & World Report, December 28, 2009.
• Examples of Logistics-related jobs include:
• Logistics analyst
• Consultant
• Customer service manager
• Purchasing manager
• Transportation manager
• Warehouse operations manager
• Source: www.cscmp.org
Logistics Professionalism (1 of 2)
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)
Logistics Professionalism (2 of 2)
• 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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