Ch03 PPT 10e (Sept 8, 2015)

CHAPTER 3
Role of Logistics in
Supply Chains
Supply Chain Management: A Logistics Perspective (10e)

Coyle, Langley, Novack, and Gibson
© 2016 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Outline
 Value-added roles of logistics
 Key logistics activities
 Macro perspective of logistics
 Micro dimension of logistics
 Logistics and systems analysis
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
2
What Is Logistics?
Logistics can be viewed as part of organizational
management with four major subdivisions.
4 1 Part of supply chain that plans, implements,

and controls the flow and storage of goods,
services, and related information.
Service Business
Logistics Logistics
2 Design and integration of all aspects of support
for the operational capability of the military
1 forces and their equipment.
3 3 Network of activities, facilities & personnel

Event Military required to organize, schedule & deploy the
Logistics Logistics resources for an event to take place and
withdraw after the event.
2 4 Acquisition, scheduling & management of

facilities, assets, personnel & materials to
support a service operation & business.
or in part. 3
Value-added Roles of Logistics
Five Principal Types of Economic Utility
TIM
E
PLAC FOR
E Economic M
Utility
QUANTITY POSSESSIO
N
or in part. 4
Value-added Roles of Logistics
Generally, production/manufacturing activities are credited with
providing form utility; logistics activities with time, place, and
quantity utilities; and marketing activities with possession utility.
Logistics
Place, Time &
Quantity utility
Production
Form
utility
Marketing
Possession
utility
or in part. 5
Key Logistics Activities
Inventory Customer
control service
Production
Storage 5 planning & 10
scheduling Plant &
Transporta- 2 Order 8 warehouse
tion fulfillment site location
1 Industrial 6 Procurement 11
packaging
3 Demand
forecasting
9 Others*
Materials
handling
7 12
* Others include parts and service
4 support, return goods handling, and
salvage and scrap disposal.
or in part. 6
Macro Perspective of
Logistics
Macro Perspective of Logistics
U.S. Business Logistics Costs
1.5 1.42 1.41 1.45
1.34 1.36 1.36
1.31
1.2 1.23
1.12
1
$ Trillions
0.5
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Figure 3-2

or in part. 8
Logistics Costs and GDP
Images courtesy of Logistics Management (2015)
or in part. 9
Major Categories of Logistics Costs
Three major categories of
logistics costs: Warehousing and
inventory costs, transportation
costs, and other logistical costs.
Images courtesy of Logistics Management (2015)
or in part. 10
Micro Dimension of
Logistics
Logistics interface with Factors affecting cost &

other functional areas importance of logistics
Micro Dimension of Logistics
Logistics Interfaces with Other Functional Areas
Manufacturing Marketing (4 Ps Marketing Mix)

 Length of the production run  Price e.g. purchase quantity discounts
 Available quantity of raw material  Product e.g. size, shape, weight,
and component packaging
 Industrial packaging  Promotion
 Place (distribution channel selection)
Finance
Logistics
Accounting
 Inventory  Cost information for analysis of
 Warehouses & transportation fleet alternative logistics options
owned and/or outsourced  Supply chain tradeoffs and
 Customer service
performance measurement
or in part. 12
Factors Affecting Cost & Importance of Logistics
1 Competitive relationships
2 Order cycle length
3 Substitutability
4 Inventory effect
5 Transportation effect
6 Product-related factors
7 Spatial relationships
or in part. 13
Factors Affecting Cost & Importance of Logistics (continued)
Competitive Order Cycle

Length Substitutability
Relationships
 Customer service can 

 Shorter order cycles Customer service is
be a very important reduce the important for highly
form of competition. inventory required substitutable
by the customer. products to reduce
lost sales cost.
or in part. 14
Transportation Spatial
Inventory Effect Effect Relationships
 Increasing inventory 
 Cost of lost sales The location of fixed
costs can reduce the can be reduced by points in the logistics
cost of lost sales. spending more on system with respect
transportation to demand and
service to improve supply points are very
customer service. important to
transportation costs.
Images courtesy of (left to right) Sales VU, Advance Staffing Solutions, WCL Consulting
or in part. 15
Spatial Relationship Example
SA1 SB1 SB2 $0.60

$0.40
A $0.75
$0.50 $1.15 B
SA2 $3.50
Production Market
cost $8.50 Production
cost $7.00
or in part. 16
Product-related Factors
 Dollar value. The product’s dollar value typically
affects warehousing costs, inventory costs,
transportation costs, packaging costs, and even
materials-handling costs.
 Density. Weight/space ratio affects transportation
and warehousing costs. As density increases for a
product, its transportation and warehousing costs
tend to decrease.
 Susceptibility to damage. The greater the risk of
damage to a product, the higher the transportation
and warehousing cost.
 Special handling requirements. Need for special handling (e.g. refrigeration,
heating, or strapping) will usually increase warehousing, transportation, and
packaging costs.
or in part. 17
Logistics and
Systems Analysis
Logistics and Systems Analysis
Short-run and Long-run Analysis
Short-run or
 Concentrates on a
specific point in
Static time or level of
Analysis production output.
Long-run or
 Examines a logistics
system over a long
Dynamic time period or range
Analysis of output.
or in part. 19
Logistics and Systems Analysis
Approaches to Analyzing Logistics Systems
The analysis of logistics systems may require different
views or perspectives of logistics activities.
Examine logistics as Examine logistics Examine nodes Examine supply
inbound vs. activities as cost (fixed spatial chain of network
outbound logistics. centers, allowing points where goods organizations
tradeoffs between stop for storage or engaged in transfer,
them to be processing) vs. storage, handling,
analyzed. links communication,
(transportation and other functions
network that that contribute to
connect the nodes product flow.
in the logistics
system).
Materials
management vs. Logistics
Cost Centers Nodes vs. Links
Physical Channels
distribution
or in part. 20
Summary
 Logistics adds place, time, and quantity utilities to products and
enhances the form and possession utilities added by manufacturing and
marketing.
 Key logistics activities are transportation, inventory, warehousing,
materials handling, industrial packaging, customer service, and
forecasting.
 On a macro basis, logistics-related costs have helped the U.S. economy
maintain its competitive position on a global basis.
 On a micro basis, logistics interface with other functional areas which
aids in making organizations more efficient and effective.
 The cost of logistics systems can be affected by market competition,
spatial relationship of nodes, and product characteristics.
 Four approaches to analyzing logistics systems are: materials
management vs. physical distribution, cost centers, nodes vs. links, and
distribution channels.
or in part.
21

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CHAPTER 3

Supply Chain Management: A Logistics Perspective (10e)

4 1 Part of supply chain that plans, implements,

3 3 Network of activities, facilities & personnel

2 4 Acquisition, scheduling & management of

Source: Figure 3-2

Images courtesy of Logistics Management (2015)

Images courtesy of Logistics Management (2015)

Logistics interface with Factors affecting cost &

Manufacturing Marketing (4 Ps Marketing Mix)

2 Order cycle length

Competitive Order Cycle

 Customer service can 

SA1 SB1 SB2 $0.60

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