LOGO
UNIVERSITY OF FINANCE AND MARKETING
Production and Logistics Management
M.A. Truong Thi Thuy Vi
Email : vitruong@[Link]
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What do you do to get this one ?
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Logistics process flow
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WHAT IS LOGISTICS?
Logistics process flow
• To sum up:
Logistics is the process of all activities of moving
materials/goods/products from the origin point to
the end of consumption point in order to meet
consumer’s requirements
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• Topic 1 Introduction to logistics management
• Topic 2 Supply chain management
• Topic 3 Customer service
• Topic 4 Order processing and information system
• Topic 5 Inventory management
• Topic 6 Warehousing and storage
• Topic 7 Materials handling and packaging
• Topic 8 Transportation
• Topic 9 Materials Flow Management
• Topic 10 Purchasing
• Topic 11 Strategic distribution planning
• Topic 12 Global distribution logistics
• Topic 13 Global logistics strategiescs
v PRESCRIBED TEXT
v Stock, J.R., Lambert, D.M. and Ellram, L.M. (2001) Strategic
Logistics Management, 4th Edn, Irwin/McGraw-Hill.
v RECOMMENDED REFERENCES
v Ballou, R.H. (1999) Business Logistics Management, 4th edn,
Prentice Hall, New Jersey.
v Bowersox, D.J., Closs, D. J., and Cooper, M. B., (2010), Supply
Chain Logistics Management, 3rd Edition, McGraw-Hill.
v Corighan, A., Anderson, E., Stern, L. and El-Ansary, A. (2001)
Marketing Channels, 6th edn, Prentice Hall, Upper Saddle River.
v Rosenbloom, B. (1999) Marketing Channels – a management
view, 6th edn, Dryden, Texas.
v Waller, D.L. (2003) Operations Management – a supply chain
approach, 2nd edn, Thomson, London.
ASSESSMENT DETAILS
Mid-Semester Examination 50%
Final Examination 50%
Total 100%
• Macroeconomic Impacts
• Economic Utility
– Possession utility
– Form utility
– Place utility
– Time utility
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FORECAST
INVENTORY MGT
WAREHOUSING
WAREHOUSING
PHYSICAL DISTRIBUTION
PHYSICAL DISTRIBUTION
PHYSICAL DISTRIBUTION
M.S. Truong Thi Thuy Vi
Phone: 0938.036.181
Email : vitruong@[Link]
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LOGO
UNIVERSITY OF FINANCE AND MARKETING
Topic 1:
Introduction to logistics management
M.A. Truong Thi Thuy Vi
Email : vitruong@[Link]
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WHAT IS LOGISTICS?
Aristote, "LOGISTIKOS” - art of calculation and
reasoning.
Caesar, Appointed a function called "logista”, to
designate an officer in charge of the camps
organization
WHAT IS LOGISTICS?
Eisenhower, "There is no tactics without
logistics. If logistics says no, logistics is
right"
Napoleon, “The amateurs discuss tactics,
the professionals discuss 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.”
Source: [Link]
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Inputs into Management actions Out puts of
logistics logistics
Planning Implementation Control
Suppliers Customers
Naturals resources Competitive
(land, facilities and advantage (marketing
equipment) orientation and
Logistics management operational
efficiencies and
Human resourses Raw In-process Finished effectiveness
material inventory goods Time and place
utility
Financial resources
Efficient movement
Logistics activities to customer
Information resources Customer service Parts and service support
Plant and warehouse site Proprietary asset
Demand forecasting
Inventory management selection
Logistics Procurement
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communications Reverse logistics
Materials handling Traffic and transportation
Order processing Warehousing and storage
packaging
Automobiles
vProducing goods:
Computers
Cosmetics
Artificial limbs
Aircraft
Foods items
Government organizations
Service sector: Hospitals
Banks
Universities, retailers,
wholesalers
Logistics management has many names :
- Business logistics
- Material management
- Channel Management
- Industrial logistics
- Distribution
- Quick response system
- Physical distribution
- Logistics Management
- Supply chain management
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• A Reduction in Economic Regulation
• Changes in Consumer Behavior
• Technological Advances
• The Growing Power of Retailers
• Globalization of Trade
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The Systems and Total Cost Approaches
to Logistics
• Systems Approach
– Interdependence of company and logistics
goals and objectives
– Interdependence of functional areas
• Stock-keeping units (SKUs)
– Interdependence of logistics activities or
Intra-functional logistics
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Figure 1-1: Control Over the Flow of
Inbound and Outbound Movements
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The total cost concept
- Cost analysis is the key to managing the
logistics function
- Goals of a firm is to reduce the total cost
of logistics activities rather focusing each
activities isolation
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Place/ customer service cost:
+ Customer service
+ Parts and service support
+ Return goods handling
Inventory costs: Transportation costs:
+ inventory management + traffic and transportation
+ Packaging
+ Inventory of return goods
Warehousing costs:
Lot quantity costs:
+ warehousing and storage
+ material handling
+ plant and warehouse site selections
+ procurement
+ Production setup costs -
Order processing and information costs:
+ Order processing
+ Logistics communications
+ Demand forecasting/ planning
The Systems and Total Cost
Approaches to Logistics
• 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
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• Finance
• Production
• Marketing
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• Marketing
– Place Decisions
– Price Decisions
• Landed costs
– Product Decisions
• Stockouts
• Sustainable products
– Promotion Decisions
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Marketing concept
Product
Four Ps of
Martketing mix
marketing
Price Promotion
Making trade off in
Place/customer service logistics is important
levels
(product)
Inventory Transportation Pricing
logistics
carrying costs costs consideration
(promotion)
Selling value added
Lot quantity Warehousing to customers
costs costs
(place)
Order processing
and information
Customer service is
costs
an output of the
logistics system
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• “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, [Link]
• Channel members
– Manufacturers
– Wholesalers
– Retailers
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• 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
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• Ownership channel
– Banks, finance companies
• Negotiations channel
– Brokers
• Financing channel
– Banks, insurance companies, finance companies
• Promotions channel
– Advertising agencies, public relations agencies
• Logistics channel
– Freight forwarders
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• Customer service • Demand forecasting
• Facility location • International logistics
decisions • Materials handling
• Inventory • Packaging
management
• Reverse logistics
• Order management
• Warehousing
• Procurement management
• Transportation
management
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Customer service:
• Customer Satisfaction
• Each component of the logistics system can affect whether a
customer receives the right product at the right place, in the
right condition for the right cost at the right time
Demand Forecasting
• Involves determining the amount of product and accompanying service
that customers will require at some point in the future
• Forecasts of future demand determine promotions strategies, allocation of
the sales force, pricing and market research activities
• Sales forecasts determines production schedules, purchasing and
acquisition strategies and in plant inventory decisions.
• Accurate estimates of future demand enable logistics manager to allocate
resources (budgets) to activities that will service that demand.
• Sophisticated computer models, trend analysis , sales force estimates or
other methods can help develop such forecasts
Inventory management:
- Because of financial necessity of maintaining a sufficient supply of
product to meet both customers’ need and manufacturing
requirements.
- Raw materials and parts, work in process and finished goods
inventories all consume physical space, personnel time and capital.
- Involves trading off inventory held to achieve high customer service
levels with the costs of holding inventory including capital tied up in
inventory. warehousing costs and obsolescence.
Logistics communications:
- Effective communication is necessary
- Communication at sequent computer systems ( EDI)
- Computerized management information system MIS
Material handling:
- Concerned with every aspect of the movement or flow of raw materials, in-
process inventory and finished goods within a plant, warehouse.
- Objectives of material handling are to :
+ eliminate handling wherever possible
+ Minimize travel distance
+ Minimize work in process
+ Provide uniform flow free of bottlenecks
+ minimize looses from waste, breakage, spoilage, and theft
Order processing
- Components of order processing
• Operation elements : order entry /editing, scheduling, order
shipping set preparation , invoicing
• Communications elements : order modification, order status
inquiries, tracing, expediting, error correction, product information
requests
• Credit and collection elements: creding checking. Accounts
receivable processing
- Automation in order processing is widely used ( EDI)
Packaging - Two functions: Marketing and logistics
Parts and service support
- Service After the sale
Plant and warehouse site selection
- The strategies placement of plants and warehouses can assist firms in
improving customer service levels
- Proper facility location can also allow lower volume-related
transportation rates in moving product from plant to warehouse
- Consideration in site selection ( need of customers and location of raw
materials, component parts, subassemblies). Other factors: labor rates,
transportation services, taxes, security , legal concerns, local factors(
attitude of community toward new industry, land cost, available of
utilities)
Procurement
- 40-60 % of their revenues for materials and services from outside
sources
- To ensure the operating effectiveness of the firms manufacturing
and logistics processes
- Selection of supply sources locations, determination of the form in
which the material is to be acquired, price determination, quality
control
Reverse logistics:
- Handling return goods, salvage, scrap disposal
- Products defects, overage, shipping errors, ..
- Product returns for warranty repair, replacement, remanufacturing,
or recycling
Traffic and transportation
- The movement or flow of goods from point of origin to point of
consumption ( as well as return)
- Involves managing the movement of products and includes selecting the
method of shipment (air, rail. Water, pile line, truck, intermodal), choosing
the specific path (routing) complying with various local, state, and federal
transportation regulations and being aware of both domestic and internal
shipping requirements
Warehousing and storage
- Products must be stored in plants or in the field for later sale and
consumption
- The greater time lag between production and consumption, the
larger the level or amount of inventory required.
LEVEL OF LOGISTICS SERVICES
• 1ST PARTY LOGISTICS
1PL
• 2nd PARTY LOGISTICS
2PL
• 3rd PARTY LOGISTICS
3PL
• 4th PARTY LOGISTICS
4PL
• 5th PARTY LOGISTICS
5PL
FIRST PARTY LOGISTICS(1PL)
1PL are companies, which do their own logistics activities
Company built up their own
internal capacities to handle all
transport, handling and storage
operations (trucks, warehouses
etc.).
Only cross-border and global
transport was sometimes
handled by external logistics
providers.
SECOND PARTY LOGISTICS(2PL)
Second party logistics people provide their own assets such as
truck owners, warehouse operators etc
Typical 2PLs would be shipping lines
which own, lease or charter their
ships; airlines which own, lease or
charter their planes and truck
companies which own or lease their
trucks.
Ex: Maersk, Wan Hai, MOL,
Evergreen, NYK
THIRD PARTY LOGISTICS (3PL)
A third-party logistics provider
(3PL) provides outsourced or
'third party' logistics services to
companies for part or sometimes
all of their supply chain
management function.
Save time – Flexibility
Reduce cost: don’t need to invest in
WHY USE 3PL’s ??? Trucks, Training, Development
Help expand :
- New markets
- international
Narrow on focus: Allow you focus on your
strengths
Reach more customers more effectively
- Can ensure delivery times
- Can help a company run leaner
Risks of Out-sourcing Logistics
1. Loss of internal logistics management capabilities
2. Based choice of service providers
3. Leakage of sensitive data and information
4. Service degradation
Less reliable? Longer order cycle time? Emergency
response?
5. Loss of control and representation
6. Reduced contact with final customer
3PL for outbound logistics interact with your
customers, you become less visible to your customers
FOURTH PARTY LOGISTICS (4PL)
4PL Providers:
• Manage and direct the
activities of multiple
3PLs, serving as an
integrator
• Refinement on the idea
of 3PLs
• 4PLs are not asset
based like 3PLs
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