THE EVOLUTION OF LOGISTICS

The probable origin of the term is the Greek logistikos, meaning ‘skilled in calculating’.
The term, logistics, was initially developed in the context of military activities in the late 18 th and
early 19th centuries
It was launched from the military logistics of World War II which was concerned with getting
soldiers and weapons to the battlefront on time for a fight with victory as their goal.

And now, a number of researches have adopted the military logistics applications to business
activities.
Business logistics was not an academic subject until the 1960s. after the world war 2 when
logistics developed to become an important function of business as it became evident that
logistics and transportation add place and time utility to products and enhance the form and
possession by manufacturing and marketing.
A key element of logistics, the trade-off between transport and inventory costs, was formally
recognized in economics at least as early as the mid-1880s. (BTRE, 2001).
Logistics over the years has been called by so many names including the following:
– Materials management
– Physical distribution
– Business logistics
– Channel management
– Distribution
– Industrial logistics
– Logistical management
However, logistics management is the most widely accepted term and encompasses logistics not
only in the private business sector but also in the public/government and not-for-profit sectors. In
addition, service organizations such as the banks, hospitals restaurants and hotels have logistics
challenges and issues and logistics management is an appropriate term in these industries
DEFINITION OF LOGISTICS
Johnson (2008) opined that logistics is a science of efficient flow of materials. It is a generic
term of all the activities which come together to ensure that materials and products are at the
right place, at the time to create place and time utility

Gibbson et al (2008) in terms of inventory argue that logistics is the management of materials in
motion and at rest
In terms of customer, argue that logistics is getting the right product, in right quantity, right
quality/condition, at the right price/cost, to the right person, at the right time, at the right place.

The Council of Supply Chain Management Professionals (CSCMP), one of the leading
professional organizations for logistics personnel, and formerly known as the Council of
Logistics Management [CLM), defines logistics management as:
‘that part of Supply Chain Management 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'

 This definition includes the flow of materials and services in both the manufacturing and
service sectors.
 Logistics is not confined to manufacturing operations alone. It also includes the service
sector with entities such as the Government, Hospitals, Banking, Telecommunications,
Educational institutions, Retailers and the Hospitality industry.

Logistics describes the entire process of materials and products moving into, through and out of
firms/organizations.
Inbound logistics/Physical supply covers the movement of material received from suppliers.
Materials management/internal logistics describes the movement of materials and components
within a firm.
Physical distribution (PD)/Outbound logistics refers to the movement of goods outward from
the end of the assembly line to the customer.

The focus of Logistics is Intra-Organizational

Supply Chain=Supplies + Materials Management + Distribution

DEFINITION OF SUPPLY CHAIN

 It is the sequence of processes involved in the production and distribution of a
commodity.

 A supply chain consists of all parties involved, directly or indirectly, in fulfilling a

customer request.

 The supply chain includes the manufacturer and suppliers, transporters, warehouses,
retailers, and customers themselves.

The Council of Logistics Management (CLM) defines Supply Chain (SC) as;

A global network of organizations that cooperate to improve the flows of material and
information between suppliers and customers at the lowest cost and the highest speed.

SUPPLY CHAIN MANAGEMENT

It is defined as;

[Link] management of materials, information, and finances as they move in a process from a
supplier to manufacturer to wholesaler to retailer to consumer.

The management of the flow of goods and services.

 [Link] is the integration of key business processes from End user through original suppliers that
provide products, services and information that add value for customers and other stakeholders.
(Lambert et al, 1998)

[Link] management of upstream and downstream relationships with suppliers and customers to
deliver superior customer value (Chritopher,1998).

[Link] involves the management of supply chain assets and products, information and funds flows
to maximize total supply chain profitability. (Choppra and Meindl 2007)

SCM involves three main flows:

 The Product flow: This includes the movement of goods from a supplier to a customer,
as well as any customer returns or service needs.

 The Information flow: It consists of credit terms, payment schedules, consignment and
title ownership arrangements.

 The Finance flow: It involves transmitting orders and updating the status of delivery.

SUPPLY CHAIN ILLUSTRATED

{Upstream SC} {Internal SC} {Downstream Supply Chain}

Supplier Distributer Retailer Consumer/User

Manufacturer
T h
e supply chain can be broadly classified into three part: Upstream, Internal and Downstream
(Turban et all., 2003, 2004).

 Upstream supply chain: This part of the supply chain is mainly concerned with the
procurement of raw materials. It includes suppliers that could be manufacturers
themselves
  Internal supply chain: This part is mainly concerned with transforming the inputs
obtained in the upstream supply chain into outputs. It starts from the time raw material
comes to an organization and continues till it gets transformed into finished goods and is
sent for distribution.
 Downstream supply chain: This part is mainly concerned with the processes involved
in delivering the finished products from the internal supply chain to the final customers.

The focus of supply chain is Inter-Organizational

Supply Chain = Supplier (s) + Supplies + Materials Management + Distribution + End-
User (s)

The Logistics System

Logistics is dependent upon Resources as its Inputs. These resources are;
i. Natural,
ii. Human,
iii. Financial and
iv. Information (resources for inputs.)
Suppliers provide raw materials, which logistics manage in the following forms; raw material,
in-process inventory and finished goods.

Management actions provide the framework for logistics activities through the process of
Planning, Implementation and Control.
The outputs of the logistics system are;
i. Competitive advantage,
ii. Time and Place utility and
iii. Efficient movement to the customer.
These outputs are made possible by the effective and efficient performance of the logistics
activities.

The Component of Logistics

The component parts of logistics are:
1. Sourcing and Procurement
2. Manufacturing/Service package
3. Distribution
4. Storage and Warehousing
5. Information systems and management
6. Customer service

The activities/functions of Logistics

Customer service Demand Forecasting
Logistics communication Reverse Logistics
Purchasing/procurement Materials Handling
Inventory control Service Support
Transportation
Warehousing
Order processing
Packaging

1. Customer Service
A service a firm provides to those who purchase its products or services. It’s a feature of the
amplified product that adds value for the buyer.

2. Logistics communication/Information System

Information is needed for both long-range and day-to-day decision making.
Information provides organisations with insight and visibility into the supply chain activities
taking place from the distant supplier to customer locations.
This information must effectively flow within the organization and between key participants/
stakeholders.
IT systems in logistics provide support in:
• Warehousing management systems
• Fleet management systems
• Routing and Scheduling
 • On-vehicle systems
• Payment systems
• Inventory systems
• Order Processing

[Link]/Purchasing
Procurement: It’s the acquisition of goods and/or services at the best possible total cost of
ownership, in the right quantity, right quality, at the right time, in the right place and from the
right source for the direct benefit or use of corporations. (5 R’s).
Purchasing: It’s the process of ordering and receiving goods. It is a subset of the Procurement
process. Generally, purchasing refers to the process involved in ordering goods such as request,
approval, creation of a purchase order record (a Purchase Order(P.O.), etc.

4. Inventory Control
Inventory/Stock is a quantity or store of goods that is held for some intended purpose or use.
Inventory may be kept "in-house," meaning on the premises or nearby for immediate use; or it
may be held in a distant warehouse or distribution centre for future use.

Pipeline inventory, also known as pipeline stock is used to refer to those goods that have left
firms warehouse but are still in company's distribution chain as they are yet to be bought by
ultimate consumers

5. Transportation
Transport or transportation is the movement of people and goods from one location to
another.
Modes of transport include;
o Air,
o Rail,
o Road,
o In-land Waterways
 o Marine/Deep water
o Cable/Space/ Telecommunication
o Pipeline

The field can be divided into infrastructure, vehicles and operations.

6. Warehousing
Warehousing is that part of a firm's logistics system that stores products (raw materials, parts,
goods-in-process, finished goods) at and between point of origin and point of consumption
Provides information to management on the status, condition and disposition of items being
stored
The term Distribution Centre (DC) is sometimes used.

7. Order Processing
Order processing is the term generally used to describe the process or the workflow associated
with order placement, order transmittal, order picking, packing and delivery of the packed
item(s) to a shipping carrier for despatch.
8. Packaging
Packaging is the Science, Art, and Technology of enclosing or protecting products for
distribution, storage, sale and use.
Packaging can be described as a coordinated system of preparing goods for transport,
warehousing, sales and end use.
9. Demand Forecasting
Activity of estimating the quantity of a product or service that consumers will purchase at
specific times.
Demand forecasting may be used in making pricing decisions, in assessing future capacity
requirements, or in making decisions on whether to enter a new market.
10. Reverse logistics
It is the process of planning, implementing, and controlling the efficient, cost effective flow of
raw materials, in-process inventory, finished goods and related information from the point of
consumption to the point of origin for the purpose of recapturing value or proper disposal.
11. Materials Handling
Handling and storing materials involve diverse operations such as hoisting tons of
steel/rice/sugar with a crane; driving a truck loaded with same; carrying bags or materials
manually; and stacking palletized bricks or other materials such as drums, barrels, lumber, etc
Improper handling and storing of materials often result in costly spoilage and injuries

12. Service Support

Parts and service support, or after-sale service support, provides repairs, spares and parts to
dealers/customers and ensures the collection of defective or malfunctioning products from
customers, and responding quickly to demands for repairs or assistance.

Goal of Logistics
 The generic goal of logistics activities is to satisfy the needs of the Ultimate
consumer. The logistics managers ensure that …the right product, in the right
quantity, in the right condition, is delivered to the right customer at the right
place, at the right time, at the right cost.

The other key Purpose and objectives of logistics are to:

 Eliminate waste in the processes of the organisation.

VALUE OR UTILITY CREATION FUNCTION OF LOGISTICS

One of the fundamental ways that logistics add value is by creating utility. Utility represents the
value or usefulness that an item or service has in fulfilling a want or need. There are four (4)
types of utility; form, possession, time and place. The latter two, time and place utility are
intimately supported by logistics.
• Form utility (what) is the process of creating the good or service, or putting it in the
proper in the right shape or form for the customer to use. E.g. when Honda of America
manufacturing transforms parts and raw materials into a car, form utility is created.
 • Possession utility (why) is the value added to a product or service because the customer
is able to take actual possession. This is made possible by credit arrangements and loans.

• Time utility (when) is the value added by having an item when it is needed. This could
occur within the organization as in having all the materials and parts that are needed for
manufacturing, so that the production line does not have to shut down i.e. received on
schedule

• Place utility (where) means having the item or service available where it is needed. If a
product desired by consumers is in transit, in a warehouse, or in another store, it does not
create any place utility for them without both time and place utility, which logistics
directly supports; a customer could not be satisfied i.e. received at agreed location

 Help build strong brand image through packaging, customer service, etc

 Achieve efficient integration of organisational activities

According to Coyle, Bardi and Langley ( 2003 ) there are four subdivisions of logistics:
Business logistics: this is the same as the definition from the CSCMP and approach we are
adopting in our discussion.
Military logistics: all that is necessary to support the operational capability of military forces
and their equipment in order to ensure readiness, reliability and efficiency.
Events Logistics: Management of all involved (activities, facilities and personnel) in
organizing, scheduling and deploying the resources necessary to ensure the occurrence of an
event and efficient withdrawal afterwards
Service Logistics: it involves acquisition, scheduling and management of facilities, personnel
and materials needed to support and sustain a service operation