ABE-Professional Diploma in Logistics and Supply Chain
Management
CHAPTER 1
INTRODUCTION TO LOGISTICS
AND
SUPPLY CHAIN MANAGEMENT
BY
DR. SWE SWE ZIN
DEFINITIONS AND CONCEPTS
Definition of Logistics Management
“Logistics is the process of strategically
managing the procurement, movement and storage
of materials, parts and finished inventory (and the
related information flows) through the organization
and its marketing channels in such a way that
current and future profitability are maximized
through the cost-effective fulfillment of orders”.
DEFINITIONS AND CONCEPTS
• Logistics is essentially a planning
orientation and framework that seeks to create a
single plan for the flow of product and
information through a business.
• Supply chain management builds upon this
framework and seeks to achieve linkage and co-
ordination between the process of other entities
in the pipeline, i.e. suppliers and customers, and
the organization itself.
DEFINITIONS AND CONCEPTS
Definition of Supply Chain Management
“The management of upstream and downstream
relationships with suppliers and customers to deliver
superior customer value at less cost to the supply chain as
a whole”.
• Thus, the focus of supply chain management is upon the
management of relationships in order to achieve a more
profitable outcome for all parties in the chain.
• A supply chain could more accurately be defined as: “A
network of connected and interdependent organizations
mutually and co-operatively working together to control,
manage and improve the flow of materials and
information from suppliers to end users”.
IMPORTANCE OF COMPETITIVE
ADVANTAGE
• Effective logistics and supply chain management
can provide a major source of competitive
advantage.
• The most common types of competitive
advantage:
1. Cost advantage
2. Value advantage
COST ADVANTAGE
• Cost advantage: ability of the organization
to operate at a lower cost
• Cost advantage can be achieved partly due
to economies of scale, which enable fixed
costs to be spread over a greater volume
VALUE ADVANTAGE
• Value Advantage: ability of the organization to
differentiate itself, in the eyes of the customer,
from its competitors
• Powerful means of adding value is service.
VALUE ADVANTAGE
•• Increasingly it is the case that markets are
becoming more service sensitive and this poses
particular challenges for logistics management.
• • Customers in all industries are seeking
greater responsiveness and reliability from
suppliers; they are looking for reduced lead
times, just-in-time delivery and value-added
services that enable them to do a better job of
serving their customers for the greater value
advantage.
DEFINING STRATEGY
• Strategy is about formulating a long-term plan for
the supply chain, as distinct from solving the day-
to day issues and problems that inevitably occur.
• There are four options for creating strategy:
1. Evolve
2. Classical
3. Accommodate
4. Systemic
STRATEGY OPTIONS
• Evolve: Strategy is not something that is formally
undertaken at all. Operating decisions are taken
in relation to the needs of the moment, with
financial goals as the main guiding principle.
• Classical: While financial goals are again the
main guiding principle, these are achieved
through a formal planning process. This is called
‘classical’ because it is the oldest and most
influential option.
STRATEGY OPTIONS
• Accommodate: Decisions are made for the day-
to- day operation, but financial objectives are no
longer the primary concern. Strategy is
accommodated to the realities of the focal firm
and the markets in which it operates.
• Systemic: This option for strategy setting sees no
conflict between the goals and means of realizing
these goals. While goal setting takes place across
all major aspect of the business (including human
resources, marketing and manufacturing policies),
these are linked to the means by which they will
be achieves in practice.
LOGISTICS STRATEGY
• Logistics strategy usually focuses on
systemic strategy setting to maximize
value for network partners.
SUPPLY CHAIN STRATEGY
• A supply chain strategy is a process that manages
networks and services between suppliers and
customers without causing friction.
• Implementing the best supply chain management
strategy is key to improving operational efficiency,
enabling profits and reducing overall costs.
• Every organization needs supply chain
management strategies to fulfill demand, build a
great network, drive customer loyalty, improve
responsiveness and more.
SUPPLY CHAIN STRATEGY
Some strategies for an excellent supply chain are:
• Cut inventory costs. Be it a brick and mortar store
or an online business, inventory is always present
and it costs money.
• Integrate business processes with technology.
• Use an inventory management software.
• Manage inventory risk.
• Take green initiatives.
THANK YOU!