Principles of Logistics Management

Diploma in Logistics Management

Principles of Logistics Management

• Chapter 1

The Role of Logistics in the Economy and Organization

Why study Business Logistics?

• Wide career prospect （前景）• Manufacturing & trading firms• Service firms e.g. 3PL （第三方物流） ,

freight forwards• Learning institutions （制度）• Government agencies• Other service institutions （机构） e.g.

restaurants, hospitals, etc

Logistics Management

The process of planning, implementing （执行） and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption （消耗） for the purpose of conforming to customer requirements.

• Council （委员会） of Logistics Management – a leading organization for logistics professionals

Logistics Managementmany names including:

• Business logistics• Channel management• Distribution• Industrial logistics• Logistical management• Materials management• Physical distribution• Quick-response systems• Supply chain management• Supply management

Components of Logistics Management构成因素

Systems Approach/Integration

• Logistics is, in itself, a system• It is a Network of activities with the purpose

of managing the orderly flow of materials and personnel within the logistics channel.

The system approach• All functions or activities need to be

understood in terms of how they affect, and are affected by, other activities.

• The sum, or outcome of a series of activities, is greater than its individual parts.

• Eg. High inventory level good or bad?-Bad: warehouse cost, obsolete, cash flow,

insurance, currency fluctuation （货币波动）-Good: support demand

Logistics role in the Economy

• Logistics is an important component of GDP

• Adds value by creating TIME and Place Utility(value)

Logistics role in the Organization

• Supports Marketing“Marketing management philosophy （哲学）

holds that achieving organizational goals depends on determing the needs and wants of target markets and delivering the desired （渴望的） satisfactions more effectively（有效的，实际上的） and efficiently than competitors.”

Marketing/Logistics Management Concept

Customer Satisfaction1.Suppliers2.Intermediate customers3.Final customers

Company Profit1.Maximize long-term profitability2.Lowest total costs given an acceptable level of customer service

Integrated Effort1.Product2.Price3.Promotion4.Place(distribution)

4 P’s of the Marketing Mix• Products- the set of utilities or characteristics a

customer receives as a result of a purchase (quality, features, customer service, warranty)

• Price- the amount of money a customer pay for a product or service

(discount, rebates, customers)

• Promotion- a product or service encompasses both personal selling and advertising

• Place- component of the marketing mix support

the levels of customer service provided by the organization

Cost Trade-offs Required in Marketing and Logistics

Role of logistics in the Organization

• Logistics Types of Utility– Form utilityManufacture – Production or Operations processThe value of making materials available in a

completed state— Possession （所有 / 持有） utilityValue added to a product allow the customer take

ownership

Role of Logistics in the Organization

• Logistics Types of Utility Time utility value created by making product or service

availability when it is needed Place utility value created or added to product or service

availability where it is needed

Role of Logistics in the Organization

One way of viewing the Major Costs of Doing Business

Profit $0.04Logistics Costs $0.21 = Time& Place utilityMarketing Costs $0.27 = Possession utilityManufacturing Costs $0.48 = Form utility

Role of Logistics in the OrganizationProfit Leverage provided by Logistics Cost Reduction

If net profit on the sales dollar is 2% then

A Savings of is Equivalent to a Sales increase$0.02 $1.00$2.00 $100.00$200.00 $10,000.00$2,000.00 $100,000.00$20,000.00 $1,000,000.00

Logistics role in the Organization

• Logistics is a Proprietary （私有） Asset （资产）• It is similar to a tangible （明确的） asset on a

firm’s books• It cannot be readily （欣然地） duplicated （复制

出） by the firm’s competitors （竞争者）• If a company can provide its customers with

products quickly and at low cost, it can gain market share advantages over competitors

Logistics allows efficient movement to the customers

7 Rights of Logistics Move the Right Materials/ProductsIn the Right QuantityIn the Right ConditionAt the Right TimeTo the Right PlaceAt the Right CostTo the Right Customers, Associates, Suppliers

and Stockholders.

The Logistics Evolution

• Fragmentation1960

• Evolving Integration 1980

• Total Integration2000

Factors Impacting the Development of Logistics

• Advances in Computer Technology• Quantitative （数量上的） techniques• Development of the systems approach• Total cost analysis concept• Recognition （酬劳 / 认出） of logistics role• Erosion （腐蚀） of firm’s profits• Profit leverage• Economic condition （状况，地位）

Key Logistics Activities

• Customer Service• Demand forecasting

planning• Inventory

management• Logistics

Communications• Material handling• Order processing• Packaging

• Parts & Service Support• Plant & warehouse site

selection• Procurement （获得）• Return goods handling• Reverse logistics• Traffic & transportation• Warehousing & storage

Key Logistics Activities

• Customer Service-Customer oriented （导向的） philosophy

（哲学、人生观）-Optimum （最适宜的，最有利的） cost-

service mix-Output of logistics system-Customer satisfaction