Chapter 2 SCM VS Logistics

Chapter 2:
scm vs logistics: role of logistics

in supply chain management
Learning objectives!
Cognitive (C2)
1. To define the logistics and the role of logistics in supply chains management
2. To explain the relationship between logistics management and supply chain
management.
3. To discuss the logistic activities as a major role in the efficiency and effectiveness
of supply chain flow.
4. To appreciate how efficient and effective logistics management can contribute to
the vitality of the economy and improve global competitiveness.
5. To discuss the importance of logistics management activities in the logistics
function
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1.
Definition of logistics
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 Logistics is the management of
the flow of goods, a firm’s order
management, inventory,
transportation, and
warehousing management
activities as integrated
throughout a facility network.  Logistics is the management
of the flow of goods between
the point of origin and the
point of consumption in order
to meet some requirements
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definition of logistics management
 Refer to the process and activities that create value focused on the
design and administration of a system to control the timing and
geographical positioning of raw material, work-in-process, and
finished inventory at a lowest total cost.
 Logistics management is the 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 customer’s requirements.
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definition of integrated logistics
 Integrated logistics serves to link and synchronize the

overall supply chain as a continuous process and is
essential to achieve the desired outcomes of the firm’s
value proposition.
 Managing the various activities as an integrated system
should lead to the maximisation of customer satisfaction, as
well as to the lowest possible total cost.
 Area of logistics work covers:
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9
2.
the importance of logistics in
supply chain management
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 Visibility: Logistics management affords greater visibility into the supply chain.
This enables businesses to better control costs, tease out efficiencies, spot
supply chain problems, conduct demand planning and gain insights into
opportunities.
 Reduced overhead: Logistics management enables companies to reduce

overhead in areas from cutting shipping costs to shrinking how much
warehouse space they need by proactively controlling inventory levels.
 Improved customer experience: An excellent customer experience is the driving

factor behind repeat sales. By delivering orders accurately and quickly, improve
the customer experience which in turn increase brand loyalty and future sales.
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 Preventing loss: Logistics management helps prevent loss in several ways. One is by a
true inventory accounting, so your company knows exactly how much stock it has on
hand at any given time. Companies can also track movement and current location so
stock won’t be misplaced or diverted without notice. In addition, by ensuring optimal
storage and transport conditions, such as temperature and moisture management,
solid logistics prevents spoilage and damage.
 Support expansion: Further, logistics management best practices help companies

scale to fulfil more customer orders on time.
 Competitive edge: Logistics management helps a company consistently deliver, or

over deliver, on promises and sharpen its competitive edge.
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3.
role of logistics in supply
chain
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✘ To provide a major source of competitive advantage
to a company
✘ Logistics system design and management affect many

management functions.
✘ Logistics provide comprehensive logistics plan and

offers comprehensive services related to the supply
chain
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4.
key processes in logistics
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the work of logistics
Five area of logistic work:
 Logistics exists to move and position inventory to achieve desired time,

place, and possession benefits at the lower total cost.
 For a supply chain to realize the maximum strategic benefit of logistics,

the full range of functional work must be integrated.
 Decisions in one functional area will impact cost of all others. It is this
interrelation of functions that challenges the successful implementation
of integrated logistical management.
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Integrated Logistics
Order Processing Inventory Transportation Warehousing, Facility Network

Materials
Handling &
Packaging
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Order Processing
 Order processing is the transmission

of customer requirements to the
supply chain
 Customers' requirements are
transmitted in the form of orders
 Orders involves order receipt,
delivering, invoicing, and collection.
 Accurate information is needed to
achieve superior logistical
performance
 Responsive supply chain requires
accurate and timely information
about customer purchase behaviour
 Fast information flows enables
improved work balancing
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Inventory
 Inventory requirements of a firm are directly linked to the facility network and the
desired level of customer service
 Inventory strategy seeks to achieve the desired customer service with the
minimum inventory commitment
 Inventory strategy is based on a combination of:
• Core customer segmentation
• Product profitability
• Transportation integration
• Time-based performance
• Competitive performance
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Core customer segmentation – best targeted customers
Product profitability – volume and profitability across product lines
Transportation integration – benefits of economy of scale
Time-based performance – minimize lead time (competitive advantages)
Competitor performance – collaboration vs. competition
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Transportation
 Transportation is the operational area

that geographically moves and
positions inventory
 There are three basic ways to satisfy
transportation requirements
• Operate a private fleet of
equipment
• Contract with dedicated transport
specialists
• Engage carriers that provide
different transportation services as
needed on a per shipment basis
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Because of its fundamental importance and visible cost, transportation has
traditionally received considerable managerial attention.
Three factors are fundamental to transportation performance:
Cost of transport Speed of transport Transportation consistency

• the payment for • the time required to complete a • variations in time required to
shipment between specific movement. perform a specific movement
two geographical • Speed and cost of transportation over a number of shipments.
locations and the are related in two ways. • consistency reflects the
expenses related to 1. transport firms capable of dependability of transportation.
maintaining in- offering faster delivery When transportation lacks
transit inventory. typically charge higher rates consistency, inventory safety
• logistical systems for their services. stocks are required to protect
should utilize 2. the faster the transportation against service failure,
transportation that service is, the shorter the time impacting both the seller’s and
minimizes total interval during which buyer’s overall inventory
system cost. inventory is in transit and commitment.
unavailable
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Warehouse, Material Handling & Packaging
 An integral part of the logistics

operation area.
• e.g., Inventory typically needs to be
warehoused at selected times
during the logistics process.
• Transportation vehicles require
materials handling for efficient
loading and unloading
• Individual products are most
efficiently handled when packaged
together into shipping cartons
 Effective integration of these functions
facilitates the speed and overall ease
of product flow throughout the
logistical system
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Facility Network
 The number, size and geographical relationship of facilities used to perform logistical
operations directly impacts customer service capability and cost
 Types of facilities in the logistics network include
• Manufacturing plants, warehouses, cross-dock operations and retail stores
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5.
inbound and outbound
logistics
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 Inbound and outbound logistics play a crucial role in the overall supply chain
strategy. In general, any business dealing with physical goods needs both
inbound and outbound logistics processes, whether they manage it themselves
or through an intermediary.
 Inbound logistics is the activities of receiving, storing, and disseminating

incoming goods or material for use. Example of inbound logistics including
material handling, warehousing, inventory control, vehicle scheduling and
return to suppliers.
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 Outbound logistics describes the process of storing, moving and distributing
goods to deliver them to their final destination: the end customer.
 The stages of outbound logistics operations are warehousing and storage,
distribution, transportation, and last-mile delivery. Outbound logistics includes
all systems that help prepare an order for delivery and get it to the end
customer through delivery service.
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THANK YOU!
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Chapter 2:

scm vs logistics: role of logistics

 Logistics management is the part of supply chain management

 Integrated logistics serves to link and synchronize the

 Reduced overhead: Logistics management enables companies to reduce

 Improved customer experience: An excellent customer experience is the driving

 Support expansion: Further, logistics management best practices help companies

 Competitive edge: Logistics management helps a company consistently deliver, or

✘ Logistics system design and management affect many

✘ Logistics provide comprehensive logistics plan and

 Logistics exists to move and position inventory to achieve desired time,

 For a supply chain to realize the maximum strategic benefit of logistics,

Order Processing Inventory Transportation Warehousing, Facility Network

 Order processing is the transmission

Product profitability – volume and profitability across product lines

Transportation integration – benefits of economy of scale

Time-based performance – minimize lead time (competitive advantages)

Competitor performance – collaboration vs. competition

 Transportation is the operational area

Cost of transport Speed of transport Transportation consistency

 An integral part of the logistics

 Inbound logistics is the activities of receiving, storing, and disseminating

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