LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Dr. Hebatallah Elmesmary

Vice Dean for Education – College of International Transport and Logistics
Associate Professor in Logistics and Supply Chain Management
LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Understanding the Supply Chain
OUTLINE
What is a Supply Chain?
What is logistics?
Decision Phases in a Supply Chain
Process View of a Supply Chain
The Importance of Supply Chain Flows
Examples of Supply Chains

1-3
WHAT IS A SUPPLY CHAIN?
Introduction
The objective of a supply chain

1-4
WHAT IS A SUPPLY CHAIN?
All stages involved, directly or indirectly, in fulfilling a customer
request
Includes manufacturers, suppliers, transporters, warehouses, retailers,
and customers
Within each company, the supply chain includes all functions involved
in fulfilling a customer request (product development, marketing,
operations, distribution, finance, customer service)

1-5
WHAT IS A SUPPLY CHAIN?
Customer is an integral part of the supply chain
Includes movement of products from suppliers to manufacturers to
distributors, but also includes movement of information, funds, and
products in both directions
Probably more accurate to use the term “supply network” or “supply
web”
Typical supply chain stages: customers, retailers, distributors,
manufacturers, suppliers (Fig. 1.2)
All stages may not be present in all supply chains
(e.g., no retailer or distributor for Dell)

1-6
 WHAT IS A SUPPLY CHAIN?
Customer wants
P&G or other Jewel or third Jewel
detergent and goes
manufacturer party DC Supermarket
to Jewel

Chemical
Plastic Tenneco
manufacturer
Producer Packaging
(e.g. Oil Company)

Chemical
Paper Timber
manufacturer
Manufacturer Industry
(e.g. Oil Company)

1-7
SUPPLY CHAIN: MANUFACTURING EXAMPLE

8
SUPPLY CHAIN: SERVICE EXAMPLE

9
FLOWS IN A SUPPLY CHAIN

Information

Product
Customer
Funds

Supply Chain

1-10
THE OBJECTIVE OF A SUPPLY CHAIN
Maximize overall value created
Supply chain value: difference between what the
final product is worth to the customer and the
effort the supply chain expends in filling the
customer’s request
Value is correlated to supply chain profitability
(difference between revenue generated from the
customer and the overall cost across the supply
chain)

1-11
THE OBJECTIVE OF A SUPPLY CHAIN
Example: Dell receives $2000 from a customer
for a computer (revenue)
Supply chain incurs costs (information, storage,
transportation, components, assembly, etc.)
Difference between $2000 and the sum of all of
these costs is the supply chain profit
Supply chain profitability is total profit to be
shared across all stages of the supply chain
Supply chain success should be measured by total
supply chain profitability, not profits at an
individual stage 1-12
THE OBJECTIVE OF A SUPPLY CHAIN
Sources of supply chain revenue: the customer
Sources of supply chain cost: flows of information,
products, or funds between stages of the supply
chain
Supply chain management is the management of
flows between and among supply chain stages to
maximize total supply chain profitability

1-13
DEFINITION OF LOGISTICS
What is Logistics ?
“ Logistics means having the right thing at the right
place , at the right time

Business Logistics deals with all move- store activities

that facilitate product flow from one point of raw
material acquisition to the point of final consumption,
as well as the information flow that set the product in
motion for the purpose of providing adequate levels
of customer service at a reasonable cost.

14
 Logistics Defined
Logistics is the process of planning, implementing and
controlling the efficient, cost-effective flow and storage
of raw materials, in-process inventory, finished goods
and related information from the point of origin to point
of consumption for the purpose of conforming to
customer requirements.
Council of Logistics Management

Supply Chain Management Defined

SCM is the integration of all activities associated with the
flow and transformation of goods from raw materials
through to end user, as well as information flows, through
improved supply chain relationships, to achieve a
sustainable competitive advantage.
Handfield and Nichols
15
Components of a logistics system (main Logistics activities)
Customer service
Inventory Management
Transportation
Storage (Warehousing) and material handling
Protective Packaging
Information processing (Order Processing &
Information maintenance)
Demand Forecasting
Production Scheduling
Acquisition / Purchasing
Facility Location
Other activities such as: parts and service support;
maintenance; return goods handling; recycling
operations…etc.
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 Key Activities/Processes
• Primary
- Setting customer service goals
- Transportation
- Inventory management
- Location

• Secondary, or supporting
- Warehousing
- Materials handling
- Acquisition (purchasing)
- Protective packaging
- Product scheduling
- Order processing
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 Relationship of Logistics to
Marketing and Production

LOGISTICS
Sample
activities: MARKETING
PRODUCTION/ •Transport Interface Sample
OPERATIONS • Inventory
Interface activities: activities:
Sample activities: • Order • Customer
• Quality control activities: • Promotion
• Product processing service • Market
• Detailed production
scheduling
scheduling • Materials standards research
• Plant • Pricing • Product
• Equipment maint . handling
location • Packaging
• Capacity planning mix
• Purchasing • Retail • Sales force
• Work measurement
location management
& standards

Production-
logistics Marketing-
interface logistics
interface

Internal Supply Chain

 A Cost Conflict in Logistics

Total cost
Cost, in dollars

Cost of
Inventory cost transportation
(includes service
storage and
intransit

Rail Truck Air

Transportation service
(greater speed and dependability)

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 More Cost Conflicts
Revenue

Total costs Total costs

Revenue
Cost
Cost

Transportation,
order processing,
and inventory Inventory
costs costs
Lost sales cost Transportation costs 0
0
0 100% 0 Increasing number of stocking points
Improved customer service

(a) Setting the customer service level (b) Determining the number of warehouses in a logistics
system

Total costs Total costs

Cost

Inventory
Cost Inventory
carrying carryng cost
costs
Lost sales cost Production costs
0 0
0 Average inventory level Product run length and product sequencing
altenatives

(c) Setting safety stock levels (d) Setting the sequence of production runs for
multiple products