INTRODUCTION TO THE CONCEPT

OF LOGISTICS AND SUPPLY CHAIN

MANAGEMENT

UNIT 2

www.knust.edu.gh

DBA242-MKOBIO 1
UNIT OVERVIEW
After reading this unit you should be able to:
• Differentiate between logistics
management, supply chain, and supply
chain management.
• List, explain and discuss the linkages
among the;
 Logistics functions
 Logistics Activities
www.knust.edu.gh

2
INTRODUCTION
• In all facets of our lives, goods and
services are transported from the
place they are produced to the place
they are consumed.
• This exchange process is the
cornerstone of all economic activity.

www.knust.edu.gh

DBA242-MKOBIO 3
INTRODUCTION
• In the case where there are many
exchanges taken place between
producers and consumers , the firms
which are involved in bringing the
products or services to the market
are aligned in a network called
supply chain.

www.knust.edu.gh

DBA242-MKOBIO 4
 Why do we have to move materials?

Let us try to answer this question by

analysing a Restaurant/ Chop bar.
• What foods do you find on the menu?
• How are they produced or prepared?
• What ingredients go into the preparation?
• Where are they sourced from?

www.knust.edu.gh

DBA242-MKOBIO 5
Why do we have to move materials?
• Imagine how many tangible and intangible
goods have been moved in this case.
• All organisations have to move materials for
even the smallest of their processes.
• Manufacturers have to procure raw materials
from suppliers and distribute finished
products to the customers
• The function that is responsible for
controlling such movement is termed
‘logistics’
www.knust.edu.gh

DBA242-MKOBIO 6
 DEFINITIONS OF LOGISTICS MANAGEMENT?
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'
www.knust.edu.gh

DBA242-MKOBIO 7
 DEFINITIONS CONT’D…
• 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, Banks, Telecommunications,
Hospitals, Educational institutions,
Retailers and the Hospitality industry.
www.knust.edu.gh

DBA242-MKOBIO 8
 DEFINITIONS OF KEY TERMS
Logistics describes the entire process of
materials and products moving into, through and
out of firms.
Inbound Logistics covers the movement of
material received from suppliers.
Materials management describes the
movement of materials and components within a
firm.
Physical Distribution (PD) refers to the
movement of goods outward from the end of the
assembly line to the customer. www.knust.edu.gh

DBA242-MKOBIO 9
 THE LOGISTICS PIPELINE

Customers
Transport
Operator Manufacturer 3rd Party Retailer
Supplier
Distributor

www.knust.edu.gh

DBA242-MKOBIO 10
 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 form of raw material, in-
process inventory and finished goods.
www.knust.edu.gh

DBA242-MKOBIO 11
 THE LOGISTICS SYSTEM CONT’D…
• 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.
www.knust.edu.gh

DBA242-MKOBIO 12
 THE LOGISTICS PROCESS

LOGISTICS MANAGEMENT

Physical Supply
(Materials management) Physical Distribution

Sources of Plants/
Customers
Supply Operations

• Transportation • Transportation
• Inventory maintenance • Inventory maintenance
• Order processing • Order processing
• Acquisition • Product scheduling
• Protective packaging • Protective packaging
• Warehousing • Warehousing
• Materials handling • Materials handling
• Information maintenance • Information maintenance

www.knust.edu.gh

DBA242-MKOBIO 13
 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
www.knust.edu.gh

DBA242-MKOBIO 14
 LOGISTICS FUNCTIONS/ACTIVITIES
The activities of Logistics are:
• Customer service • Order processing
• Logistics • Packaging
communication • Demand Forecasting
• Purchasing/ • Reverse logistics
procurement • Materials Handling
• Inventory control • Logistics Strategic
• Transportation planning
• Warehousing • Service support
 
www.knust.edu.gh

DBA242-MKOBIO 15
 Elements of Logistics Cont’d...
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
www.knust.edu.gh

DBA242-MKOBIO 16
 Elements of Logistics Cont’d...
IT systems in logistics provide support in:
• Order processing

www.knust.edu.gh

DBA242-MKOBIO 17
 Elements of Logistics Cont’d...

IT systems in logistics provide support in:

• Warehousing management systems
• Fleet management systems
• Routing and Scheduling
• On-vehicle systems
• Payment systems
• Inventory systems
www.knust.edu.gh

DBA242-MKOBIO 18
 Elements of Logistics Cont’d...
3. Procurement/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)
www.knust.edu.gh

DBA242-MKOBIO 19
 Elements of Logistics Cont’d...
3. Procurement/Purchasing
• 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.

www.knust.edu.gh

DBA242-MKOBIO 20
 Elements of Logistics Cont’d...
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.
www.knust.edu.gh

DBA242-MKOBIO 21
 Elements of Logistics Cont’d...
5. Transportation
• Transport or transportation is the movement of
people and goods from one location to another.
• Modes of transport include;
o Air,
o LAND: Rail, Road, Water,
o Cable,
o Pipeline and
o Space.
• The field can be divided into infrastructure, vehicles
and operations.
www.knust.edu.gh

DBA242-MKOBIO 22
 Elements of Logistics Cont’d...
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. www.knust.edu.gh

DBA242-MKOBIO 23
 Elements of Logistics Cont’d...
6. Warehousing

www.knust.edu.gh

DBA242-MKOBIO 24
 Elements of Logistics Cont’d...
6. Warehousing

www.knust.edu.gh

DBA242-MKOBIO 25
 Elements of Logistics Cont’d...
7. Order Processing
• Order processing is the term generally
used to describe the process or the work
flow associated with the picking, packing
and delivery of the packed item(s) to a
shipping carrier.

www.knust.edu.gh

DBA242-MKOBIO 26
 Elements of Logistics Cont’d...

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.
www.knust.edu.gh

DBA242-MKOBIO 27
 Elements of Logistics Cont’d...
8. Packaging cont’d…
• Packaging contains, protects, preserves,
transports, informs, and sells.
• Packaging Objectives:
 Protection (Physical, barrier,)
 Containment or agglomeration
 Information transmission
 Marketing
 Security, etc.
www.knust.edu.gh

DBA242-MKOBIO 28
 Elements of Logistics Cont’d...
8. Packaging cont’d…

www.knust.edu.gh

DBA242-MKOBIO 29
 Elements of Logistics Cont’d...
8. Packaging cont’d…

www.knust.edu.gh

DBA242-MKOBIO 30
 Elements of Logistics Cont’d...
8. Packaging cont’d…

www.knust.edu.gh

DBA242-MKOBIO 31
 Elements of Logistics Cont’d...
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.
www.knust.edu.gh

DBA242-MKOBIO 32
 Elements of Logistics Cont’d...
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.
www.knust.edu.gh

DBA242-MKOBIO 33
 Elements of Logistics Cont’d...
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.
www.knust.edu.gh

DBA242-MKOBIO 34
 Elements of Logistics Cont’d...
12. Logistics Strategic Planning
• The challenge for logistics managers
nowadays is to constantly balance a need
to perform well while responding to a
constantly changing environment.
• Logistics managers must proactively and
strategically plan for the future and
therefore prepare for these changes.
www.knust.edu.gh

DBA242-MKOBIO 35
 Elements of Logistics Cont’d...
13. 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.

www.knust.edu.gh

DBA242-MKOBIO 36
Factors influencing Logistics Planning
• Globalization
• Technology
• Uncertainties
• Industry Growth

www.knust.edu.gh

DBA242-MKOBIO 37
 DEVELOPMENT OF LOGISTICS OVER TIME
• 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
18th 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.
www.knust.edu.gh

DBA242-MKOBIO 38
 DEVELOPMENT OF LOGISTICS CONT’D…
• 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.
• 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).
www.knust.edu.gh

DBA242-MKOBIO 39
 DEVELOPMENT OF LOGISTICS CONT’D…
• Development of logistics started 40-50 years
ago with the integration of local level transport
and warehousing operations into Physical
Distribution systems
• This integration has transformed the way
businesses move, store and handle their
products.
• Businesses now use different types of
transport to link suppliers & distributors
across long distances
• PDM - Total Logistics - SCM
www.knust.edu.gh

DBA242-MKOBIO 40
EVOLUTION OF LOGISTICS
i. Early 1960s: Physical Distribution
Management (PDM)
Efforts were started in the USA to transform
PDM. Separate Distribution unit created to
coordinate the management of transport,
warehousing, inventory management, materials
handling and order processing. Outbound
distribution integration helped firms to develop
explicit customer service strategies and led to
meeting customer needs at minimum cost
www.knust.edu.gh

DBA242-MKOBIO 41
EVOLUTION OF LOGISTICS
ii. Late 1970s: Logistics and “Total
Logistics”
The era handled the overall responsibility
for the movement, storage, and handling
of both inbound & outbound products.
Played a role in product development,
recycling and after sales service.

www.knust.edu.gh

DBA242-MKOBIO 42
 EVOLUTION OF LOGISTICS
iii. Early 1990s: Logistics & Business Process
Re-engineering (BPR)
Principles of BPR was adapted to logistics
emphasizing 4 factors common to Logistics
ReEng–Systems Integration, Benchmarking,
Analysis of Logistics activities and Continuous
Improvement
iv. Last 20 Years
Supply Chain Management (SCM) and its
optimization. The main motivation of this SCM
era has been the desire to minimize inventory
www.knust.edu.gh

DBA242-MKOBIO 43
 Review Questions
1. Analyze the logistics system of ;
a. A church
b. A Telco in Ghana
2. Is Logistics relevant to KNUST’s
operations?

www.knust.edu.gh

DBA242-MKOBIO 44
End of Lecture
Thank You

www.knust.edu.gh

DBA242-MKOBIO 45