OVERVIEW OF

BUSINESS
LOGISTICS AND
PLANNING

PL201
FUNDAMENTAL OF
LOGISTICS
MANAGEMENT

LECTURER : NOR HASLIZA BINTI MOHD FADZIL

 Logistics

LOGISTICS involves those activities that focus on

getting the right amount of the right products, to the
right place, at the right time, at the lowest possible
cost.

The performance of these activities is LOGISTICS

MANAGEMENT which is the practice of organizing
the cost-effective flow of raw materials, in-process
inventory, finished goods, and related information
from point-of-origin to point-of-consumption to
satisfy customer requirements.
 Logistics

 Logistics Usually Refers to Management of:

 Movement of Materials Within Factory
 Shipment of Incoming Materials From Suppliers
 Shipment of Outgoing Products to Customers
 Movement of Materials within Factories

Typical Locations From/To Which Material Is Moved:

Incoming
Incoming Receiving
Receiving Quality
Quality Warehouse
Warehouse
Vehicles
Vehicles Dock
Dock Control
Control

Work
Work Other
Other Work
Work Finished
Finished
Packaging
Packaging
Center
Center Centers
Centers Goods
Goods

Shipping
Shipping Outgoing
Outgoing
Shipping
Shipping Dock
Dock Vehicles
Vehicles
 Importance of business logistics
 The importance of logistics systems lies in the fact that it leads to ultimate
consummation of the sales contract. The buyer is not interested in the promises of
the seller that he can supply goods at competitive price but that he actually does
so. Delivery according to the contract is essential to fulfilling the commercial and
legal requirements. In the event of failure to comply with the stipulated supply of
period, the seller may not only get his sale amount back, but may also be legally
penalized, if the sales contract so specifies. There is no doubt that better delivery
schedule is a good promotional strategy when buyers are reluctant to invest in
warehousing and keeping higher level of inventories. Similarly, better and/or timely
delivery helps in getting repeat orders through creation of goodwill for the supplier.
 Thus, as effective logistics system contributes immensely to the achievements of
the business and marketing objectives of a firm. It creates time and place utilities in
the products and thereby helps in maximizing the value satisfaction to consumers.
By ensuring quick deliveries in minimum time and cost, it relieves the customers of
holding excess inventories. It also brings down the cost of carrying inventory,
material handling, transportation and other related activities of distribution. In
nutshell, an efficient system of physical distribution/logistics has a great potential
for improving customer service and reducing costs.
 Components of
Logistics Management Outputs of
Inputs into
logistics
logistics Management actions
Natural Planning Implementation Control Competitive
resources advantage

Logistics
management Time and
Human Raw In-process place utility
Suppliers Finished Customers
resources materials inventorygoods
Efficient
Financial movement
resources Logistics activities to customer

Customer service Plant & warehouse site Proprietary

Information Demand forecasting selection
Inventory management
asset
resources Procurement
Logistics communications Packaging
Material handling Reverse logistics Copyright © 2001 by The
Order processing Traffic and transportation
McGraw-Hill Companies, Inc.
All rights reserved.
Parts and service support Warehousing and storage
Supply Chain Management
 Introduction

 Materials Are Any Commodities Used Directly or

Indirectly in Producing a Product or Service.
 Raw Materials, Component Parts, Assemblies, & Supplies
 A Supply Chain Is the Way Materials Flow Through
Different Organizations From Raw Material Supplier to
Finished Goods Consumer.
 Supply Chain Management

 Supply Chain Management Includes All Management

Functions Related to Flow of Materials From Company’s
Direct Suppliers to Its Direct Customers.
 Includes Purchasing, Traffic, Production Control, Inventory
Control, Warehousing, & Shipping.
 Materials Management & Logistics Management Includes
All Decisions About Purchasing Materials and Services,
Inventories, Production Levels, Staffing Patterns,
Schedules, and Distribution.
 Supply Chain Overview

Transportation Transportation Customers

Warehousing

Information
flows
Factory

Transportation

Vendors/plants/ports
Warehousing Transportation

CR (2004) Prentice Hall, Inc. 1-2

 Supply Chain Structure

SUPPLIER FACTORY DC RDC RETAILER

Raw Materials
Finished Goods

Information Flow
 Typical Supply Chain Network

Suppliers Plants

Customers
Distribution
Centers
 Supply Chain Planning Processes
Demand Forecasting
Material Requirement Planning Demand Planning

Component Production
Requirement Plan

Supplier Plant Warehouse Logistics Retailer

Order Management
Inventory at Different Stocking Points

Raw Work in Finished

materials process goods

Supplier Manufacturing plant Distribution center

Retailer

Figure 8.1
 Materials management

 Material management includes:-

 Administration of raw materials
 Subassemblies
 Manufactured parts
 Packing materials
 In-process inventory
 Physical distribution

 Physical distribution, which means the whole

operations and activities assembly that assure
products availability for the firm;s clients, providing
quantity, time and place utilities, concording to the
bottom marketing channels’ expectations where the
organization is involved.
 Physical distribution
performance cycle

Order processing Order transmission Customer order

Order delivery
Order selection Order transportation
to the customer
 Reverse logistics

 Reverse logistics is the process of reclaiming

recyclable and reusable materials, returns, and
reworks from the point of consumption or use for
repair, remanufacturing or disposal. This practice
reduces waste in landfills and lowers company
operating costs.
 THE ACTIVITY MIX
 The activities to be managed that make up business logistics (supply chain
management) vary from firm to firm, depending on a firm's particular
organizational structure, management's honest differences of opinion about
what constitutes logistics, and the importance of individual activities to its
operations. Follow along the supply chain as shown in Figure 1-1, and note
the important activities that take place.
 Again, according to the Council of Logistics Management, the components
of a typical logistics system are: customer service, demand fore­casting,
distribution communications, inventory control, material handling, order
processing, parts and service support, plant and warehouse site selection
(location analysis), purchasing, packaging, return goods handling, salvage
and scrap dis­posal, traffic and transportation, and warehousing and
storage.6
 Figure 1-2 organizes these components, or activities, as to where they are
most likely to take place in the supply channel. The list is further divided into
key and support activ­ities, along with some of the decisions associated with
each activity.
Figure 1-2
 Corporate strategy
 Strategy is the process whereby plans are formulated for
positioning the firm to meet its objectives.
 Strategy formulation begins with defining a corporate strategy.
This involves:
a. Assessing needs, strengths, and weaknesses of the 4
major components:
 customers
 suppliers
 competitors
 the company itself
b. "Visioning" where counter -intuitive, unheard of, and
unconventional strategies are considered.
 Corporate strategies are converted to more specific strategies for
the various functional areas of the firm such as logistics.
 Logistics planning
 The objectives of logistics strategy are:
 Minimize cost
 Minimize investment
 Maximize customer service

 Levels of logistical planning:

 Strategic
 Tactical
 Operational

 The 4 problem areas of supply chain planning

 Customer service levels
 Facility location
 Inventory decisions
 Transportation decisions
 Logistics planning

 When to plan?
 No distribution network currently exists.
 There has been no re-evaluation in 5 years.
 When costs are changing rapidly, especially transport &
inventory.
 When markets have shifted.
 When current distribution economics encourage shifts.
 When there has been a major policy shift in logistics such as
in price, customer service, or investment level.
 Strategic, Tactical, and
Operational Decision Making
Decision Area Strategic Tactical Operational
Transportation Mode selection Seasonal equipment Dispatching
leasing
Inventories Location, Control Safety stock levels Order filling
policies
Order Order entry, Processing
processing transmittal, orders, Filling
and processing back orders
system
design
Purchasing Development of Contracting, Expediting
supplier buyer Forward buying
relations
Warehousing Handling equipment Space utilization Order picking
selection, Layout and restocking
design
Facility Number, size, and
Questions & Answers