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Prof. Anatoly Sachenko -Kontakt

Zakład Informatyki i EkonometriiBudynek A, pokój 414Instytut Ekonomii i InformatykiWydział Organizacji i Zarządzania

http://dydaktyka.polsl.pl/roz6/asachenko/default.aspx

sachenkoa@yahoo.com or a_sachenko@ieee.org

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Lecture 1. Logistics Origin and Basics

Lecturer:

Prof. Anatoly Sachenko

Informatics in Logistics Management

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Lecture Overview

Definition and Origins System ApproachLogistics ManagementLogistics Perspective

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Definition of Logistics

Logistics - “Planning implementing and controlling the physical flow of material and finished goods from point of origin to point of use to meet customer`s need at a profit” Philip Kotler

Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations.

Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security

Logistics is one of the main functions within a company

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Origin of Logistics

The term logistics comes from the Greek logos (λόγος), meaning "speech, reason, ratio, rationality, language, phrase", andmore specifically from the Greek word logistiki

(λογιστική), meaning accounting and financial organization

The word logistics has its origin in the French verb loger to lodge or to quarter

Its original use was to describe the science of movement, supplying & maintenance of military forces in the field

Later on it was used to describe the management of materials flow through an organization

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Main Logistics Targets and Fields

Its main targets are divided into performance related and cost related

They are high due date reliability, short delivery times, low inventory level and high capacity utilization

But when decisions need to be made, there is always a trade off between these targetsIt’s making a logistician challenging and interesting

Main Logistics fields:Procurement LogisticsProduction LogisticsDistribution LogisticsAfter sales LogisticsDisposal Logistics

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Logistics Viewpoints

Inbound logistics is one of the primary processes andit concentrates on purchasing and arranging

inbound movement of materials, parts and/or finished inventory from suppliers to: manufacturing or assembly plants, warehouses

or retail storesOutbound logistics is the process related to the storage

and movement of the final product and the related information flows fromthe end of the production line to the end user

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Scope of Logistic

It is a critical importance for organization how it delivers tangible or intangible products & services to the customer

Effective physical movement of the tangible product will speak of intangible services associated with the product and the delivered organization

In Case of intangible product, the delivery of tangibles at the right place & right time will speak about its quality

On the macro level infrastructure it’s contributing to a large extent in the physical movement of produced goods

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Scope of Logistic

This speed & reliability in distribution of products & services contribute to a great extent in the growth of a country`s domestic & international trade

Logistic cost as a percentage of GDP across the world is shown in the following table

Country Logistic cost as a percentage of GDPKorea 16China 15Japan 14India 13France 12UK 11USA 10

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Logistics –A system approach

Logistics recognizes that all the activities of material movement across the business process are interdependent and needs close coordination and these are to be maintained as a system

Logistics System is an adaptive system including following functional Areas:

Order ProcessingInformation Flow

WarehousingInventory control

PackagingTransportation

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Order Processing

Order checking for any deviation in agreed on negotiated term

Technical details; price; delivery period; payment terms; taxes etc.

Checking the availability of material in stock (material requisition)

Production & material scheduling for shortage.Acknowledging the order, indicating deviation if any

It is routine operation but require great deal of planning training of people involved and investment

to bring about efficiency & accuracy

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Information Flow

It is basically info based activity of inventory movement across the supply chainHence role of info system plays a vital role in

delivering superior customer serviceThis function is required to facilitate the following

info needs Order registration Order checking & editingOrder processingCoordination - means to integrate the total supply

chain of the company with info needs as to time, quantity, value

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Warehousing

A storage place wherein finished goods are stored till they are sold.

Effectiveness of an organization`s marketing strategy depends on making the right decision regarding warehouse

Warehouse are treated as switching facilities rather than storage place

Major decision of warehouse are as follows: Location ,Size & Number of warehousing facilities Warehouse layout Design of building Ownership of the warehouse

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Modern Warehouse

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Packaging

It is also a critical element in physical distribution of the product, which influences the efficiency of the logistic

system this is done with the view of following: For handling and damage prevention For communications For inter modal transportation Storage space economy

Thus to reduce packaging cost

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Transportation

For goods movement of a transportation is the most fundamental and important component of logistic

E.g. for low unit value products the transportation cost component is 20% of the product cost

In logistic cost its share varies up to 65-70%There are the few decision involved in transportation

Mode of transportation ( Cost & time factor) Own fleet or Outsourcing Route Planning Vehicle scheduling

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Logistics Management

Logistics Management is that part of Supply Chain Managementthat plans, implements, and controls the efficient,

effective, forward, and reverse flow and storage of goods, services, andrelated information between the point of origin

and the point of consumption in order to meet customers’ requirements

From a traditional point of a view a goal of any firm is to produce competitive products and increase its volumeIn this case management can boil down to a

General Manager + minor staff-see next slide

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Logistics Management – Traditional Structure

Person’s Decision Making Process

(Chief Manager)

Supplier Production Customer

Material flow

Information flow

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Logistics Management – Traditional Structure

Both terms Flaw and Inventory are the main categories of Logistics

In Logistics Management are diffeation Flows- see previous and next slides

Material Flow red the Material and Informis the description of the transportation of raw materials, pre-fabricates, parts, components, integrated objects and finally products as a flow of entities

Logistics operations with Information Flow include acquisition, storing, processing and transfer of info

In next slide is shown a contemporary structure of Logistics Management

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Logistics Management – Contemporary Structure

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Logistics' perspective: Three ForcesThree Forces which have change the perspective of

logistics: GlobalizationFocus on Supply Chain ManagementOutsourcing of Non Core Competency Functional

Area

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GlobalizationThe entire world has become a global village for

marketers because of the liberalization of economics of most countries, and the emergence of World Trade Organization

which is forcing business organizations to supply products beyond the national boundaries wherever there is a market opportunity

However in such conditions the role of LOGISTICS will beto provide time and place time and place utility

of the product to the customer

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Focus on Supply Chain Management

Business the world over are striving for competitiveness

In their struggle for survival their focus has shifted to the supply chain i.e.Integrating the process of Procurement ,

processing & distributing to deliver value for money to the customer

Two key roles logistics planning & support areValue delivery processSuccess of Supply Chain Management

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Outsourcing of Non Core Competency Functional Area

Outsourcing is a acceptable trend in businessCorporation have realized that doing everything by

themselves does not result in effective & efficient use of scare resources available to them

It is better to outsource functional area to experts who can do job at the lowest cost and that to efficiently & Effectively

LOGISTICS is one such area where most of business org. do not have enough expertise thus needs to be outsourced

Thus Logistics have shaped into different service industry offering complete & customized logistics solutions