logistics chap 01 introduction
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8/10/2019 Logistics Chap 01 Introduction
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Lecturer:
Ho Trung Thao (thao.hotrung@hoasen.edu.vn)
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Course Objectives
Understand the definitions Logistics and Supply Chain
Understand the concept and key points of Supply ChainManagement.
Understand how to manage Supply Chain and Logistics inreal companies.
Apply to a group project.
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Chapter 1
Fundamentals of Logistics
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Learning Objectives
DEFINE ‘logistics’ and associated terms
UNDERSTAND the role and structure of supply chains
LIST different activities of logistics and understand the
relationships between them DISCUSS the aims of logistics
SHOW how logistics contributes to customer satisfaction
RECOGNISE the importance of logistics to every
organization.
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1. Basics Definition
All organizations move materials.Manufacturers: raw materials finished goods.
Definition of Logistics: Logistics is the function that is
responsible for the movement of materials (and
information). It is responsible for the transport and
storage of materials between suppliers and customers.
According to the Council of Supply Chain Management
Professionals (CSCMP), a professional organization for
Logistics and SCM professionals, logistics is defined as:
“the process of planning, implementing and controlling theefficient, effective flow and storage of goods, services and
related information from point of origin to point of consumption
for the purpose of conforming to customer requirements”
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what is products?
What is products?
Basic Definition (contd.)
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Basic Definition (contd.) Products: Goods (tangible) and Services (intangible)
Operations: Operations include manufacturing, serving,
transporting, selling, training, and so on. The main outputsare products.
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- People
- Buildings
- Raw materials
- Equipment- Information
- Investment
etc. . .
INPUT OUTPUT
OPERATIONS
- Manufacture
- Serve
- Supply
- Transport- Sell
- Train
etc…
- Goods
- Services
- Profit
- Waste- Wages
etc…
Fig. 1.2. Operations of a organization
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Basics Definition (contd.)
LOGISTICS is the function responsible for the flow of
materials from suppliers into an organization,through operations within the organization, and thenout to customers.
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Inbound logistics: activities between external suppliers and the
organization
Outbound logistics: activities between external customers andthe organization
Operations within the organization: activities between internal
suppliers and internal customers
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Link:
http://www.youtube.com/watch?v=V4JRH3e4xrg&featur
e=related
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2. THE SUPPLY CHAIN
-Different names for these chains of activities and organizations.
emphasize the operations, refer to the process;
emphasize marketing, call it a logistics channel;
look at the value added, call it a value chain,
see how customer demands are satisfied, call it a demand chain. ---Here we are emphasizing the movement of materials and will use
the most general term of supply chain.
A SUPPLY CHAIN consists of the series of activities andorganizations that materials move through on their journey
from initial suppliers to final customers.
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Supply Chain of Sheets of Paper?
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Inbound logistics: activities between externalsuppliers and the organisation
Outbound logistics: activities between externalcustomers and the organisation
Operations within the organisation: activities betweeninternal suppliers and internal customers
Fig. 1.5. Supply Chain
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Structure of the supply chain
SUPPLY CHAIN = a series of activities and organizations that move materials from initial suppliers to finalcustomers
Upstream supply chain activities: involve initial supplier,
third tier supplier, second tier supplier, first tier supplier Downstream supply chain activities: involve first tier
customer, second tier customer, third tier customer, finalcustomer
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Do you want to avoid supply chain?
EG: The market of vegetables
the sugar and sugar cane, beet
Well , You can get answer from figure!
Benefit from Supply Chain
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3. ACTIVITIES OF LOGISTICS
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Procurement or purchasing.
Inward transport or traffic management Receiving
Warehousing or stores
Stock control, Order picking and Materials handling.
Outward transport Physical distribution management
Recycling, returns and waste disposal
Location and Communication
Logistics is the process of planning, implementing and controlling theefficient, cost-effective flow and storage of raw materials, in-process
inventory, finished goods and related information from point of origin to
point of consumption for the purpose of conforming to customer
requirements (Council of Logistics Management (CLM) -
http://cscmp.org/default.asp)
S f l i i i i i
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Summary of logistics activities
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Case Study
NIKE logistics centerhttp://www.youtube.com/watch?v=NkfHVYv5nUo&feature=related
How UPS Cargo Containers Workhttp://www.youtube.com/watch?v=MyeqlieHhi4
Simulationhttp://www.youtube.com/watch?v=_0UJ0lKnn_o&feature=related
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Organizing Logistics
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4. Aims of logistics
When you buy an item, what kind of contents will be takeinto your consider?
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Aims of Logistics Logistics is responsible for the flow of materials through a
supply chain. This function is also called supply chainmanagement.
LOGISTICS is the time-related positioning of resources, or
the strategic management of the total supply-chain The SUPPLY-CHAIN is a sequence of events intended to
satisfy a customer.
The overall AIM OF LOGISTICS is to achieve highcustomer satisfaction. It must provide a high qualityservice with low – or acceptable – costs.
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Source: From Assoc. Prof. Ho Thanh Phong, IU lecture notes 26
profits earne Assets asse
dRe tsturn on = employed
Stocks,
money etc.
Property,
Equipment,
Plant, etc.
Current Assets
Fixed Assets
Assets
Importance of Logistics
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Source: From Assoc. Prof. Ho Thanh Phong, IU lecture notes 27
profits earne Assets
asse
dRe
tsturn on =
employed
Customer
Satisfaction
Operating
Costs
Product
Features
Sales
Profit
Margin
Price
Profit
Importance of Logistics (cont.)
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Example: ABC currently has sales of $ 20 mil. a year, with a stock level of 35% of
sales. Annual holding cost for the stock is 20% of value. Operating
costs are $8 mil./ year and other assets are valued at $15 mil. What isthe current return on assets? How does this change if stock levels arereduced to 25% of sales?
Solution: Taking costs over a year, the current position is:
Cost of stock = stock × holding cost = (20 × 0.35) × 0.2 = 1.4 mil./year
Total costs = operating cost + cost of stock = 8 + 1.4 = 9.4 mil./year
Profit = sales − total costs = 20 − 9.4 = 10.6 mil. /year
Total assets = other assets + stock = 15 + (20 × 0.35) = 22 mil.
Return on assets = profit / total assets = 10.6 / 22 = 0.4818 (48.18%)
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The new position with stock reduced to 25% of sales has: ???Cost of stocks = 20 × 0.25 × 0.2 = 1 mil. /year
Total costs = 8 + 1 = 9 mil. /year
Profit = 20 − 9 = 11 mil./year
Total assets = 15 + (20 × 0.25) = 20 mil.
Return on assets = 11 / 20 = 0.55 or 55%
Reducing stocks gives lower operating costs, higher profitand a significant increase in Return on Asset (ROA).
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Example (cont.):
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Development of logistics
pressures to the use of logistics
Changes of Customers.
Changes of Competition
Other changes in retail markets International trade continues to grow.
Organizations become to outsource peripheral activities and
concentrate on their core operations.
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Current trends
Improving communication Electronic data interchange (EDI)
Electronic point-of-sales data (EPOS)
e-purchasing of e-procurement
…
Support of EDI:
Item coding (often bar-coding)
Electronic Fund Transfer (EFT)
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Current trends
Improving customer service Lower lead-times
synchronized material movement
mass customization
Other significant tendencies Globalization
Reduced number of suppliers
Concentration of ownership
Outsourcing. Make or Buy.
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Current trends
Other significant tendencies Cross-docking
Direct delivery
Stock reduction methods
Increasing environmental concerns More collaboration along the supply chain
Three important themes for logistics consider
LEANNESS, AGILITY and INTEGRATION . Ideally,logistics should aim for all three of these
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Current themes
LEAN Logistics faster deliveries, reduce stock levels, reduce handling, lower
costs, reduce waste etc.
AGILE Logistics
flexible and responsive, customized service, respond quicklyto a changing demand.
INTEGRATION Logistics
co-operate with other organizations
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Summary❑Every organization creates products to satisfy customer demand.
The operations that create these products need an effective and
efficient flow of materials. In this sense, ‘materials’ are all the goodsand services needed to create products.
❑ Logistics is the function that is responsible for the flow of materialsinto, through and out of an organization.
❑ Materials move through a series of related activities andorganizations between initial suppliers and final customers. Theseform a supply chain. Each product has its own supply chain.
❑ There are many possible structures for supply chains, but thesimplest view has materials converging on an organization through
tiers of suppliers, and products diverging through tiers ofcustomers.
❑ Logistics consists of a series of related activities. These range fromprocurement at the beginning of operations, through to physical
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Summary (cont.) ❑ An overall aim for logistics is to achieve high customer
satisfaction or perceived product value. This must be achieved with acceptable costs.
❑ Every organization depends on the movement of materials, andthe way this is done affects costs, profits, relations with suppliersand customers, customer service, and virtually every other
measure of performance.❑ There are a lot of pressures for improving logistics. Current
trends are: Improving communication, Improving customer service,some other significant tendencies.
❑ Current themes:
LEAN logistics, AGILE logistics, INTEGRATION logistics.
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Q i 01
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Quiz 01Prob.01
ABC currently has sales of $ 20 mil. a year, with a stocklevel of 35% of sales. Annual holding cost for the stock is
20% of value. Operating costs are $8 mil./ year and
other assets are valued at $15 mil. What is the current
return on assets? How does this change if stock levels arereduced to 25% of sales?
Prob.02
Draw a Supply Chain for Bottle of water
Homework 01
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Homework 01
(Due: next class) 5. The cost of logistics varies widely from organization to
organization. What factors affect these costs? Are the costsfixed or can they be controlled?
6. How could you find the best balance between service leveland costs?
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Production Inventory & Warehousing
Transportation
Customers
Manufacturers
Suppliers
Material
Transportation
Fig. 1.3. Logistics Network Transportation
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In practice, most organizations get materials from manydifferent suppliers, and sell products to many differentcustomers.
The supply chain converges as raw materials move inthrough the tiers of suppliers, and diverges as productsmove out through tiers of customers.
A manufacturer might see sub-assembly providers as firsttier suppliers, component makers as second tier suppliers,materials suppliers as third tier suppliers, and so on. Itmight see wholesalers as first tier customers, retailers as
second tier customers, and end users as third tiercustomers .
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