Business Logistics 101

Martin DresnerUniversity of Maryland

Robert H. Smith School of Business

Agenda

Logistics DefinedNew Logistics StrategiesFinal Remarks

Pipeline View

Suppliers ConsumersManufacturer Distributor Retailer

Logistics Activities

TransportationWarehousingInventory ManagementMaterials HandlingPurchasingOrder Processing

New Paradigm

Suppliers

Carriers

Manufacturer

Carriers

ThirdParty

Provider

Distributor Retailer

CarriersConsumers

“Alphabet Soup” of Logistics Strategies

JIT - Just-In-TimeER - Efficient ReplenishmentCR - Continuous ReplenishmentECR - Efficient Consumer ResponseVMI - Vendor Managed InventorySBT - Scan-Based Trading

Just-In-Time Purchasing

Frequent shipments of small quantities

Short time windows for deliveriesIncreased traffic on highways and in

metropolitan areasPartially offset by suppliers locating

near customers

Vendor Managed Inventory

Vendor determines shipment amounts and timing based on customer needs

Requires tie-in between vendor and customer’s inventory system

Vendor may still deliver on a JIT basis with time windows set by buyer

Traffic impact remains

Scan-Based Trading

Suppliers are paid by retailers when consumer purchases are scanned at check-out

Requires item information (e.g., price paid by retailer) to be included in retailer’s cash register information system

Supplier and retailer need to closely link information systems (e.g., same item codes)

Scan-Based Trading

Big advantage is that retailer no longer needs to check in items when they are delivered by suppliers

Supplier can set delivery times during off-peak hours

Supplier can deliver JIT but with a reduced impact on roadways

Final Remarks

Firms are using information technology to change the way they conduct their logistics operations

New logistics strategies can have dramatic impacts on transportation infrastructure

The better these strategies are understood, the better able we will be to make the appropriate infrastructure decisions