lm session 3 - the logistics product student copy

7/23/2019 LM Session 3 - The Logistics Product STUDENT COPY

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Logistics

Management TheLogistics Product

CHAPTER 3 THE LOGISTICS PRODCT!BUSINESS LOGISTICS MANAGEMENT!"ALLO! R#H#

SSHMITA $ARA%A$A $ITIE &'()


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The *ogistics +roductIt is a co**ection o, characteristics that can -emani+u*ated -. the *ogistician

It generates the re/enues ,or the 0rm

The products basic dimensions (characteristicspac!a"e and price# $orm the e%ement o$ customerser&ice in the desi"n o$ %o"istics s'stems



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The Logistics ProductTangi-*e1eight! 2o*ume! Sha+e! eatures! Per,ormance! Dura-i*it.Intangi-*eA,ter4Sa*es Su++ort! Com+an. Re+utation! Communications! *e5i-i


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C*assi,.ing ProductsDe+ending on 6ho uses them

Consumer roducts

The goods and ser/ices directed to6ards the u*timate

consumer7 Con/enience +roducts 8tooth+astes! detergent! groceries!

etc#9

7 Sho++ing +roducts 8automo-i*es! ,ashion goods! medica*care9

7S+ecia*t. +roducts 80ne ,oods! custom4madec*othes:de/ices:automo-i*es9

1ho 6ou*d direct*. -ear the distri-ution costs in eachcase;

1hat 6ou*d -e the im+act on the distri-ution costs ,or

the a-o/e c*asses;SSHMITA $ARA%A$A $ITIE &'()


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C*assi,.ing ProductsDe+ending on 6ho uses them

Industria% roducts

The goods and ser/ices that are directed to indi/idua*s or

organice su++*ies! -usiness

ser/ices9

Di>cu*t to identi,. a *ogistics strateg. -ased on thisc*assi0cation



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C*assi,.ing Products"ased on the Product Li,eC.c*e7 Introduction

7 Cautious

7 Gro6th7 Distri-ution needs to ?ee+ +ace

6ith increasing a/ai*a-i*it.

7 Maturit.7 1idest distri-ution achie/ed

7 Dec*ine7 Distri-ution needs a*so dec*ine



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C*assi,.ing ProductsThe @'4&' cur/e

Possi-*e *ogistics com-ination7 A items 6ide geogra+hica* distri-ution! man. 6arehouses! high

stoc? a/ai*a-i*it.

7 C items sing*e! centra* stoc?ing +oint

7 " items intermediate stoc?ing +oint +osition

The @'4&' cur/e is de+endent on the PLC7 Dierent +roducts in dierent stages o, the PLC

Generic ,ormu*a ,or the @'4&' cur/e

Y= (1+A)X/(A+X)7% B cumu*ati/e ,raction o, sa*es B cumu*ati/e ,raction o, items

AB constant



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E5am+*eTurno/er Ratio

B Annua* Sa*es: A/erage In/entor.



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E5am+*e sing the A"C ,ormu*a,or in/entor. assessment

Su++ose that in the ,o**o6ing *ist o, items! B'#&( and%B'#@# C*asses ,or each item ha/e -een determined,rom +rior data and the items ha/e -een sorted indescending order o, sa*es# I, Annua* Sa*es is e5+ected to

-e F&)!'''! ho6 much 6ou*d -e the in/estment in thein/entor.;


Product Class Item No.(Rankas perSales)

CumulativeItem

Proportion(X)

CumulativeSales

Proportion(Y)

CumulativeProjectedSales ($)

ProjectedItem Sales

($)

ProjectedClass Sales

($)

TurnoverRatio

vera!eInventor" ($)

#%& ' %.%%' %.&&& '''%* '''%* +

#' %.',', %.*,% '-- &,, '-- + ,-#',- %.++ %.+&,& ',+&* +-' -

#' & %.**& %.,%, %-'% '+*& -

#' - %.&-&-- %.,*&+ '++ '+ -

#'+ * %.-&-&- %.%-- *&% % **&- - '#'- C + %.*** %., *

#', C , %.+++ %.--' ,,% -&,

#' C %.,',', %.+- && &&&

#%% C '% %.%% %.,+*& &*' *+


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Dimension ( 4 ProductCharacteristics

Weight-Bulk Ratio

Higher densit. +roducts resu*t in more e>cient uti*i


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Value-Weight Ratio

Storage costs are de+endent on /a*ue 8+roduct +rice or ru+ee/a*ue9

Trans+ortation de+end on +roduct 6eight

Lo6er /a*ue46eight ratio Higher trans+ortation costs Lo6erstorage costs

Higher /a*ue46eight ratioHigher storage costs Lo6ertrans+ortation costs

Im+*ications 7 $egotiation ,or *o6er trans+ortation rates ,or *o6er /a*ue46eightratio +roducts Change +ac?aging re=uirements

7 Maintain *o6er a/erage in/entories ,or higher /a*ue46eight +roducts



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Dimension ( Productcharacteristics

Substitutability

Can -e /ie6ed as *ost sa*es to the su++*ier

Litt*e contro* o, *ogistician o/er the su-stituta-i*it. o, the +roduct

Im+*ications 4 can eect change in the re/enues -.A9 Im+ro/ing trans+ortation 8greater s+eed! de+enda-i*it. o,de*i/er.! *o6er incidence o, *oss and damage97Trade4o -:6 *o6er *ost sa*es and higher trans+ortation costs ,or an

a/erage in/entor. *e/e*

"9 Increasing +roduct a/ai*a-i*it. in the mar?et 8more stoc?ing+oints97Trade4o -:6 *o6er *ost sa*es and higher storage costs ,or a

trans+ortation cost



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Risk characteristics

Perisha-i*it.! inJamma-i*it.! high /a*ue

Im+*ications costs increase in higher ris? +roducts



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Dimension & ProductPac?aging

$eed ,or Product Pac?aging7 aci*itate storage and hand*ing

7 Promote -etter uti*i


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Dimension 3 ProductPricing

Logistics decisions indirect*. inJuence the 0na* +ricing o,the +roduct

T6o t.+es o, methods re*e/ant to *ogistics management7 Geogra+hic Pricing Methods #O#"# +ricing! Kone Pricing!

Sing*e or ni,orm Pricing! reight E=ua*i


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Dimension 3 Product Pricing Geogra+hic Pricing Methods

!o!b! "rici#g

#o#-# ree on -oard

The +o*ic. that de+icts the *ocation ,or 6hich the +ricing

is eecti/e


!o!b! $actory !o!b! %esti#atio#

Price is =uoted at the ,actor.*ocation or in the /icinit.

Price is =uoted to customers*ocation or /icinit.

Customer ta?es tit*e o, the goods atthe +oint designated

Trans+ortation costs are a*read.inc*uded in the +rice and is the

res+onsi-i*it. o, the su++*ierCustomer is res+onsi-*e ,ortrans+ortation! -ut ma. +a.se+arate*. ,or su++*ierstrans+ortation ser/ices 8e#g#automo-i*es9

Ma. +ro/ide a net trans+ortationcosts ad/antage to the -u.er as-u.er ma. not -e a-*e to generate/er. high shi++ing /o*umes8common +ricing method9


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Dimension 3 Product Pricing

Geogra+hic Pricing Methods


&rici#garra#ge'e#t

escri"tio#

#o#- origin!reight co**ect

The -u.er o6ns the goods in transit! -ears and +a.sthe ,reight costs! and 0*es an. trans+ortation c*aims

#o#- origin!reight +re+aid

The -u.er o6ns the goods in transit and 0*es an.trans+ortation c*aims# The se**er -ears and +a.s the,reight charges

#o#- origin!reight +re+aidand charged -ac?

The -u.er o6ns the goods in transit! -ears the ,reightcharges! and 0*es an. trans+ortation c*aims# The se**erinitia**. +a.s the ,reight charges! and in/oices the -u.er

#o#-# destination!,reight co**ect

The -u.er -ears and +a.s the ,reight charges# These**er o6ns the goods in transit and 0*es an.trans+ortation c*aims

#o#-# destination!,reight +re+aid

The se**er -ears and +a.s the ,reight charges! o6ns thegoods in transit! and 0*es an. trans+ortation c*aims#

#o#-# destination!,reight co**ect and

The -u.er -ears and +a.s the ,reight charges# These**er o6ns the goods in transit and 0*es an.


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o#e &rici#g

1ith greater num-er o, customers! indi/idua* +ricing -ecomesdi>cu*t and:or e5+ensi/e

Kone +ricing esta-*ishes a sing*e +rice 6ithin a 6ide geogra+hic

areaAn. num-er o, areas ma.-e de0ned

Ma.-e com-ined 6ith ,#o#-# +ricing 8trans+ortation costs ma.-echarged


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reight ,ualiatio# &rici#g

irms ma. com+ete on*. on trans+ortation costs! a** e*se-eing e=ua*

In case mar?ets are not e=uidistant ,rom the 0rms,actor. *ocations! one o, the 0rms has to a-sor- theadditiona* trans+ortation costs

Trans+ortation costs ma. -e a/eraged in this case as 6e**



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Basi#g &oi#t &rici#g

i5ing a -ase +oint other than the origin as the +oint tocom+ute +rice 8e#g# stee* and cement industries9

irms ma. use sing*e or mu*ti+*e -ase +ointsIs a*so a com+etiti/e +ricing mechanism

Attracti/e 6hen7 Product has a high trans+ortation cost re*ati/e to o/era**

/a*ue

7 Litt*e +re,erence among -u.ers as to the su++*ier

7 Re*ati/e*. ,e6 su++*iers and +rice4intensi/e com+etition



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.egal co#cer#s i# geogra"hical "rici#g

Price discrimination occurs i, the tota* trans+ortation+rices are not reJected in the 0na* +roduct +rice to thecustomer

Price discrimination is a ,eature o, sing*e!


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Dimension 3 Product Pricing Incenti/e Pricing Arrangements

ua#tity iscou#ts

Larger =uantities trans+orted at a time resu*t in greatereconomies o, sca*e ,or the trans+orter:su++*ier

"ene0ts can -e +assed do6n to the customer


lm session 3 - the logistics product student copy

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