Logistics Strategy & Planning

Why the Increasing Interest? Deregulation Globalization Technological breakthroughs Environmental concerns Performance impact

Logistics Decision AreasTransportation

◦ Modes◦ Formats◦ Pricing

Warehousing◦ Consolidation◦ Cross-Docking and Break-Bulk◦ Hub-and-Spoke◦ Inventory

Major Transportation ModesRoadWaterRailAirPipeline

ConsolidationAir Road Pipeline Rail Water

• Cost components• Fixed infrastructure

and equipment• Labor and fuel• Variable –

passenger/cargo• Key issues• Location/number of

hubs• Fleet assignment• Maintenance

schedules• Crew scheduling• Prices and

availability

• Use of more than one mode of transportation to move a shipment

• Grown considerably with increased use of containers

• May be the only option for global trade

• More convenient for shippers – one entity

• High fixed cost• Primarily for crude

petroleum, refined petroleum products, natural gas

• Best for large and stable flows

• Pricing structure encourages use for predicable component of demand

• Move commodities over large distances

• High fixed costs in equipment and facilities

• Scheduled to maximize utilization

• Transportation time can be long

• Limited to certain geographic areas

• Ocean, inland waterway system, coastal waters

• Very large loads at very low cost

• Slowest• Dominant in global

trade• Containers

Warehousing

Any operation that stores, repackages, stages, sorts, or centralizes goods or materials

Consolidation

Warehouse

Small shipments in ...

Large economical shipments out ...

Logistics Strategy Choices

Pricing Logistics Economic factors

◦Pricing versus distance◦Price exchange rate◦Storability, handling, and liability◦Market factors

Ratings◦Goods classification◦Class index

Customer Service

From a logistics perspective, customer service is the outcome of all logistics activities or supply chain processes.Customer service, when utilized effectively, is a prime variable that can have a significant impact on creating demand and retaining customer loyalty.Order entry and ends with delivery of product to customers.Equipment service maintenance other technical support.The speed and dependability with which items ordered can be made available.

Elements of Customer Service

Dimensions of Customer Service

oTimeoDependabilityoFlexibilityoCommunication

Logistics Products

1.Nature of the logistics product

2.Product characteristics

3.Product packaging

4.Product pricing

5.Incentive pricing arrangement

6.Risk

Nature of logistics Products

oCustomer ProductsoIndustrial ProductsoConvenience ProductsoShopping ProductsoSpecialty Products

Product Life Cycle

Product CharacteristicsoWeight

oVolume

oValue

oPerishability

oFlammability

oSubstitutability

Product PackagingoTo facilitate storage and handling.

oTo promote better utilization of transport equipment.

oTo provide product protection.

oTo promote the sale of the product.

oTo change the product density.

oTo facilitate the use of the product.

oTo provide reuse value for the customer.

Product PricingoGeographical Pricing

oIncentive Pricing

oTax Effects

oProduct Standard

oEconomies of Scale

oDiscounted Pricing

oInternational Level

Risk In ProductsoPerishability (fresh fruits and whole blood)

oFlammability tendency to explore (gas, oil)

oValue, ease be stolen (pens. watches. cigarettes)

oSpecial treatment, whether transportation, storage or packaging, adds to the cost of distribution.