LOGISTICS

TOPIC 1.1

- Definition

Logistics management is that part of supply chain management that plans,

implements, and controls the efficient, effective forward and reverse flows and
storage of goods, services and related information between the point of origin and
the point of consumption in order to meet customers’ requirements.

1. PART OF A SUPPLY CHAIN MANAGEMENT

= It is part of a bigger picture. Logistics can affect how well or how poorly an
individual firm and its associated supply chains can achieve goals and objectives.
Regardless of the size of a company, big or small, relies heavily on logistics and its
day to day operations.

2. PLANS, IMPLEMENTS, AND CONTROLS

= Logistics involve careful and strategic planning, implementation and control
throughout the supply chain. It should be involved in all three activities and not just
one or two. Neglecting any one of the planning, implementation and control
processes could disrupt the flow of supply chains.

3. EFFICIENT & EFFECTIVE FORWARD & REVERSE FLOWS & STORAGE

= Logistics is also integral for the efficient and effective forward and reverse flows as
well as storage and warehouse activities. Logistics concerns not only the forward
movement of goods and services but is equally important for the backward (reverse)
flow. Warehousing and storage activities are critical elements in the logistics process
and operations.

4. GOODS, SERVICES AND RELATED INFORMATION

= All goods, services and information throughout the supply chain are shared and
communicated with every parties within the chain.

5. TO MEET CUSTOMER REQUIREMENTS

= Logistics complex processes and operation are done to meet customer
requirements. Therefore, logistics strategies and activities should be based on
customer wants and needs, rather than the wants, needs and capabilities of
manufacturers or retailers.

To simply summarize,

“Logistics is in everything. And everything needs logistics”

THE EVOLUTION

In 1960s,
Term logistics not known. In fact, often referred to ‘physical distribution’, indicating
movement of goods from one place to another. During this era, companies were
heavily focused on the outbound movement. Meaning heavily emphasized on the
production of goods. Producing as much as they can and distribute as frequent and
as further as they can.
All the way up to 1980s.

But this time, 1980s,

Companies have better understanding between their outbounds and inbounds of
goods. At this moment in time, inbound and outbound were known as material
management.

In 1990s,
Term ‘logistics’ comes into better picture in this era. They have better understanding
of logistics and the importance of supply chain management. Here, logistics focused
on the full spectrum of distribution from the raw materials to the customer
consumption.

In 2000s,
Logistics continued to grow on rapid pace. Regarded as a contemporary business and
business began to appreciate logistics as a competitive advantage. During this time,
niche market and logistics sector began to arise. For instance, some logistics
disciplines, such as reverse logistics, humanitarian logistics, .. and sustainable
logistics began to receive central attention.

In 2010s,
Logistics field continued to progress and considered an industry more. This era
received a rise in the corporation of physical and digital logistics combined together.
This means that companies are not only concerned of goods and services across the
supply chain, they are equally concerned on the digital and information technology
that goes in logistics operations. During this time, saw a rise of artificial intelligent in
logistics management for use of decision makings, guidance and even physical
distribution. Progressing continuously...
 TOPIC 1.2

- THE ECONOMIC IMPACT OF LOGISTICS

Example, the countries’ main source of export or revenue in Brunei is oil.

The economic impacts of logistics in 4 perspectives/factors:

1. CHANGES IN CONSUMER BEHAVIOR

Although changes in consumer behavior are commonly the purview of the
psychology and marketing disciplines. Such changes have important logistical
implications as well. Several examples are, customized customer, changing family
roles and rising customer expectations.
Logistics play a vital role in ensuring the purchased product, regardless location and
size, delivered to door step in exact condition and fast.
*Bring benefit to consumer*

2. TECHNOLOGICAL ADVANCES
There are tremendous technological advances during the course of our lifetime.
From desktop computers to tablets, example, have profoundly influenced business
management and, by extension, business logistics.
Technological advances have influenced logistics by allowing companies to offer
greater market coverage with improved service delivery. Shipment tracking for
example. Global positioning systems providing real time location and information of
shipment.

3. ADVANCES IN RETAILING
Retailing in second decade noticeably different from 21st century. Omnichannel
retailing is a strategy that focus on providing customers with a seamless shopping
experience regardless of sales channel.
How is it possible as a consumer to enjoy foods from overseas harvest for months
and sold fresh at supermarkets?
Through temperature control, transport fleet management, warehousing inventory
management, logistics have improved experience.

4. GLOBALIZATION OF TRADE
Greater today than ever before. Many factors such as rising of living standards and
multi-country trade alliances, have contributed to the growth of global trade which
without a doubt logistics have played a key role to. Such as shipping containers, an
important catalyst for growth and global trade, that allows many different products
to be securely transported across all 4 modes of transportation. All consumers,
businesses, as well as governments are allowed to trade.

MACRO perspective
- Logistics impact our country?
 MICRO perspective
- Logistics impact our personal life?
TOPIC 1.3

- LOGISTICS OBJECTIVES
. To improve lead-time
. To reduce transportation costs
. To minimize inventory (stock) holding
. To maximize efficiency of product/service distribution
. To maximize infrastructure/equipment utilization

BALANCE – Logistics activities should be balanced between capability, cost and customer
expectation.

CREATING UTILITY
1. Possession Utility
Refers to the value or usefulness that comes from a customer being able to take
possession of a product. Possession utility can be influenced by the payment terms
associated with the product. Example credit and debit cards, facilitate possession
utility to purchase product without producing cash. In logistical context, you don’t
have to travel all the way to Switzerland for the chocolate, you can simply buy it
from a nearby supermarket or online.

2. Form Utility
Refers to a product’s being in a form that:
(1) Can be used by the customer and
(2) Is of value to the customer
Although it is generally associated with production and manufacturer. Logistics can
also contribute to form utility. Example, to achieve production economies of lower
cost per unit, a soft drink may produce 1000 cases of soft drinks. You’re not likely to
purchase 1000s, but rather in small quantities. Through allocation, logistics can break
down to smaller and more manageable quantities desired by customers. therefore,
form utility.

3. Place Utility
Having products available where they are needed by customers. Products are moved
from points of lesser value to points of greater value. Example the soft drinks. Place
utility is increased when cans moved from points of lesser value, like storing in
warehouse to greater value, like in a supermarket shelf. They have more value there
ready to be purchased by customers.

4. Time Utility
Refers having products available when they are needed by customers. It is important
to recognize that different products have different sensitivities to time. Example a
three day late of perishable items like cartons of milk likely has more serious
consequences than three days late delivery of soft drinks.
CONTEMPORARY LOGISTICS TEXT often concur the logistics objective is fundamentally to
fulfil the 7 RS.

Referring to 1.1, Satisfying customer requirements.

RIGHT PRODUCT

RIGHT QUANTITY,

RIGHT CONDITION,

RIGHT PLACE,

RIGHT PRICE,

RIGHT TIME,

RIGHT CUSTOMER.

*VITAL*
TOPIC 1.4

- LOGISTICS AND FIRM

How does the business functions intertwine with logistics?

1. Production
2. Marketing
3. Finance
4. Procurement

Production and logistics – involves the lengths of production runs. Production department
favors long production runs of individual products, because it allows the relevant fixed costs
to be spread over more units. Thus resulting in lower production cost unit. Another
consideration with long production runs, is sometimes access to inventory for particular
products.
Some value added activities such as
Warehousing activities are adding more

Contemporary marketing places a heavy emphasis on customer satisfaction. Logistic

strategies can facilitate customer satisfaction by reducing the cost of products. Translating
to lower prices as well as bringing a broader variety of choices closer to where the customer
wishes to buy or use the product. Logistic strategies offer unique ways a company can
differentiate itself among competitors.

Finance staff is often charged with the responsibility of allocating the firms’ funds to projects
desired by the various operating departments. Often instrumental in approving capital
budgeting decisions that affect logistics. Example, the acquisition of materials handling
equipment such as forklifts, the use of warehouse facilities as well as use of third party
logistics providers will only get going if they are available and have adequate funding.

Other than it is inventory. Finance measures inventory in terms of cost and value in terms of
dollars. Whereas the logistics measure in terms of units. They then inflate the overall cost
which causes disagreement between the departments.

Procurement, referring to raw materials, component parts and supplies bought from
outside the organization with objectives to support the companies’ operation. It is an
important activity, closely related to logistics. As acquired goods and services must be
entered into the supply chain in the exact quantities and at the precise time they are
needed. Most of the time, materials are procured from multiple locations. Therefore once
procured, logistics will then ensure the safe delivery of shipments from origin to the desired
locations.
TOPIC 1.5
- ACTIVITIES IN LOGISTICS
There are various logistics activities. Varying from company to company.
1. Transportation
2. Warehousing
3. Packaging
4. Material Handling
5. Order Processing
6. Inventory Management
7. Procurement
8. Customer Service

TRANSPORTATION MANAGEMENT
- Defined as the actual physical movement of goods or people from one place to
another.
- Transportation is the most important task a logistics performs as it moves products
throughout the supply chain.
- Transportation management refers to the management of transportation activities
by a particular organization.
- Transportation can account for up to 50% of a firm’s total logistic costs and that
represents the costliest logistics activity in many organizations.
- The decision of which mode of transport to use is directly tied to the consideration
of distance, type of cargo, timing and financial capacity.

WAREHOUSING
- Refers to places where inventory can be stored for a particular period of time.
- It is directly related to transportation.
- This involves decision on where goods will be stored, the number and location of
warehouse and the amount of inventory that will be held in each distribution center.
- Also relates to how products will be handled in the storage area, from order picking
to order tracking and finally distribution.

PACKAGING
- Both marketing and logistical dimension.
- Logistical packaging, also known as protective packaging, refers to packaging that
prepares a product for storage in transit. Some modes of transportation require
additional packaging to prevent product damage. In addition to protecting products
during transportation and storage, packaging must be compatible with material
handling equipment in warehousing layout.

MATERIAL HANDLING
- Concerned with the physical handling of the product.
- Refers to the short distance movement of products within the confines of a facility.
- Example warehouse. Loading and unloading of goods from vehicles, placement and
order picking goods and movement in facilities.
 - In logistics, efficient material handling can save cost, cuts down on handling time as
well as minimizing on product damage.
ORDER PROCESSING
- Order management. Refers to the management of the activities that take place
between the time the customer places an order and the time it is received by the
customer.
- As such, order management, it is a logistics activity with a high degree of visibility to
customers.

INVENTORY MANAGEMENT
- Inventory refers to stocks of goods maintained for a variety of purposes.
- Such as for resale to others as well as to support manufacturing or assembling
processes.
- When managing inventory, logisticians need to simultaneously consider three
relevant costs:
1. Costs of carrying or holding a product
2. Cost of ordering a product
3. Cost of being out of stock
- Inventory management and control involves maintaining the needed amount of
stocks, setting an arrangement for timely replenishment and also maintaining
accurate inventory counts.
- Also directly tied to transportation as arrangements must be made for timely
inbound shipments and materials once stocks depleted.

PROCUREMENT
- Refers to the raw materials, component parts and supplies bought from outside
organizations to support a company’s operations.
- Procurements direct link to outside organizations means that its strategic
importance has increased as supply chain management has become more popular.

CUSTOMER SERVICE
- As logistics is all about fulfilling customer wants and needs, it is an inter role part of
logistics.
- Customer service, fundamentally, is all about keeping customers happy.
- Involves making sure that the right person, receives the right product, at the right
place, at the right time, in the right condition and at the right cost. Which is the
essence of logistics.