LOGISTICS MANAGEMENT

Development of Logistics

CHAPTER 2 DEVELOPMENT OF LOGISTICS

Early logistics
Pressures to improve logistics Customer satisfaction Improving communications Responding to changes in the business environment New logistics operations

LEARNING OBJECTIVES
Review the development of logistics Discuss the pressures that force logistics to

change Outline ways in which managers respond to these pressures Consider the move towards increasing customer service Appreciate the ideas behind lean and agile logistics Describe the effects of improved technology and communications in logistics List ways in which logistics is responding to changes in the business environment Describe some new types of logistics operations

Logistics has a long history

But it has grown dramatically in the past few years

Pressures for these changes include: Changing management attitudes Changes in the nature of markets Changes in the nature of customers Changes in business operations Changing views of society

A key pressure for change concerns customer satisfaction

Customer satisfaction depends on logistics meeting

and preferably exceeding customer expectations It is in everyones interest to achieve customer satisfaction, so that customers have the deliveries they want and suppliers can look forward to repeat business A closely related concept is customer service, which is a measure (or set of measures) which show how well logistics is performing

Customer service is largely determined at the interface between a supplier and its customers and is set during
Pre-transaction activities Transaction activities

Post-transaction activities
It is important to recognise the differences between: an internal view of suppliers - largely concerned with cost and efficiency an external view of customers, who judge a service by how pleased they are with the result

Two particularly important aspects of customer service appear as:

Cost

Generally (but not inevitably) concerned with low or competitive

costs Aligned with leanness which aims at removing all waste from a supply chain
Lead time

Generally (but not inevitably) concerned with delivering materials

as quickly as possible Aligned with agility which aims at a flexible service that responds quickly to changing conditions and gives high customer service

Improving communications have had a major effect on logistics

Appears in many forms, such as global positioning and in-

cab computers But most obvious in various forms of e-business Key elements for this are:
Electronic data interchange (EDI)

Electronic point of sales data (EPOS)

Electronic fund transfer (EFT) Websites and the Internet Item coding (such as RFID)

E-business brings benefits of

Less paperwork shorter supply chains Improved communication Transaction recording Convenient timing Convenient locations Short lead times Efficient operations Access to a wider range of products Lower operating costs etc

Logistics has responded to many changes in the business environment, giving:

Greater co-operation and integration Globalisation

Outsourcing
Using fewer suppliers Concentration of ownership

Movement of power to retailers

Increasing environmental concern Risk management

It has introduced new practices

Postponement

Factory gate pricing

Cross-docking Direct delivery Stock reduction Small deliveries Increasing vehicle utilisation

CHAPTER REVIEW
Logistics has a long history

It has developed rapidly in recent years as

managers respond to changing conditions A major trend is towards increasing customer service, illustrated by agility Another trend uses improved technology Other trends develop in response to a changing business environment (such as globalisation) While others reflect new types of operations (such as postponement)