Logistics in the Firm

 

LOGISTICS IN THE FIRM

 

Module outline 1. Introduction 2. Im Impo port rtan ance ce of of an effe effect ctiv ive e logi logist stic ics s orga organi niza zati tion on 3. Lo Logi gisti stics cs int inter erfa faces ces wit with h ma manu nufac factu turi ring ng,, op oper erat atio ions ns and marketing 4. Logi Lo gist stic ics s ac acti tivi vity ty whi which ch in inte terf rfac aces es wi with th manufacturing 5. Lo Logi gist stic ics s int inter erfa face ces s wit with mar marke keti ting ng 6. Fa Fact ctor ors s affe affect ctin ing g the the cost cost imp impor orta tanc nce e of log logis isti tics cs

 

INTRODUCTION

• Rol Role e of log logist istics ics in the the firm is an an impo importa rtant nt str strate ategic gic dec decisi ision on • Raw Raw part parts, s, mat mater eria ials ls and and ser servi vice ces s must must be be dist distrib ribut uted ed efficiently • Co Comp mpan anie ies s hav have e be beco come me mo more re gl glob obal al • Imp Import ortant ant to ens ensure ure pro prope perr inter interfac faces es of of logis logistic tics s functi function on with with operations/ manufacturing and other supporting departments • Com Compan panies ies can be bene nefit fit fro from m the sea seamle mless ss flo flow w of of thei theirr goo goods ds and services across the region when the logistics industry becomes fully integrated

 

IMPORTANCE OF AN EFFECTIVE LOGISTICS ORGANIZATION • In tra tradit dition ional al firm firms, s, the fun functi ction ons s of of log logist istics ics wer were e not not specialized and were scattered throughout the firm • Unt Untilil the the lat late e 197 1970s, 0s, the firm pa parad radigm igm was “bi “bigg gger er is is bette better.” r.” • The The prob problem lems s and and chall challeng enges es do do not not lie lie prim primari arily ly with with str strate ategic gic decision making • Requir Requires es ree reengi ngine neeri ering ng in sys system tem,, stru structu cture, re, mis missio sion, n, peo people ple,, corporate culture and reward structure • Cas Case e stud study y of IBM IBM:: Reo Reorga rganiz nizing ing to Re Rega gain in Comp Competi etitiv tive e  Advantage,  Advantag e, is a good example example

 

LOGISTICS INTERFACES WITH MANUFACTURING, OPERATIONS AND MARKETING • Big cha challe lleng nge e for log logist istics ics fun functi ction on in a firm firm is is to man manage age the whole logistics system • Ensu En sure re ord order er ful fulfill fillmen mentt to mee meets ts or ex excee ceeds ds cu custo stomer mer expectations • A new new fa face ce of lo logi gist stic ics s sta starte rted d fro from m ear early ly 19 1980 80s s • Align Align log logist istics ics to to ens ensure ure the it can can add add valu value e throu through gh inte interfa rfaces ces with many sub-depa sub-departments rtments • Inte Interf rfac aces es wi with th pr prod oduc ucti tion on - de dete term rmin ine e th the e le leng ngth th of th the e production run. • Inte Interf rfac aces es wi with th ma mark rket etin ing g - de dete term rmin ine e the the se sellllin ing g of of th the e products.

 

LOGISTICS ACTIVITY WHICH INTERFACES WITH MANUFACTURING Logis gistic tics s serv service ices s that that can be pro provid vided ed to the fir firm m are are:: • Lo Transportation

Packaging

Kitting

Warehousing

Distribution

Staging

Inventory management

 

LOGISTICS ACTIVITY WHICH INTERFACES WITH MANUFACTURING • Ensure Ensure the ava availilabi abilility ty of of part parts s and and raw materials • Cruci Crucial al ifif the firms run its its operati operations ons 24x7 basis • Must meet the JustJust-In-T In-Time ime (JIT) requirement • Fail Failure ure in in feeding feeding of raw raw materia materials ls to manufacturing line will cause the line dow down n – even eventual tually ly loss sale sale • ensuring ensuring prod product uct avail availabil ability ity at the right time, right quantity, and at right place plac e - give competi competitive tive advant advantage age to the firm

Transportation

• Spac Space e that that st stor ored ed al alll the the components, raw materials and finished goods of a firm • A pro proper per lay layout out and and proper proper segregation, can confirm correct picking, packing and delivery process • righ rightt number number of safe safety ty stock stock can ensure the availability of products even if there is a revision in production planning or in customer demands

Warehousing

 

LOGISTICS ACTIVITY WHICH INTERFACES INTERFACES WITH MANUFACTURING

Distribution • Distri Distribut bution ion is in invol volvin ving g manag manageme ement nt of goods on the physical path between production, consumption and storage • Impo Important rtant wh when en the firms have store stored d their products in distribution centers and meant for distribution to many drop points (customer’s (customer ’s locations) • A good routin routing g planning planning will will ensure ensure the effective distribution plan to meet the customers demand

Inventory management • Very im impor portan tantt activi activity ty for for logis logistic tics s in firm • Keep Keeping ing righ rightt quanti quantity ty and and right right product is very important for continue producing the products a per production plan • Mana Managin ging g and distri distribute bute the the invent inventory ory information in firm, also a critical factor in interfacing with manufacturing

 

LOGISTICS ACTIVITY WHICH INTERFACES INTERFACES WITH MANUFACTURING

Staging

Kitting

• Staging Staging is importa important nt in order to have have a lean lean material material movement movement to support the production • Stag Staging ing areas areas are an area area where where material materials s or equipmen equipmentt in transit are assembled or processed

• Kitting Kitting involves involves the the gathering gathering of all the the parts needed needed for a particular assembly from the stockroom and issuing the kit to the manufacturing line at the right time and in the right quantity

 

LOGISTICS ACTIVITY WHICH INTERFACES INTERFACES WITH MANUFACTURING

Packaging

process ss that enclo enclosing sing the the goods goods for protecti protection on for • proce distribution, storage, sale, and, use while handling in warehouse and transporting in a vehicles • Certain packages will be printed printed with with certain symbol symbols s which which classify product certification, certification, trademarks, proof of purchase, communicate aspects of use and safety, and environment and recycling

 

LOGISTICS ACTIVITY WHICH INTERFACES WITH MANUFACTURING • Symbols on on pa packaging:

Fragile

Center of gravity

Clamped as indicated

Keep away from sunlight

Keep away Thi his s wa way y up from water 

Do not hand hook

Explosives

Do not clamped as indicated

Flammable liquid

 

LOGISTICS INTERFACES WITH MARKETING • Lo Logi gist stic ics s pla play y an an imp impor orta tant nt rol role e in: in:

Customer satisfaction

Integrated efforts/ system approach

 Adequate corporate profit

 

LOGISTICS INTERFACES WITH MARKETING Suppliers Intermediate customers Final customers



Customer satisfaction

Integrated effort

   





Product Price Promotion Place



Company profit



Maximize long-term profitability Lowest total costs

 

LOGISTICS INTERFACES WITH MARKETING • Logis Logistic tics s play play a cruci crucial al role role part particu icular larly ly in assi assisti sting ng of getting the product to the right place • In order orde r totoensur en sure e the the success succ ess of oof f the marketi mark eting ng effort eff ort,, the the firm have integrate ideas having the r ight: right:

Product

Price

Promotion

Place

 

FACTORS AFFECTING THE COST IMPORTANCE OF LOGISTICS • Th The e major major categ categori ories es which which contr contribu ibutin ting g to logist logistics ics cost cost are: are:

 

FACTORS AFFECTING THE COST IMPORTANCE OF LOGISTICS

Customer service - Capital

that spent to enhance the

customer service - Extr Extremely emely dif difficul ficultt to to measure measure the true cost of customer service!

Transportation - Del Delive ivery ry of materia materials ls drives drives transportation costs - Cost Cost can can be dif differi fering ng considerably with volume of cargo, weight of cargo, distance, and point of origin and destination

 

FACTORS AFFECTING THE COST IMPORTANCE OF LOGISTICS

Warehousing - Pu Purel rely y creat created ed by storage and warehousing activities

Order processing & information - Cos Costt includes: includes: order order processi processing, ng, communications, distributions, and forecasting demand

 

FACTORS AFFECTING THE COST IMPORTANCE OF LOGISTICS Purchasing ng or prod producti uction on relate related d cost cost • Purchasi • Vary w with ith changes changes in in order order size size or

Cost quantity

Inventory carrying

frequency

• Costs Costs inclu include de inven inventory tory cont control, rol, packaging, and salvage and scrap disposal • Fou Fourr type type of inv invent entory ory cos cost: t: • Capi Capital tal cost cost or oppor opportuni tunity ty cost cost • Inv Invent entory ory se servi rvice ce cos costt • St Stor orag age e spac space e cos costt • In Inve vent ntor ory y risk risk cos costt