Understanding Logistics and Supply Chain Management Essentials

School

Technological Institute of the Philippines**We aren't endorsed by this school

Course

LOGISTICS LM001

Subject

Industrial Engineering

Date

Dec 11, 2024

Pages

Uploaded by CorporalSkunk659

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMLOGISTICS MANAGEMENTLogistics is related to efficienttransferring of goods from theplace of their manufacture to the consumption point with least cost and an acceptable service level. (Rushton et al. 2014: 6) The management of the flow for goods or raw materials from the origin location to theconsumption point is called logistics. (Grant et al. 2006: 3) Logistics is the process of planning, implementing and controlling of goods/services with effective storage and transportation from the point of supply to the consumption point to achieve customer requirements. (Mangan & Lalwani 2016: 9)From these definitions, the following two main perspectives emerge: Material managementthis refers to the raw materials/required parts beinghandled, used and stored correctly. Physical distributionthis refers to the final product and how this is delivered to retailers or customers properly.THE HISTORY OF LOGISTICS2700 B.CMaterial handling and transportation technology in pyramid construction.300 B.CRevolutionary Greek rowing vessels built a new foundation for intercontinental trade.700 A.BThe Mezquita Mosque in Spain was constructed with pillars from the Islamic Empire.1200The Hanseatic League established a cooperation for transport bundling and international sea transport.1500A progressive postal service was established in Europe between Paris, Vienna and Spain. 1800Discovery of new road conveyances and the railroad followed the invention of the steam engine and discovery of crude oil.1940Military logistics during the world wars 1

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMinspired the business world.1956Invention of the sea container significantly contributed to globalisation and the new consumption patterns.1970 - 1980Kaban and 'just-in-time' enabled logistics to link to other operational functions.1990The introduction of Quick Response (QR) and Efficient Consumer Response (ECR) technologies progressed distribution from storing goods into moving goods facilities.TODAYSupply chain management is viewed as a holistic considerationof key business processes that extend from the supplier to the end user.In today’s world, the 7Rs oflogistics is key.The 7Rs relate to the following:The right product/serviceIn the right placeIn the right quantity and rightqualityIn the right way (mode)At the right timeFor the right customerAt the right costIMPORTANCE OF LOGISTICSThe geographical context of trade is key when we considerthe economic importance of logistics. The UK's import/export volumes and trade agreements,like any other country, are central to its economic performance.COUNTRYLogistics costsas apercentage ofGDPUnited States8.5 %South Africa12.7 %India13 %Thailand15.2 %Brazil15.4 %China17.8 %Finland19 %Spend AnalyticsLogistics cos insightsLogistics Efficiency StrategiesBusiness Guidance2

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMLOGISTICS ACTIVITIESLogistics activities include all activities from the procurement of raw materials, all the way through to delivering the right products to customers. Activities include: Procurement and ordering of goods/materials by manufacturers or retailers to fulfil expected customer demand. Movement of goods using airplanes, trains, ships and trucks. Manufacturers producing the right goods in line with expectations using the raw materials. Storage of produced goods in warehouses or distribution centres.Collaborating with inventory management to ensure correct stock levels and to avoid shortagesSpecific terms associated with these activities include:Procurement Order management Transportation management Material handling Inventory management Warehouse management Demand forecasting Customer service Packaging Facility locating Reverse logisticsLOGISTICS AND SUPPLYCHAINThe term ‘supply chain’ began to appear in the 1980s. A supply chain is the network of elements involved in different stages, from upstream (supplier-end of the supply chain) to downstream (customer-end of the supply 3

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMchain), producing value in terms of products and services to the ultimate customer.There is often confusion between the terms ‘logistics’ and ‘supply chain’. However, Larson and Halldorsson (2007) offer four perspectives, outlining the relationship between the two terms: Traditionalist: the Supply Chain Management (SCM) is part of logistics – and logistics is the wider term used. Re-labelling: there is no difference between the terms; however, SCM is the term used instead of logistics. Unionist : SCM is the wider concept that incorporates logistics.Intersectionist: there are similarities between the two terms, but each possesses its own characteristics.We approach this course from theunionist perspective,recognising that SCM is the wider concept incorporating logistics. The table below defines the relationship and differences between the two terms:LOGISTICS MANAGEMENTTotal Logistics Concept (TLC)a commonly used term relatingto the treatment of alllogistic activities, amongall partners, as one integrated system. In effect, all decisions at different levels are made based on logistics activities asa whole.For example, 1.packaging used by a companyshould be based on the requirements of the 4

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMtransportation and storage elements of the supply chain. If we take a situation where goods are repacked in a warehouse because of the transportation requirements, there could be an unnecessaryextra cost applied to the supply chain, which could have been considered earlier on.2.suppose that the manufacturer uses cardboard boxes in the first stage, then the goods are repacked on wooden pallets, which are then stored or transported easily to the final customer. If the cardboard boxes are not valuable for storing or transportation, they can be eliminated, which might save considerable costs. Applying the TLC can save such costs inthe supply chain.How to operate in International Level?If we consider globalisation from a business perspective, this translates to a strategy employed by organisations to operate on an international scale. At a logistics level, this translates to raw materials and components being sourced by various companiesacross the world, with products subsequently being distributed to various countries with some local customisation.Increased revenue Cost advantages achieved through economies of scaleAccess to global sourcing and distribution channels Access to advanced technologies Reduced tax liabilities Access to bigger markets and taking advantage of new business opportunitiesEnhanced sustainability Access to free trade zonesVALUECustomer valueis related to two main factors: perception of benefits and total cost of ownership.Some strategies that can create a better perception of benefits to the customerinclude reducing prices, making it easier to buy and receive products, making products easier to us and maintaining a good brand reputation.here are several factors that affect product/service costs (total cost of ownership), which include management, operating, inventory, maintenance, technical, training, disposal and acquisition costs.5

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMCUSTOMER VALUE: 4ELEMENTSThere are four elements to customer value in logistics, whichare: quality, service, cost and time.Quality relates to the functionality, good performance and technical specification of the offered product, which covers customer requirements. Service includes all services (or support) that are delivered to the customer after purchasing. This includes the flexibility to meet customer demands or market changes too. Costincludes all the transactions that the customer pays for(e.g. purchasing and life cycle costs) and is dependent on the logistics costs (including design, production, quality assurance, distribution, inventory and other operational costs). Timeis taken to deliver the product to the customer, or respond totheir requirements.QUALITYQuality: Defining quality fromdifferent points of view Quality can be defined from different points of view, including: transcendent, product-based, user based, manufacturing-based and value-based.Transcendent definition: quality is something that is understood clearly, but it’s not tangible and can’t be communicated, such as love or beauty. Product-based definition: quality refers to the 6

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMattributes/characteristics or features that a product has. User-based definition: a product has quality if it satisfies the user requirements. Manufacturing-based definition: quality is evident in how the product is conformed to design specifications and manufacturing standards. Value-based definition: if a product is perceived to be offering good value for the price, it possesses good quality.DIMENSION OF SERVICEQUALITYTangibles Includes the physical appearance of the physical service facilities, the equipment, the personnel whodo the servicing, the communication materials and all tangible elements of service provider facilities or surroundings.EX.Cleanliness of the environment; personnel uniform; vehicles; flight.Service reliability Differs from the product reliability in that it relates to the ability of the service provider to perform the promised service dependably and accurately.EX. Achieving delivery times stated on the website.Responsiveness The willingness of the service provider to be helpful, be prompt in providing services, and to respond to customers’ requests, problems or complaintsEX.The speed of helping customer online or by telephoneAssuranceThe knowledge and courtesy of employees and their ability to inspire trust and confidence– creating trust and confidence will gain the customers’ loyaltyEX.The excellent reputation and highlevels of trust based on previous experiences with the company.Empathy Caring, individual attention paid to customers by the 7

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMservice firm to meet each customer’s demands properly.EX.Employees’ high emphasis on customer requests to achieve higher satisfaction.SERVICECustomer ServiceThe concept of customer service is essential for customerretentionand achieving competitive advantage.Customer service is the interaction of all factors that affect the process of making a product (or service) available to customers easily. It includes:Pre-transaction: all written statements relating to service policy and organisational flexibility; Transaction: relating to physicaldistribution and delivery.Post-transaction: elements relating to the supportive functions, like warranty services and product replacement, repair services and customer complaints.To retain and develop markets, companies need to consider and anticipate the expectations of customers. As a way of being able to identify and customise customer service needs, businesses need to: Identify the key components of customers’ needs Determine the relative importance of each extracted component Cluster customers based on their similar customer service requirementsPERFECT ORDER &CUSTOMER EXPECTATIONSPerfect Order Metric (or Perfect Order Rate) is a collection of key performance indicators (KPI) in delivery logistics. Perfect order measures show you the percentage of how many orders are fulfilled successfully and without any incidents including inaccurate 8

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMorders, late deliveries, or damaged itemsThe goal of measuring the perfect order KPIs is to show the effectiveness of your operations to fulfill orders according to customer requirements over time. This metric also represents how well your organization delivers goods to customers. But also the number of successful orders that are completed without a hitch. Tracking the perfect order rateover time indicates delivery success rate, as well as your ability to keep promises to customers. That’s why it’s oneof the ways you can determine consumer satisfaction with your delivery.1.Orders that arrive on time.On-time delivery (or orders that arrive on time) consists of deliveries completed within the specified time window. Either you or the customer determine the date (and time) of delivery. But once the delivery is scheduled, it’s up to you to fulfill the order within that time frame and without any delays. On-time delivery is critical for customer satisfaction. The longer customers wait for deliveries, the more likely they are to stop ordering goods from you. In fact, 69% of consumers say they will stop buying froma brand if their orders don’t arrive on time.2.Orders that arrive with no damage Orders that arrive withoutdamage (damage-free deliveries) are those that arrive intact to the customer: Orders that include products that were in no way, shape, or form dent, defective, or broken during any stage of delivery. Damaged products or damaged items during delivery are a big problem in parcel shipping. In fact, there was a 19.1% increasein damaged packages in 2020 due to the impact ofCOVID-19. What’s interesting is that most damaged goods arrived tocustomers via establishedcarriers.At least one in ten ecommerce packagesarrived damaged in 2020,with UPS accounting for 11% of damaged deliveries, followed by USPS (10%) and FedEx (11%).9

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMIf a damage does occur, it’s important that you find out why the package was damaged and record the reason. That’s the only way to ensure damages don’t happen in the future.3.Orders with Correct Invoicing & DocumentationOrders with correct invoicing and documentation Order accuracydepends alot on your ability to generate the correct invoiceand documents for each order. Invoicing mistakes may leadyou to: Charge more money to a customer, which may prevent you from retaining them. Charge less money toa customer, which causes you to lose money. Send the invoice to the wrong customer, which causes you to lose two customers.Order documentation mistakes can lead to: Packaging the wrong items Delivering to the wrong customer Delivering to the wrong address Missing delivery dates and times All of these situations cause you to lose money. And they can hurt customer service.4.Orders with Correct LabelsOrders with correct labels help you process orders and prepare them for delivery. Similarly to incorrect documentation, incorrect labels cause dissatisfactionamong customers.There is nothing more frustrating to a customer than receiving the wrong order. Or the wrong products in that order. Or not receiving it at all due to you mislabeling their order.Automating the pick and pack processcan help you avoid such issues.10

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMWhat is a good perfect order rate?A good perfect order rate should be above 95% (at least). But, in reality, this number is much lower for most delivery services. In fact, the average perfect order index in the United States is 90% (American Productivity and Quality Center). Still, if you want to be a top performer and achieve success, your goal should be 95%.TIMELead time can be defined as the elapsed time from order to delivery. It’s a crucial competitive variable, owing to the increasein time competition. A reduction of lead times can increase customer value, as well as decrease inventory level.The lead time can be defined from two perspectives: the customer’s and supplier’s perspective. From the customer's perspective, this is how long it takes from making the order to receiving the delivery. From the supplier’s perspective, however, this is how long it takes to convert an order to cash.MEASURING LOGISTICSFirst, strategic aims are defined, followed by Critical Success Factors (CSF) or Key PerformanceIndicators (KPI). Finally, department and sub-section performance measures are determined. For measuring logistics, there area range of quantitative measuresto assess – and improve – the performance of each element of a supply chain. These include:On-time delivery percentageLogistics costs as a percentage of sales11

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMComplete order fill rateAverage order cycle timeSales lost due to stock-outPercentage error pick rateLogistics cost per unitWAREHOUSE LOGISTICSWarehousing is that part of firm's logistics system that stores products at and between point of origin andpoint of consumption.The term "Warehousing" is referred as transportation at zero milesper hour.Warehousing provides time and place utility for raw materials, industrial goods, and finished products, allowing firms to use customer service as a dynamic value-adding competitive tool.The Role of Warehousing inthe ContemporaryDistribution Network?What is a WAREHOUSE?A warehouse is a building for storing goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial parks on the outskirts of cities, towns, or villages.12

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMThey usually have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for the loading and unloading of goods directly from railways, airports, or seaports. They often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks.Stored goods can include any rawmaterials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing, and production.Consolidation centerIt accumulates and consolidates products from various points of manufacture within a single firm, or severalfirms, for combined shipment to common customers. Consolidation allows to controlthe overheads of transportation operations by:Allowing the operation of the carriers to their capacity, and therefore, themore effective amortizing of the fixed transportation costs.Reducing the number of shipping and receiving operationsCross-dockingConsolidation without stagingValue-Added-Processing (VAP)Increasingly, warehouses are required to undertake some value-added-processing tasks like:pricing and labelingkitting (i.e., repackaging items to form a new item; e.g., "beauty" products)light final assembly (e.g., assembly of a computer unit from its constituent components, delivered by different suppliers)invoicingIn general, this development is aligned to and suggested by the idea/policy of postponement of product differentiation, which allows for customized product configuration, while maintaining a small number of generic product components.13

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMWAREHOUSING IN THESUPPLY CHAINRaw material storagePostponement, customization, subassembly facilitiesFinished goods storage Consolidation centers/transit warehousesTranshipment/break-bulk centersCross-docking centersSortation centersFulfilment centersReverse logisticsWHY DO WE NEED AWAREHOUSE?1 Basic Storage2 Efficient Accessibility3 Improved Production Processes4 Increased Turnover5 Decreased Shrinkage6 Optimal SafetyWAREHOUSE OBJECTIVESRespond rapidly to changes in the market and customer ordersMinimize variances in logisticsserviceMinimize inventory to reduce costsConsolidate product movement by grouping shipmentsMaintain high quality and engage in continuous improvementSupport the entire product lifecycle and reverse logisticsCHALLENGES IN WAREHOUSEMANAGEMENT1. Excess Stock2. Lack of space3. Low traceability and connectivity4. Excess procedures14

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERM5. Incorrect time management6. Inaccurate inventory and outfitting7. Delays in the gathering process8. Damaged products9. Being unprepared for the demand10. Issues with human capitalTYPES OF WAREHOUSE1. Public warehouseOwned by governmental bodies and made available for to public and private sector companies.Can be lent for both businessand personal use.Typically not that advanced technologically, they are generally the most affordable and accessible option for small and start-up companies.2. Private warehousePrivately-owned by wholesalers, retailers, distributors or manufacturers.Large retail and online marketplaces also have theirprivately-owned warehouse.Generally more expensive than public warehouse.3. Cooperative warehouseOwned and run by cooperative farmers (e.g. agri-trading purpose).Typically both coop membersand those outside coop may use the facility.Coop members enjoy the benefits of reduced rate4. Bonded-warehouseCan store imported goods before customs are required to be paid on them. Can be utilized as storage of restricted items, until proper paper work is complete.Facilities to store items for extended period of time.Perfect for importers.Custom-bonded is regulated by government.PRACTICAL TIPS ONWAREHOUSING1. InfrastructureExternal (Lighting, CCTV, Motion Sensors, etc.)Internal - Inside warehouse facility (CCT, Fire Extinguisher, Fire Alarm, Emergency Kit/Checklist, etc.)"Clean as you Go"Warehouse Manager must place facility orderliness with DOs and Don'ts properly cascaded to warehouse personnelDevelop a covenant-type document and allow the personnel to sign or pledge on 15

LM 001 – PRINCIPLES OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT2NDSEMESTER | MIDTERMabiding the rules stipulated on the covenant2. PersonnelNew Hires: Orientation and TrainingRegular: Continuous Training / RetoolingFire and Earthquake drillFlood and other potential environmental hazardsAccidentOthersCareer-path planningPerformance incentivesOther Benefits (HMO etc.)3. EquipmentPeriodic MaintenanceDevelop outsource equipment repair and maintenance providersContinuous research for updated and modern equipment4. SystemAcquisition and placement ofvarious warehousing system to cover:Inventory Management SystemSecurity System (Alarm, biometrics etc)Fire Prevention SystemWarehouse Accounting SystemAutomatic system like Barcoding, RFID and similartechnology5. Strategy: Customer Acquisition and RetentionUtilization of social mediaParticipation in Trade ShowsNetwork with Industry and Industry-related companies and personalitiesContinuous reviews and updating of warehouse activities16

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