Chapter 1

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Overview of Logistics

Key Terms

–Big-box retailer

–Co-branding

–Container

–Cost trade-offs

–Disintermediation

–Economic utility

–Form utility

–Humanitarian logistics

– Landed costs

– Logistics

–Marketing channels

– Logistics

–Marketing channels

–Materials management

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Key Terms

–Physical distribution

–Place utility

–Possession utility

–Postponement

–Sorting function Stock-keeping units (SKUs)

–Stockouts

–Sustainable products

–Systems approach

–Tailored logistics

–Time utility

–Total cost approach


Learning Objectives

• To discuss the economic impacts of logistics

• To define what logistics is

• To analyze the increased importance of logistics

• To discuss the systems and total cost approaches to logistics


Learning Objectives

• To expose you to logistical relationships within the firm

• To introduce you to marketing channels

• To provide a brief overview of activities in the logistics channel

• To familiarize you with logistics careers


Economic Impacts of Logistics

• Macroeconomic Impacts

• Economic Utility

– Possession utility

– Form utility

– Place utility

– Time utility


Table 1-1: The Cost of the Business Logistics System in Relation to a Country’s Gross Domestic Product (GDP)


Logistics: What It Is

• Council of Logistics Management definition: “Logistics is that part of the supply chain process that

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

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Source: www.cscmp.org

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The Increased Importance of Logistics

• A Reduction in Economic Regulation

• Changes in Consumer Behavior

• Technological Advances

• The Growing Power of Retailers

• Globalization of Trade


The Systems and Total Cost Approaches to Logistics

• Systems Approach

– Interdependence of company and logistics goals and objectives

– Interdependence of functional areas

• Stock-keeping units (SKUs)

– Interdependence of logistics activities or

Intrafunctional logistics


Figure 1-1: Control Over the Flow of Inbound and Outbound Movements


The Systems and Total Cost Approaches to Logistics

• Total Cost Approach

– Cost trade-offs: changes to one activity cause some costs to increase and others to decrease

– Total Logistics Concept: integration of all activities into a unified whole that seeks to minimize distribution costs in a manner that supports an organization’s customer service objectives


Logistical Relationships within the Firm

• Finance

• Production

• Marketing


• Marketing

– Place Decisions

– Price Decisions

• Landed costs

– Product Decisions

• Stockouts

• Sustainable products

– Promotion Decisions

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Logistical Relationships within the Firm

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Marketing Channels

• “set of institutions necessary to transfer the title to goods and to move goods from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process.” Source: American Marketing Association Dictionary, www.marketingpower.com

• Channel members

– Manufacturers

– Wholesalers

– Retailers


Marketing Channels

• Ownership channel – Covers movement of the title to the goods

• Negotiations channel – Buy and sell agreements are reached

• Financing channel – Payments for goods

• Promotions channel – Promoting a new or existing product

• Logistics channel – Moving and storing product throughout the

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Channel Intermediaries/Facilitators

• Ownership channel – Banks, finance companies

• Negotiations channel – Brokers

• Financing channel – Banks, insurance companies, finance companies

• Promotions channel – Advertising agencies, public relations agencies

• Logistics channel – Freight forwarders


Activities in the Logistical Channel

• Customer service • Facility location

decisions • Inventory

management • Order management • Procurement • Transportation

management

• Demand forecasting • International logistics • Materials handling • Packaging • Reverse logistics • Warehousing

management


Logistics Careers

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• Logisticians need to be both a generalist and a specialist

– As a generalist, the logistician must understand the relationship between logistics and other corporate functions, both within and outside the firm.

– As a specialist, the logistician must understand the relationships between various logistics activities and must have some technical knowledge for various activities.

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Logistics Careers

• “Logistician” highlighted as one on the 50 best careers for the year 2010 and suggested that logistics employment should increase by 20% through 2018.

Source: Liz Wolgemuth, “The 50 Best Careers of 2010”, U.S. News & World Report, December 28, 2009.


Logistics Careers

• Examples of Logistics-related jobs include:

– Logistics analyst

– Consultant

– Customer service manager

– Purchasing manager

– Transportation manager

– Warehouse operations manager Source: www.cscmp.org


Logistics Professionalism

• APICS – The Association for Operations Management (www.apics.org)

• American Society of Transportation and Logistics (AST&L) (www.astl.org)

• Council of Supply Chain Management Professionals (www.cscmp.org)

• Delta Nu Alpha (DNA) (www.deltanualpha.org)

• International Society of Logistics (SOLE) (www.sole.org)

• Supply Chain & Logistics Association Canada (SCL) (www.sclcanada.org)

• The Chartered Institute of Logistics and Transport in the UK – CILT (UK) (www.ciltuk.org.uk)

• Warehousing Education and Research Council (WERC) (www.werc.org)

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Professional Organizations Dedicated to Advancing the

Professional Knowledge of their members:

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http://www.apics.org/

http://www.astl.org/

http://www.cscmp.org/

http://www.deltanualpha.org/

http://www.sole.org/

http://www.sclcanada.org/

http://www.ciltuk.org.uk/

http://www.werc.org/

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retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

permission of the publisher. Printed in the United States of America.

Chapter 1

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