ROLE OF LOGISTICS IN SUPPLY CHAIN MANAGEMENT

MODULE OUTLINE
1 Introduction 2 3 4 5 6 Emergence of logistics Development in supply chain Logistics service provider in supply chain management Value-added roles of logistics

Key logistics activity

INTRODUCTION
Recent trend in global production have: a. increased supply chain complexity b. reinforce the notion that logistics strategies and practices are essentials elements of business strategy

INTRODUCTION
The emergence of the extended manufacturing enterprise, has brought new attention to how organizations coordinate the flow of information and materials across their supply chain Traditional logistics practices and technologies that integrate productive activities within the factory are necessary but not sufficient for competitive success

INTRODUCTION
New logistics practices and technologies must now also link production and logistics processes in different organizations across geographically dispersed locations

EMERGENCE OF LOGISTICS
Logistics activity is literally thousands of years old It first began to gain attention in the early 1900s The complexity of supplying materials and shipping out in globalized supply chain has made the logistics evolved as a vital business concept Having the right item in the right quantity at the right time at the right place for the right price is the science of process

DEVELOPMENT IN SUPPLY CHAIN

Three major movements can be observed in the evolution of supply chain:

Creation era

Integration era

Globalization era

DEVELOPMENT IN SUPPLY CHAIN

Creation era
Supply chain management term was introduced in 1980s Supply chain in management concept, was of great importance long before in the early 20th century The goal of SC was cost reduction and at the same time increasing the value added In recent years the goal of SC has shifted towards customer fulfillment

Integration era
The highlight of this era was the development of Electronic Data Interchange (EDI) system Continued to develop into the 21st century with the expansion of internet-based collaborative systems Increasing value-added and cost reduction through integration

Globalization era
Development of global systems of supplier relations Expansion of supply chain over national boundaries Goal of globalization of supply chain management to increase competitive advantage, creating more value-added, and reducing cost through global sourcing

LOGISTICS SERVICE PROVIDER IN SUPPLY CHAIN

Offer the most added values to transactions in the freight trade Play an important role in supply chain management, as an increasing number of firms outsource their logistics function Now, involved in the design, management, and control of firms supply chains Integrating their clients supply chains in order to lower the cost

LOGISTICS SERVICE PROVIDER IN SUPPLY CHAIN

Supplier Manufacturer/ Exporter Custom Port of origin

Logistics service provider

Custom Port of destination

Distributor/ importer

Retailer

Control system Information flow Physical flow

Role played by logistics service provider in global supply chain

LOGISTICS SERVICE PROVIDER IN SUPPLY CHAIN

Logistics provider can take over and provide every subsequent function from factory gate to final delivery

VALUE-ADDED ROLES OF LOGISTICS IN THE ECONOMY

Logistics industry playing significant role in the economy In the USA, logistics contributed 10.5 percent of GDP in 1996 U.S. industry spent $451 billion on transportation About $311 billion was spent on warehousing, storage, and carrying inventory

VALUE-ADDED ROLES OF LOGISTICS IN THE ECONOMY

Logistics also support the movement and flow of many economic transactions One of the fundamentals ways that logistics add value is by creating time and place utility
Production Form utility

Marketing Possession utility

Logistics
Place Utility
Logistics Place utility Time utility

Time Utility

KEY LOGISTICS ACTIVITY

Key activities required to facilitate the flow of a product from point of origin to point of consumption
Customer service Parts and service support Plant and warehouse site selection

Demand forecasting/ Planning

Packaging

Procurement

Inventory management

Order processing

Return goods handling

Logistics communications

Material handlings

Traffic and transportation

Warehousing and storage

KEY LOGISTICS ACTIVITY

Customer service Demand forecasting Inventory management
Key way to gain competitive advantage Excellent customer service will help to increase customer satisfaction

Logistics becomes involved in forecasting Required logistics participations in production and marketing forecasting and planning

Levels of inventory held to meet customer service levels with the cost of holding inventory

KEY LOGISTICS ACTIVITY

Logistics communication Materials handling Order processing
Becoming increasingly automated, rapid, and complex To ensure efficient functioning of any supply chain function, communication is the key

Objective of material handling is to eliminate handling wherever possible because it can incurs cost Movement of raw materials, work in progress (WIP), or finished goods

scope of order processing: checking inventory status, invoicing, customers credits, and accounts receivable Order processing lead time is a key area of customer interface

KEY LOGISTICS ACTIVITY

Packaging
Playing roles to provide protection during storage and transport

Parts & service support Plant & warehouse site selection

After-sale service support is become a key function in ensuring customer satisfaction and business growth Logistics become a player in responsible for providing after-sale service support

Determining the location of the plant(s) and warehouse(s) is a strategic decision that affects not only the cost of transporting raw materials inbound and finished goods outbound, but also customer service level and speed of response

KEY LOGISTICS ACTIVITY

Procurement
In recent times, the procurement function plays a more significant role in the organizations Strategic plans are developed with suppliers to support the manufacturing The function develops rapid communication systems, such as EDI

Return goods handling Traffic & transportation Warehousing & storage

Referred to as After Market Customer Service. Many logistics company facing a tough time in handling return goods. The cost involved is very high

Key activity in logistics is to provide for the movement of goods and materials

Stores products at and between point of origin and point of consumption Provide information to management on the status, conditions, & disposition of items stored