VIRKSOMHEDSKONOMI

HH NIVEAU B

15. The concept of logistics and logistics efficiency

Definition of Logistics
Logistics
is a holistic system of management used to ensure the necessary planning, implementation and monitoring of en efficient flow of materials all the way from suppliers of raw materials to final users, as well as the disposal and recycling of obsolete products all with a view to satisfying the needs of customers

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.1 The logistic system
Supply market
Supplier Supplier Purchasing control Stock of raw materials

Production company
Production control
Production Internal logistics

Sales market
Middleman Middleman
Consumer Consumer

Distribution control Stock of finished products

Incoming logistics Recycling

Outgoing logistics

Sorting Disposal Return logistics

Collection Waste

Waste and recycling market

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.2 Supply Chain Management page 487

Suppliers of raw materials

Suppliers of components

Producers of finished goods

Wholesalers

Retailers Dorrit

Consumers

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HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.3 Logistics strategy page 489
Supply strategy
Which products should the company produce itself? Which products should the company purchase from its suppliers? How close do the company want to be linked to is suppliers?

Production strategy
How to coordinate the production resources How to organize the production processes

Distribution strategy
Which distribution channels?

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.4 The logistics coordination page 492
Many Sales
Short Delivery speed Large Long Large Small

Varieties

Few Finance
Small Purchasing quantity Large Large

Stock

Production

Short

Delivery speed

Long

Purchasing

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VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.5 Organising the logistics function page 492
15.5.1 Centralising the logistics function Managing director

Logistics

Production

Sales

Finance

Purchasing

Storage

Production planning

Distribution

Main advantage a clear overall view of all the logistics activities Main disadvantage conflicts between the managers of the different departments
Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.5 Organising the logistics function page 492

15.5.2 Decentralising the logistics function

Managing director

Purchasing

Production

Sales

Finance

Purchasing

Storage

Production planning

Distribution

Advantages higher degree of flexibility Disadvantages difficult to ensure an all-round approach

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.6 Logistic efficiency page 494
Delivery service
Delivery speed Level of stock service Observation of delivery deadlines Delivery reliability Delivery flexibility Delivery information

Logistics costs
Stock costs Packaging and packing costs Transport costs Administrative logistics costs Nonconformity costs

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.6 Logistic efficiency page 494

Logistics efficiency - page 498 Delivery service Logistics efficiency = Logistics costs Logistics efficiency improves by:
Look at the fraction

Effect of logistics efficiency on Return Of Investment

Better delivery service might increase the turnover Reduce investment in stocks without reducing delivery service

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.6.2 Stock turnover speed page 500
20x3 Net turnover - Cost of sales Gross profit 25.000 14.800 10.200 20x4 30.000 18.000 12.000 20x5 33.000 20.000 13.000

Ultimo 20x2
Stock 2.500

Ultimo 20x3

Ultimo 20x4

Ultimo 20x5
360 14.800 18.000 20.000 360 360 = 67 days == 5,4 =5,8 6,2 62 58 times times days times 5,4 2.750 5,8 3.100 3.250 6,2

3.000 360 No. of days in stock = Turnover Stock turnover speed = speed 20x3 Primo stock Ultimo stock Total Avarage stock Stock turnover speed 2.500 3.000 5.500 2.750

3.200 3.300 Cost of stock Average stock time 20x4 3.000 3.200 6.200 3.100 5,8 times 62 days 20x5 3.200 3.300 6.500 3.250 6,2 times 58 days

10 Number of days in stock

5,4times 67 days

Dorrit

VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.6.3 Analysing costs of logistics page 503
20x3 Net turnover Stock costs Packaging and packing costs Transport costs Administrative logistics costs Total Indeks Net turnover Stock costs Packaging and packing costs Transport costs Administrative logistics costs 25.000 1.750 1.250 1.500 800 5.300 20x3 100 100 100 100 100 100 20x4 30.000 1.950 1.450 1.850 850 6.100 20x4 120 111 116 123 106 115 20x5 33.000 2.075 1.550 2.050 900 6.575 20x5 132 119 124 137 113 124 Dorrit

Index figure =
Figure of the year x 100 Figure of the base year

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Total

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HH NIVEAU B

15. The concept of logistics and logistics efficiency

15.6.4 Analysing delivery service page 504
Priority of delivery service
ABC customers ABC products Questionnaire Compare the actual delivery speed Delivery speed No of orders dispatched x 100 With the goal Level of stock service Numbers orders delivered no.of Of orders received on time x 100 Delivery deadline Number of orders delivered correct quantity x 100 total number of in orders Delivery reliability (quantity)) total number of in orders Number of orders delivered the right quality x 100 Delivery reliability (quality) Number of times totalchanges number in oforders ordershave been met Delivery flexbility Number of request for changes in orders
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Qualitative analyses
Quantitative analyses

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HH NIVEAU B

15. The concept of logistics and logistics efficiency

Gap analysis of logistics efficiency page 512
Stock turnover speed Target Performance 20x3 8,0 times 5,4 times 20x4 8,0 times 5,8 times 20x5 8,0 times 6,2 times

Gap
Level of stock service based on number of orders Target Performance Gap Level of stock service based on number of order lines Target Performance Gap

2,6 times
20x3 95% 94% 1% 20x3 98% 95% 3%

2,2 times
20x4 95% 95% 0% 20x4 98% 96% 2%

1,8 times
20x5 95% 94% 1% 20x5 98% 97% Dorrit 1%

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VIRKSOMHEDSKONOMI
HH NIVEAU B

15. The concept of logistics and logistics efficiency

Benchmarking page 514
Benchmarking
Internal benchmarking
Compares one department with other departments of the company

External benchmarking
Compares with the best in the same business

Functional benchmarking
Compares with the best in the same area

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