GLOBAL LOGISTICS MANAGMENT

1. GLOBAL LOGISTICS MANAGMENT A Competitive Advantage for the 21st Century

2. House Keeping • Syllabus • Office: • Phone Number: • E-mail: • Website:

3. GLOBAL LOGISTICS MANAGMENT Chapter 1: Introduction to Logistics

4. Introduction • Logistics is a word often heard but seldom understood • Definitions of logistics abound and are often framed in the context of a single business, military, societal or personal issue • Logistics enables growth of business, global commerce and our civilization

5. The Historical Perspective • Like many other areas of management, logistics was originally associated with the military • Sun Tzu Wu (500 BC) in his The Art of War discussed logistical functions and their relationships with strategy and tactics • Alexander the Great • The Roman Armies • Napoleon

6. The Historical Perspective • Management techniques and philosophies developed by the military were adopted by the commercial sector • Logistics was the enabler and frequently the determining factor in success of • Colonization • The industrial revolution • Urbanization • Centralization of commerce and power • Increasing consumerism

7. The Modern Perspective • As we study logistics in this course we will find that, at its heart, logistics addresses issues of customer satisfaction • The systematic management of the various activities required to move benefits from their point of production to the customer

8. The Modern Perspective • Traditional definition: Logistics is the process of planning, implementing and controlling the efficient, effective flow and storage of raw materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements (Council of Logistics management 1985)

9. The Modern Perspective Modern Definition: Logistics is the continuous process of meeting customer needs by ensuring the availability of the right benefits for the right customer, in the quantity and condition desired by that customer at the time and place the customer wants them, all for a price the customer is willing to pay.

10. The Modern Perspective • Logistics means or is applied differently by different organizations (or different parts of the same organization): • Materials Management – management of raw materials and parts into the production processes • Physical Distribution – management of finished products through delivery to the customer • A combination of both the above *Production Management may be included in either or addressed separately depending on the organization

11. Raw Distributor Materials Customer Parts Supplier Raw Customer Manufacturer Materials Parts Supplier Customer Raw Distributor Materials Materials Materials Distribution Management Management Management Logistics The Modern Perspective

12. Customer service Inventory management Transportation Storage and materials handling Packaging Information processing Demand forecasting Purchasing Facility location Reverse Logistics Warranty support Components of Logistics Systems Many of these functions have traditionally been stand-alone roles within the organization….BUT they are all related because of their ability to impact customer satisfaction.

13. The Modern Perspective • Supply Chain Management • The integration and management of inter and intra business logistics to deliver customer satisfaction at the lowest system cost. Optimization of the value chain.

14. Raw Distributor Materials Customer Parts Supplier Raw Customer Manufacturer Materials Parts Supplier Customer Raw Distributor Materials Materials Materials Distribution Management Management Management Logistics Supply Chain Management The Modern Perspective

15. Components of the Logistics System • ??

16. Logistics in the Organization Michael Porter’s concept of the value chain

17. Logistics in the Organization • Primary activities of the organization are shown running vertically • Ongoing production • Marketing • Delivery • Servicing of the product or services, etc.

18. Logistics in the Organization • Horizontal activities are the support services • Purchasing • Human resources • Facilities, etc.

19. Logistics in the Organization • Note that two of the five primary activities are logistics activities • Inbound logistics • Outbound logistics • Depending on the size of the organization and the complexity of the products/services provided, there is frequently a function with Operations that addresses internal logistics.

20. Logistics in the Organization • The ultimate value a firm creates is a function of the amount buyers are willing to pay for its products/services • Profit occurs when the value exceeds the total cost of production/delivery activities • Firms gain competitive advantage by delivering at lower total cost than their competition

21. Logistics as a Competitive Edge • Logistics is important strategically and tactically in order to gain competitive advantage • Business is increasingly aware that well-managed logistics systems can provide the organization with a sustainable competitive advantage

22. Logistics as a Competitive Edge • Appreciation of the importance of logistics is a relatively recent phenomenon • Lower labor cost • Natural resources • Large captive markets • Technical advantage/expertise

23. Logistics as a Competitive Edge • Into the ’80s companies focused on improved productivity and lower costs • In the late ’80s, focus shifted to high quality • In the ’90s, focus shifted to customer service • Business strategies • Lose advantage over time • Window of opportunity for any given strategic innovation is relatively narrow

24. Logistics as a Competitive Edge • In the early 1980s business strategy focused on improved productivity and lower costs as foreign competition eroded once strong domestic markets • Later in the 1980s, business strategic focus shifted to include higher quality in goods and services • In the 1990s, business focus shifted to excellence in customer service

25. Logistics as a Competitive Edge • Growing demand for time-based logistics management • Streamlining the flow of goods from supplier to customer • Reducing or eliminating activities that add time but not value

26. Logistics as a Competitive Edge • Customers demand • Faster delivery • Continuous shipment tracking • Electronic transfer of information • Reduction of wasted time

27. Logistics as a Competitive Edge • The challenge for any organization is to focus its skills on satisfying those customer needs that offer the greatest opportunities for obtaining a sustainable competitive advantage. • Speed of delivery may be important to those in developed regions/countries • Consistency of availability may be more important to those in underdeveloped regions

28. Interest in Logistics is Growing • Searching for ways to capitalize on the new markets • Central and Eastern Europe • China, India and the Russian Far East • Central Africa • Taking advantage of these opportunities requires logistics systems that are often different from those in developed countries

29. Interest in Logistics is Growing • Emerging Trade Blocks • Give smaller countries economic advantage • Simplifies economic transactions between members • Reshaping the perception of domestic vs. international markets

30. Customers Demand Greater Value • Customers prefer perceived ‘highest customer value’ • The difference between total customer cost and total customer value • Difficult for global companies to determine with customers in many different markets • Customers seldom lower their desired level of delivered value

31. Customers Demand Greater Value

32. Customers Demand Greater Value • Transportation • Complex framework of laws and regulations • Recently deregulated (1977) • Reorientation towards more competitive transport system • Opportunities for shipper to obtain better service and lower prices • Increased complexity for transport managers

33. Customers Demand Greater Value • Environmental concerns affect society’s quality of life • Logistics impacts are important in affluent countries • Willing to pay more for environmentally friendly goods …recycling, “green” products/services, etc. • Less important to those in developing countries • More interested in raising their standard of living

34. Customers Demand Greater Value • Changing view of inventory • Historically used to compensate for internal problems that could result in customer dissatisfaction • Long runs for reduced set-up cost • Sales force pressures • Focus on inventory costs • JIT results in lower cost but lower customer service • Inventory management increasingly critical management activity for global companies

35. Customers Demand Greater Value • Information technology • The glue that holds the logistics system together • Dramatic improvements in the past 20 years enable systematic management of logistics • Capability to fully automate the logistics system is now available • EDI • Supply chain visibility • Customer visibility of order fulfillment • RFID, GPS, secure containers, etc.

36. Customers Demand Greater Value • Electronic commerce • E-commerce rapidly taking hold • Security issues • Quick order placement requires quick delivery to insure customer value • Total logistics management (Supply chain management) is the best approach to the problem we have today

37. Global Organization of Logistics • Traditional approach to business concentrates on geographic markets • Global organizations must look at the whole world as one potential market • Sourcing • Manufacturing • Researching • Raising capital • Sales

38. Global Organization Logistics • Challenge is managing this global network • Spread activities among nations to serve the world market “locally” • Coordinate among those dispersed activities to minimize cost and maximize value for each customer population served • Outbound logistics, after-sales service and marketing tied to buyer’s location • Inbound logistics and manufacturing performed anywhere

39. The Logistics System