Quản trị kinh doanh - Logistics concepts and supply chain

LOGISTICS CONCEPTS AND SUPPLY CHAINLearning outcomesAt the end of this lecture, students should be able toUnderstand the various concepts of logisticsUnderstand the main logistics elementsUnderstand the supply chain management conceptDifferentiate Supply chain from Logistics managementGohoho Emmanuel Sena3LOGISTICS CONCEPTSTrade-off/Total CostValue AddedLead TimeOutsourcingJust in timeIntegration/linkage (backward/forward)Total costs conceptsOne of the main aims of logistics is to: “minimise the total cost of doing business rather than the cost of doing individual activities”LOGISTICS COSTS CONCEPTSTotal costs cont’dTotal logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, inventory carrying, administration and order processing costs. Any change made in one aspect of an organisation is likely to have an effect on the cost of other aspects and in effect, the overall cost because - the individual activity costs are related.Costs trade-off analysisA useful tool that aims at minimising total costs is cost trade-off analysisdifferent combinations of all cost elements should be sought, analysed and compared so that the optimal portfolio can be identifiedFor instance...analysis by the logistics department of a company proves that moving the production plant of an organisation from one area to another may reduce labour production cost but at the same time increase transportation costs. if the cost saved in labour results in a reduction in the total logistics cost of the business then the decision to take advantage of cheap labour is worth considering.Gohoho Emmanuel Sena8Value added It is the marginal enhancement to a product/service at each stage of the value chain (logistics chain) till the final product is completed. Virtually, all value-added activities contribute to the cost build-up of the final product. For example the production of a coca cola may start at GHC1 at raw materials stage but end at GHC5 due to cost -incurring value activitiesGohoho Emmanuel Sena9Value-Added HierarchyRaw materials Final ProductValue-Added HierarchyGHC10GHC50Gohoho Emmanuel Sena10Lead Time This refers to the time it takes the organisation to source, produce and deliver products to customers after confirmed order. Lead time is crucial in logistics management as it is one of the essential ingredients for customer satisfaction. Shorter lead times may be seen by customers as efficient service and vice versa.Gohoho Emmanuel Sena11Outsourcing It refers to the contracting out, hiring or using the services of an external organisational specialist to perform tasks often seen by offerors as non-core business.Efficiency, cost, lean production and others drive outsourcingGohoho Emmanuel Sena12Just in Time JIT is a production system that survives on lean production, fast flow of goods, integration of all major actors to help supply quality goods at affordable prices to customers. It is used by manufacturers in their production process and depends heavily on effective transport and logistics management. It thrives on a pull logistics system (demand driven)JIT ensures that products arrive at the production place just in time to be included in the production process.Savings are registered in storage, documentation and double handling.Communication and Information Technology are central to successful JIT strategiesShipments by air are more supportive of JITGohoho Emmanuel Sena13Integration/Linkages There are two types of integration i.e vertical and horizontal integrationVertical integration refers to the ability of a member of the supply chain to take over the activities of the other to help enhance its own activities.It is backward integration if a buyer takes over the control of a supplier through acquisition, merger, etcIt is forward integration if a supplier takes over the activities of the buyer through same modes or otherIt could also be where both supplier and buyer have a close-knit collaboration which enhances their activitiesGohoho Emmanuel Sena14Integration/Linkages Horizontal integration is where there is a merger or acquisition of organisations who are seen as competitor through acquisition, merger, strategic alliances, etcSupplierBuyerSupplierBuyerBackwardForwardHorizontalHorizontalGohoho Emmanuel Sena15MAIN LOGISTICS ELEMENTSCustomer ServiceDemand forecasting / planningInventory managementLogistics communicationsMarketingMaterial handlingOrder processingPackagingParts and service supportPlant and warehouse site selectionProcurementReturn good handlingReverse LogisticsStevedoring Traffic and TransportationWarehousing and storageWhat is the supply chain?The supply chain as a whole ranges from basic commodities (what is in the ground, sea and air) to selling the final product to the end customer to recycling the used product. The analogy to the flow of water in a river is often used to describe organisations near the source as upstream and those near the end-customer as downstream.Definition...A supply chain is a network of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by the end customer, and who manage returns at each stage.OrThe term supply chain is the process, which integrates, coordinates and controls the movement of goods, materials and information from the supplier, through to a customer to a final customer. Supply chain: structure and tieringA typical retail supply chain (for instance Shoprite) is formed from five such links.Supply chain or supply network?Difference between supply chain management and logisticsVarious authors have offered explanations on the difference between supply chain and logistics, stating that SCM and logistics are not the same.The Council of Logistics Management’s (CLM) in 1985 defined logistics as:“the process of planning, implementing and controlling the efficient flow and storage of raw materials, in-process inventory, finished goods, services, and related information from point of origin to point of consumption (including inbound, outbound, internal and external movements) for the purpose of conforming to customer requirements”.This definition was modified in CLM’s 1998 version of the definition of logistics“Logistics is that part of the supply chain process that plans, implements, and controls the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements”.Logistics as a Subset of SCMTwo driven forces of SCM developmentExternal pressures -Stanleyet.al, (2010) have noted that the development of technology and increased customers satisfaction, gaining lower costs, and the competitive relationships among the enterprises are the main external pressures.Potential benefits that include adding values to customers, controlling the inventory turnover, and reducing the costs through the upstream to the downstream of SC.Assignment 1 (Presentation)You are required to take any product of your choice and draw its supply chain. Note that two people should not work on the same product.28Akpe na mi!