Supply Chain Logistics ManagementBS Industrial EngineeringCHAPTER 2: Logistics Presented by:Engr. Richard A. Abayhon, MScAssistant Professor, Industrial Engineering
Supply Chain Logistics ManagementBS Industrial Engineering•Logistics of business is big and important•The logistical value proposition•The work of logistics•Logistical operations•Logistics integration objectives•Logistical operating arrangements•Flexible structure•Supply chain synchronizationOverview of logistics
Supply Chain Logistics ManagementBS Industrial EngineeringWhat is logistics? •Logisticsis the design and administration of systems to control movement and geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost.
Supply Chain Logistics ManagementBS Industrial Engineering•Postwar U.S. (1945-1995)–Global leader in distribution and logistics, as a direct result of World War II•Rise of EEC and Asia (1980-2000)–Both regions became major exporters and distributors•e-Commerce (1998-Present)–Global logistics capability almost everywhereLogistics has risen to a key position in the global economy
Supply Chain Logistics ManagementBS Industrial EngineeringYearNominal GDP ($T)Inventory CostTransportation CostAdministrative CostTotal Logistics CostLogistics% of GDP19802.802202141745116.119854.222272742052112.319905.802833512565911.419957.403024413077310.420009.8237459439100710.3200512.433957394611809.5201014.603967694712128.3Table 2.1- U.S. logistics cost, 1980-2010 in five year intervals ($B)Source: Adapted from Rosalyn Wilson, 22ndAnnual “State of Logistics Report” Council of Supply Chain Management Professionals and Penske: Oak Brook, IL, 2011.
Supply Chain Logistics ManagementBS Industrial EngineeringThe cost of logistics0200400600800100012001400198019851990199520002005Year$ Billions GDP01020% Gross Domestic Product$ Inventory Carrying Cost$ Transport$ Total% GDP
Supply Chain Logistics ManagementBS Industrial EngineeringLogistics will continue its renaissance in the future •Information technologies will automate many of the traditionally manual logistical functions:–Automated port and rail operations–RFID tagging of materials –Advanced technologies for warehousing and inventory operations •Removal of trade barriers will continue to expand global trade and logistics
Supply Chain Logistics ManagementBS Industrial Engineering•To satisfy customer expectations for delivery of products (or services) while minimizing the total cost•Managers must support the requirements for procurement, manufacturing and customer accommodation supply chain operationsGoal of logistics management
Supply Chain Logistics ManagementBS Industrial Engineering•Transportation Costs relative to the Total Cost of Logistics have gone up –Because of fuel prices and movement of manufacturing to Asia•Inventory Costs relative to the Total Cost of Logistics have gone down –Adoption of JIT and Lean practices have reduced these•Administrative Costs relative to the Total Cost of Logistics have stayed the same Logistics costs trends from Table 2.1