Logistics

An Introduction to Supply Chain Management

Contents
Introduction

1 The Context of Logistics

Introduction
Definitions
The Supply Chain
Activities of Logistics
Aims of Logistics
Importance of Logistics
Discussion Questions
References
Further Reading

2 Integrating the Supply Chain

Progress in Logistics
Current Trends in Logistics
Integrating Logistics Within an Organisation
Integration Along the Supply Chain
Achieving Integration
Discussion Questions
References
PART II
Planning the Supply Chain

3 Logistics Strategy
Strategic Decisions
Logistics Strategy
StrategyOptions
Designing a Logistics Strategy
Discussion Questions
References

4 Implementing the Strategy

Relating Strategy to Lower Decisions
Areas for Decisions in Implementation
Managing Change
Discussion Questions
References

5 Locating Facilities
Importance of Location
Choosing the Geographic Region
Infinite Set Approaches
Feasible Set Approaches
Network Models
Location Planning
Discussion Questions
References
Further Reading

6 Planning Resources
Types of Planning
Capacity Planning
Adjusting Capacity
Tactical Planning
Short-term Schedules
Discussion Questions
References
Further Reading

7 Controlling Material Flow

Material Requirements Planning
Extending the Role of MRP
Principles of Just-in-time
Achieving Just-in-time Operations
Extending JIT Along the Supply Chain
Discussion Questions
References
Further Reading

8 Measuring and Improving Performance

Measuring Performance
Comparing Performance
Analysing a Supply Chain
Improving Performance
Discussion Questions
References
Further Reading

PART III
Activities in the Supply Chain

9 Procurement
Definitions
Choosing Suppliers
Procurement Cycle
Types of Purchase
Discussion Questions
References
Further Reading

10 Inventory Management
Reasons for Holding Stock
Economic Order Quantity
Uncertain Demand and Safety Stock
Periodic Review Systems
Effort of Stock Control
Discussion Questions
References
Further Reading

11 Warehousing and Material Handling

Purpose of Warehouses
Activities Within a Warehouse
Ownership
Layout
Materials Handling
Packaging
Discussion Questions
References
Further Reading

12 Transport
Introduction
Mode of Transport
Inter-modal Transport
Ownership of Transport
Routing Vehicles
Discussion Questions
References
Further Reading

13 Global Logistics
International Trade
Problems with International Logistics
Organising International Operations
Discussion Questions
References
Further Reading
Index

PA R T I
Introduction
This book is divided into three parts. Part I contains two chapters and gives an overall
introduction to logistics, as well as setting the scene for the rest of the book. It introduces
some important issues which are developed in later chapters. Chapter 1 defines the key
terms, discusses the role of logistics, its aims, importance and the general context of
supply chain management. Chapter 2 describes current trends, and shows how logistics
has developed into a single, integrated function. Parts II and III look at planning in the
supply chain, and focus on different activities of logistics.

CHAPTER 1
The Context of Logistics
CONTENTS
■ Aims of the chapter ■ Introduction ■ Definitions ■ The supply chain ■ Activities
of logistics ■ Aims of logistics ■ Importance of logistics ■ Chapter review ■ Case
study – Ace Dairies ■ Project – Websites ■ Discussion questions ■ References ■
Further reading
AIMS OF THE CHAPTER
After reading this chapter you should be able to:
■ DEFINE ‘logistics’ and associated terms
■ UNDERSTAND the role and structure of supply chains
■ LIST different activities of logistics and understand the relationships between them
■ DISCUSS the aims of logistics
■ SHOW how logistics contributes to customer satisfaction
■ RECOGNISE the importance of logistics to every organisation
INTRODUCTION
All organisations move materials. Manufacturers build factories that collect raw materials
from suppliers and deliver finished goods to customers; retail shops have regular
deliveries from wholesalers; a television news service collects reports from around the
world and delivers them to viewers; most of us live in towns and cities and eat food
brought in from the country; when you order a book or DVD from a website, a courier
delivers it to your door. Every time you buy, rent, lease, hire or borrow anything at all,
someone has to make sure that all the parts are brought together and delivered to your
door. Logistics is the function that is responsible for this movement. It is responsible for
the transport and storage of materials on their journey between suppliers and customers.
On a national scale, logistics involves a huge amount of effort. The USA has a gross
domestic product (GDP) of US$10 trillion,1 so its population of 280 million produces
and consumes an average of US$36,000 of goods and services. The world’s seven largest
economies (USA, Japan, Germany, UK, France, Italy and Canada) have a combined GDP
of US$20 trillion.
All of this – whether it is oil produced in Canada, consumer electronics in Japan, cars in
the UK or dairy products in France – relies on logistics to collect materials from suppliers
and deliver it to customers. Millions of people are involved in this effort, and it costs
billions of dollars a year to keep everything moving.
Ordinarily we only notice a small part of logistics. We might see lorries driving down a
motorway, visit a shopping mall, drive through a trading estate, or have a parcel delivered
to our homes. These are the visible signs of a huge industry. In this book, we take a more
detailed look at this complex function. We discuss the issues and developments, and see
how managers can get the best results from their logistics.
DEFINITIONS
Supporting operations
Every organisation delivers products to its customers. Traditionally we have described
these products as either goods or services. Then manufacturers like Sony and Guinness
make tangible goods, while AOL and Vodafone provide intangible services. In reality,
this view is rather misleading, and every product is really a complex package that
contains both goods and services. Ford, for example, manufacture cars, but they also give
services through warranties, after-sales service, repairs and finance packages.
McDonald’s provide a combination of goods (burgers, cutlery, packaging, and so on) and
services (when they sell food and look after the restaurant). It is more accurate to describe
products as lying on the spectrum shown in Figure 1.1. At one end of this spectrum are
products that are predominantly goods, such as cars and domestic appliances; at the other
end are products that are predominantly services, such as insurance and education. In the
middle are products with a more even balance, such as restaurant meals and hospitals.
At the heart of an organisation are the operations that create and deliver the products.
These operations take a variety of inputs and convert them into desired outputs, as shown
in Figure 1.2. The inputs include raw materials, components, people, equipment,
information, money and other resources. Operations include manufacturing, serving,
transporting, selling, training, and so on. The main outputs are goods and services. The
Golden Lion restaurant, for example, takes inputs of food, chefs, kitchen, waiters, and
dining area; its operations include food preparation, cooking and serving; the main
outputs are meals, service, customer satisfaction, and so on.

Figure 1.1 Spectrum of products

Figure 1.2 Operations creating outputs

The products created by an organisation are passed to its customers, giving the cycle
shown in Figure 1.3. This shows customers generating demands, with operations using
resources to make products that satisfy them. Logistics moves materials around this
cycle.
The operations are usually divided into a number of related parts, in the way that a
hospital has an emergency room, surgical ward, purchasing department, heart unit,
operating theatre and so on. So logistics also moves materials through the different parts
of an organisation, collecting from internal suppliers and delivering to internal customers
(as shown in Figure 1.4). This leads to our basic definition.
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LOGISTICS is the function responsible for the flow of materials from suppliers into an
organisation, through operations within the organisation, and then out to customers.
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