Chapter Two Logistics is Big Business Thefirstpointmadereallybringsithometousallthatlogisticsmeans24/752weeksoftheyear.It neverstopsandtheexpectationisthatitisalwaysOTIFOnTimeinFulloftheOrder.Itnevergoes wronginthattheorderisdeliveredandtheproductisperfect. Thedistinctionismadewithinthefirm:thechallengeistohavefunctionalcompetencytosatisfythe customer.Externaltothefirmandbetweenfirms:thechallengeisoperationalsynchronization. Thetextsdefinitionoflogisticsisinboldtypeonp.

.22: The responsibility to design and administer systems to control movement and geographical positioning of raw materials, work in process and finished inventories at the lowest total cost. (p.22) LogisticsofBusinessisBigandImportant: Thissectiondemonstratesthe%toGDPseeslidesaswelltogainapictureoftheimportance. TheLogisticalValueProposition: Thevalueoflogisticsliesinserviceandcost: Servicelevelsismeasuredintermsof: (i)inventoryavailability, (ii)operationalperformanceand a.speed b.consistency c.flexibility d.resilienceierecoverytime (iii)servicereliability. a.Quality b.Specialattentionthisisleadingtocustomersegmentationandproductsegmentation. CostMinimizationistheconceptoftotalcostbeingminimisedandthisdoesnotjustmean tighteningthetransportcosts.Itleadsintotheintegrationofthetotalsupplychainandtradeoffs. Overallthissectionclaimsthatlogisticscompetenciescangainsomecompetitiveadvantage. WorkofLogistics: Thissectiongivesyouasummaryofthingstocome.Itisarapidflythroughoforderprocessing, inventory(andlookatthefiveaspectsatthebottomofp.27wewillcovertheseininventory lectures.KnowalsotheParetoprinciplelookituponthewebformoreinfo.),transport(cost, speedandconsistencythiscoversthetimelinessofdeliveriesaswell),warehousing,materials handlingandpackagingandfinallynetworkdesigns. LogisticalOperations InventoryFlowandInformationflowsaretheonlytwocovered.Icoveredfinancial,information, businessprocessesandphysicalflowsinlectures. LogisticalObjectives: Nowthissectionisinteresting.Lookatthetradeoffsbetweenresponsivenessandreducing inventory.Lookatshipmentconsolidationandholdinglargeinventories.Lookatlifecyclesupport andwheretheprofitsaremadeoverthelifeoftheproduct.Isitbettertopurchaseanexpensive productwithlowersupportcostsoveritslifeorviceversaAhthatwilldependonthelogistics. Frompage36andFigure2.3throughtofigure2.7performancecyclesisrelevant.Considerallthese cyclesandflowsandthenlookatthetimelinessandvarianceintimeonperformance.Youcould applythistimevariancetoreliabilityofproductvariance,qualityvarianceetcaswell.