Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin
1-1
JAMES
R.
STOCK



DOUGLAS
M.
LAMBERT
STRATEGIC LOGISTICS
MANAGEMENT
FOURTH EDITION
CHAPTER 1
Logistics Role in the
Economy and the
Organization
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-3
That part of the supply chain process that plans,
implements, and controls the efficient, effective
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.
Council of Logistics Management
Logistics Management Defined
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-4
Components of
Logistics Management
Copyright 2001 by The
McGraw-Hill Companies, Inc.
All rights reserved.
Management actions
Planning Implementation Control
Raw
materials
In-process
inventory

Finished
goods

Natural
resources


Human
resources


Financial
resources




Information
resources



Time and
place utility

Efficient
movement
to customer




Proprietary
asset



Competitive
advantage

Logistics management
Suppliers

Customers
Inputs into
logistics
Outputs of
logistics

Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support

Plant & warehouse site selection
Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage

Logistics activities
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-5
Marketing/Logistics
Management Concept
Customer satisfaction
Integrated effort
Company profit
Suppliers
Intermediate customers
Final customers
Maximize long-term
profitability
Lowest total costs
given an acceptable
level of customer
service

Product
Price
Promotion
Place (distribution)

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-6
Cost Trade-offs in Marketing
and Logistics
Product
Order processing
and information
costs

Inventory
carrying costs

Place/customer
service levels
Order processing
and information
costs
Price
Lot quantity costs Warehousing costs
Transportation
costs
M
A
R
K
E
T
I
N
G

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-7
Relationship of Logistics
Activities to Logistics Costs
Customer service levels
Transportation costs
Warehousing costs
Order processing/information systems costs
Lot quantity costs
Inventory carrying costs
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-8
Key Logistics Activities
Customer service
Demand forecasting
Inventory
management
Logistics
communications
Material handling
Order processing
Packaging

Parts and service
support
Plant and warehouse
site selection
Procurement
Reverse logistics
Traffic and
transportation
Warehousing and
storage

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-9
Flow through the Supply Chain
Customer
Customer
Customer
Customer
Customer
Customer
Supplier
Supplier
Supplier
Distribution
center
Distribution
center
Manufacturing
site
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-10
Strategic Profit Model
$
Financial
leverage
Return on
net worth
Return on
assets
Net profit
Net worth
Total assets
Net worth
Net profit
Total assets
Net sales
Total assets
Net profit
Net sales
Net profit
margin
Net profit
Gross margin
Sales
Sales
Cost of
goods sold
Variable
expenses
Fixed
expenses
Accounts
receivable
Other current
assets
Inventory
Sales
Total assets
Asset
turnover
Current assets
Fixed assets
Income taxes
Total expenses
=
=
x
x
+
+
+
+
+
+
-
-
-
x
%
%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-11
Future Challenges and Areas for
Performance Improvement
Supply Chain Management
Strategic Planning
Total Quality Management
Just-in-Time
Quick Response
Efficient Consumer Response
Logistics as a Competitive Weapon

1-11 a
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
1-12
Future Challenges and Areas for
Performance Improvement (cont.)
Accounting for logistics costs
Logistics as a boundary-spanning activity
Global logistics
Increasing skill requirements
Logistics information systems
Strategic alliances, partnerships, and
outsourcing
Green marketing and reverse logistics
1-11 b