Logistics in the Firm

7/27/2019 Logistics in the Firm

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LOGISTICS IN THE FIRM


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Module outline

1. Introduction

2. Importance of an effective logistics organization3. Logistics interfaces with manufacturing, operations

and marketing

4. Logistics activity which interfaces with

manufacturing

5. Logistics interfaces with marketing

6. Factors affecting the cost importance of logistics


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INTRODUCTION

Role of logistics in the firm is an important strategic decision

Raw parts, materials and services must be distributed

efficiently

Companies have become more global

Important to ensure proper interfaces of logistics function with

operations/ manufacturing and other supporting departments Companies can benefit from the seamless flow of their goods

and services across the region when the logistics industry

becomes fully integrated


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IMPORTANCE OF AN EFFECTIVE LOGISTICS

ORGANIZATION

In traditional firms, the functions of logistics were not

specialized and were scattered throughout the firm

Until the late 1970s, the firm paradigm was bigger is better.

The problems and challenges do not lie primarily with strategic

decision making

Requires reengineering in system, structure, mission, people,corporate culture and reward structure

Case study of IBM: Reorganizing to Regain Competitive

Advantage, is a good example


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LOGISTICS INTERFACES WITH MANUFACTURING,

OPERATIONS AND MARKETING

Big challenge for logistics function in a firm is to manage the

whole logistics system

Ensure order fulfillment to meets or exceeds customer

expectations

A new face of logistics started from early 1980s

Align logistics to ensure the it can add value through interfaces

with many sub-departments Interfaces with production - determine the length of the

production run.

Interfaces with marketing - determine the selling of theproducts.


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Logistics services that can be provided to the firm are:

Transportation

Warehousing

Distribution

InventorymanagementStaging

Kitting

Packaging

LOGISTICS ACTIVITY WHICH INTERFACES WITH

MANUFACTURING


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Ensure the availability of parts andraw materials

Crucial if the firms run its operations24x7 basis

Must meet the Just-In-Time (JIT)requirement

Failure in feeding of raw materialsto manufacturing line will cause theline down eventually loss sale

ensuring product availability at theright time, right quantity, and at rightplace - give competitive advantageto the firm

Transportation

Space that stored all thecomponents, raw materials andfinished goods of a firm

A proper layout and proper

segregation, can confirm correctpicking, packing and deliveryprocess

right number of safety stock canensure the availability of productseven if there is a revision in

production planning or in customerdemands

Warehousing


MANUFACTURING


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Distribution

Distribution is involving managementof goods on the physical pathbetween production, consumptionand storage

Important when the firms have storedtheir products in distribution centersand meant for distribution to manydrop points (customers locations)

A good routing planning will ensurethe effective distribution plan to meetthe customers demand

Inventorymanagement

Very important activity for logistics infirm

Keeping right quantity and right

product is very important for continueproducing the products a perproduction plan

Managing and distribute the inventoryinformation in firm, also a criticalfactor in interfacing with

manufacturing


MANUFACTURING


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Staging

Staging is important in order to have a lean material movementto support the production

Staging areas are an area where materials or equipment in

transit are assembled or processed

Kitting

Kitting involves the gathering of all the parts needed for aparticular assembly from the stockroom and issuing the kit tothe manufacturing line at the right time and in the right quantity


MANUFACTURING


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process that enclosing the goods for protection fordistribution, storage, sale, and, use while handling inwarehouse and transporting in a vehicles

Certain packages will be printed with certain symbols whichclassify product certification, trademarks, proof ofpurchase, communicate aspects of use and safety, andenvironment and recycling

Packaging


MANUFACTURING


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Symbols on packaging:


MANUFACTURING

Fragile Center of

gravity

Keep away

from water

This way up Do not clamped

as indicated

Clamped asindicated

Keep awayfrom sunlight

Do nothand hook

Explosives Flammableliquid


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LOGISTICS INTERFACES WITH MARKETING

Customer

satisfaction

Integrated

efforts/ systemapproach

Adequate

corporate profit

Logistics play an important role in:


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Customersatisfaction

Companyprofit


Integrated

effort

Suppliers

Intermediate

customers

Final customers

Product Price

Promotion Place

Maximize

long-termprofitability

Lowest total

costs


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Product Price

Promotion Place

Logistics play a crucial role particularly in assisting of

getting the product to the right place

In order to ensure the success of the marketing effort, the

firm have to integrate the ideas of having the right:



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FACTORS AFFECTING THE COST IMPORTANCE

OF LOGISTICS

The major categories which contributing to logistics cost are:


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Customer service- Capital that spent to enhance the

customer service- Extremely difficult to measure

the true cost of customer service!

Transportation- Delivery of materials drives

transportation costs

- Cost can be differing

considerably with volume of

cargo, weight of cargo, distance,

and point of origin and

destination


OF LOGISTICS


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Warehousing- Purely created by

storage and warehousing

activities

Order processing &information

- Cost includes: order processing,communications, distributions,

and forecasting demand


OF LOGISTICS


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Purchasing or production related cost

Vary with changes in order size orfrequencyCost quantity

Costs include inventory control,packaging, and salvage and scrapdisposal

Four type of inventory cost:

Capital cost or opportunity cost

Inventory service cost

Storage space cost

Inventory risk cost

Inventorycarrying


OF LOGISTICS

Documents

Logistics in the Firm