Strategic Logistics Management

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JAMES R. STOCK

STRATEGIC LOGISTICS MANAGEMENT DOUGLAS M. LAMBERT

FOURTH EDITION

CHAPTER 1 Logistics’ Role in the Economy and the Organization

Logistics Management Defined

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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

Components of Logistics Management Inputs into logistics

 Natural resources

Implementation

Logistics management

Human Raw In-process Finished Suppliers resources materials inventory goods Financial resources Information resources

Outputs of logistics

Management actions Planning

Control

Competitive advantage

Time and Customers  place utility

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

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

Efficient movement to customer  Proprietary asset Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Marketing/Logistics Management Concept Customer satisfaction •Suppliers •Intermediate customers •Final customers

Integrated effort •Product •Price •Promotion •Place (distribution)

Company profit •Maximize long-term  profitability •Lowest total costs given an acceptable level of customer service

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Cost Trade-offs in Marketing and Logistics Product Price

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Order processing and information costs

Place/customer service levels Inventory carrying costs

Transportation costs

Lot quantity costs

Warehousing costs Order processing and information costs

M A R K E  T  I    N  G

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

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Key Logistics Activities • Customer service

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• Demand forecasting

• Parts and service support

• Inventory management

• Plant and warehouse site selection

• Logistics communications

• Procurement

• Material handling

• Traffic and transportation

• Order processing • Packaging

• Reverse logistics

• Warehousing and storage

Flow through the Supply Chain

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Customer

Carrier  Distribution center Supplier

Customer

Carrier 

Customer Carrier  Supplier

Carrier  Manufacturing site

Customer

Carrier  Supplier

Carrier 

Customer

Distribution center Customer

Sales 1-10

Strategic Profit Model

$

Gross margin  Net profit  Net profit margin

$

Financial leverage

=

Return on assets x

%

 Net profit Total assets  Net profit x =  Net worth  Net worth Total assets

 Net profit  Net sales

$

+

% Return on net worth

$

Sales

Total expenses

x Asset turnover 

Sales

Income taxes

$

Fixed expenses

$ $

Total assets

$

$

Inventory

$ +

 Net sales Total assets

Variable expenses

+

$

$

-

Cost of goods sold

Current assets

$

+

Accounts receivable

$ +

Fixed assets

$

+

Other current assets

$

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

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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

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