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a) the entire process of materials and products moving into, through, and out of a firm.
b) the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimising the goods- or service-producing network to fulfil customer requests; and utilising the network to fulfil customer requests in a timely way.
c) the management of supply chain in commerce and industry. Logistics management has three constituent elements; namely, procurement logistics, production logistics and distribution logistics.
Logistics is responsible for managing the physical flow of products including transport and warehousing, and information flow.
Supply chain management integrates product, information and cash flows among organisations from the point of origin to the point of consumption, with the goal of maximising customer satisfaction and minimising costs
Logistics management is part of supply chain management.
JIT (Just-In-Time): to reduce costs and risks associated with storage of materials by timing the system such that the materials arrive at a facility just as they are needed in a process. This requires intricate and efficient timing of shipment.
Integrated logistics: the integration of following activities:
Integrated logistics is characterised by the consolidation of goods in larger and fewer locations throughout the trade system. Costs can be reduced by the reduction of stock expenses and lead times. Handling costs are reduced by the use of modern equipment and automated facilities.
Integrated logistics potentially creates higher transport demands. Why?
Hub and spoke system!
Goods often do not move from the supplier to the demander by the shortest possible route. They go via a terminal – seaport, airport, road or rail terminal – to be reloaded with goods from other regions for distribution.
Four factors shaped the development of integrated logistics distribution
Scientific management: (advanced production technology + increased marketing costs + distribution cost: 10-30% of total costs)
Data processing technology: automated inventory control was realised. Computers allowed data to be entered once and reused for various purposes including order tracking, production scheduling, shipping, invoicing, and analysis.
Customer satisfaction: get the product to the customer at the right time in the right quantity and with the right logistical support.
Profit: profit leverage available from reduced logistics costs.
Stage 1 Physical distribution: integration of finished goods transport, warehousing, inventory management, customer service (balance between costs and service)
Stage 2 Internal linkages: join two or all three of the internal material flow loops so that 60% to 100% of the firm’s total inventory could be better managed, (elimination of buffer inventories between two loops, e.g. JIT)
Stage 3 External linkages: search for efficiencies in relationship with vendors, customers, and third parties. Development of Electronic Data Interchange (EDI), Just-in-time (JIT), and Distribution Requirements Planning (DRP).
The mismatch between the place of production and demand due to labour specialisation, mass production and scale economies, creates the need for transport. Transport is the physical thread connecting the company’s geographically dispersed operations. It adds value to the company by creating time and place utility.
Time compression: faster transit time minimises pipeline inventories; time saved in delivery frees up time in other areas of the logistics chain; maximising inventory velocity (how many times inventory turns per year, or the average number of days of inventory on hand) and reducing dwell-time (average number of days inventory sits idle in the pipeline).