Logistics plays a strategic role in coordinating purchasing, distribution, and other functions to deliver goods and services. The document outlines key logistics activities like planning, sourcing, production, delivery, and returns. It provides examples of how these processes work for a transit bus operation and IKEA's supply chain. The different modes of transportation like truck, ship, air, rail, pipeline, and hand delivery are also discussed.

1. 1-1
Lecture 1
Logistics’ Strategic Role in the Economy and
the Organisation
● Logistics’ Strategic Role in the Economy
and the Organisation
● Development of Logistic Management
● Key Logistics Activities

2. 1-2
Logistics’ Strategic Role in the Economy
and the Organisation
• Purchasing, website services, logistics, and
distribution need to be carefully coordinated
for success
• In the increased interconnected and
interdependent global economy, the process
of delivering finished goods, services, and
supplies from one place to another must be
accomplished

3. 1-3
Development of Logistic Management
Process is one or more activities that transform
inputs into outputs that involves:
• Planning
• Sourcing
• Making
• Delivering
• Returning

4. 1-4
Planning consists of the processes needed to
operate an existing supply chain strategically.
Here a firm must determine how anticipated
demand will be met with available resources.
A major aspect of planning is developing a set of
metrics to monitor the supply chain so that it is
efficient and delivers high quality and value to
customers.

5. 1-5
Sourcing involves the selection of suppliers that will deliver
the goods and services needed to create the firm’s
product.
A set of pricing, delivery, and payment processes are
needed, along with metrics (measurement tool such as
balance score card) for monitoring and improving the
relationships between partners of the firm.
These processes include receiving shipment, verifying
them, transferring them to manufacturing facilities, and
authorizing supplier payments.

6. 1-6
Making is where the major product is produced
or the service provided.
The step requires scheduling processes for
workers and the coordination of material and
other critical resources such as equipment to
support producing or providing the service.
Metrics that measure speed, quality, and worker
productivity are used to monitor these
processes.

7. 1-7
Delivering is also referred to as logistics
processes.
Carriers are picked to move products to
warehouses and customers, coordinate and
schedule the movement of goods and
information through the supply network, develop
and operate a network of warehouses, and run
the information systems that manage the receipt
of orders from customers and the invoicing
systems that collect payments from customers.

8. 1-8
Returning involves processes for receiving worn-
out, defective, and excess products back from
customers and support for customers who have
problems with delivered products.
In the case of services, this may involve all types
of follow-up activities required for after-sales
support.

9. McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved
Chapter 1
Operations and Supply Chain Management

10. 1-10
Learning Objectives
1. Understand why it is important to study operations and
supply chain management.
2. Define efficient and effective operations.
3. Categorize operations and supply chain processes.
4. Contrast differences between services and goods
producing processes.
5. Identify operations and supply chain management
career opportunities.
6. Describe how the field has developed over time.

11. 1-11
What is Operations and Supply
Chain Management?
• Operations and supply management
(OSM): the design, operation, and
improvement of the systems that create
and deliver the firm’s primary products
and services
– Functional field of business
– Clear line management responsibilities
• Concerned with the management of the
entire system that produces a good or
delivers a service
LO 1

12. 1-12
Understanding the Global Supply
Chain
• Success in today’s global markets requires a
business strategy that matches the
preferences of customers with the realities of
supply networks
• A sustainable strategy is critical
– Meets the needs of shareholders and employees
– Preserves the environment
• Supply refers to processes that move
information and material to and from the
manufacturing and service processes of the
firm
LO 3

13. 1-13
Organization of OSCM: The Integration of
Strategy, Processes and Planning
LO 1

14. 1-14
Work Involved in Each Type of
Process
• Planning: the processes needed to operate
an existing supply chain strategically
• Sourcing: the selection of suppliers that will
deliver the goods and services needed to
create the firm’s product
• Making: Where the major product is produced
or the service provided
• Delivering: carriers are picked to move
products to warehouses and customers
• Returning: the processes for receiving worn-
out, defective, and excess products back from
customers
LO 3

15. 1-15
Differences Between Services and
Goods
1. Services are intangible
2. Services requires some interaction
with the customer
3. Services are inherently
heterogeneous
4. Services are perishable and time
dependent
5. Services are defined and evaluated as
a package of features
LO 4

16. 1-16
The Goods-Services range
LO 4

17. 1-17
Servitization Strategies
• Servitization refers to a company
building service activities into its
product offerings for its current users
– Maintenance, spare parts, training, and so
on
• Success starts by drawing together the
service aspects of the business under
one roof
• Servitization may not be the best
approach for all companies
LO 4

18. 1-18
International Growth in Services
LO 4

19. 1-19
Efficiency, Effectiveness, and
Value
• Efficiency: Doing something at the
lowest possible cost
• Effectiveness: Doing the right things to
create the most value for the company
• Value: quality divided by price
LO 2

20. 1-20
Careers in Operations and Supply
Management
• Plant manager
• Hospital
administrator
• Branch manager
• Call center manager
• Supply chain
manager
• Purchasing
manager
• Business process
improvement
analyst
• Quality control
manager
• Lean improvement
manager
• Project manager
• Production control
analyst
• Facilities manager
LO 5

21. 1-21
Historical Development of
Operations and Supply Management
• Lean manufacturing, Just-In-Time (JIT), and
Total quality control (TQC)
• Manufacturing strategy standard
• Service quality and productivity
• Total quality management (TQM) and quality
certifications
• Business process reengineering
• Six-sigma quality
• Supply chain management
• Electronic commerce
• Service science
LO 6

22. 1-22
Current Issues in Operations and
Supply Management
1. Coordinating the relationship between
mutually supportive but separate
organizations
2. Optimizing global suppliers, production, and
distribution networks
3. Managing customer touch points
4. Raising senior management awareness of
operations as a significant competitive
weapon
5. Sustainability and the triple bottom line
LO 6

23. 1-23
Key Logistics Activities
Logistics is the art and science of obtaining,
producing, and distributing material and product
in the proper place and in the proper quantities.
International logistics is all functions concerned
with the movement of materials and finished
goods on a global scale

24. 1-24
Key Logistics Activities
Example: Transit Bus Operation
• Involves a logistics system.
• The term logistics refers to the movement of
things such as materials, people, or finished
goods

25. 1-25
• used on campus or in a metropolitan area
• peaks in demand during the day and evening
• depending on the situation
Example:
The route has 60 stops, passengers request the
bus to stop or when the driver sees customers
waiting to board at a stop. In addition, this route
is busy during the day because visitors to the city
tend to start visiting early and continue until dark.

26. 1-26
Key Logistics Activities
Example: IKEA
Activity-system maps is:
Diagrams that show how a company’s strategy
is delivered through a set of supporting activities
(refer to page 31)

27. 1-27
Decisions related to logistics
A key decision area is deciding how material will
be transported.
The Logistics-System Design Matrix shows:
Exhibit 15.1 that there are six widely recognised
modes of transportation: highway (trucks), water
(ships), air (aircraft), rail (trains), pipelines, and
hand delivery

28. 1-28
Highway (truck)
• Actually, few products are moved without
some highway transportation.
• The highway offers great flexibility for moving
goods to virtually any location not separated
by water.
• Size of the product, weight, and liquid or bulk
can all be accommodated with this mode.

29. 1-29
Water (ship)
• Very high capacity and very low cost, but
transit times are slow, and large areas of the
world are not directly accessible to water
carriers.
• This mode is especially useful for bulk items
such as oil, coal, and chemical products.

30. 1-30
Air
• Fast but expensive.
• Small, light, expensive items are most
appropriate for this mode of transportation.

31. 1-31
Rail (trains)
• This is a fairly low-cost alternative, but transit times can
be long and may be subject to variability.
• The suitability of rail can vary depending on the rail
infrastructure.
• The European infrastructure is highly developed,
making this an attractive alternative compared to trucks,
while in the United States, the railroad infrastructure
has declined over the last 50 years, making it less
attractive.

32. 1-32
Pipelines
• This is highly specialized and limited to liquids,
gases, and solids in slurry forms.
• No packaging is needed and the costs per mile
are low.
• The initial cost to build a pipeline is very high.

33. 1-33
Hand Delivery
• This is the last step in many supply chains.
• Getting the product in the customer’s hand is
often a slow and costly activity due to the high
labor content.