BATAAN PENINSULA STATE UNIVERSITY
COLLEGE OF BUSINESS AND
ACCOUNTANCY
Balanga, Campus
Balanga City, Bataan
SUBJECT: LOGISTICS
MANAGEMENT SUBJECT CODE:
OMPR0113 CHAPTER 1
Topic: Introduction to Logistics Management
I. Learning Outcomes
1. Understand what are the different types of logistics
2. Learn what are the different types of logistics management
3. Understand about what logistics management
II. Introduction
Logistics management is a supply chain management component that is used to
meet customer demands through the planning, control and implementation of the
effective movement and storage of related information, goods and services from origin to
destination. Logistics management helps companies reduce expenses and enhance
customer service.
The logistics management process begins with raw material accumulation to the
final stage of delivering goods to the destination. By adhering to customer needs and
industry standards, logistics management facilitates process strategy, planning and
implementation.
In logistics management, unwise decisions create multiple issues. For example,
deliveries that fail or are delayed lead to buyer dissatisfaction. Damage of goods due to
careless transportation is another potential issue. Poor logistics planning gradually
increases expenses, and issues may arise from the implementation of ineffective logistics
software. Most of these problems occur due to improper decisions related to outsourcing,
such as selecting the wrong vendor or carrying out delivery tasks without sufficient
resources.
III. Content
Supply Chain: It is a network of activities which transforms raw materials into Finished
Goods
Logistics: Movement of materials in Supply Chain
Definitions of Logistics
It is a process of Planning, Implementing, and Controlling the efficient and
effective flow of goods/services and related information from the point of origin to
point of consumption conforming to customer requirements. “Logistics is a process of
implementing 7R’s to achieve Customer satisfaction” (Shine Babu). It is the
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procurement, maintenance, distribution and replacement of personnel and materiel”
(Webster’s Dictionary)
Word LOGISTICS derived from
1. Logistikos (Greek) - means calculation using Mathematical standards
2. Logisticus (Latin) - same meaning
3. Logistique (French) - work related to army or military (movement of men and
materials in the war)
Phases in Logistics
1) Inbound Logistics: Movement of materials from the point of origin to point
of production. Other names are physical supply and upstream.
2) Outbound Logistics: Movement of finished goods from the point of
production to the point of consumption. Other names are physical distribution
and downstream.
3) Reverse Logistics: Movement of damaged, expired, unsold products from the
point of consumption to the point of production.
Purchasing or buying Transport Warehouse Factory Transport
Warehouse Customer Consumer
Note: Here, the customer is wholesaler, distributor or retailer
Types of Logistics
1) Business Logistics - is the blend of Greek mission plus French operations.
Application of Logistics techniques or principle in business or a commercial
management.
2) Military Logistics - is the planning and movement of military force, arms and
ammunitions in a disciplined order.
3) Event Logistics - is the science of planning, controlling and managing the
transfer, storage and other tangible and intangible operations performed in the
process of event planning and management.
4) Service Logistics - the management of activities which respond to customers on
an individual basis. It provides guiding concepts to central service response
logistics.
Objective of Logistics
1. Cost Minimization 8. Low cost delivery
2. Increasing the profit 9. Speedy delivery or quick response
3. Customer satisfaction 10. Right condition or reduce damage
4. Reducing DLT 11. Provide best service
5. Cash Spin 12. Reliability
6. Cash to Cash convertion 13. Repeated Business
7. Generate Business 14. Inventory Reduction
* LT Lead Time
* DLT Deliver Lead Time (this is the gap between order placement and
order receipt)
Demand Forecasting: it is the art of determining future market conditions
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Erratic Customer Order
In order to overcome this problem there are several methods used:
1. MTO: Make To Order
2. MTS: Make To Stock
3. A.O.: Assemble to Order
4. E.O.: Engineer To Order
5. JIT: Just In Time
LOGISTICS PRINCIPLE
1) when the service level increase the cost will also increase
2) when the service level reduces the customer satisfaction will also reduce
3) achieve desired level of customer satisfaction at reasonable cost
What should a Manufacturer DO
1. Right Quantity Purchase
2. Reliable/Right Product
3. Reasonable Storage
4. Right Quantity Production
5. Right Time Delivery
6. Customer Satisfaction
7. Product Quality
8. Best Service Provider
Different Types of Service Providers
1. Fleet Operator (Truck) 10. C&F
2. Rail Operator 11. Freight Forwarders
3. Water (ship + inland) 12. Cargo Consolidators
4. Shipping Lines 13. Ship Brokers
5. Warehouse Operators 14. Logistics Companies
6. Terminal (CFS, PORT) 15. 4PL
7. 3PL 16. Container Leasing Company
8. Brokers 17. Container Manufacturing Company
9. Customs House Agents 18. Container Repairing Company
Mainly Two Types of Service Providers
a) Asset Based
b) Non-asset Based
* VOCC - Vessel Operating Common Carriers
* NVOCC - Non-Vessel Operating Common Carriers
Participants in Transportation
1. Seller - who sells the product
2. Buyer - who buys the product
3. Service Provider - who makes the facilitation to sell the product
4. IT Service Provider - who provides technical services such as computer, internet,
phone etc.
5. Government - who controls the entire activities
6. Public - who is getting all merits and de-merits of all this activity
Stuffing - loading into the container
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Destuffing - unloading from the container
MRO - Maintenance Repair and Operating
MTO - Multi Model Transport Operator
FTL - Full Truck Load
LTL - Less than a Truck Load
LCL - Less than a Container Load
FCL - Full Container Load
INVENTORY - Asset or resources of a company kept for own use or for sale. Raw
materials, Finished Goods, Work in Progress, MRO, Sub-assemblies
Consolidation - Means combining or grouping of cargos to achieve an economic Freight
The Four Types of Logistics:
1. Supply Management and Logistics
Supply management involves the planning and coordination of materials that are
needed in a certain location at a specific time to support production or activity (as in the
case with military supply). Supply logistics must include transportation of the materials
and storage as well as a means for evaluating the level of supply at different stages of the
process to make sure the flow of materials matches needed. This can involve getting all
of the construction materials to a construction site or parts that are needed in a
manufacturing plant.
2. Distribution and Material Movement
Distribution involves managing how a supplied and stored material is then
dispersed to the locations it is needed. This involves issues of material movement
(loading, unloading, and transportation), tracking of stock and accountability of use
(recording how the supply is used and by whom). This can involve moving supplies from
a central warehouse to the shelves of a retail store.
3. Production Logistics and Management
Production logistics manages the stages of combining distributed supplies into a
product. This can involve the coordination required in a manufacturing or assembling
process and in the case of applications such as military production, the logistics of
coordinating space and areas of production to occur. In construction as well, production
logistics will include the staging of material at the right time to coordinate with the phase
of building taking place.
4. Reverse Logistics and Product Return
Reverse logistics involves the reclamation of material and supplies from a
production or assembly process. For instance, in the logistics management of a
construction project, reverse logistics plans for the removal of excess material and re-
absorption of the material into a stock supply.
In military applications, it is commonly used for exit strategy planning and
coordinating the transfer of material and equipment back to a storage base from an area
where military exercises were performed.
It can also apply to the return of unwanted but unused products from an end
customer seeking a refund. There is a whole industry that has been created in recent years
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to handle customer returns, including testing, refurbishment and adding items back to
inventory. A customer might order something online like a printer or children’s toy that
they never used. Before it can be resold, it should go to a process to ensure that it will be
suitable to be sold to another customer.
Supply Chain Best Practices and Their Benefits
10 Best Practices that companies in the retail industry (and any industry) need to
ensure that their supply chain management is as effective as possible and contributing
as much as possible to the company’s bottom line.
1. Identify supply chain stakeholders and establish a committee to engage
stakeholders in supply chain issues and establish a workgroup comprised
of departments.
2. Make sure the supply chain itself has appropriate staffing.
3. Technology is your friend.
4. Establish synergistic relationships with key suppliers.
5. Engage in collaborative strategic sourcing.
6. Don’t just consider price when making supply chain decisions. Consider the
“total cost of ownership.”
7. Supply chain leaders should have some contribution and control with contracts.
8. Inventory optimization is essential.
9. Establish appropriate controls throughout the supply chain system to minimize
risk.
10. Keep the supply chain sustainable with social responsibility and green initiatives.
7 R’S IN LOGISTICS MANAGEMENT SERVICES
1. Right Product
A company who offers this kind of service must first know the kind of
products that they are going to handle and transport. Having the right knowledge will
give you an advantage to properly and efficiently manage both your time and
resources.
2. Right Place
The right product must be delivered to the right place. Courier services
provided by an LMS company must have knowledgeable drivers as well as a
systematic delivery system and tracking. Both customer and the provider must have a
synchronized location tracking to ensure that the products are delivered to the right
place.
3. Right Price
Pricing is very essential and all products and services. They must have an
appropriate price value in order to track the company income and expenses. A good
system for storing and updating the right prices ensures success in LMS.
4. Right Customer
Every LMS Provider must know their target market to identify the right
customers. If they will offer their services to the right market, they have more chances
of gaining leads and customers that will most likely to avail them. Some uses the
traditional marketing while others use digital marketing to reach more customers
around the globe.
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5. Right Condition
Every product or goods that are to be entrusted by the customers to LMS providers
must be stored and delivered with the right condition. This is where the specifications
must be referred to in order to place it on required facilities to maintain its quality.
6. Right Time
Time is very important when it comes to logistics, clients are more concern on the
time of delivery. That is why every service provider must know the right time to deliver the
products and in a very efficient way. Every system has a tracking functionality to monitor all
deliveries and making sure that they arrive on time.
7. Right Quantity
Knowing and specifying the right quantity is also one of the key in a successful
LMS. Since most of the providers are third party, companies that relies on their service must
be careful in sending the right amount or quantity of goods to be delivered. Thanks to our
modern technological developments that 3PLs can now manage all quantities of goods to
ship/deliver.
5P’s of Logistics Management
1. Production - Production of right material with right raw material availability.
2. Price - The right produced product can be more competitive by using more competitive and
effective logistics operation.
3. Product - The right product can be produced by using best collaboration between marketing
and logistics. So that the packing and size of the product should be feasible.
4. Promotion - Logistics should work closely with marketing to decide which strategy
of distribution either push or pull will be followed.
5. Place - It refers to the distribution channel’s decision, whether warehouse, the type
of transportation and so on.
7Ps
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IV. Summary
Logistics management provides for the flow and storage of information and
products between the firm and its suppliers (inbound), the firm and its customers
(outbound) and the various plants, divisions and units of the firm.
The objectives of logistics management is to provide customers with heir required
service benefits at the lowest total logistics cost.
A complete logistics management system comprises 6 major decisions areas:
facility network design, inventory management, order management, transportation
management, warehousing management and packaging and materials handling
management.
Logistics has an important relationship to manufacturing, marketing, finance and
other areas of the organization.
The cost of logistics systems can be affected by a number of major factors,
including competition in the market, the spatial relationship of nodes and product
characteristics.
V. Learning Task
Answer the question below.
Is Logistics the same as Supply Chain Management? Explain your answer.
VI. Reference
1. Pereda, Pedrito R. (2014). Logistics Management (Practical Approach
to Purchasing and Inventory Management)
2. Jacobs, Robert F. (2014) Operations and Supply Chain Management, 14th edition
3. Wisner, Joel D.; Tan, Keah-Choon and Leong, Keong, (2013), SUPPLY CHAIN
MANAGEMENT, 3rd edition
4. Schroeder, Roger G. (2013) Operations Management in the Supply Chain
5. Boyer, Ken and Verma, Rohit, (2012). LOGISTICS MANAGEMENT
Prepared by
MELINDA M. ABERIN, MACE
CBA Faculty
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