Supply Chain Management
Licence d’excellence Marketing, Logistique et Digital
Pr. Ilham RHAROUBI
Année universitaire: 2023/2024
Chapter 1: Introduction to logistics
• Definitions
• What is logistics management
• Logistics activities
• Logistics evolution
• Seven R’s of logistics
• The role of logistics
Recently, the pressure of the competitive market and new information
technologies has affected the structures of the production systems,
calling for:
§ Reduction of time to market
§ Higher flexibility of the systems
§ Drastic reduction of costs
§ Extended quality concept
Logistics
History of Military Logistics
The word "logistics" has military origins
For strategists of the 19th and 20th centuries, logistics is: "the practical
art of moving armies and supplying them by establishing and organizing
their supply lines"
"l'art pratique de déplacer les armées et de les ravitailler en
établissant et organisant leurs lignes de ravitaillement".
What is Logistics Management?
Logistics management tends to plan, implement, and control multiple
processes that ensure the effective functioning of storage and
movement of goods starting from the origin to the final destination.
Managing logistics involves activities such as warehouse management,
inventory control, raw material accumulation, planning supply and
demand etc. Therefore, it deals in the vast array of supply chain
processes. The main goal of logistics management is to reduce the
company’s overall operational cost and increase the customer
satisfaction.
logistics activities
Supply & demand planning
Storage handling
Distribution & product management
Implementing technology & automation
Sales logistics
Customer service management
Reverse logistics
Logistics
• Logistics à competitiveness
• Logistics is evolving with the changes experienced by the company
and especially its management method
• A competitive firm is already a performant one
What is Logistics?
‘The process of strategically managing the movement and storage of materials,
parts and finished inventory from suppliers, through the firm and on to
customers.’ Professor Martin Christopher
‘Logistics is the function responsible for moving materials through their supply
chain.’ Donald Waters, Global Logistics, 2010.
Logistics consider a wide set of activities dedicated to transformation &
circulation of goods, such as material supply for production, core distribution &
transport function, wholesale & retail & also provision of households with
consumer goods as well as related information flows (Handfield & Nichols, 1999).
To achieve a target level of customer service
The goal of Logistics at lowest possible cost
The goal is to Plan,
implement, & control
efficient, effective forward
& reverse flow & storage of
goods, services & related
information between point
of origin & point of
consumption in order to
meet customers'
requirements
Source: Waters (2002)
Warehousing; Materials handling; Inventory; Packaging and Recycling
Freight Transport: inbound and outbound logistics; Information
• Velocity and Movement in a Direction:
• "Velocity" refers to the speed at which products move through the supply chain.
It emphasizes the importance of swift and efficient transportation to ensure
timely delivery.
• "Movement in a direction" signifies that transportation is not just about
relocating goods; it involves a purposeful movement towards a specific
destination, usually the end customer. Each movement should contribute to
fulfilling an order, replenishing inventory, or optimizing the production process.
Definition
Logistics is the process of planning, implementing and controlling the efficient,
cost-effective flow and storage of raw materials, in-process inventory, finished
goods and related information from point of origin to point of consumption for the
purpose of conforming to customer requirements
If we try to define the term “logistics”. A Google search for logistics will
yield approximately 53 million results (R. Neil Southern, 2011). A more
precise definition can be found in the dictionary, which states that
logistics derives from the Greek word -logistike-, “the art of
calculating“, and from logos, which means “reason” (Merriam-Webster
Online Dictionary 2010).
The evolution of logistics
The 1950s – The Transportation Era
In the 1950s, transportation was the primary focus of academic
courses, but topics like logistics, physical sourcing, and supply chain
management were not covered, and the concept of total cost and
collaborative relationships with suppliers or customers were not
priorities for managers.
During this time, logistics was primarily a military term, emphasizing
the importance of having the right supplies in the right place at the
right time during war.
The 1960s – Physical Distribution
In the 1960s, the study of transportation shifted toward logistics,
leading to the establishment of the National Council of Physical
Distribution Management (NCPDM) in 1963, which later became the
Council of Supply Chain Management Professionals (CSCMP).
During this period, logistics was divided into outbound logistics and
inbound logistics. Notable literature and publications in logistics
emerged, and transportation remained a vital component, with
significant developments like the establishment of the Department of
Transportation in 1966.
The 1970s – Physical Supply, Deregulation and
Logistics
In the early 1970s, there was a shift towards encompassing the input
side of logistics, focusing on physical supply or material management.
This period saw the emergence of academic journals like the
Transportation Journal, emphasizing transportation's significance, and
the introduction of the Journal of Business Logistics, marking a pivotal
decade for the evolution of the broader logistics concept.
The 1980s – Transportation Deregulation,
Physical Distribution and Business Logistics
In the 1980s, deregulation in transportation continued in the United
States, notably with the Motor Carrier Act and the Staggers Rail Act,
reducing regulations on road freight rates and railway operations. This
era witnessed the decline of the term "physical distribution," making
way for the prominence of "logistics." The Council of Physical
Distribution Management (NCPDM) also adapted to this shift, renaming
itself the Council of Logistics Management (CLM) in 1985. Federal
deregulation led to a more competitive and flexible transportation
system in the country.
The 1990s – Business Logistics
In the 1990s, businesses increasingly recognized the importance of
logistics, focusing on cost savings through negotiations with carriers
and adopting the systems approach and total cost concept. This period
saw the integration of electronic and communication technologies like
the Internet and electronic data interchange, leading to the rise of
third-party logistics organizations and strategic partnerships.
Companies began viewing logistics as a fundamental component of
their overall business strategy, emphasizing efficiency and integrated
solutions.
The 2000s – Logistics and Supply Chain
Management
In the early 21st century, there has been a gradual shift from logistics
to supply chain management in both academia and the business world.
While larger companies embraced the supply chain concept, small and
medium enterprises were slower to adopt it. Supply chain
management now encompasses planning, sourcing, converting, and
all logistics activities, emphasizing integrated information sharing
among partners. Additionally, online and distance education in logistics
and supply chain management has become widespread, with many
colleges and universities offering online courses, reflecting the evolving
educational landscape in this field.
2010-present: the current era - supply chain
digitalization
Supply chain digitalization, marked by the dematerialization of
information processing, is crucial for managing data flows efficiently
and ensuring reliable supply chain information. Faced with globalized
competition, businesses must embrace supply chain digitization to
maintain competitiveness, making it an essential practice for optimizing
production flow management and ensuring operational efficiency.
The evolution of logistics
From 2010 to today:
Supply chain digitalization
(emerging technologies: AI,
cloud, blockchain…)
Change management
Digital competencies
Seven R’s of logistics
Right Right Right Right Right Right Right
Product quantity condition place time customer Price
Mission
The goal of logistics is to get the right goods or services to the right place, at the
right time, and in the desired condition and quantity to customers
Logistics activities
• Warehousing
• Material handling
• Inventory
• Packaging and recycling
• Transportation
• Information sharing
• Cross-docking
• Reverse logistics
1. Warehousing
Warehousing refers to the process of storing goods and products in a
centralized location, often a warehouse or distribution center.
Warehouses serve as intermediate storage points in the supply chain,
allowing businesses to manage inventory, facilitate order fulfillment,
and streamline distribution.
Warehouse: place where goods are kept
Warehouse-keeper: the person in charge of warehouse
Key Functions of warehousing
• Storage: Warehouses provide a secure environment for goods, protecting
them from damage, theft, or deterioration.
• Inventory Management: Warehouses help in managing stock levels,
tracking quantities, and ensuring timely replenishment.
• Order Fulfillment: Products are picked, packed, and shipped from
warehouses to customers or retail locations.
• Cross-Docking: In some cases, goods arriving at a warehouse are
immediately sorted and shipped out without being stored, reducing
storage time.
2. Materials Handling
Materials handling involves the movement, control, and protection of materials,
goods, and products throughout the manufacturing, distribution, consumption,
and disposal stages of the supply chain.
Key Activities:
• Loading and Unloading: Moving goods onto or off vehicles, shelves, or storage
areas.
• Sorting: Organizing products based on criteria like destination or product type.
• Packing: Preparing products for shipment, ensuring they are secure and
protected.
• Palletizing: Arranging products on pallets for easier handling and
transportation.
3. Inventory
Definition: Inventory refers to the goods and materials a business holds for the purpose of
resale or use in production. Inventory management involves balancing the need for product
availability against the need for minimizing holding costs and losses due to obsolescence or
theft.
Key Aspects:
• Stock Levels: Maintaining optimal quantities to prevent shortages or excess inventory.
• Demand Forecasting: Predicting future demand to plan inventory levels accordingly.
• Inventory Turnover: Calculating how many times inventory is sold or used in a specific
period, indicating efficiency.
• Safety Stock: Maintaining a buffer inventory to handle unexpected demand spikes or
supply disruptions.
Importance of inventory management
àBalancing supply and demand: maintaing the right level of inventory
• How many units to order ?
• When to order ?
àAvoiding excess or shortage of goods
àImpact the organization’s profitability
4. Packaging and Recycling
Definition: Packaging involves designing and producing containers or
wrappers to protect products during transportation, storage, and display.
Recycling pertains to the process of reusing materials from packaging or
products to create new items, reducing environmental impact.
Significance:
Protection: Proper packaging safeguards products from damage, ensuring they reach
customers intact.
Sustainability: Environmentally friendly packaging and recycling efforts reduce waste and
contribute to a sustainable supply chain.
Compliance: Adherence to packaging regulations and eco-friendly practices is essential for
businesses' ethical and legal responsibilities.
5. Freight Transport: Inbound and Outbound
Logistics
• Inbound Logistics: Inbound logistics involves the management of
goods and materials coming into a business. This includes sourcing
materials, transportation, and storage of raw materials before
production.
• Outbound Logistics: Outbound logistics focuses on the movement
and storage of finished goods from the business to customers. It
includes order fulfillment, warehousing, packaging, and
transportation to end-users or retailers.
6. Information
Information in the context of supply chain management refers to the data and insights
collected, analyzed, and utilized to make strategic decisions. It includes data on inventory
levels, demand patterns, supplier performance, and customer preferences.
Importance:
• Data-driven Decisions: Businesses use information to optimize processes, reduce costs,
and enhance customer satisfaction.
• Visibility: Real-time information provides visibility into the supply chain, allowing for
proactive issue resolution and efficient planning.
• Collaboration: Sharing information with partners fosters collaboration, allowing for
synchronized activities and mutual benefits.
7. Cross-docking
Cross-docking is a logistics strategy where products from a supplier or
manufacturer are unloaded from an inbound shipment and then immediately
loaded onto outbound vehicles for distribution without being stored in a
warehouse or distribution center. In other words, cross-docking involves the
direct transfer of goods from an incoming truck or container to an outgoing
one, with minimal or no storage in between.
Key aspects of cross-docking
• Efficiency: Cross-docking reduces the need for warehousing and storage space, which can lead to significant cost savings.
It streamlines the supply chain by minimizing handling and storage time, allowing products to reach their destination
faster.
• Minimal Inventory Holding: Unlike traditional warehousing, where goods are stored for an extended period, cross-docking
aims to move products quickly. This approach reduces holding costs, including storage fees and the risk of inventory
obsolescence.
• Sorting and Consolidation: Cross-docking facilities often serve as hubs where products from multiple suppliers are
consolidated and sorted based on their destinations. This consolidation allows for more efficient transportation as smaller
shipments can be combined into larger, more economical loads.
• Just-in-Time (JIT) Inventory: Cross-docking is often used in a Just-in-Time inventory system, where products are delivered
immediately before they are needed in the manufacturing process or by customers. This helps in minimizing storage costs
and optimizing production schedules.
• Product Mixing: In some cases, products from multiple suppliers are mixed at the cross-docking facility to create variety
packs or bundled products that meet specific customer demands.
• Transshipment: Cross-docking can involve transshipment, where goods are transferred directly from one vehicle to
another without being stored. Transshipment can occur between different modes of transportation, such as from a ship to
a truck or from a truck to a train.
• The challenge is the question of handling the
products that are coming back into the
Reverse logistics operation.
• The decision on whether to accept the
product, whether a refused shipment, an
authorized customer return, or an unexpected
• Reverse logistics is the process of return must be planned for and
moving goods from their place of communicated with the distribution
use, back to their place of operation.
manufacture for re-processing, re-
filling, repairs or recycling.
• Reverse logistics refers to the
skills of logistics management to
reduce, manage and dispose-off
waste arising from products and
inputs.
The Role of Logistics in Business
• Due to market liberalization, the success of any business is based on its ability
to differentiate itself from its competitors, meaning offering better
commercial deals (optimized costs and deadlines) to customers while
generating profits. In this context, logistics becomes a strategic weapon,
both offensive and defensive.
• Numerous studies reveal that companies that excel in logistics also occupy
the best competitive positions. Despite being a performance lever, logistics
remains a relatively unknown function. The role of logistics in a business can
make the following contributions:
By ensuring product availability at the desired location, at the right time,
and at the lowest possible cost, logistics contributes to achieving the
company's objectives and profitability.
