logistics

Part I: Concepts of Logistics and Distribution

Introduction to Logistics and Distribution

• Logistics has been recognized as a major function only in recent decades.

• Comprised of many sub-functions and systems, needing a holistic view.

• The academic and business communities acknowledge the importance of interrelating these operations.

• This chapter covers basic aspects of distribution, logistics, and the supply chain.

  • Definitions and scope review.

  • Key elements of logistics.

  • Historical growth of logistics and its importance.

  • Description of typical distribution and logistics structures.

Scope and Definition of Logistics

• Rise in importance has led to diverse terms and definitions:

  • Physical distribution, materials management, procurement, supply chain management, etc.

• No single "true" name or definition due to product and company differences.

• Equation of Logistics:

  • Logistics = Materials Management + Distribution

• Supply Chain Definition:

  • Supply Chain = Suppliers + Logistics + Customers

• Focus on physical and information flows:

  • Includes raw materials to final product delivery.

• Importance of information flow, reverse logistics (return of used products).

Key Definitions of Logistics

• Logistics defined differently by various sources:

  • Facilitating movement and coordination of supply and demand (Hesket et al, 1973).

  • Management of goods, energy, information (Wikipedia, 2006).

  • Efficient flow of goods and related information to meet customer needs (CSCMP, 2006).

• Modern view emphasizes efficiency and customer service.

Key Components of Distribution and Logistics

Major Components

• Transport

• Warehousing

• Inventory

• Packaging

• Information Management

Detailed Areas

• Location of warehouses and distribution depots.

• Types of storage and materials handling equipment.

• Control procedures and information systems.

The Planning of Logistics

• Planning is essential for effective distribution operations.

• Systematic planning involves several key questions and decision-making processes.

• Future chapters will address planning and operations in logistics.

• Discuss system interrelationships and cost/service level constraints.

Historical Perspective on Logistics

Development Stages

1. 1950s-60s:

   • Unplanned distribution systems; minimal control.

2. 1960s-70s:

   • Emergence of physical distribution as a managerial focus; realization of interrelated activities.

3. 1970s:

   • Distribution included in organizational management structures.

4. 1980s:

   • Rise of professionalism in distribution; focus on effective cost-saving logistics.

5. Late 1980s-90s:

   • Integration of functions; embarking on advanced logistics strategies.

6. 2000s:

   • Recognition of logistics as crucial for business success, with a focus on value addition.

7. 2010 and Beyond:

   • Addressing key future issues in logistics and supply chain management.

Importance of Logistics and Distribution

Economic Impact

• Approximately 30% of the UK workforce is involved in logistics-related work.

• Logistics accounts for 8-11% of GDP in major economies, and higher percentages in developing countries.

Cost Breakdown

• Transportation: 50% (US logistics costs).

• Inventory carrying cost: 20%.

• Storage/Warehousing: 20%.

• Emphasizes the need for managing logistics costs effectively.

Variation by Industry

• Logistics costs vary widely by industry and company structure.

• Retail logistics dominate the global market at 63.9% share.

• Highlight differences in logistics costs related to product value (e.g., cement vs. spirits).

Logistics and Supply Chain Structure

• Logistics involves the flow of materials interspersed with periods of storage or processing.

• Costs and functionalities provide added value to products rather than merely being cost burdens.

• Summary of the chapter covers names, definitions, history of logistics, and economic significance.