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UMMC – Supply Chain Mgmt.
Course 3Logistics & Distribution Concepts
Objectives
• Discuss a general overview of the basics of logistics
• Gain an understanding of the complexity of logistics and distribution
• Be a better inventory professional by knowing what goes into the products you use
Agenda• Introduction to Logistics• Activity 1• Costs of logistics• Transportation• Activity 2• Distribution Concepts• Summary
What is Logistics?
Materials Management
Integrated Logistics Management
Logistics ManagementDistribution
Physical Distribution Management
Business Logistics Management
Marketing Logistics
Industrial Logistics
Logistics Definitions
Common cultureHandling the details of an activity
DictionaryThe branch of military science having to do with procuring, maintaining,
and transporting material, personnel, and facilities
Business Logistics
The planning, implementation, & control of the efficient & effective flow and
storage of goods, services, & related information from point of origin to point of
use or consumption in order to meet customer requirements
Council of Logistics Management Professionals
ProductSourcing ManufactureStorage Storage Distributor Retailer
Customer
OrderReceipt
Supplier Storage Manufacturer
Storage Distributor Customer End User
Peo
ple
Tech
nolo
gies
Pro
cess
es
Plan
Source
Make
Deliver
Buy
Place Utility-(Where)
• Moving goods from production surplus points to points where demand exists
• Extends physical boundaries of a marketing area, adding value to goods
• Created primarily through transportation
Time Utility (When)
• Economic value added by having good or service at a demand point at a specific time
• Proper inventory maintenance, strategic location of good/services, and transportation
Quantity Utility (How Much)
• Delivering the proper quantities of the item
• Done through production forecasting, production scheduling and inventory control
Cardinal Scorecard
September 2011
Overall, the average for the month was - 'True' fill 98.03% w/Subs 99.53%.
Some top items of the unfilled lines for the month:
• H100-05 (IM# 006011 - Medical Action) – Inventory Issue (6.58% of unfilled lines – 9/11-9/12)
• 176630 (IM# 800985 - United States Surgical) – Mfg backorder (5.76% of unfilled lines – 9/13-9/30)
• DVT10 (IM# 005336 - Sterilmed) – Forecast exceeded (3.91% of unfilled lines – 9/23-9/27)
Some Logistics Activities
Transportation
Warehousing & Storage
Materials HandlingOrder fulfillment
Procurement
Forecasting
Customer Service
Return Goods Handling
Activity 1
• Read about you logistical activity• Summarize it • Tells us an example of this activity
within FV• What utility could it be and why?
Utilities
Place: Moving goods from production surplus points to points where demand exists, Extends physical boundaries of a marketing area, Created primarily through transportation
Time: Economic value added by having good or service at a demand point at a specific time, Proper inventory maintenance, strategic location of good/services, and transportation
Quantity: Delivering the proper quantities of the item, Done through production forecasting, production scheduling and inventory control
Suppliers Manufacturers Warehouses &Distribution Centers
Customers
Material Costs
TransportationCosts
TransportationCosts Transportation
CostsInventory Costs
Manufacturing Costs
Logistics Costs as a Percentage of GDP
Price of a 2-slice toaster:
1980: $23 ($4.14)
2010: $24.88 ($1.99)
Global Comparison
Logistics Cost % of GDP
• Asia 13-20%• China 15%
• Europe 12-14%• India 13%• Japan 11%• Mexico 14%
Components of Logistical Costs
Transportation Role
• Physical movement of people and goods between origin and destination
• Critical link between organizations• Allows for competition in global market• Critical to demand fulfillment• Services must be in line with customer
requirements
Challenges
• Complexity • Competing Goals• Changing customer demands• Limited information
ChallengesA typical cross-border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight
forwarders, and complying with over 600 laws and 500 trade agreements that are
constantly changing. Adrian Gonzalez, ARC Advisory Group
Modes of Transportation
Air
Pipeline
Water
Highway
Rail
Activity 2
• Each group will get a slide about their form of transportation.
• Answer the following questions:1. What is a strength of this form of
transportation?
2. What is a weakness of this form of transportation?
• Give an example of a disruption to this transportation process—real world example
Rail
Pipeline
Water
Air
Highway
Channel of Distribution Functions Direct/Indirect
Assorting Accumulation Storage Information feedback Warehousing
Allocation Buying Contacts New
Products Financing Distribution
Service Promotion Pricing Risk Taking Physical Possession
Sorting…………..
How Cardinal Does It?
U.S. CAH Factories- 10%
Asian CAH Factories- 7%
*Includes sourced product
Mexican and Caribbean
CAH Factories- 3%
2 Redistribution Centers
U.S. Branded- 80%
Other Medical Distributors
Custom
ers
Jeopardy
Let the Games Begin!
Logistics Transportation/Costs
Distribution
$100 $100 $100
$200 $200 $200
$300 $300 $300
LOGISTICS
1. This term is most widely used by organizations like banks and hospitals.
2. The planning, implementation, & control of the efficient & effective flow and storage of goods, services, & related information from point of origin to point of use or consumption in order to meet customer requirements
3. This utility focuses on proper inventory maintenance, strategic location of good/services, and transportation
TRANSPORTATION/COST
1. 63% of logistical costs of GDP
2. Slow, but dependable way to transport products
3.This ARC Advisory Group Director estimated that a typical cross-border shipment involves the accurate completion and filing of 35 documents, interfacing with 25 parties including customs, carriers and freight forwarders, and complying with over 600 laws and 500 trade agreements that are constantly changing.
DISTRIBUTION
1.
Rail
• high fixed costs (land, tracks)
• low variable costs (operating costs, e.g., labor, fuel)
• slow, but inexpensive way to transport heavy freight that doesn’t require special handling, long
distances
Highway
• low fixed costs (government builds, maintains highways)
• medium-high variable costs (operating costs, e.g., labor, fuel)
• most accessible mode (more highways than railroads, waterways, pipelines); best for transporting medium to
high value products short to moderate distances
Water
• moderate fixed costs (ships and freight handling equipment)
• low variable costs (operating costs, e.g., labor, fuel)
• very slow, but inexpensive way to transport large, heavy freight over long distances (e.g., oceans, rivers,
inland waterways, lakes)
Air
• low fixed costs (aircraft and freight handling equipment)
• highest variable costs (e.g., labor, fuel, maintenance)
• very fast; used for transporting high value and/or high perishability product over short to medium distances.
Pipeline
• highest fixed costs (right of way & construction costs of equipment)
• lowest variable costs (no significant labor or fuel costs)
• slow, but dependable (e.g., no weather, traffic disruptions); no flexibility with regard to types of products that can be
transported – must be liquid (e.g., petroleum)