Materials management

Movement and storage of materials and components within a firm
Physical distribution

Storage of finished products and movement to the customer
2.
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Table 1-1: The Cost of the Business Logistics System in Relation to Gross Domestic Product (GDP) in $ Billion
Year Inventory Carrying Costs 31 38 56 97 220 Transportation Costs 44 64 91 116 214 Administrative Costs 3 4 6 9 17 Total U.S. Logistics Cost 78 106 153 222 451 Logistics As a Percentage of GDP 14.7 14.7 14.7 13.5 16.1
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Economic impacts of logistics
Macro-level
1.
economic impacts:
Logistics is most definitely an important component in a country’s economy. Logistics can also play an important role in a nation’s economics growth and development.
Logistical Relationships within the Firm

Finance
Allocating money: buying or leasing equipment
Inventory: an asset, valued in terms of LIFO or FIFO Inventory float: cash flow associated with holding inventory
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Logistical Relationships within the Firm

Marketing
Place Decisions

Co-branding
FOB origin:
Not include transportation cost Buyer select the carriers and transportation modes
Chapter 1
Logistics and Supply Chain
Learning Objective
To learn the definition of logistics To understand the economic importance of logistics To learn of recent events and their influences on logistics practices To gain an understanding of logistics practices within a firm To learn different pricing policies To know about logistics careers
1960 1965 1970 1975 1980
1985
1990 1995
227
283 302
274
351 441
20
25 30
521
659 773
12.4
11.4 10.4
2000
377
590
39
1,006
10.1
Source: R. Wilson and R. Delaney, Twelfth Annual State of Logistics Report, 2001
Note :
Each term is associated with managing the flow from the point of origin to the point of consumption
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What Logistics is
Definition:
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The Systems and Total Cost Approaches to Logistics
Business
logistics
Inbound logistics

Movement and storage of materials into a firm

Globalization of trade
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The Systems and Total Cost Approaches to Logistics
Input
Processing
Output
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The Systems and Total Cost Approaches to Logistics
Price Decisions

Price Decisions

FOB destination pricing systems
Include the transportation cost Seller select the carriers and the transportation modes
Economic impacts of logistics
Micro-level
impacts—economic utility:
1.Possession utility: value or usefulness that comes from a customer being able to take possession of a product. 2.Form utility: a product’s being in a form that can be used by the customer and is of value to the customer.
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What logistics is
1. 2. 3. 4. 5.
part of supply chain plans, implements and controls: not one or two efficient and effective forward and reverse flows and storage: reverse logistics goods, services and related information to meet customers requirements: mass logistics and tailored logistic.
logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirement. (CSCMP)
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What Logistics is
Terms Business logistics Distribution Industrial distribution Logistics Logistics management Materials management Physical distribution Supply chain management

Key Points

1.
Key Points
Economic impacts of logistics Logistics : What it is The systems and total cost approaches to logistics
2.
3.
4.
Activities in the logistical channel
Logistical Relationships within the Firm
Marketing:
Pricing decisions
Landed
cost
The price of product at the source plus transportation cost to the destination
Intrafunctional logistics
The Systems and Total Cost Approaches to Logistics
System
approaches:
a company’s objectives can be realized by recognizing the mutual interdependence of the major functional areas of the firm, such as marketing, production, finance, and logistics.