Managing Logistics Systems

Planning and Analysis for a Successful Supply Chain

John M. Longshore, Angela L. Cheatham

• Publisher: Routledge
• Year: 2022
• ISBN:
  9781000595390
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Operations

This textbook introduces logistics from a broad perspective to include all activities throughout the product and service life cycle pertaining to supply chain and logistics management, the physical supply and distribution of products, and the corresponding maintenance and support.

It recognizes the mutual interdependence of the major functional areas of the organization including marketing, production, and finance. The emphasis throughout the text is on logistics in the context of a total business system design process. It views the business as a "system", managing logistics within that system, and thus transforming their Supply Chain. Pedagogy to aid learning is incorporated throughout every chapter, with chapter objectives, case studies, and concept checks.

This text is intended for both upper-level undergraduate and lower-level graduate students in both Business and Engineering on logistics and supply chain tracks. It can also serve as a reference for practitioners actively engaged in day-to-day management of logistics and supply chain activities.

Supplementary online resources include an instructors' manual, chapter-by-chapter PowerPoint slides, glossary, and a test bank of exam questions.

1 An Overview of the Logistics System

DOI: 10.4324/9781003128939-1

The Scope of Logistics

The principles and concepts of logistics stem from specific facets of activity within both the commercial and federal sectors. There are different perspectives of logistics, with variations of key elements. Logistics is the coordination of complex operations, including procurement, transportation, maintenance, and operations affecting the effective and efficient movement of goods throughout the supply chain (Haq, 2006).

Logistic activities include (1) the identification and management of suppliers and procurement and order processing and physical supply of materials and/or services from sources of supply to the manufacturer or producer; (2) the materials handling and inventory management of materials and/or services during and throughout the manufacturing process; and (3) the subsequent transportation and distribution of products from the manufacturer to the ultimate consumer. Figure 1.1 illustrates logistics activities in a forward flow from supplier to consumer. A reverse flow is illustrated as well. This is the flow of items from the consumer back to the point of disposal. These activities are required when materials and products are retired, recycled and/or disposed of and phased out of inventory. This is called reverse logistics, a topic that will be covered in depth in Chapter 12 (Svensson, 2002).

Logistics in the commercial sector has traditionally been oriented toward the management of the physical flow of materials and products among members of the channels of distribution of the organization. Activities such as transportation and warehousing have been available to ensure that the movement of the product is continuous and reliable. Purchasing departments have been responsible for the procurement and acquisition of materials, and marketing and sales groups have been responsible for providing planning information to set demand forecast. In essence, the spectrum of logistics in Figure 1.2 contains a number of different organizational elements working together toward a given objective yet operating independently.

With advances in information technology topologies such as Advanced Planning and Scheduling (APS) and Scaled Agile Framework (SAFe) systems, logistics has taken over new roles within the supply chain architectural framework. The advancement in Bar Coding methodologies for instant Point of Sale (PoS) order processing and rapid improvements in both passive and active Radio Frequency identification (RFID) tags and global positioning systems have enabled rapid and efficient transfer of information on product and material flows.

All of these information system technological advances coupled with data aggregation and transformation structures such as Blockchain clearly signal that the logistics has taken on a more comprehensive, integrated approach and has a leading role in activities such as information technology, marketing and sales, and finance as they relate to the physical flow of materials and products (Winston, 1998).

Figure 1.1 Logistics Flows During the Production Process.

Figure 1.2 Generic Logistics Organizational Structure.

At the same time, globalization trends represent the competitive landscape with more complexity and the need for partnerships and coalitions to influence the expansion of logistical services. All these various developments have evolved and are directly associated with the supply chain (SC) and Supply Chain Management (SCM).

SCM integrates supply and demand management within and across companies and, as stated by the Council of Supply Chain Management Professionals (CSCMP), ‘includes all logistics management activities, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology (Zinn, 1997).

Supply chain includes all those activities associated with inbound logistics, the flow of materials and services from the supplier to the producer and/or manufacturer, the material flows within the factory, and the outbound logistics, flow of materials, products, and services from the factory to the customer. Conversely, SCM is the management of that supply chain, or groups of supply chains, efficiently and effectively with the overall objective being to accomplish those activities shown in Figure 1.1, with a total Business perspective in mind (Winston, 1998).

In the federal sector, logistics evolved through the concept of integrated logistics support (ILS) which was formally developed in the mid-1960s. As defined in the 4100.35G, Integrated Logistics Support Planning Guide for DoD (Department of Defense) Systems and Equipment, ILS is

a composite of all support considerations necessary to assure the effective and economical support of a system at all levels of maintenance for its programmed life cycle. It is an integral part of the other aspects of system acquisition and operations.

(Werbel, 2002)

As initially envisioned, ILS included a life cycle approach to the planning, development, acquisition, and operation of systems and equipment to maximize readiness and optimize costs. The principal elements of ILS, as shown in Figure 1.3, included the system design and support, interface, reliability and maintainability, maintenance planning, support, and test equipment, supply support, transportation and handling, technical data, facilities, personnel and training, logistics support resource funds, logistics support management information, and contractor support services (Castaldo, 2009).

The emphasis here is on logistics as it pertained to total life cycle system support versus the supply and distribution of components and consumables. It includes not only the maintenance and sustaining support of those systems during their period of utilization, but also the design of those systems for reliability, maintainability, and supportability.

During the ensuing decades of the 1970s, 1980s, and 1990s, the principles and concepts of logistics were further expanded and, as defined by the Defense Systems Management College (DSMC), Integrated Logistics Support Guide was expanded to constitute a

disciplined, unified and iterative approach to the management and technical activities necessary to (1) integrate support considerations into system and equipment design; (2) develop support requirements that are related consistently to readiness objectives, to design, and to each other; (3) acquire the required support; (4) provide the required support during the operational phase at minimum cost (Castaldo, 2009).

Inherent within this definition is the current requirement of design for supportability. This pertains to the degree to which a system can be effectively supported in terms of built-in design characteristics and overall maintenance support infrastructure.

To further stress the requirement for dealing with logistics in the system design process, the concept of performance based logistics (PBL) has been introduced by the Department of Defense. The objective is to emphasize the importance of and need for the maintenance and support infrastructure by establishing specific metrics and to include these as quantitative design-to-performance requirements in the appropriate specifications (Whitmore, 2015).

Figure 1.3 Integrated Logistics Support Elements.

In covering the scope of logistics, one needs to consider the entire spectrum of activity, both the commercial and federal (defense) approaches. There is a need to address all logistics activities on an integrated life-cycle basis and from a total system perspective. The interrelationships are many, and, if organizations are to remain competitive in today’s environment, integration of both commercial and federal aspects of logistics is important.

The Economic Impact of Logistics

The logistics discipline has evolved, and one element that has remained constant is the economic impact of logistics. Table 1.1 represents business logistics cost in relation to gross domestic product (GDP) for a select group of countries. As should be noted, although absolute and relative logistics costs in relation to GNP vary from country to country, logistics is definitely an important component in any country’s economy.

The macroeconomic impact of logistics is significant; equally significant are the microeconomic impacts of logistics on the individual consumer. These economic impacts can be illustrated through the concept of economic utility which measures the value or usefulness of a product or service in fulfilling a consumer’s needs and wants. The four general types of economic utility are possession, form, time, and place.

The value or usefulness to a customer is based on the ability to take possession of a product or service or what is called the Possession Utility.

Form Utility refers to product completion in a form that can be used by the customer and is of value to that customer. Normally, form utility is associated with the production of a product or service. Breaking down production lots into useable allocation sizes for individual consumer consumption is form utility.

Having products available where they are needed by the consumer is Place Utility. Products and/or services are moved from a point of less value (warehouse) to that of higher value (consumer).

Time Utility refers to having the product and/or service available when needed by the customer. Different products have different sensitivities to time; perishable products would be more time sensitive than, for example, a product than 3-week shelf life.

Table 1.1 The Cost of Logistics in Relation to a Country’s Gross Domestic Product Source; Research-gate; 2019. Nominal GDP (2020) (Lee, 2002).

Country	Logistics as a Percentage of GDP	Nominal GDP (2020)
The United States	8.5	20,936,600
South Africa	12.7	301,923
India	13	2,622,983
Thailand	15.2	501,794
Brazil	15.4	1,444,733
China	17.8	14,722,730
Finland	19	271,233
Vietnam	22.5	271,158

Source: The World Bank, World Development Indicators.

Simultaneously achieving possession, form, place, and time utilities contributes greatly to achieving, but not guaranteeing customer satisfaction.

The Increased Importance of Logistics

Formal study of business logistics and predecess...