LOGISTICS AND SUPPLY CHAINS
Learning objectives 3 Role of logistics 4 Supply chains 8 Aims of logistics 14 Activities of logistics 18 Importance of logistics 22 Chapter review 28 Case study – Ace Dairies 29 Project – useful websites 30 Discussion questions 31 References 31 Further reading 32
LEARNING OBJECTIVES After reading this chapter you should be able to: • understand the broad role of logistics • see how logistics support the operations of an organisation • describe the role and structure of supply chains • discuss the overall aims of logistics • understand how logistics contribute to organisational performance • appreciate the balance between customer service and costs • list the activities within logistics and understand the relationships between them • recognise the importance of logistics to every organisation.
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Role of logistics
Every organisation has to move materials. Manufacturers have factories that collect raw materials from suppliers and deliver finished goods to customers; retail shops have deliveries from wholesalers; a television news service collects reports from around the world and delivers them to viewers. Most of us live in towns and cities and eat food brought in from the country. When you order books from a website, a courier delivers them to your door, and when you buy a mobile phone it has probably travelled around the world to reach you. Every time you buy, rent, lease, hire or borrow anything at all, someone has to collect it and deliver it to your door. Logistics is the function responsible for this movement.
Logistics the function responsible for all aspects of the movement and storage of materials on their journey from original suppliers through to ﬁnal customers
• Logistics is the function responsible for all aspects of the movement and storage of materials on their journey from original suppliers through to ﬁnal customers.
On a national scale, logistics needs a huge amount of effort. China has become ‘the factory of the world’ and exports US$100 billion of goods a month, while the internal trade of goods within the European Union (EU) is worth more than US$2 trillion a year – and all of this has to be moved between strings of suppliers and customers. A rule of thumb says that logistics accounts for 10–20% of gross domestic product (GDP), so the USA’s GDP of US$13 trillion1 might include US$2 trillion for logistics. The 30 members of the Organisation for Economic Co-operation and Development (OECD) have a combined GDP of US$40 trillion2 and might spend US$6 trillion on logistics. Despite this effort, we hardly notice logistics as it goes about its business – but sometimes you might notice the lorries driving down a motorway, visit a shopping mall, drive through a trading estate, see a container ship unloading, fly from an airport, or have a parcel delivered by a courier service. These are the visible signs of a huge industry that employs millions of people and costs billions of dollars a year. In this book, we describe this complex function, seeing exactly what it involves and how it can be managed.
Logistics support operations
Product the combination of goods and services that an organisation supplies to its customers
Every organisation delivers products to its customers. Traditionally, these products are described as either goods or services. Then manufacturers like Sony, Ford and Guinness make tangible goods, while the BBC, Qantas and Vodafone provide intangible services. But this view is misleading, and it is more realistic to describe every product as a complex package that contains a mixture of both goods and service. For example, Toyota manufactures cars, but they also give services through warranties, after-sales guarantees, repairs and finance packages. McDonald’s provides a combination of goods (burgers, cutlery, packaging, etc.)
L O G I...
References: 1. United Nations Statistics Division (2008) Industrial Statistics Yearbook, UN, New York and Website at www.unstats.un.org. 2. Organisation of Economic Co-operation and Development (2008) Annual National Accounts, EOCD, Paris and Website at www.oecd.org. 3. Porter, M.E. (1985) Competitive advantage, Free Press, New York. 4. Cooper, M.C., Lambert, D.M. and Pagh, J.D. (1997) Supply chain management, International Journal of Logistics Management, 8(1), 2. 5. European Community (2002) WEEE Directive 2002/96/EC, Brussels. 6. International Standards Organisation (2007) ISO 14000: environmental management, ISO, Geneva. 7. Peck, H. (2006) Supply chain vulnerability, risk and resilience, in Global Logistics (5th edition), Waters D. (editor), Kogan Page, London. 8. Chartered Institute of Logistics and Transport (1998–2007) Members’ Directory, CILT, London and Website at www.ciltuk.org.uk. 9. Alderson, W. (1954) Factors governing the development of marketing channels, in Clewett R.M. (editor) Marketing channels for manufactured products, Richard D. Irwin, Homewood, IL. 10. Bowersox, D.J. et al. (1992) Logistical excellence, Digital Press, Burlington, VT. 11. Harrington, L. (1996) Untapped savings abound, Industry Week, 245(14), 53–58. 12. Christopher, M. (1996) Emerging issues in supply chain management, Proceeding of the Logistics Academic Network Inaugural Workshop, Warwick. 13. The Council of Supply Chain Management Professionals (formerly The Council of Logistics Management), promotional material and Website at www.cscmp.org. 14. LaLonde, B.J., Ginter, J.L. and Stock, J.R. (2007) The Ohio State University 2007 survey of career patterns in logistics and Website at www.cscmp.org. 15. Christopher, M. (1986) The strategy of distribution management, Heinemann, Oxford. 16. Shapiro, R.D. and Heskett, J.L. (1985) Logistics strategy, West Publishing, St Paul. 17. Bowersox, D.J., Closs, D.J. and Cooper, M.B. (2007) Supply chain logistics management (2nd edition), McGraw-Hill, New York, NY. 18. Malone, R. (2006) Logistics costs soar, Forbes.com, 18 July 2006.
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19. Federal Highway Administration (2005) Freight management and operations, U.S. Department of Transport, Washington, DC. 20. Ofﬁce for National Statistics (2008) Annual abstract of statistics, HMSO, London. 21. Council of Supply Chain Management Professionals (2007) 18th Annual State of Logistics Report, CSCMP, Oak Ridge, IL. 22. Childerley, A. (1980) The importance of logistics in the UK economy, International Journal of Physical Distribution and Materials Management, 10(8), 185–92. 23. A.T. Kearney Ltd (2004) Excellence in logistics, European Logistics Association, Brussels. 24. Institute for Supply Management Website at www.im.ws. 25. Novich, N.S. (1990) Leading-edge distribution strategies, The Journal of Business Strategy, November/ December, 48–53. 26. Factor, R. (1996) Logistics trends, Materials Management and Distribution, June, 17–21.
There are a number of books on logistics, and you might ﬁnd the following useful. Bowersox D.J., Closs D.J. and Cooper M.B. (2007) Supply chain logistics management (2nd edition), McGraw-Hill, New York, NY. Chopril S. and Meindl P. (2007) Supply chain management (3rd edition) Pearson Education, Upper Saddle River, NJ. Christopher M. (2005) Logistics and supply chain management (3rd edition), FT Prentice Hall, Harlow, Essex. Coyle J.J., Bardi E.J. and Langley C.J. (2002) The Management of business logistics (7th edition), South Western College Publishing, St Paul, MN. Gattorna J.L. (2006) Living supply chains, FT Prentice Hall, Harlow, Essex. Grant D., Lambert D.M., Stock J.R. and Ellram L.M. (2006) Fundamentals of logistics management – European Edition, McGraw-Hill, Maidenhead, Berks. Handﬁeld R.B. and Nichols E.L. (2008) Introduction to supply chain management (2nd edition), Prentice Hall, Englewood Cliffs, NJ. Harrison A. and van Hoek R. (2007) Logistics management and strategy (3rd edition), FT Prentice Hall, Harlow, Essex. Hill J.E. and Fredenhall L.D. (2001) Basics of supply chain management, St Lucie Press, Philadelphia, PA. Rushton A., Croucher P. and Baker P. (2006) The handbook of logistics and distribution management, Kogan Page, London. Simchi-Levi D., Kaminsky P. and Simchi-Levi E. (2007) Designing and managing the supply chain, McGraw Hill, New York. Waters D. (2007) Global logistics (5th edition), Kogan Page, London.
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