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CHAPTER LEARNING OUTCOMESAfter completing this Chapter, students should be able to: ü Indicate the definition of Business Logistics and its evolution ü Understand the nature of Business

CHAPTER 2:

INTRODUCTION ABOUT BUSINESS LOGISTICS

HO CHI MINH CITY UNIVERSITY OF TRANSPORT

CHAPTER LEARNING OUTCOMES

After completing this Chapter, students should be able to:

ü Indicate the definition of Business Logistics and its evolution

ü Understand the nature of Business Logistics

ü Categorize the Business Logistics activities

ü Discuss the issues related to Corporate

ü Explain the key drivers and role of Business Logistics

CHAPTER OUTLINE

2.1 Definition of Business Logistics

2.2 Evolution of Business Logistics

2.3 Nature of Business Logistics

2.4 Categories of Business Logistics

2.5 Key drivers of Business Logistics

2.6 Some issues for Enterprises

2.7 Roles of Business Logistics

REFERENCE LIST

[4]-Douglas M.lambert James R.Stock,Lisa M Ellram, Fundamentals of Logistics Management, Mc

grow Hall,1998 – Chapter 1

[6]-Lê Phúc Hòa, “Bản chất của logistics, mục tiêu và các hoạt động chủ yếu của nó”, Tạp chí Giao thông

vận tải, 5/2005, tr.51-52

[12]-Trường đại học Kinh tế Tp HCM (2012), Quản trị hậu cần,Nxb Đại học kinh tế quốc dân – Chapter 1

[18]-Ronald H Ballou (1999), Business Logistics Management, Nxb Prentice Hall, 1999 – Chapter 1

2.1 DEFINITION OF BUSINESS LOGISTICS

vFrom customers’ perspective

Getting the Right product , to the Right customer, in the Right quantity , in the

Right condition , at the Right place , at the Right time, and the Right price

vFrom management perspective:

“that part of supply chain management 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’ requirements”

(CSCMP-The Council of Supply Chain Management Professionals)

2.2 EVOLUTION OF BUSINESS LOGISTICS

Total integration 2000

Figure 2.1: The evolution of Logistics by integration level

(Source: Center for Supply Chain Research, Penn State University)

Corporate Logistics

Supply Chain Logistics

Global Logistics

Figure 2.2: The evolution of Logistics by scope & influence

Source: Frazelle (2002)

q Workplace Logistics: the flow of material at a single workstation The objective of

workplace logistics is to streamline the movements of an individual working at a

machine or along an assembly line.

q Facility logistics: the flow of material between workstations within the four walls of

a facility (that is, interworkstation and intrafacility) The facility could be a factory,

terminal, warehouse, or distribution center.

q Corporate: the flow of material and information between the facilities and

processes of a corporation (interworkstation, inter-facility, and intra-corporate)

q Supply Chain Logistics: the flow of material, information, and money between

corporations (interworkstation, interfacility, intercorporate, and intrachain).

q Global Logistics: the flow of material, information, and money between countries

2.3 NATURE OF BUSINESS LOGISTICS

“ no stock is the best”

Demand

changes

Inaccurate forecast

Poor suppliers Quality issues Bottlenecks

Level A Level B

Workplace 2

Workplace 1

Workplace 3

Physical flow

Information flow

Figure 2.3: KANBAN technique (1958)

A B

C

D E F

Transit

Transit

+ New concept of stock keeping changes the commercial practice

Large shipment Small shipment

+ The new concept of stock keeping requires a change in organizing transport

v Logistics is facilitated by the material management techniques

MRP

2.4 CATEGORIES OF BUSINESS LOGISTICS

v Physical flow-based categories:

2.5 KEY DRIVERS OF BUSINESS LOGISTICS

₋ Globalization of commerce

₋ Development of advanced information technology

₋ Rapid increase in transportation cost

₋ Manufacturing cost savings at peak

₋ Inadequate supply and distribution costs

₋ Increase in the diversity of product lines

₋ Society’s increasing awareness about environmental issues

₋ Scarce resources

₋ Regulations and Policies

₋ Competition

2.6 KEY ISSUES FOR ENTERPRISES

• Where to source materials?

• Where to manufacture the products?

• Where to promote and sell the products?

• Where to keep inventory and distribute the products/services?

How much inventory should be kept?

• Which mode of transportation should be selected?

• …

2.7 ROLES OF BUSINESS LOGISTICS

₋ A tool to support economic activities nationally and globally

₋ Using the social resources economically, sustainably and efficiently

₋ Logistics has made a great contribution to enhance the commercial and

economic cooperation

₋ Logistics contributes to the reduction in manufacturing cost, distribution

cost, adding competitiveness to the products as well as the whole economy

₋ A country’s logistics development level as well as its logistics cost have

become the most important factors in the investment strategy of MNEs

₋ Logistics requires the completion and standardization of procedures,

documents in commercial and transporting areas

2.7.1-Role of Logistics in the Economy

Table 2.1: Logistics cost as a percentage of GDP in the USA,

Japan and South Korea (1991 - 1999)

Figure 2.7: Logistics cost as a percentage of GDP in the USA

(2008 - 2019)

(Source: Annual State of Logistics Report 2020)

Figure 2.7: Logistics cost as a percentage of GDP in 2018

(Source: Armstrong & Associates 2020)

Ø Logistics improves the management efficiency, reducing production

costs, and enhancing the competitiveness for Enterprises

Ø Logistics facilitates businesses to move goods and services efficiently to

customers

Ø Logistics supports managers to make accurate decisions in production

and business activities

Ø Creating 2 out of 4 utilities of Logistics (form utility; possession utility;

time utility; place utility):

• ……… utility

• ……… utility

2.7.2- Roles of Logistics in the Organization

+ Logistics has a significant impact on Return on Asset (ROA) and Return on Investment (ROI):

Ø Logistics interfaces with Financial functions

+ Transportation and warehousing costs also affect the ROA

• If the company owns warehouses and transportation fleetg ………in assets

• If the company outsources its transportation and warehousing activities g ……… in expenses

• More focus on customer service level would………… revenue (R>E)

• If the increase in revenue is higher than that of customer service cost gROA ………

+ Inventory is reported as an asset on the balance sheer and an expense in the income statement, which

means: An increase in inventoryg………… in assets and ………in cashflow

Ø Logistics should be in collaboration with Production and Marketing

- Product scheduling

- Plant location -………

Interface Activities