Logistics summary

Logistics – a practical approach Part 1: The foundations of Logistics Chapter 1: Introduding Logistics – Logistics is more than just Transportation – Involves aspects like procurement (Beschaffung), sourcing, planning, storing, control and distribution (Verteilung/Austeilung) – Shift towards placing production in Central Europe b/c production is cheaper – Delivery: customer gets what he ordered, where he wants it and at the right time, not too early & not too late – Completeness: orders should arrive as one delivery – Accuracy: should deliver what you promised – Billing: only want to pay for what you ordered Customer service: enough stock to satisfy the customer + service – Flexibility: ability to produce anything on time and anything at any time – Production in developing countries makes it possible to offer goods for the lowest price – Good logistics will result in gaining customers, gaining trade and success for the business itself – Automotive industry is one of the first industries to make good use of all new developments in the field of business studies – Henry Ford discovered the power of a conveyor belt where everyone makes just a small part of the car and becomes a specialist in his own little world. Mistakes are easily recognized ( Work becomes routine and effective ( Saving time and time ismoney- mass production became the norm – later just-in-time managementwas taken up by the whole automotive industry which was started by the Japanese Conflictinggoalsof logistics: – efficient use of machinery – low inventory – many different varieties of products – short delivery time e. g. within two hours – Logistics should help each and everyone in the organization to achieve the overall goal of the company Value chain of Porter shows that we do not have “ very important” and “ less important” departments – “ A chain is only as strong as its weakest link” – Final goal is getting a maximum profit and the survival in the long run [pic] – Planning the activities: instead of taking one aspect or link at a time and trying to obtain an optimal result for this part we now have to look at the whole chain and concentrate on obtaining a maximum result at an integral level. This requires planning for the whole chain (traditional planning vs. modern approach: integral planning ( p. 25) – Symbols: [pic] most logistic value chains will consist of many different forms and will resemble networks – these different aspects all make up the basic elements of logistics within the value chain – all elements within a Supply Chain should be connected – the main goal: to ensure that the customer gets the right product – cooperation is needed in order to ensure that all links have a common goal in mind: to increase the efficiency and effectiveness of the chain – results should be: higher profit margins; lower sales prices; improved competition; faster introduction of new products – Supply Chain: a network of connected and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users – The more links there are between you and the final customer, the more difficult it will be to understand that market Logistics is a combination of the activities: – Material Handling – Stock control – Order handling and processing – Customer service – Demand prediction – Sourcing, Vendoring and purchasing – Distribution: internal and external – Location of warehouses and production facilities – Handling reversed flows of goods, rejects and packaging material – Spare parts, repairs and customer service – Production planning

Definition of logistics: Logistics is the process of planning, implementing and controlling the efficient, effective flow and storage of raw materials, in-process inventory, finished goods, services and related information from point of origin to point of consumption for the purpose of conforming to customer requirements – Logistics management consists of 2 blocks: Material Management (MM) and Physical Distribution (PD) (p. 36) – Logistics and the most important relationships: [pic] – it is difficult to determine the costs for logistics, as every company has a different concept for what to include and what not – during the last decades, the costs for logistics have seen a huge increase compared to other costs – to get a quick insight into the buildup of costs and the relationships with profits: Return on Investment (ROI) – ROI = Profit / total assets ROI = (Profit/Turnover) * ( Turnover/total assets) ( Not possible to increase the ROI by increasing sales – Turnover: total sales – Total cost: all costs made in an organization – Costs of logistics: all costs related to logistics – Other costs: all costs except cost of logistics – Profit: what is left after all costs are paid – Profit margin: profit as a percentage of sales – Depts. : all outstanding debts, mainly with suppliers – Liquid assets: assets quickly transferred into cash – Fixed assets: assets which only can be transferred into cash with huge costs like machinery etc. – Total assets: everything invested in an organization – Turnover rate: total assets as a percentage of sales