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 is money - mass production became the norm - later just-in-time management was taken up by the whole automotive industry which was started by the Japanese Conflicting goals of 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
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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
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