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Introduction to Logistics

Introduction to Logistics. Logistical and Supply Chain issues for Lincolnshire food businesses. Martin Hingley Professor of Strategic Marketing University of Lincoln Business School . David B. Grant Professor of Logistics and Director, Logistics Institute Hull University Business School.

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Introduction to Logistics

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  1. Introduction to Logistics Logistical and Supply Chain issues for Lincolnshire food businesses Martin HingleyProfessor of Strategic Marketing University of Lincoln Business School David B. Grant Professor of Logistics and Director, Logistics Institute Hull University Business School

  2. Agenda: • What are Logistics and Supply Chain Management? • Their Relationship to Marketing • Functional Activities of Logistics • Inventory • Warehousing • Transportation • Information Systems and Technology • Current Issues in Logistics and SCM • Issues of retailer-led centralized food supply? • Access for the small and specialist food supplier?

  3. Definitions of SCM and Logistics Supply Chain Management (SCM): “...the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.” Logistics Management: “...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.”

  4. A simplified supply chain... Grant, D.B. (2012) Logistics Management, Pearson

  5. Intensification of competition Liberalisation of trade Deregulation of transportation Shortened expectation of time Move beyond product to ‘product and service’ Mass customisation, service & product based Product variety, market segmentation Consumer expectation service delivery, price efficiency Change in channel power Global brands Retailers v manufacturers Global manufacturing economies IT improvements Power, functionality & cost Planning, execution and control Profit Leverage Cost minimisation with service excellence Business process re-engineering The Emerging Importance of Logistics and SCM

  6. Logistics/Marketing Interface Grant, D.B. (2012) Logistics Management, Pearson

  7. Logistics activities are services! Perishability Intangibility Heterogeneity Inseparability Ownership Grant, D.B. (2012) Logistics Management, Pearson

  8. Inventory and Inventory Management Stocks“are stores of all goods and materials that are stored by an organization until needed for future use” Inventory “is a list of all the items held in stock” Inventory Management “is the function responsible for all decisions and aspects of stock control in an organization” BUT... “It is surprising how many blue chip companies do not have stock policies in place and rely on local management knowledge and skill to maintain the levels of stock necessary often to poorly defined service level requirements...” “Inventory management is a mixture of economically sound theory, accepted industrial practices, tested personalized approaches and outright fallacies.”

  9. Why Hold Stocks? “Stocks are expensive, why hold them…?” There are several answers that all have the same basic requirement: Stocks provide a Buffer between Supply and Demand!! TIME: reduces customer waiting time (time and possession utility!) DISCONTINUITY: allows inter-related functions to be disconnected and operated more efficiently (place utility!) UNCERTAINTY: offers protection against unanticipated and unplanned events ECONOMY: permits bulk purchases at discounted rates (beware “false” economies though!)

  10. Model of Inventory Carrying Costs

  11. What Warehouse Activities Take Place? Grant, D.B. (2012) Logistics Management, Pearson

  12. Handling Units and Terms Grant, D.B. (2012) Logistics Management, Pearson

  13. What is Freight Transport? A simple definition could be: “The planning and undertaking the movement of goods between two points in a cost effective manner and which also achieves the times and condition specified.”

  14. Parameters of Freight • Service frequency • scheduled • Reliability • congestion • weather • alternative routings • international regulation • Environmental costs • externalities • Cost structure • fixed, variable, direct assets, track/terminals • Price • regulated • throughput /distance/time • Geographic scale • length of haul • Volume/weight/value • dimension limits • market capacity • Consignment, load & transit unit • intermediate handling • Accessibility • terminals • primary & secondary • Transit time • speed • door-to-door lead time

  15. Freight Mode Characteristics Grant, D.B. (2012) Logistics Management, Pearson

  16. Current Issues in Logistics and SCM • Costs • Globalisation of supply and markets • Supply chain structures • Time compression • Product range and life cycles • Quality of service • Risk and disruption • Environmental impact • Let’s look at three a little more deeply…

  17. Time Compression and Order Lead Times Number of Days

  18. Product Complexity and Range The Boeing 787 ‘Dreamliner’

  19. Environmental Impact of Logistics and SCM Food Miles Road Congestion Greenhouse Gases/Global Warming

  20. One company, still dominates UK retailing (30% market share, Feb 2012) >>>>>>> Retail market concentration…

  21. Centralized Distribution Information/feedback Distribution Centre Supplier Store Supplier Store Supplier Store Supplier Source: Adapted from IGD, 2001

  22. Reduced sourcing and preferred supply Reduced source model & ‘preferred’/Supply Chain Relationships (Hingley, 2005) Competition is not between firms, but entire value chains (Horvath, 2001). As networks of competing supply chains rather than through inter-firm competition:-

  23. Overseas Suppliers Complementary Customers Retailer Partner PrimaryProducers Inputs and raw materials “Super Middlemen” Consumers & Overseas Markets Competitor Relationship Innovative/ Specialist Supplier Source: Hingley

  24. ....but are the big guys the most creative and innovative? It can also be boring for the customer…

  25. Doesn’t have to be boring…

  26. …but What about access for good new, innovative and small-specialist suppliers? Multiple led ‘hubs’ : e.g. Asda, Lincs Co-op, Ideal Lincs? www.asdasupplier.com/about-us/local-sourcing http://www.specialityfoodmagazine.com/content/news/new_delivery_service_for_heart_of_england

  27. SC Issues of Small and Specialist suppliers Benefits: Flexible, unique, differentiated, local, responsive… Problems: Non-standard, volume issues, stock-holding and control issues…

  28. Hubbing of specialist/local/specialist product Information/feedback Distribution Centre Supplier Store Supplier Store Specialist Supplier Store Hub e.g. Ideal Lincs

  29. …and finally, a tale of full circle SC ‘back to the future…’ Case example of a speciality fresh produce grower: The evolution of their SCRs and evolving routes to market

  30. Source: Hingley Phase 1. Traditional wholesale transactional Phase 2. Grower owned co-op Phase 3. Super-middleman dedicated Phase 4. ‘Back to the future’ and spreading the customer base Retailer partner Super Middleman Growers Co-op Consumers & Overseas Markets Wholesalers & Hubs 2 Small retailers 3 1 4 Innovative /Specialist Supplier

  31. Thank you; any questions…?

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