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Value and Supply Chain Management. What is Logistics?.
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What is Logistics? • The Institute of Logistics defines logistics as the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers. It involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging and occasionally security.
What is Logistics? • Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software. According Davies (2008:14) logistics is a “science that deals with the procurement, maintenance and transportation of materials, personnel and facilities. It is the time-related positioning of resources."
What is Logistics? • According to Waters, D. (2003:4) logistics is the function responsible for the transport and storage of materials on their journey between suppliers and customers. It is the function that ensures the flow of materials from suppliers into an organisation, through operations within an organisation and then outward to customers.
What is Logistics? • Products can be either physical, tangible goods or invisible services e.g. the Namibian Diaries delivers tangible goods such as milk, cheese and cream to the country. Cell One and Telecom provide invisible services to their customers or a combination of goods and services.
Logistics management • According to Baziotopoulos (2008:29), logistics management is “that part of the supply chain which 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 customer & legal requirements. A professional working in the field of logistics management is called a logistician.”
Operations defined • Operations are the function in each organisation that creates and deliver value (products/services) to the customer. Operations use inputs (raw materials, components, equipment, information, money and minerals) to process or manufacture the required outputs. Operations include the following activities: manufacturing, serving, transporting, training, processing, designing.
Operations defined • Goods and services produced by an organisation in the operations process are generally referred to as the value or offerings. This is what they sell to their clients. Value is what satiate the needs, choices, tastes and preferences (demand) of your clients. It is interesting to note that logistics is entirely responsible for moving the materials from one stage to the other, from source to end user.
Service Management • Service Management is integrated into Supply Chain Management as the joint between the actual sales and the customer. The aim of high performance Service Management is to optimize the service-intensive supply chains, which are usually more complex than the typical finished-goods supply chain. Most service-intensive supply chains require larger inventories and tighter integration with field service and third parties.
Service Management • They also must accommodate inconsistent and uncertain demand by establishing more advanced information and product flows.
Service Management • Moreover, all processes must be co-ordinated across numerous service locations with large numbers of parts and multiple levels in the supply chain. Among typical manufacturers, post-sale services (maintenance, repair and parts) comprise about 25 percent of revenue. But among the most innovative companies in the service industry today, service management activities often generate more than 50 percent of their profits.
Service Management • Traditionally overlooked as a ‘necessary evil’, Service Management is moving to the forefront as a business strategy. To maintain growth and customer loyalty in a competitive environment, leading companies are now recognizing the need to improve Service and Service Parts Management capabilities.
Benefits of Service Mgt & Logistics • The main drivers for a company to establish or optimize its Service Management & Logistics practices are: • High service costs can be reduced i.e. by integrating the service and products supply chain. • Inventory levels of service parts can be reduced and therefore reduce total inventory costs. • Customer service or parts/service quality can be optimized. • Increasing service revenue.
Benefits of Service Mgt & Logistics • Reduce obsolescence costs of service parts through improved forecasting. • Improve customer satisfaction levels. • Reduce expediting costs - with optimized service parts inventory, there is no need to rush orders to customers. • Minimize technician visits - if they have the right part in hand, they can fix the problem on the first visit.
Components of Service Management & Logistics • Generally, Service Management and Logistics comprises six different capabilities that companies should consider for optimization: • 1. Service strategy and service offerings: • Service Strategy Definition • Service Offerings Definition & Positioning • Go-To-Market Strategy • Service Portfolio Management
2. Spare parts • Parts Supply Management • Inventory Management • Parts Demand Management • Fulfillment Operations & Logistics • Service Parts Management
3. Returns, repairs and warranties • Warranty & Claims Management • Reverse logistics • Returns Processing • Remanufacturing
4. Field Service Management or Field force effectiveness • Technician Enablement • Mobility • E-learning • Activity Scheduling • Service Billing
5. Customer management • Order Management & Availability • Channel & Partner Management • Customer Insight • Technical Documentation
6. Assets, Maintenance, Task Scheduling, Event Management • Remote Monitoring and Tracking • Diagnostics & Testing • Asset Management/Optimization • Configuration Management
The Role of Logistics • The role of logistics is to ensure the smooth and efficient flow of materials from the point of origin through the manufacturing process (operations) right up to the end user. Moving materials into the organisation from source suppliers is the activity known as in-bound logistics (inward logistics). Moving materials within the organisation is the activity we call materials management.
The Role of Logistics • On the other hand, moving materials out to customers is the activity known as out-bound logistics (outward logistics). In practice, logistics is used to move both tangible and intangible products such as information, messages, programmes transmission, entertainment, finished products, work in progress, people, paperwork, energy, money and minerals.
The Role of Logistics • The term materials is used to describe all of the above put together. Waters, D. (2003:7) assets that materials are all things that an organisation moves to create its value (products/services). The materials can be both tangible and intangible.
