SUBJECT NAME: Logistics management

TEACHER: mgr inż. Joanna Oleśków-Szłapka

Number of hours: 30
The contents of the course:
1. Logistics – definitions, functions
2. Logistics management – definitions and fundamentals
3. Transportation, distribution, inventory management and control
4. Global logistics manegement
5. Logistics strategies (MRP, JIT, Lean, Agile etc.) , supply chain strategies
6. Replenishment systems, CPFR, VMI, EDI, ECR, QR
7. Forecasting methods
8. Production logistics, ERP, SCM systems
9. Reverse logistics, e-logistics

Form of credit: an exam

Credit criteria: exam, case studies and active participation
Basic reading list:
1. M. Christopher, Logistics &Supply Chain Management, 2005
2. John J. Coyle,Edward J. Bardi,C. John Langley, Supply Chain Management –
A logistic perspective, South Western Educational Publishing 2008
3. J. Langford, Logistics principles and applications, McGraw Hill, 2007
Supplementary literature:
1. Harvard Business Review on Supply Chain Management, Harvard Business
Press, 2006
2. D. Grant,D.M. Lambert, J.R. Stock, and L.M. Ellram, Fundamentals of
Logistics Management, 2005
3. D.J. Bowersox, D.J. Closs, M.B. Cooper, Supply Chain Logistics Management,
McGraw Hill, 2009
4. A. Harrison, R. Van Hoek, Logistics Management and Strategy: Competing
through the supply chain, Prentice Hall, 2008
5. And others book related to Logistics, Supply Chain Management etc.
Articles from Logistics Journals i.e. Supply Chain Management Review,
International Journal of Logistics Research and Applications, International Journal
of Logistics Management, Journal of Business Logistics etc.
 TEACHING MATERIALS

Lecture 1 – Logistics and logistics management – introduction

The term "logistics" originates from the ancient greek "λόγος" ("logos"—"ratio, word,
calculation, reason, speech"). – (Logistics, http://en.wikipedia.org/wiki/Logistics)
Logistics - definitions
A) Logistics is defined as a business planning framework for the management of
material, service, information and capital flows. It includes the increasingly
complex information, communication and control systems required in today's business
environment. (business definition - Logistix Partners Oy, Helsinki, FI, 1996)
B) Logistics - ...the process of planning, implementing, and controlling the efficient,
effective flow and storage of goods, services, and related information from point
of origin to point of consumption for the purpose of conforming to customer
requirements.“ (Reference: Council of Logistics Management, 12 Feb 1998)
C) RIGHTS OF LOGISTICS (7R) - GET THE RIGHT PRODUCT IN THE RIGHT
QUANTITY TO THE RIGHT PLACE FOR THE RIGHT CUSTOMER AT THE
RIGHT TIME IN THE RIGHT CONDITION AT THE RIGHT COST.
Or 5R - THE RIGHT PRODUCT IN THE RIGHT QUANTITY IN THE RIGHT
CONDITION IN THE RIGHT PLACE IN THE RIGHT TIME – (Kee Huang Lai,
T.C.E. Cheng, Just in time Logistics, Gower, 2009)

Logistics management – definition

Application of management principles to logistics operations for efficient and cost effective
movement of goods and personnel
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. (Air Force Logistics Management Agency (AFLMA) “Quotes for the
Air Force Logistician” http://www.aflma.hq.af.mil/lgj/)
Strategic Logistics Management – key points
1. All Activities
2. Raw materials, in-process inventory, services and finished goods
3. Flow = movement and storage
4. Source of supply to point of consumption
5. Systems approach
Classical Logistics functions:
• planning,
• procurement,
• transportation,
• supply, and maintenance.
United States Department of Defense DOD
Classical logistics processes:
• requirements determination,
• acquisition,
• distribution,
• and conservation.
United States Department of Defense DOD
 Figure 1 Logistics activities
Source: Logistics and the supply chain, chapter 1, lecture, Prentice hall 2008

Figure 2 Logistics management and supply chain management – scope

(Source –Elaborated based on A. Harrison, R. Van Hoek, Logistics Management and
Strategy: Competing through the supply chain, Prentice Hall, 2008)
 Figure 3 Components of logistics management
(source: Yemisi Bolumolé, International Logistics:
Course Introduction & Objectives, lecture http://www.ibp.uw.edu.pl/download/2005-2006/)

Logistics planning
Decide what, when, how in three levels:
– Strategic – long range > 1 year
– Tactical - < 1 year horizon
– Operational – frequently on hourly or daily basis
Examples of logistics decisions:
Table 1 Examples of logistics decisions

Type Strategic Tactical Operational

Location Facilities size, Inventory positioning routing
location
Transportation Mode Seasonal service mix Replenishment
quantity and timing
Order Processing Selecting order entry Priority rules for Expediting orders
system customers
Source: M. Christopher, Logistics &Supply Chain Management, 2005
 Lecture 2 – Transportation and distribution
Transportation is the most important component of logistics cost. Usually 1/3 - 2/3 of total
cost.
Transport involves:
• equipment (trucks, planes, trains, boats, pipeline),
• people (drivers, loaders & un-loaders), and
• decisions (routing, timing, quantities, equipment size, transport mode)
When deciding the transport mode for a given product there are several things to consider:
• Mode price
• Transit time and variability (reliability)
• Potential for loss or damage.
NOTE: In developing countries we often find it necessary to locate production close to
both markets and resources, while in countries with developed distribution systems people
can live in places far from production and resources.

Transport cost characteristics:

1. Fixed costs - Terminal facilities, Transport equipment, Carrier administration,
Roadway acquisition and maintenance [Infrastructure (road, rail, pipeline, navigation,
etc.)]
2. Variable costs – Fuel, Labor, Equipment maintenance, Handling, pickup &
delivery, taxes
 Figure 4 Transportation modes
(Source: Nathan George, Lecture : Distribution Channels and Logistics Management,

Distribution channels
A set of interdependent organizations involved in the process of making a product or service
available for use or consumption by the consumer or business user.
Number of intermediaries:

Intensive distribution

Exclusive distribution

Selective distribution
Figure 5 Distribution strategies
Source: Distribution strategy, http://www.scribd.com/doc/18789011/Distribution-Strategy

(a) Direct shipment , (b) warehousing, (c) crossdocking

 Figure 6 Channels of distribution
Source: Distribution strategy, http://www.scribd.com/doc/18789011/Distribution-Strategy

Third party logistics (3PL)

“Third-party Logistics is simply the use of an outside company to perform all or part of the
firm’s materials management and product distribution function.”
- Simchi-Levi (2000)
“A relationship between a shipper and third party which, compared with the basic services,
has more customized offerings, encompasses a broad number of service functions and is
characterized by a long-term, more mutually beneficial relationship”
- Murphy & Poist (1998)
Characteristics of 3PL
– Perform outsourced logistics activities
– Process management / Multiple activities
– More customized services
– Mutually beneficial and risk-sharing relationship
– Long-term commitments (1~ 3 years)
Third-party logistics providers are:
• freight forwarders
 • courier companies
• other companies integrating & offering subcontracted logistics and transportation
services
In the "PL" terminology, it is important to differenciate the 3PL from the:
• 1PL, which are the shipper or the consignee,
• 2PL, which are actual carriers,
• 4PL, which are consulting firms such as Rollins, Deloitte, SCMO (company), BMT
Limited, or Accenture.
 Lecture 3 – Global logistics management –supply chains

Basically, the Global Logistics Management is the key job of the enterprise’s procedure
reformation and creative. Global Logistics Management means to carry out the enterprise
Logistics Management activity with multinational programming.

Figure 7 Factors Pushing Global Logistics

(Source: e-Logistics Services, From Warehouse to Logistics Service Center, lecture 13.02.2004,
TASKco Corporation)

International supply chains:

International distribution systems

Manufacturing still occurs domestically, but distribution and typically some
marketing take place overseas.

International suppliers

Raw materials and components are furnished by foreign suppliers

Final assembly is performed domestically.

In some cases, the final product is then shipped to foreign markets.

Offshore manufacturing

Product is typically sourced and manufactured in a single foreign location

Shipped back to domestic warehouses for sale and distribution

Fully integrated global supply chain

Products are supplied, manufactured, and distributed from various facilities
located throughout the world.
Key challenges of global logistics network:
1. Lengthening of the Supply Chain
2. Difficulty & Cost Inefficiencies in Transportation Execution
3. Lost Sales/Mismatch in Supply & Demand
4. Import/Export Compliance Procedures
5. Disconnect between International and Domestic Transportation
6. Lack of Strong Technology support
7. Lack of Experience and Skill Sets
Issues in International Supply Chain Management
– International vs Regional Products
Region-specific products; some products have to be designed and manufactured
specifically for certain regions.
Example: Automobile designs
– Local Autonomy vs Central Control
Centralized control can be important. However, in many cases it makes sense to allow
local autonomy in the supply chain.
– Miscellaneous Dangers
Many potential dangers that firms must face as they expand their supply chains
globally

Exchange rate fluctuations

Administer offshore facilities, especially in less-developed countries.

Promise of cheap labor masking threat of reduced productivity

Expensive training may be required but it may not be enough

Table 2 Regional differences in logistics

First World Emerging Third world
Infrastructure Highly developed Under development Insufficient to support
advanced logistics
Supplier operating High Variable Typically not considered
standard
Information system Generally available Support system not Not available
availability available
Human resources Available Available with some Often difficult to find
searching
 Lecture 4. Logistics strategies – fundamentals, supply chain management
strategies

A company can start to develop a logistics strategy by looking at four distinct levels of their
logistics organization
1. Strategic - company’s objectives and strategic supply chain decisions, the logistics
strategy should review how the logistics organization contributes to those high-level
objectives
2. Structural - structural issues of the logistics organization: optimum number of
warehouses and distribution centers or what products should be produced at a specific
manufacturing plant etc.
3. Functional - Any strategy should review how each separate function in the logistics
organization is to achieve functional excellence.
4. Implementation - The key to developing a successful logistics strategy is how it is to
be implemented across the organization. The plan for implementation will include
development or configuration of an information system, introduction of new policies
and procedures and the development of a change management plan

Logistics strategy objectives – examples:

a. Process Reduction - Cycle time, Lead time, Automation
b. Capital Reduction - Inventory investment, number of warehouses
c. Service Improvement – usually the antithesis of the foregoing

The impact of a company’s strategy on logisticsbased on BCG matrix:

(elaborated based on
https://www.dhl_discoverlogistics.com/cms/en/course/management/strategic_log_plan/)
Star
Basic strategic rules
• Maintaining relative market share
• Keeping sufficient funding available
Impact on logistics
 • Optimizing material flow while expanding production capacity
• Optimizing production-management systems
• Optimizing supplier/customer service
• Optimizing purchasing management
• Optimizing product-distribution systems
Figure 8 BCG matrix

(Source: The impact of a company’s strategy on logistics

https://www.dhl_discoverlogistics.com/cms/en/course/management/strategic_log_plan/)

Question Mark
Basic strategic rules
• Maintaining relative market share
• Exploiting cost-cutting potential
• Releasing funds
Impact on logistics
• Maintaining supplier/customer service
• Rationalizing all logistics functions and systems
• Rigorously executing inventory management and valuation policies
• “Consciously“ raising productivity
Cash Cow
Basic strategic rules
• Gaining relative market share
• Accepting losses
Impact on logistics
• Searching for production sites
• Conceiving / expanding goods-distribution systems
• Improving delivery service
• Focusing logistics on special market segments
Poor Dog
Basic strategic rules
• Abandoning hopeless products
• Minimizing losses
Impact on logistics
• Minimizing inventories
• Maintaining delivery service in only selected market segments
• Minimizing goods-distribution costs

Supply chain manegement strategies

Table 3 Supply chain strategies dependent on product and process typology

Product typology
Standard Innovative
Process typology Stable Lean supply chain Responsive supply
chain
unstable Risk hedging Agile supply chain
supply chain
Source: M. Christopher, Logistics &Supply Chain Management, 2005

Lean
• Applicable when demand forecasting accuracy and production process stability are high.
• In particular, companies try to eliminate or outsource every non value-adding activity,
looking for economies of scale in production.
• In order to coordinate a complex system and reduce lead times, it is of great importance
to automate the information exchange with suppliers.
Responsive
• In some cases market demand is variable and products range is high, while operational
processes are settled.
• As a consequence, it is hard to plan requirements in order to keep stocks low.
• On the other side, stable technologies allow a flexible and reactive supply chain
management.
• Procurement, production and distribution lead-time reduction is fundamental, in order to
answer to customer needs.
Risk hedging
• In other cases market demand can be forecasted but processes of procurement, production
and distribution are subjected to frequent changes.
• The attention is then directed to minimize risks, which can be structural (production
capacity, quality, strikes, etc.) or anomalous (fires, floods, earthquakes, etc.).
• Backup stocks are required in such cases
• Information systems help in coordinating the different actors and having timely and
accurate information on stocks and demand along the chain
Agile
• The most difficult supply chains to manage are those where demand is highly variable
and processes are unstable.
• In such cases responsive and risk hedging approaches should be combined.
• Some companies adopt different supply chain strategies according to different products
of different parts of the chain.
 Figure 9 Other strategies for global logistics
(Source: e-Logistics Services, From Warehouse to Logistics Service Center, lecture 13.02.2004,
TASKco Corporation)

Postponement strategy aims at delaying some supply chain activities until customer demand
is revealed in order to maintain both low systemwide cost and fast response
4 major strategies within postponement
• Purchasing postponement - Delay purchasing of some expensive and fragile materials
• Manufacturing postponement - Products in semi-finished forms and can be customized
quickly in production facilities
• Logistics postponement - Products in semi-finished forms and can be customized quickly
in production facilities close to customers
• Time postponement - Finished products are kept in central location and are distributed
quickly to customers
 Figure 10 Purchasing postponement

Figure 11 Manufacturing postponement

Figure 12 Logistics postponement

(Figure 10-12 source: Johny Wan, Postponement Strategy, 22.03.2006,

http://www.ifm.eng.cam.ac.uk/mtms/events/documents/Johnny_Wan.pdf)
JIT II
a supplier representative works right in the company’s plant, making sure there is an
appropriate supply on hand.

Lecture 5. Inventory control

Inventory control:
– Stock of items kept to meet future demand
Two forms of demand
 Dependent
 Demand for items used to produce final products
 Tires stored at a Goodyear plant are an example of a dependent demand item
 Independent
 Demand for items used by external customers
 Cars, appliances, computers, and houses are examples of independent demand
inventory
Inventory costs
Carrying cost - cost of holding an item in inventory
Ordering cost - cost of replenishing inventory
Shortage cost - temporary or permanent loss of sales when demand cannot be met

The ABC Classification

The ABC classification system is to grouping items according to annual sales volume, in an
attempt to identify the small number of items that will account for most of the sales volume
and that are the most important ones to control for effective inventory management
Class A
□ 5 – 15 % of units
□ 70 – 80 % of value
Class B
□ 30 % of units
□ 15 % of value
 Class C
□ 50 – 60 % of units
□ 5 – 10 % of value

EOQ (Economic Order Quantity) Model

Assumptions
 Demand is known with certainty and is constant over time
 No shortages are allowed
 Lead time for the receipt of orders is constant
 Order quantity is received all at once

2 DS
Q* =
H
Where:
Q = Number of pieces per order
Q* = Optimal number of pieces per order (EOQ)
D = Annual demand in units for the Inventory item
S = Setup or ordering cost for each order
H = Holding or carrying cost per unit per year
Expected number of orders (per year)
N=Demand / order quantity = D/Q*
Expected time between orders
T=number of working days in year/N [days]
Total annual cost = setup cost + holding cost

D Q*
TC = S+ H
Q* 2
Reorder point (ROP) - tells when to order

ROP = (Demand per day)x(lead time for a new order in days)= d x L (constant demand)
Reorder point with variable demand - R = d L + zσ d L
where
d= average daily demand
L= lead time
σd = the standard deviation of daily demand
z= number of standard deviations corresponding to the service level probability (service
factor)
zσd L = safety stock

Safety stock - buffer added to on hand inventory during lead time

Stockout - an inventory shortage
Service level - probability that the inventory available during lead time will meet demand

Bullwhip effect
– demand information is distorted as it moves away from the end-use customer
– higher safety stock inventories to are stored to compensate
Symptoms of bullwhip effect
– Excessive Inventory
– Poor Forecasts
– Insufficient and/or excessive capacities
– Unavailable Products
– Long Backlogs
– Costs for Expedited Shipments and Overtime
 Figure 13 Supply chain without bullwhip effect

Figure 14 Supply chain bullwhip effect

(Figure 13-14 source: Tom Sporleder , Nature and Scope of AgriFood

Supply Chain Dynamics, lecture Presented at FAMPS Conference May 4-5, 2005)

Lecture 6. Replenishment systems, CPFR, VMI, EDI, ECR, QR

Inventory Counting Systems

 • Periodic System - Physical count of items made at periodic intervals
• Perpetual Inventory System - System that keeps track of removals from inventory
continuously, thus monitoringcurrent levels of each item
• Two-Bin System - Two containers of inventory; reorder when the first is empty
• Universal Bar Code - Bar code printed on a label that has information about the item
to which it is attached
Basics systems for stock review
Figure 15 Fixed order quantity

Figure 16 Fixed order cycle

(Figure 15-16 source Dusit Dubai, Supply Chain Planning,19.09.2004, SCLG – Dubai)
Vendor Managed Inventory
Vendor Managed Inventory (VMI) is a planning and management system in which the vendor
is responsible for maintaining the customer’s inventory levels.
Instead of the customer monitoring the sales and inventory for triggering replenishment
orders, the vendor assumes responsibility for these activities.
Potential problems in setting up a VMI system
– Unwillingness to share data
– Seasonal products
– Investment and restructuring costs
– Customer vulnerability
– Lack of standard procedures (between different customers)
– System maintenance
Consignment Inventory
Consignment inventory is an extension of the VMI program where the vendor places
inventory at the customers location while retaining ownership of the inventory.
Inventory payment is not made until the inventory is actually resold or consumed by the
customer

EDI – Electronic Data Interchange

computer to computer exchange of business transaction in a standard format. Is the electronic
transfer of information between two trading partner’s systems using a set of transactions that
have been adopted as a national or international standard for the particular business function
What company needs if want to use EDI:
• EDI server
• Internet access
• Translation & mapping software
• Staffing
• Registration
• Encryption software
Characteristics of EDI
• Provides standardized rigid format
– American National Standards Institute (ANSI) EDI standards (X12)
– Stability and uniformity
• High level of security
• Point-to-point integration
• Exchanges large amounts of data with no intervention
• Requires dedicated EDI server
• Minimizes file size in the exchange
• Machine decipherable (difficult for a person to read)
• Focus on data and structure
• Not web based
• Many trading partners available
EDI benefits
• Quick access to information
• Reduced labor and material costs associated with handling paper-based business
transaction
• Better communication
• Increases productivity
• Improved tracing and expediting
• Improved billing
• Better customer service

Collaborative Planning, Forecasting and Replenishment (CPFR)

Developed by the Voluntary Inter-industry Commerce Standards Association (VICS)
Builds on “best-in-class” VMI and CMI implementations
Principles:
. Builds on the trading partners’ competencies (includes several “scenarios”)
. Working off a single forecast which imbeds the retailer’s view (of multiple suppliers’
plans) and the supplier’s view (of multiple retailers’ actions)
. Making the whole supply chain more efficient
Most firms implement CPFR based on Voluntary Interindustry Commerce Standards Process
Model
Step 1: Develop Collaboration Arrangement
Step 2: Create Joint Business Plan
Step 3: Create Sales Forecast
Step 4: Identify Exceptions for Sales Forecast
Step 5: Resolve/Collaborate on Exception Items
Step 6: Create Order Forecast
Step 7: Identify Exceptions for Order Forecast
Step 8: Resolve/Collaborate on Exception Items
Step 9: Order Generation

ECR – Efficient Consumer Response

A process where suppliers and retailers focus on creating supply side efficiencies to provide
greater consumer value through reduced acquisition and inventory costs
(1997 Business Management Network)

Figure 17 Supply chain according to ECR concept

 Figure 18 ECR

ECR components:
Continuous replenishment
Sometimes called rapid replenishment, in which vendors receive POS data and use these data
to prepare shipments at previously agreed-upon intervals to maintain specific levels of
inventory.
Automated Store Ordering
a retail based system that automatically generates store orders when shelf stock falls below a
set level. A computer system will track stock of all items in store, adjusting for deliveries of
stock and sales of products using EPOS data; part of EDI and ECR
Cross docking
a logistics activity that attempts to reduce costs and total lead time. It eliminates the need to
place inventory in storage.
In a crossdock, goods arriving from the vendor already have a customer assigned, so workers
need only move the shipment from the inbound trailer to an outbound trailer bound for the
appropriate destination.
In pre-distribution crossdocking, the customer is assigned before the shipment leaves the
vendor, so it arrives to the crossdock bagged and tagged for transfer.
In post-distribution crossdocking, the crossdock itself allocates material to its stores.

Figure 19 Cross docking

Quick response
Suppliers receive POS data from retailers and use this information to synchronize their
production and inventory activities with actual sales at the retailer. In this strategy, the retailer
still prepares individual orders, but the POS data are used by the supplier to improve
forecasting and scheduling and to reduce lead time.

Figure 20 Quick response Initiatives Streamline Distribution Process

(Source: e-Logistics Services, From Warehouse to Logistics Service Center, lecture 13.02.2004,
TASKco Corporation)
Table 4 Main characteristics of Quick response, Continuous replenishment, Advanced Continuous
replenishment and VMI
(Source: e-Logistics Services, From Warehouse to Logistics Service Center, lecture 13.02.2004,
TASKco Corporation)
 Lecture 7. Forecasting methods
Figure 21 Quantitative Forecasting Methods (non-naive)

1. Moving average and weighted moving average

– A simple average of the previous X months/years
– A six-month moving average forecast is an average of the previous six months

Moving Average Forecast =

∑ demand in previous n periods
n

Where n is the number of periods in the moving average

3-period Moving average forecast

1
yt* = (yt-3 + yt-2 + yt-1)
3

Table 5 Moving average for 3 and 5 periods- example

Period Actual 3 Quarter MA 5 Quarter MA
Forecast forecast
Mar-83 239.3 - -
Jun-83 239.8 - -
Sep-83 236.1 - -
Dec-83 232 238.40 -
Mar-84 224.75 235.97 -
Jun-84 237.45 230.95 234.39
Sep-84 245.4 231.40 234.02
Dec-84 251.58 235.87 235.14
… So on..
One can impose weights and use weighted moving averages (WMA).

Weighted Moving Average Forecast =

∑ (weight for period n ) ⋅ (demand in period n )
∑ weights
e.g. yt* = 0.25 yt-3 + 0.25 yt-2 + 0.5 yt-1

NOTE: The weights are given. The sum of all weights must be 1.

2. Exponential smoothing (Brown model)

Exponential Smoothing Forecast

yt* = α yt-1 +(1-α) yt-1*

S(t) = Y(t) + (1- ) S(t-1)

Where yt* = New Forecast

yt-1* = Previous Forecast
α = Smoothing Constant: (0 ≤ α ≤ 1)
yt = Previous Period’s Actual Demand

NOTE: Forecast for 1st period calculate as average from three periods( y1*= (y1+y2+y3)/3
How to calculate forecast error? – Forecast mean absolute percentage error (FMAPE)
Source( H. Visser, Basic principles and demand forecasting, chapter 5, 8.02.2009, Logistics: Principles and
Practice)
 Lecture 8. Production logistics, ERP, SCM

Note: Production logistics will be subject of Production Management.

MRP (Material Requirements Planning) - Warehouse management (Economic Order
Quantity, EOQ) + purchase activity + management of multi-product environment
MRP II (Manufacturing Resource Planning) - In addition to the previous the availability of
capital and workforce in manufacturing
ERP (Enterprise Resource Planning) - In addition to the previous the enterprise’s all internal
resources (manufacturing and service etc.)
Internal ERP/SCM (Supply Chain Mgmt) - All enterprise’s internal suppliers and customers;
Increasing ebusiness!
External ERP/SCM - External suppliers and customers are taken along; internal vs. external
customer?
Figure 22 Evolution of ERP systems
(Source:Enterprise Resource Management, www.managementsupport.com/erp.htm)

Most of ERPs are modular → tailoring is (at least partly) possible

 Figure 23 SAP R/3 modular structure
Source: SAP website

ERP Software Companies and Marketshare

Advantages of ERP
• Uses single database & common software infrastructure
• Communicates with supply chain members
• Helps reduce supply chain inventories. Supply chain visibility leads to reductions of the
bullwhip effect (buildup of supply chain safety stock inventories)
• Standardizes processes & eliminates redundant resources while increasing productivity
• Tracks employees’ time & performance
• Integrates financial, production, supply,
• & customer information.
Disadvantages of ERP
• Substantial capital investment is needed to implement the system. The average total cost
of ERP ownership was $15 million.
• Software is designed around a specific business model based on specific business
processes. The adopting firm must change its business model & associated processes to
fit the built-in business model designed into the ERP system.
Lecture 9. Reverse logistics, e-logistics
Reverse logistics – definition
“Process of planning, implementing and controlling the efficient, cost-effective flow of raw
materials, in-process inventory, finished goods and related information from the point of
consumption to the point of origin for the purpose of recapturing value or proper disposal”
- Rogers and Tibben-Lembke –
Reverse logistics activities:
1. Handling of returned merchandise
– Damage
– Seasonal inventory
– Resell via outlet
– Salvage of outdated products
– Stock–balancing returns
2. Recycling and reuse
– Material reuse
– Remanufacturing / refurbishing
3. Hazardous materials disposition
Figure 24 The Reverse Logistics Process
(Source: H.Mendonca, B. Mrabet, D. Restrepo, M. Velez, Reverse logistics,
web.eng.fiu.edu/leet/...2007F/Reverse_Logistics_Presentation.ppt)
 E-logistics - mechanism of automating logistics processes and providing an integrated,
end-to-end fulfillment and supply chain management services to the players of logistics
processes. Those logistics processes that are automated by elogistics provide supply chain
visibility and can be part of existing e-Commerce or Workflow systems in an enterprise.
The typical e-logistics processes include:
– Request For Quotes (RFQ),
– Shipping, and
– Tracking.
If we look wider, E-logistics mean doing e-business inside of the TLC between
companies (B2B) and outside of it, between the TLC (Total Logistic Control TLC, a full
service third party logistics provider) and customers (B2C) over the Internet. This whole
integration of e-business ensures that the TLC from outside looks like one company, even
though it is composed of many. If we want to implement E-logistic philosophy in all
companies inside the TLC, we must renovate their business processes.