1-1

JAMES
R.
STOCK

STRATEGIC LOGISTICS
MANAGEMENT

DOUGLAS
M.
LAMBERT

FOURTH EDITION

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 1
Logistics Role in the
Economy and the
Organization

Logistics Management Defined

1-3

That part of the supply chain process that plans,

implements, and controls the efficient, effective
flow and storage of goods, services, and related
information from the point-of-origin to the
point-of-consumption in order to meet
customers requirements.
Council of Logistics Management

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Components of
Logistics Management
Inputs into
logistics
Natural
resources

Human
resources Suppliers
Financial
resources
Information
resources

McGraw-Hill/Irwin

Outputs of
logistics

Management actions
Planning

Implementation

Logistics management
Raw
In-process
materials inventory

Finished
goods

Control

Competitive
advantage

Time and
Customers place utility

Logistics activities
Customer service
Demand forecasting
Inventory management
Logistics communications
Material handling
Order processing
Parts and service support

1-4

Plant & warehouse site selection

Procurement
Packaging
Reverse logistics
Traffic and transportation
Warehousing and storage

Efficient
movement
to customer
Proprietary
asset
Copyright 2001 by The
McGraw-Hill Companies, Inc.
All rights reserved.

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Marketing/Logistics
Management Concept

1-5

Customer satisfaction
Suppliers
Intermediate customers
Final customers

Integrated effort
Product
Price
Promotion
Place (distribution)

McGraw-Hill/Irwin

Company profit

Maximize long-term
profitability
Lowest total costs
given an acceptable
level of customer
service

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Cost Trade-offs in Marketing

and Logistics

1-6

Order processing
and information
costs

Price

MARKETING

Product

Place/customer
service levels
Inventory
carrying costs

Transportation
costs

Lot quantity costs

Warehousing costs
Order processing
and information
costs

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Relationship of Logistics
Activities to Logistics Costs

1-7

Customer service levels

Transportation costs
Warehousing costs
Order processing/information systems costs
Lot quantity costs
Inventory carrying costs

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Key Logistics Activities

Customer service
Demand forecasting
Inventory
management
Logistics
communications
Material handling
Order processing
Packaging

McGraw-Hill/Irwin

1-8

Parts and service

support
Plant and warehouse
site selection
Procurement
Reverse logistics
Traffic and
transportation
Warehousing and
storage
Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Flow through the Supply Chain

1-9

Customer

Carrier
Distribution
center
Supplier

Customer

Carrier

Customer
Carrier
Supplier

Carrier
Manufacturing
site

Customer

Carrier
Supplier

Carrier

Customer

Distribution
center
Customer

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Profit Model

Gross margin
Net profit
Net profit
margin

Financial
leverage

Return on
assets

Net profit Total assets x Net profit

=
Net worth
Net worth Total assets

Net profit
Net sales

Sales

Total expenses

x
Asset
turnover

Sales

Income taxes

$
Current assets

$
Fixed
expenses

Accounts
receivable

$
+

Fixed assets

$
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Variable
expenses

Total assets

Cost of
goods sold

Inventory

$
+

Net sales
Total assets

%
Return on
net worth

Sales 1-10

Other current
assets

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Future Challenges and Areas for

Performance Improvement

1-11a
1-11

Supply Chain Management

Strategic Planning
Total Quality Management
Just-in-Time
Quick Response
Efficient Consumer Response
Logistics as a Competitive Weapon

McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Future Challenges and Areas for

Performance Improvement (cont.)

1-12b
1-11

Accounting for logistics costs

Logistics as a boundary-spanning activity
Global logistics
Increasing skill requirements
Logistics information systems
Strategic alliances, partnerships, and
outsourcing
Green marketing and reverse logistics
McGraw-Hill/Irwin

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.