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Logistics Management > 1. Definition of Logistics and historic evolution > Flashcards

1. Definition of Logistics and historic evolution Flashcards

1
Q

The CSCMP: Council of Supply Chain Management Professionals, define logistics management as:

A

*Part of Supply Chain Management
*that plans, implement and controls
*the efficient and effective
*forward, reverse flow and storage
*of goods, services and information
*from a point of origine to a point of destination
*meeting with customer requirements
+and sustainable development goals.

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2
Q

Define Efficiency

A

Use of resources to achieve goals

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3
Q

Define Effectiveness

A

Achievement of right goals

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4
Q

Logistics definition has evolved with time, how the radar chart explains it?

A

The radar chart explains the evolution split in the 4 main areas (axis) in which Logistics has evolved into what it is today.

The main areas are:
* Activity (y+ 4)
* System (y- 3)
* Product (x+ 4)
* Performance(x- 3)

In the exam:
+LM definition & areas description!

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5
Q

Talking about the radar chart, explain the “Activity” axis.

A

The activity axis explains the evolution of LM in terms of “what was done”.

1.Execution: Physically moving goods.
2. Planning/Control: Managing the execution of LM as a core business function.
3. Process: Integrating LM as an input-process-output system interacting with other business areas and stakeholders.
4. Reverse Logistics: Managing the efficient return of goods.

execution-planning/control-process-reverse.

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6
Q

Talking about the radar chart, explain the “Product” axis.

A

The product axis show the evolution in terms what is about to be stored, handled, transported and/or delivered in function of customers demand.

  1. FG: emphasis in physical goods from end of the line to the customer.
  2. Goods: from POO to POD. ex. RM
  3. Information: needed to coordinate the SC
  4. Services: intangible activities to meet customer needs. ex after sales
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7
Q

Talking about the radar chart, explain the “System” axis.

A

The System axis explains the evolution starting from isolated processes to fully integrated and collaborative supply chains.

  1. Distribution: product delivery from production to consumers.
  2. Internal Supply Chain: Integrated processes within an organization
  3. External Supply Chain: Expanded coordination between multiple organizations
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8
Q

Talking about the radar chart, explain the “Performance” axis.

A

Logistics performance evolves by shifting priorities, aiming to meet objectives more comprehensively focusing on achieving specific goals while optimizing resources.
1. Efficient: minimizing costs and maximizing resource utilization.
2. Effective: Prioritizes meeting customer requirements.
3. Sustainable: Aims to balance economic, environmental, and social factors for long-term impact.

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9
Q

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

  1. Logistics performance indicators
A

Axis: Performance

From cost reduction to customer service and profit optimisation to sustainability.

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10
Q

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

  1. The 3 stacks of logistics management
A

Axis: Activity

From execution to planning to design

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11
Q

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

  1. Types of logistics
A

Axis: Product

From direct flow of products to info, money, services… till reverse flow.

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12
Q

Taking again the radar chart of logistics, which axis we make reference and what is the trend:

  1. Integrated Logistics and Supply Chain Management
A

Axis: System

From the optimisation of single activities to an integrated function

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13
Q

Logistics Performance Indicators:

What are the main costs related to activities?

A
  1. Transportation
  2. Warehousing
  3. Administrative
    +Packaging
    +Poor Service
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14
Q

Logistics Performance Indicators:
Cost related to the activity:

Transportation

A

Can be split in 2 mainly because of their cost drivers:
1. Primary transportation (saturation)
2. Secondary Transportation (time btw points/customers)

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15
Q

Logistics Performance Indicators:
Cost related to the activity:
Transportation:

Primary transportation

A

Long-haul, full loaded, point-to-point

Long distance transportation, Aim is to use all the capacity of the transportation means, driver = saturation.

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16
Q

Logistics Performance Indicators:
Cost related to the activity:
Transportation:

Secondary transportation

A

Last mile, less than full load, multi-point

Normally in the low part of the distribution network, it has to reach multiple points = customers. Real. constrain = time. How many customer I can reach in that period and how to increase that number.

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17
Q

Logistics Performance Indicators:
Cost related to the activity:

Warehousing

A

Related to warehouses and factories.

Within a warehouse two types of costs can be
distinguished:

1.Handling (driver: flows)
2. Inventory related (driver: inventory level)

Main difference = drivers

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18
Q

Logistics Performance Indicators:
Cost related to the activity:
Warehousing:

Handling cost

A

Driver: flows

Cost related to movements of the products within the nodes of the chain.

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19
Q

Logistics Performance Indicators:
Cost related to the activity:
Warehousing:

Inventory-related cost

A

Driver: inventory level

Cost to keep inventory within the nodes of a chain.

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20
Q

Define flow when talking about handling

A

how many IU enters/exit the system

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21
Q

Logistics Performance Indicators:
Cost related to the activity:

Administrative costs

A

Network management and information flows.
Order to payment cycle.

  1. Logistics accounting (inventory control, planning, order & invoice)
  2. Information systems
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22
Q

Logistics Performance Indicators:
Cost related to the activity:

Packaging costs

A

Packaging influences the transportation and warehouse

Hierarchy…
Primary packaging: connected to the product
Secondary: ex. carton
Tertiary: (pallet for instance)

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23
Q

Logistics Performance Indicators:
Cost related to the activity:

+Impact of production costs

A

Set up costs: lot size & freq

24
Q

Logistics Performance Indicators:
Cost related to the activity:

+Poor service cost

A

Lost sales, Obsolescence
If no inventory, no sales

25
Q

If we talk about:

Target Service Level
Complexity of Logistics’ Process

What they refer to?

A

Main drivers of logistics cost

26
Q

How do we calculate the Incidence of logistics cost in a company
(equation)

A

Is the ratio between the Logistics cost divided the Revenues.

LC/R

27
Q

There are two drivers that makes the Logistics Costs and Revenues variate:

A
  1. Complexity and Target Service Level
  2. Value density
28
Q

LC/R
If Complexity and target SL increases:

A

L increases
R slight increase

Incidence … increases

29
Q

LC/R
If value density increases:

A

R increases
L slight increase

Incidence … decreases

30
Q

Importance of LM, cost depends on 3 reasons:

A

Non-dicretionary activities
Costs between 5-15% Rev
Impacts the assets

31
Q

In terms of LM cost incidence, rank some examples

A

<5 luxury & pharma
>5 fashion E-commers
10 food
15 water RM
>15 ecommers of food

32
Q

True or false:

External factors should be considered when looking at logistic costs.

Like production factors and reduction of capacity

A

True

33
Q

How is the incidence of Logistic costs in a Supply chain

A

Is the sum of the incidence of the manufacturers portion over the Transfer price of the manufacturer and the portion of the transfer price of the retailer.

Being TPM<TPR

34
Q

In the objective function of logistics other than cost we have:

A

customer service

35
Q

List the indicators related to Customer service:

A

Time related (OCT, punctuality, frequency)

Availability (order fill rate, Item fill rate, completeness)

Accuracy/compliance/quality (order, packaging, documents)

36
Q

This indicators has to be with speed in punctuality in relation to customers expectations and promises made

A

Time related

37
Q

Time related:

Speed perceived by the customer, from order to delivery.

A

Order Cycle Time OCT

38
Q

Time related:

Supply Chain lead time = OCT

A

No.
There is a decoupling point were forecasting and ordering is divided. the OCT is about the order side of the chain.

39
Q

Time related:

Related to the ability to deliver compliant UL in the time window.

A

Punctuality / on time

40
Q

Time related:

number of deliveries planned in a reference window

A

Frequency

41
Q

they measure the capability of the supplier to satisfy the request through inventory inhand

A

Availability (filtrate)

A=on hand/ demand

42
Q

Availability indicators

A

Order Fill Rate OFR= all items 100%, missing 0%

Order completeness = 100% lines

Item Fill Rate IFR= How many lines available

OFR= IFR elevado N
if IFR=99%
N lines = 10
OFR=90%

43
Q

Give me an example of a compound indicator for customer service

A

DIFOT
Delivered InFull InTime

44
Q

Sustainability Indicators

A

Sustainability related goals (ONU)
GHG
Materials
Energy
Water
Emissions
Waste

45
Q

3 stacks:
If we say transportation, handling, storage, physical transformation

A

Execution

46
Q

3 stacks:
Getting the supply chain aligned and tuned

plans for the adjustment of operations and executions linking the demand and supply side

A

Planning

47
Q

3 stacks:
Logistics network structure
Transportation modes
MVB
decisions aligned with overall company

A

Design

48
Q

What is the heart of logistics

A

Integration

Interconnection of activities on order to influence/impact/improve performances

49
Q

Why is wrong to consider only transportation cost to select a transportation mode

A

The objective function of logistic cost is:

LC= Transportation + Inventory (CS + IT)

50
Q

Define Supply Chain Management

A

Integration of business process along the supply chain.

51
Q

What means IFR = 95%

A

5 out of 100 times that a customer wants a product, the product is not available

52
Q

True or False
ISC < IManufacturer + IRetailer

A

True
Example Vendor Managed Inventory VMI
Where manufacturer manages the inventory directly at the retailers facilities and they get to have insights about customers demand

collaboration is fundamental

53
Q

Types of logistics, list them.
From direct flow to reverse logistics

A

Focused on systems
Materials
Other flows (information)

54
Q

Compare direct vs reverse flow in terms of:
Flow shape
Items
Transformation

A

Direct:
Flow shape - divergent
Items: identified
Transformation: might need

Reverse:
Flow shape - convergent
Items: non identified
Transformation: Needed

55
Q

Which models can we use to understand:
1. What is the connection between logistics strategy and corporate strategy?
2. What are the possible approaches to logistics strategy?

A

a) ROA Model - IMPACT: Analyzes the return on assets, a measure of the company’s profitability.

b) Supply Chain Strategy Model - STRATEGY: Examines the overall strategy for managing the flow of goods and services.

56
Q

Explain the profit optimization approach

A

Graph 1: Profit Optimization

This graph shows how to maximize profit by balancing service level and costs.

X-axis: Service Level (from 85% to 100%). This represents how well the distribution network meets customer needs (e.g., on-time delivery).

Y-axis: Euros per year (€/year). This represents the monetary value of costs and profits.
Gross Margin (Purple Line): This is the overall revenue minus other non-logistic costs (like manufacturing). It generally increases with better service levels (as happy customers buy more). Notice it flattens out towards the highest service levels, meaning the extra cost to achieve perfect service may not yield much additional revenue.

Logistic Costs (Orange Line): This is the cost of operating the distribution network (warehousing, transportation, etc.). It increases with higher service levels because providing faster and more reliable delivery requires more investment (more warehouses, faster shipping options).

Margin (Gap between the lines): The space between the Gross Margin and Logistic Costs curves represents the actual profit. The biggest gap shows the optimal service level for maximum profit (indicated by MMAX on the graph). In this example, it’s somewhere between 95% and 99%. Pushing for 100% service might not be the most profitable strategy, as the logistic costs rise sharply.

57
Q

Explain the cost of poor service and total cost optimization

A

Graph 2: Total Cost Optimization

This graph shows how the total cost changes with different service levels.

X-axis: Service Level (from 85% to 100%)
Y-axis: Euros per year (€/year)
Logistic Costs (Purple Line): Same as before – cost of the distribution network. It goes up with higher service levels.

Cost of Poor Service (Orange Line): This is the cost associated with not meeting the desired service level. This includes lost sales due to late deliveries, customer service expenses for handling complaints, etc. This cost goes down as service level improves.

Total Cost (Green Line): This is the sum of Logistic Costs and the Cost of Poor Service. The goal is to find the lowest point on this curve, which represents the most cost-effective service level. In this example, the optimal point is again somewhere around 95%. This shows that balancing the cost of logistics with the cost of unhappy customers is key to minimizing total costs.

Logistics Management (6 decks)

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