Chapter 11: Strategic Leadership Chapter 1 Introduction to business logistics.

Chapter 11: Strategic Leadership

Chapter 1

Introduction to business logistics


Introduction to business logistics

This chapter addresses the following six topics:

• Background to business logistics

• Business logistics in a macroeconomic perspective

• Evolution of the concept of logistics

• Emergence of logistics in a business context

• The concepts of logistics and supply chain management

• Business logistics activities


Background to business logistics

• Spatial and temporal separation between: - location of natural resources for production and- where and when people use and consume products

• Economic development and growth is dependent upon:- productive regional specialisation and division of labour and skills and- exchange of goods, services and information

• Greater logistics value of road transport leads to increased use of road over rail.


Background to business logistics (continued)• Regulatory failures (post-late 1970s) often more

damaging than market failures • Rapid change in economic life (1970s–1980s) had two main driving forces:- The emergence of freer competition nationally and internationally- Rapid technological advances

• Global competition and sophisticated consumers led to:- Competition through logistically arranged product supply chains, rather than through individual businesses operating in isolation


Business logisticsin a macroeconomic perspective

GDP of South Africa (2006):

• Transport: R157 million

• Logistics as a proportion of GDP: 14.7%

• USA logistics as a proportion of GDP: 9.9%


Business logisticsin a macroeconomic perspective (continued)


Evolution of the concept of logistics

• Logistics = logistikos (Greek): ‘skilled in calculating; relating to arithmetic’ or ‘concerned with reason’

• Logos is translated as ‘reason’, ‘word’ or ‘discourse’

• Logistikos (Greek) = logistique in French (1546)

• Logistique (noun; 1611) referred to adding, subtracting, multiplying and dividing


Evolution of the concept of logistics (continued)

• Logistique (adjective; 1765) means ‘with reference to calculation’.

• Jomini, ‘Summary of the Art of War’ (1836): combining and coordinating the quartering, means of transport and supply and support of troops through reasoning by calculation during a military campaign.


Emergence of logistics in a business context

• After WW II Western Europe moved from military to business logistics to rebuild infrastructure based on Jomini’s legacy of military logistics.

• Experts employed in the post-war revitalisation used logistics, systems analysis and operations research.

• To regain economic self-sufficiency primary production, secondary manufacturing and tertiary service delivery were required.

• Within the region logistics chains emerged as if no international borders existed.


Emergence of logistics in a business context (continued)• By 1960, coordinated logistics practice had taken root; business logistics was in place and developed.

• The French Academy’s definition of business logistics: ‘All means and methods of organising a service, a business and especially the flow of materials before, during and after production.

• Integrated and coordinated management means attaining the lowest total process cost, not the lowest cost of each function in the process.

• Achieving efficient logistics necessitates systems analysis and operations research.


Systems analysis

Systems analysis entails seven consecutive steps:

1. Problem identification

2. Systems modelling

3. Generating alternative solutions

4. Evaluation

5. System selection

6. Implementation

7. Monitoring and review


Systems analysis and logistics management


The concepts of logistics and supply chain management

• 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.’ (CSCMP)


The concepts of logistics and supply chain management (continued)

• Logistics management is: - Performance required to move and position inventory throughout a supply chain (the value chain)- Creating value by timing and positioning goods- Integrating function that links, coordinates and optimises the entire value chain as a continuous process

• Supply chain management adds manufacturing and applied marketing (practical sales) to logistics management.


The concepts of logistics and supply chain management (continued)


Analysing the definition of logistics management

• Logistics management is a subset of supply chain management.• It includes the actions required to:- prepare (plan);- organise (implement); and - execute (control) the activities of a firm when moving materials or finished products to customers.

• Logistics management encom-passes many of a firm’s strategic, tactical and operational activities.


Analysing the definition of logistics management (continued)

• The optimal level of logistics expenditure occurs where marginal expenditure (i.e. the expenditure attributed to the last unit of output) equals marginal revenue (i.e. the revenue attributable to the last unit of output).

• An objective of logistics management is to be efficient across the entire system.


Business logisticsactivities

The flow of goods, services and information between the point of origin and the point of consumption or application involves the following activities:

• Demand forecasting

• Site selection and facility design

• Procurement

• Materials handling

• Packaging

• Warehouse management


Business logisticsactivities (continued)

• Inventory management

• Order processing

• Logistics communications

• Transport

• Reverse logistics

• Customer service

Chapter 11: Strategic Leadership Chapter 1 Introduction to business logistics.

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