Transportation/Logistic Strategy

John OzmentOren Harris Chair of Transportation

University of Arkansas

(479) 575-6142(479) 521-3355

jozment@walton.uark.edu

Transportation/Logistic Strategy

Coordination of ActivitiesFlow of GoodsMinimum CostDesired Level of Service

Definition of Business Logistics 

Logistics is that part of the supply chain process 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 (CLM).

Transportation/Logistic Strategy

Customer ServiceOrder ProcessingTraffic & TransportationWarehousingMaterials HandlingPackagingInventory ControlPurchasingProduction SchedulingForecastingLocation AnalysisCommunications

Activities To Coordinate 

Transportation/Logistic StrategyFlow of Goods

(Purchasing)

Logistics

(Marketing)(Operations)

S

S

S

S

S

Suppliers

C

C

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Customers

ProductionProcessing

Repackaging

Firm

Transportation/Logistic Strategy

Consider Total "Relevant" Costs

Take Advantage of Cost Trade-Offs

Avoid Suboptimization

Total Cost Approach

Transportation/Logistic StrategyTraditional Organization Chart

President

VPMarketing

VPOperations

VPFinance

SalesAdvertising

Marketing ResearchEtc.

Machine ShopsWelding ShopsAssembly Lines

Etc.

BookkeepingCapital Budgeting

Financial ManagementEtc.

Transportation/Logistic Strategy

Customer ServicePart of Order Processing

Field WhsingLocation Analyses

TrafficScheduling

Raw Materials WhsingPackaging/Handling

Part of Order ProcessInventory

ForecastingCommunications

Traditional Organization Chart

President

VPMarketing

VPOperations

VPFinance

SalesAdvertising

Marketing ResearchEtc.

Machine ShopsWelding ShopsAssembly Lines

Etc.

BookkeepingCapital Budgeting

Financial ManagementEtc.

Transportation/Logistic StrategyDevelopment of Business Logistics

Military ExperienceDevelopment of the Marketing ConceptProliferation of ProductsRising Transportation CostsTechnological PeakKnowledge of InventoryRecession of 1958Development of the ComputerCreative Uses of the Computer

Transportation/Logistic Strategy

Harvard Air Freight Study (1956)

Bowersox's Textbook (1961)

CLM (1963)

Organizational Name Changes

Supply Chain Management

Educational Focus on Logistics

Transportation/Logistic Strategy

Knowledge of Inventory Carrying Costs

Application of Pareto’s Law

Focus on Total Costs/Cost Trade-offs

Use of Premium Transportation

Harvard Air Freight Study

Transportation/Logistic Strategy

Knowledge of Inventory Carrying Costs

Application of Pareto’s Law

Focus on Total Costs/Cost Trade-offs

Use of Premium Transportation

Harvard Air Freight Study

Transportation/Logistic StrategyElements of Inventory Carrying Costs

Interest and Opportunity Cost 10-20 %Storage and Handling 8-14 %Depreciation and Obsolescence 6-12 %Insurance and Taxes 2 -3 %

Total 25-50 %

Transportation/Logistic Strategy

Knowledge of Inventory Carrying Costs

Application of Pareto’s Law

Focus on Total Costs/Cost Trade-offs

Use of Premium Transportation

Harvard Air Freight Study

Transportation/Logistic StrategyABC Analysis

Percentof Sales

Percent of Items20 50 100

A B C

100

80

95

Transportation/Logistic Strategy

Knowledge of Inventory Carrying Costs

Application of Pareto’s Law

Focus on Total Costs/Cost Trade-offs

Use of Premium Transportation

Harvard Air Freight Study

Transportation/Logistic StrategyFocus on Total Costs/Cost Trade-offs

Savings from Inventory Consolidation

vs

Added Transportation Costs

Transportation/Logistic Strategy

Knowledge of Inventory Carrying Costs

Application of Pareto’s Law

Focus on Total Costs/Cost Trade-offs

Use of Premium Transportation

Harvard Air Freight Study

Transportation/Logistic Strategy

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