CHAPTER 2 ROLE OF LOGISTICS IN SUPPLY CHAINS
After reading this chapter, you should be able to do the following:
• Understand the role and importance of logistics in private and public organizations.
• Discuss the impact of logistics on the economy and how effective logistics management contributes to the vitality of the economy.
• Understand the value-added roles of logistics on both a macro and micro level.
• Explain logistics systems from several perspectives.
• Understand the relationship between logistics and other important functional areas in an organization, including manufacturing, marketing, and finance.
• Discuss the importance of management activities in the logistics function.
• Analyze logistics systems from several different perspectives to meet different objectives. • Determine the total costs and understand the cost tradeoffs in a logistics system.
Logistics is misunderstood and often overlooked with the excitement surrounding supply chain management and all of the related technology that has been developed to support the supply chain. The glamour associated with the e-supply chain, e-tailing, e-business, and so on, seems to overshadow the importance of logistics in an organization and the need for efficient and effective logistics support in a supply chain.
The concepts of supply chain management and logistics must be compared or, more appropriately, related to each other. Supply chain management has been defined using a pipeline analogy with the start of the pipeline representing the initial supplier and the end of the pipeline representing the ultimate customer.
What is Logistics?
The term logistics has become much more widely recognized by the general public in the last 20 years. Television, radio, and print advertising have lauded the importance of
IM Supply Chain Management: A Logistics Perspective
Role of Logistics in Supply Chains
Chapter 2 logistics. Another factor contributing to the recognition of logistics has been increased customer sensitivity to not only product quality but also to the associated service quality.
Even with increased recognition of the term logistics, however, there is still confusion about its definition. Some of the confusion can be traced to the fact that a number of terms are used by individuals when they refer to what has been described as logistics.
For example, consider the following list of terms:
• Logistics management
• Business logistics management
• Integrated logistics management
• Materials management
• Physical distribution management
• Marketing logistics
• Industrial logistics
Logistics management is the most widely accepted term and encompasses logistics not only in the private business sector but also in the public/government and nonprofit sectors. For the purposes of this text, the definition offered by the Council of Supply Chain
Management Professionals (formerly the Council of Logistics Management) is utilized:
“The art and science of management, engineering, and technical activities concerned with requirements, design, and supplying and maintaining resources to support objectives, plans, and operations.”
The logistics concept began to appear in the business-related literature in the 1960s under the label of physical distribution, which had a focus on the outbound side of the logistics system. During the 1960s, military logistics began to focus on engineering dimensions of logistics—reliability, maintainability, configuration management, life cycle management, and so on—with increased emphasis on modeling and quantitative analysis.
In the twenty-first century, logistics should be viewed as a part of management and has four subdivisions:
• Business logistics: That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, service, and related