Page 44 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 2: Introduction to Logistic

food-chain, the manufacturer’s physical distribution is the same process as a retailer’s procurement Notes
operations. Although similar or even identical transportation requirements may be involved,
the degree of managerial control and risk related to performance failure varies substantially
between physical distribution and procurement.
Within a typical enterprise, the three areas of logistics overlap. Viewing each as an integral part
of the overall value-adding process creates an opportunity to capitalize on the unique attributes
of each while facilitating the overall process. The prime concern of an integrated logistical
process is to coordinate overall value added inventory movement. The three areas combine to
provide integrated management of materials, semi-finished components, and products moving
between locations, supply sources, and customers of the enterprise. In this sense, logistics is
concerned with strategic management of total movement and storage.

2.4.5 Information Flow

Information flow identifies specific locations within a logistical system that have requirements.
Information also integrates the three operating areas. The primary objective of developing and
specifying requirements is to plan and execute integrated logistical operations. Within individual
logistics areas, different movement requirements exist with respect to size of order, availability
of inventory, and urgency of movement. The primary objective of information sharing is to
reconcile these differentials. In the discussion that follows it is important to stress that information
requirements parallel the actual work performed in physical distribution, manufacturing support,
and procurement. Whereas these areas contain the actual logistics work, information facilitates
coordination of planning and control of day-to-day operations. Without accurate information
the effort involved in the logistical system can be wasted.

Logistical information involves two major types of flows: coordination flows and operational
flows.
The objective at this point is to provide an introductory overview of the information requirements
necessary to drive an integrated logistics system.

2.4.6 Planning and Coordination Flows

Coordination is the backbone of overall information system architecture among value chain
participants. Coordination results in plans specifying (1) strategic objectives, (2) capacity
constraints, (3) logistical requirements, (4) inventory deployment, (5) manufacturing
requirements, (6) procurement requirements, and (7) forecasting.

The primary drivers of the overall value chain are the strategic objectives that result from
marketing and financial goals. Strategic objectives detail the nature and location of customers,
which are matched to the required products and services to be performed. The financial aspect of
strategic plans detail resources required to support inventory, receivables, facilities, equipment,
and capacity.
Capacity constraints coordinate internal and external manufacturing requirements. For non-
manufacturing participants in the value chain, this form of capacity planning is not required.
Given strategic objectives, capacities constraints identify limitations, barriers, or bottlenecks
within basic manufacturing capabilities and determine appropriate outsource requirements.

Example: To illustrate, whereas Kellogg owns the brand and distributes Cracklin Oat
Bran, a third party on a contract basis performs all manufacturing. The result of capacity constraints
is a plan that places strategic objectives in a time-phased schedule that details facility utilization,
financial resources and human requirements.

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