LOGISTICS - LOGISTICS ACTIVITIES AND COSTS OF THEIR IMPLEMENTATION . The aim of this lecture is to get acquainted with individual logistics activities and costs of their implementation Šárka Čemerková Lecturer Logistics - Logistics activities and costs of their implementation . Logistics activities Transport - Transportation Logistics costs Structure of the lecture LOGISTICS ACTIVITIES 1. CUSTOMER SERVICE •it connects and manages all the components of the connection to the customer within the specified costs / service ratio •logistics system output •it must be measured by specific measures - customer service level indicators •3 phases: pre-sales, sales and after-sales 2. DEMAND FORECASTING •How much to order from suppliers and how many products should be prepared or available? •series of realized sales are starting point: osales at some times are lower than actual demand oestimate of total market capacity is not usually included 3. STOCK MANAGEMENT •Goal: To maintain stock levels to achieve the required level of customer service while achieving minimum storage and stock maintenance costs •the most sophisticated part of logistics theory •in companies often quite badly managed 4. LOGISTICS COMMUNICATION •key to efficient operation of any system •the level of communication within the system can be the basis of the company's competitive advantage •trends: rapid increase in complexity, automation and speed •relations: oenterprise and its suppliers and customers omain business units (logistics, technical departments, accounting, marketing and production) odifferent logistics activities with each other ovarious logistics activities within yourself oenterprise and logistics service provider 5. MATERIAL HANDLING •all aspects of the movement or transfer of raw materials, production stocks and finished products within the plant or warehouse of the enterprise •always generates costs, but does not add value to the item •It is necessary to eliminate as much as possible! C:\WINDOWS\Plocha\Logistika\Logistika_01\0146.gif 6. ORDER PROCESSING •key contact point of the customer and the company, i.e. it can have a great influence on the level of quality of services and thus also on customer satisfaction •very wide and highly automated area (EDI, EFT) •summary indication of all activities that are needed between shipping the order and receiving the delivery with the recipient •time between order submission and delivery, including its payment, is known as the order cycle, i.e. the sum of the duration of the following activities: osignal path of need odetermination of ordered quantity osupplier selection and negotiation oexecution and delivery of the order, or conclusion of the contract osupplier's delivery time otransport to the store (this time may already be included in the delivery time) oacceptance of delivery ostorage of the delivery and recording of receipt or delivery •evenness vs. speed •space for shortening - internal and external part •consequences of errors 1. customer places an order 6. customer receives the goods 5. order is transported to the customer 4. order is completed and packed 3. order is being processed 2. order accepted by a supplier Size of orders •influenced by a number of internal and external factors: osize needed oavailable funds ostore layout osituation on the suppliers market ocapacity of transport equipment •minimum size vs. smaller quantities at extra costs • 7. PACKAGING •marketing vs. logistics meaning of packaging •in logistics 2 key functions: oprotective orational handling, transport and storage unit •bearer of logistics information •boxes, bags, pallets and containers A:\MVC-009L.JPG 8. SERVICE SUPPORT AND SPARE PARTS •logistics is also responsible for providing after-sales service: osupply of spare parts ostorage of spare parts opicking up defective or malfunctioning products oquick response to repairs 9. DETERMINATION OF PRODUCTION AND STORAGE LOCATION •strategic decisions •it will affect the cost of transport of raw materials to the enterprise and finished products to customers, as well as the level of customer service and response speed •localization factors: olocation of customers and suppliers oavailability of transport services oavailability of qualified workers with acceptable pay levels opossibilities of cooperation with authorities etc. 10. PROCUREMENT / PURCHASE •providing input from external organizations •for most industries, 40-60% of revenue is used to procure materials and services that come from outside sources •purchase activities: oselection of suppliers oprice negotiations onegotiations on delivery terms and quantities opurchase itself oevaluation of supplier quality 11. HANDLING OF RETURNED GOODS •for various reasons: oproblem with product operation ocustomer changes his mind •complicated process: omostly handling of a small quantity back from the customer ocompany is used to handling of large volumes towards the customer •many logistics systems have a problem handling this type of goods movement 12. REVERSE LOGISTICS •removal and, where appropriate, disposal of waste material arising from the production, distribution and packaging of goods •includes: otemporary storage of materials osubsequent transport to the place of disposal, treatment, re-use or recycling •there is a growing interest in recycling and reuse of materials •legislative restrictions 13. STORAGE •significantly contributes to the creation of the utility value of time and place: it enables the goods to be manufactured and retained for later consumption •storage activities concern: o design and layout of store o deciding on ownership of store o automation o staff training and many other areas 14. TRANSPORT AND TRANSPORTATION •key logistics activity •often the largest single cost item •ensuring transportation includes: ochoice of mode of transport oselection of a transport route oensuring that the regulations of the country of transport are not exceeded oselection of a carrier Carrier •transport operator •realizes its own movement in space and time by means of transport •producer and implementer of transport services on the market, i.e. sells transport services • Transporter •carrier customer - manufacturer, trader, exporter, importer •often the owner of tangible goods •it may be itself a carrier if he owns a fleet (own or leased) and operates a transport for his own use •if the fleet is not owned by the transporter, the entities providing the transportation are usually entered into the relationship - shippers, intermediaries, associations of transporters, etc. Speed of transport •the speed of the vehicle in a particular section of the route •maximum speed vs. average speed Speed of transportation •in freight transport, the total time it takes to transportation of goods (consignments) from place to destination, including the time required for transshipment •in passenger transport, the time elapsed between the start of the journey and its end, including transfers and the time spent waiting for connections LOGISTICS COSTS • caused by logistics activities • total cost concept - it is not possible to focus on individual isolated logistics activities, but to reduce the total costs of logistics activities • the conflicting nature of logistics costs - reducing costs in one area can result in costs in other areas 1.COSTS RELATED TO CUSTOMER SERVICE • customer service support: ocosts associated with processing orders ocosts of securing spare parts ocosts of servicing ocosts of returning the goods • insufficient level of customer service - costs associated with the loss of sales opportunity • determining the level of customer service based on the identification of customer needs • 2.TRANSPORTATION COSTS • caused by the transportation of goods • they can be analyzed from a variety of aspects (according to customers, products, channel type,…) • varies greatly depending on: odelivery volume odelivery weight otransportation distance oplace of origin odestination otype of means of transport 3.STORAGE COSTS • arise in the process of storing goods •affected by the choice of location of production capacities and storages of the company • include all costs incurred in changing the number or location of storages 4.COSTS OF ORDER PROCESSING AND IS • costs associated with : o orders processing o logistics communication o demand forecasting • order processing system and IS mean an extensive investment - they significantly contribute to the level of customer service and cost management • 5.QUANTITY COSTS • originate in a change in quantity • include the following: opreparatory costs oloss of capacity due to outages when replacing a line or switching to another supplier omaterial handling, planning and shipping oprice differences due to the purchase of different quantities oorder costs associated with placing and tracking orders 6.STOCK MAINTENANCE COSTS • some of the most problematic - they very often evoke additional costs • high costs of maintaining stocks usually indicate other problems • arise as a result of log. activities: ostock management opackaging oreverse logistics (disposal of waste material, packaging,…) • four main categories of stock maintenance costs: ocapital costs ocosts related to services (insurance, taxation) ostock storage costs (costs of changing storage area depending on stock levels) ocosts of risk (obsolescence of goods, theft, damage during movement) o Summary of the lecture You can: •List and briefly characterize all 13 logistics activities •Explain the difference between transport and transportation •Define logistics costs and assign activities that result from them • •