Module 1 Background Knowledge of Logistics

Chapter 1 A General Introduction of Logistics

Objectives

● To understand the definition of logistics

● To understand the definition of international logistics

● To learn the activities of logistics system

Focus on

● The definition of logistics

● The importance of logistics

● Main activities of logistics system

Text

Lead in

What is logistics

The word “logistics” was first used in the military. It dealt with the supply of materials and equipment to the troops, and it could be traced back to the early American Independent War. The British Army in America depended almost entirely upon Britain for supplies. At the height of the war there were 1, 200 troops overseas, and for the most part they had not only to be equipped, but fed from Britain. Therefore, it had been argued that the defeat of the British in the American Independent War could largely be attributed to logistics failure when the war was over.

During World War II, logistics played a major role. Military forces made effective use of logistics models and forms of system analysis to ensure that materials were at the proper place when needed. After that, logistics was widely used in military and military management. For example, during the Iraq War, an U. S. armored division could consume daily 5,000 tons of ammunition, 555,000 gallons of fuel, 300,000 gallons of water, and 80,000 meals. It all depended on the very effective, magnificent supply. With the development of social economy and advanced technology, logistics is now used more widely in the field of business.

troop[tru:p] n. 军队；组；群

height[hait] n. 身高；顶点

attribute [ə'tribju:t] vt. 归属；把……归于

1.1 The Definition of Logistics

Logistics is a hot topic in China and the whole world. Although there has been the “move” of the goods since the beginning of human civilization, logistics is nothing but a newborn baby, and lots of people still have limited awareness and knowledge about it. So what logistics really is?

It has taken a further 70 years or so for the basic principles of logistics management to be clearly defined. One of the definitions coming from the Council of Supply Chain Management Professionals (CSCMP) (previously known as “Council of Logistics Management”) —one of the world's most prominent organizations for logistics professionals maybe the most authoritative:Logistics is the process of planning, implementing, and controlling the efficient, effictive flow and storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of meeting customer requirements. According to the definition, logistics mainly focuses on procurement and distribution of physical goods. Besides, it is also linked with production, and the key issue is to decide how and when raw materials, and semi-finished goods should be acquired, moved and stored. All these will be extended and developed as the book progresses.

previously ['priviəsli] adv. 以前地

prominent ['prɔminənt] adj. 显著的；杰出的

implement ['implimənt] vt. 实施，执行

extend [iks'tend] vt. 延伸；扩大；推广

1.2 Analysis of Logistics Definition

The basic definition of logistics is quite long. To understand it better, we can analyse it in the following details.

● The essence of logistics is a process of “planning, implementing, and controlling”

Firstly, the definition of logistics involves three activities: “planning, implementing, and controlling”, which is scientific planning, effective implementing, and real-timely controlling, not just one or two.

● The principle of logistics is “efficient, effective flow and storage”

Secondly, the definition of logistics indicates the main status of goods in the logistics is “flow and storage”. How to make it efficient and effective is the principle of logistics designing and management. For example, a company promises that all orders will be executed within 24 hours of receipt, thus the percentage of orders which are actually executed within 24 hours of receipt becomes the standard which is used to estimate whether the logistics is efficient and effective or not.

● The research object of logistics contains “goods, services, and related information”

Thirdly, the definition of logistics also indicates that logistics involves the flow and storage of “goods, services, and related information”. In fact, in the contemporary business environment, a successful logistics system not only contains the flow of goods and service, but also contains the flow of related information. And the latter plays an important role in the whole system;advanced information technology makes it increasingly easy and less-costly for companies to obtain important information to make logistics decision.

● The purpose of logistics is “meeting customer requirements”

Finally, the definition of logistics indicates that the purpose of logistics is“meeting customer requirement”. That is, the company should establish and adopt the suitable strategies on the basis of customer wants, needs, and demands.

essence ['esns] n. 本质，实质；精华

indicate [ˈindikeit] vt. 表明；指出；预示；象征

execute [ˈeksikju:t] vt. 实行；执行

estimate [ˈestiˌmeit] vi. 估计，估价

1.3 The Importance of Logistics

In a yearly study of domestic logistics, the percentage of China's Gross Domestic Product (GDP) that was spent on logistics activities (transportation, inventory, and other administrative costs linked to logistics activities) stood at 20 percent in 1999, while that of the United States just stood at 10.7 percent in 1997, 9.9 percent in 2000, and 8.5 percent in 2004. At this point to consider logistics in the context of business and economy, logistics is an important activity making extensive use of the human and material resources that affect a national economy.

Advanced and professional logistics management is being required by the development of socialism market economy and commodity production; and our economical goal couldn't be realized without the assistance of logistics. For example, the production and consumption in bulk of general merchandise, such as coal, oil, steel and cement, needed to be guaranteed by a high speed increasing of transportation. The improvement of logistics creates important prerequisite for economic development.

domestic [dəˈmestik] adj. 国内的；家庭的

commodity [kəˈmɔditi] n. 商品，货物；日用品

prerequisite [ˌpri:ˈrekwəzit] n. 先决条件

1.4 Main Activities of Logistics System

Logistics refers to the systematic management of the various activities required to move goods from their points of production to the customer. To make a logistics system function, a variety of activities must be executed together.Let's briefly introduce some of these main activities of logistics system.

● Demand forecasting

Demand forecasting refers to effort to estimate product demand in a future time period. An accurate forecasting is essential to effective logistics management. According to it, a company can make decisions such as what kinds and how many raw materials should be ordered from their suppliers; when to start manufacturing and how many finished goods should be transferred or held in each market.

● Inventory

Inventory refers to stocks of goods that are maintained for a variety of purposes, such as for resale to others, as well as to support manufacturing or assembling processes. The inventory requirements of a firm are directly linked to the facility network and the desired level of customer service. To achieve good inventory management, logisticians need to balance the cost of maintaining additional products on hand against the risk of not having those items when the customer wants them. The objective in inventory strategy is to achieve desired customer service with the minimum inventory commitment.

● Transportation

Transportation is the operational area of logistics that geographically moves and positions inventory. It is a very important part of the logistics system. It mainly involves selection of the transport mode, routing of the shipment, compliance with the regulation in the region of the country, and selection of carriers. Commonly, transportation is the most costly logistics activity, and can range from 40% to 60% of a firm's total logistics cost.

● Storage

Storage involves two separate but related activities: inventory management and warehousing. Inventory serves as buffers between supply and demand so that needed product availability may be maintained for customers while providing flexibility for production and logistics to seek more efficient methods for manufacturing and distributing the products. Warehousing refers to places where inventory can be stored for a particular period of time. In the past decades, important changes have occurred with respect to the role of warehousing in contemporary logistics system.

● Packaging

Packaging focuses on protecting the product while it is being shipped or stored. The type of transportation and storage affects packaging requirements. Too much packaging increases costs while inadequate protection can result in merchandise damage and ultimately, customer dissatisfaction.

● Materials handing

Materials handing refers to the short-distance movement of products within the confines of a facility (e.g. plant, warehouse). Logistics managers are concerned with the movement of goods into a warehouse, the placement of goods in a warehouse, as well as the movement of goods from storage to order-picking areas and eventually to dock areas for transportation out of the warehouse to reduce the cost.

● Information management

Information is the key to the success of logistics because it can link all areas of the logistics system together, such as: companies’ internal logistics information system, their suppliers, customers and partners, etc.

● Procurement

Procurement is concerned with purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Since these input can have direct impact on both the cost and the quality of the final product/service offered to the customer, this activity is important to the overall success of the logistics effort.

● Production planning

The primary logistical responsibility in production planning is to participate in formulating a master production schedule and to arrange for its implementation by timely availability of materials, component parts, and work-in process inventory. Thus the overall concern of manufacturing support is not how production occurs but rather what, when, and where products will be manufactured. Thus, production planning is at the center of the entire logistics process. Yet it is often viewed as a stand-alone entity with its own objective and agenda.

● Customer service

Customer service is a complex topic and one that concerns other functional company areas. Decisions about inventory, transportation, and warehousing relate to customer service requirements. Customer service involves making sure that right person receive the right product with the right quantity at the right place and at the right time in the right condition at the right cost.

● Order fulfillment

Order fulfillment is the final key activity. Its costs usually are minor compared to that of transportation or inventory maintenance. Nevertheless, order fulfillment is an important element of the total time that it takes a customer to receive goods or service. It is also the activity that triggers product movement and service delivery.

inventory [ˈinvəntri] n. 存货，存货清单

assembling v. 装配（assemble [əˈsembl]的ing形式）；聚集

commitment [kəˈmitmənt] n. 承诺，保证

compliance [kəmˈplaiəns] n. 顺从，服从；承诺

buffer [ˈbʌfə] n. 缓冲

flexibility [ˌfleksi'biliti] n. 灵活性

contemporary [kən'tempərəri] adj. 当代的；同时代的

inadequate [inˈædikwit] adj. 不充分的，不适当的

ultimately ['ʌltimitli ] adv. 最后；最终

dock [dɔk] n. 码头；船坞

internal [inˈtə:nəl] adj. 内部的；内在的；国内的

inbound [ˈinˌbaund] adj. 入境的；归本国的；回内地的

formulate [ˈfɔ:mjuleit] vt. 规划；用公式表示；明确地表达

agenda [əˈʤendə] n. 议程；日常工作事项

fulfillment [fulˈfilmənt] n. 履行；实行

trigger [ˈtriɡə] vt. 引发，引起；触发

Notes

1. Council of Supply Chain Management Professionals

供应链管理专家委员会

2. China's Gross Domestic Product (GDP)

中国的国内生产总值（GDP）

Exercises

Ⅰ. Answer the following questions in English.

1. What is the definition of logistics?

2. What kind of logistics activities may cost most in a company?

3. What does a successful logistics system contain?

4. What activities do storage involve?

5. What are the main activities of logistics system?

Ⅱ. Fill in the blanks with the following words or phrases in the box.

1. Consequently, the fast rise in bulk of foreign tourists may eventually______the decline of local tourism.

2. Good self-esteem is a______for a happy life.

3. We can supply any reasonable quantity of this______.

4. In 1989, about a year after we went public, we had a horrible problem related to______management.

5. Because of its______, we can mold software into any form to do almost anything.

6. That happened to millions of people two years ago______the world food crisis.

7. In the process of practice it is not______. This is because I should improve my English level.

8. These companies represent the______of the American spirit—the promise that anyone can succeed in this country if you have a good idea and the determination to see it through.

9. Of course there are lots of ways we can______the cycle, but this is a simple one, and these are steps that we're all familiar with at this point.

10. If a question asks you to take a position on some issue, try to______a more nuanced answer.

Ⅲ. Translate the following sentences into English.

1. 物流涉及采购、仓储、运输、配送等多种功能。

2. 你在物流方面所做出的任何改进，其结果都会在一定程度上节约业务成本。

3. 物流有时候被描述成是实现“六个正确”的艺术。

4. 所有以产品为导向的买卖都把物流当成做生意的一项成本。

5. 存储包含两个独立但相关的活动：库存管理和仓储。

Ⅳ. Translate the following sentences into Chinese.

1. In fact, in the contemporary business environment, a successful logistics system not only contains the flow of goods and service, but also contains the flow of related information.

2. An important characteristic of any product is its availability at the place where a customer wishes to consume it.

3. The overall goal of logistics is to achieve a targeted level of customer service at the lowest possible total cost.

4. Excessive inventory will ultimately result in higher than necessary total logistics cost.

5. Logistics has received more and more attention from different sectors of the society.