3. General flows interaction scheme
So-called synergy effects or synergy relations have characterized logistical coordination.
Synergy effect – mutual support of the system elements. Synergy relations are common first off all in logistic systems. They are aimed to increase general effect comparatively to the sum of the effects of the system elements. Analogy on the system level – mutual relations enhancing between relations of the separate logistic systems.
In the long term – depend on the logistic strategy. Global logistic strategy (EC as an example) – formation of stable trade-economic relations between the countries or groups of countries on the basis of international labor division, specialization and industry cooperation.
Logistic processes and interaction of the flows are presented in the certain economic categories called logistic systems.
Identification of the systems – by classification and structure.
Phase, functional and institutional divisions.
Institutional:
Micro-logistic system: production, service enterprises, logistic enterprises
micro-logistic subsystem – organization internal systems – supply, processing, etc.
Meta-logistic system: forms of cooperation of production, distribution, logistic services enterprises.
Mezo-logistic system: cooperation of meta-logistic systems. Integration of all participants of logistic process from the material source original till the consumer. Eg. Systems of regional supply, regional safety, if its possible to localize logistical flows within their borders.
Macro-logistic system: Integration of logistic flows within the country. Eg. National transportation system, system of strategic reserves, defense system etc.
International macro-logistic system: globalization of world economy, European integration. Eg: international transportation systems, information systems, safety systems (best example - EC).
Division by phases:
By Subsystems: in the supply sphere, In the production sphere, in Distribution sphere, Waste materials recycling sphere.
Division by functions:
Subsystems of: transportation; storage; packing; customer services; quality controlling, etc.
Logistic as a science: to develop models of flows interactions.
It is important to organize production, purchasing and supply, storage and transportation as a one whole unit.
Logistic – is an implementation of system theory in the sphere of optimization of material flows.
Start to project logistic model – from analysis of marketing information (supply and demand analysis).
4. Optimization of logistical operations
Logistic has very high potential of economic effectiveness.
Sometimes it is difficult for the logistic system to guarantee at the same time the maximum service to clients and lowest distribution costs. Service presumes storage of big inventories, perfect transportation system, and a numerous warehouses network.
To reduce distribution costs – cheap transportation system, storage of small inventory batches, not so many warehouses.
Contradictions:
1. Firms prefer to deliver goods by railways (river or sea transport) instead of plains. But trains are slower, capital engaged – less turnover.
2. Usage of cheap containers, packing, etc – damage of goods, quality levels.
3. Firms prefer to have small inventory levels, to reduce storage costs. For clients – shortage of goods available, fails of deliveries, emergency cases to produce extra goods and expensive methods of delivery.
Therefore, some firms offer less services (deliveries) but with smaller prices, others – bigger deliveries but for higher prices because of costs growing.
Therefore – firm aims – what’s more important – time of delivery, quality, or costs.
Logistic effectiveness characterized by (characteristics):
1. Inventory levels 2. duration of materials movement along the logistic chain (turnover) 3. duration of the service cycle, quality and level of service 4. batch sizes of goods 5. level of production capacity utilization 6. flexibility, adaptability, etc.
Old methods – division of transportation services and storage. New – united, or coordinated, management of flows distribution. Complex accounting of the costs for materials movement, not only of transport tariffs.
Logistic systems – initiated the term of “logistic costs”. which are related to flows.
Costs structure: main – transportation; warehousing; storage; receiving, loading-unloading, packing, sorting; administration costs.
Research:
Capital invested stays idle in inventories – up to 1/3; customer pays 20-40% of the price for inventory costs (incl. Transport-storage operations);
JIT delivery – to reduce up to 50% inventory and up to 50-70% reduce of producer cycle.
100% logistic costs: in average 45% transport costs, packing, sorting – 25%, administration – 15%, other, incl. customer services (technical issues) – 10-15%.
Ukrainian particulars (to be taken into account while developing logistic models )
1. Undeveloped infrastructure (transport means, communication, etc). reduce the cycles speeds, quality of goods 2. Strong concentration of production and consumption on big enterprises. – intensification of material flows (+), but less flexibility to clients requests. Small enterprises have advantageous here. 3. Big territory – more complex log. systems needed, more inventories and transport-supply costs. 4. Low market saturation [sete’reishen]. Easier to marketing, but difficulties for purchasing management. 5. Weak management (education, research and in practice).
Logistical optimization – reduce of logistic costs along with improving customer service.
It depends on the chosen strategy. However, each element from the logistic costs, related with changes in time, place and form of the logistic products should be useful for the client, thus adding certain additional value.
Separate logistic actions do not add useful value for the customer; but increase costs. Therefore, logistic optimization assumes elimination of such actions.
The potential of such elimination depends on the type of the logistic system and level of integration of its participants.
Optimization – by an optimal ratio of fixed and working capital, and the profits received.
Questions:
The main principles of logistic approach
Logistic subject and types of objects
The categories of logistic flows and transformation of their parameters.
Material flow, its major types and their limits (boundaries)
Introduce the concepts of information and financial flows, characteristic of their parameters and correlation with material flows.
Introduce the concepts of logistic system, synergy effects, logistic strategy and logistic processes.
Identification of flows interactions within logistic systems (by divisions)
Contradictions in logistic systems (from the customer and producer positions)
Characteristics of logistic effectiveness
The category of logistic costs, their structure and corresponding values
General approaches for optimization of logistic costs, Ukr. experience.