Logistics and Supply Chain Management Essentials
Logistics vs. Supply Chain
| Logistics | Supply Chain |
|---|---|
| Movement & storage of goods (operational focus) | Full network: raw materials → end customer (strategic focus) |
| Includes: transport, warehousing, order fulfillment, distribution, reverse logistics | Includes: Suppliers → Mfg → Warehousing → Transport → Distribution → Info Mgmt |
Main Goal
Right product · right place · right time · at the lowest possible cost.
The Last Mile
Final stage of delivery: from distribution center to the customer. Most expensive & complex segment due to:
- Geographic dispersion of customers
- Urban traffic and congestion
- Fast (same-day) delivery expectations
The Core Idea
The supply chain strategy must match the product type and customer demand.
| Product Type | Right SC Strategy | Wrong Strategy → Problem |
|---|---|---|
| Functional (stable demand, long lifecycle, low margins) | Efficient (lean, low cost) | Too responsive → excess costs, no added value, margins eroded |
| Innovative (short lifecycle, unpredictable demand) | Responsive (flexible, fast) | Too efficient → stockouts, lost sales, customers move to competitors |
| Zara | Agility + Nearshore production | Rapid trend capture, constant stock turnover |
| Amazon | Automation + Scale | Fast delivery, handles very high volumes |
| Toyota | Lean + Continuous improvement | Low cost, high quality, quick responsiveness |
The 6 Supply Chain Drivers
There are exactly 6 supply chain drivers: Facilities, Inventory, Transportation, Information, Sourcing, and Pricing.
| Driver | Key Idea | Main KPIs |
|---|---|---|
| Facilities | More facilities = faster service but higher costs | Capacity, Utilization, Downtime, Delivery Times |
| Inventory | More inventory = better availability but higher holding costs | Inventory Turnover, Safety Stock, Stockout Time |
| Transportation | Faster transport mode = more expensive | Cost per unit weight, Utilization level, Wait times |
| Information | Better data sharing = less bullwhip effect | Forecast Error, Planning Variance, Update Frequency |
| Sourcing | Choice of suppliers affects cost, quality, and lead times | Supplier Reliability, Supply Time, Supply Quality |
| Pricing | Pricing strategy influences demand and SC load | Profit Margin, Unit Variable Cost, Avg Selling Price |
Mini Case: Drivers
Scenario: A retailer has great transportation but poor information systems. Suppliers constantly overstock or understock.
Problem: Information driver is weak → high Forecast Error → bullwhip effect across the whole chain.
Fix: Implement shared demand-data systems (EDI, VMI) to improve visibility and reduce forecast errors.
Technology and Employment
Technology increases productivity but shifts job tasks. It does not permanently destroy more jobs than it creates (net +78M jobs by 2030, WEF Future of Jobs Report 2025).
3 Ways Technology Affects Jobs
| Type | Definition | Example |
|---|---|---|
| Substitution | Technology replaces a job entirely | Telephone operators replaced by automation |
| Augmentation | Technology makes workers more capable | Warehouse workers using exoskeletons |
| Creation | New jobs emerge because of technology | Drone operators, AI trainers, data analysts |
Scaling: Doing More with Fewer
Technology augments human labor so fewer workers can produce more output.
Mini Case: Technology
Scenario: Amazon Kiva robots replace warehouse pickers, but new roles emerge for robot technicians and data specialists.
Analysis: Substitution + creation happen simultaneously. Net employment stays positive; tasks shift, not just disappear.
Key Technologies
| Technology | Use in Logistics |
|---|---|
| IoT | Real-time tracking of goods and assets |
| AI / Big Data | Demand forecasting, route optimization |
| Robotics / Automation | Automated picking, sorting, and packaging |
| ERP Systems | Integrated planning across all SC functions |
| Blockchain | Traceability and transparency across the chain |
| Drones / Autonomous Vehicles | Last-mile delivery innovation |
Distribution Network Types
There are 6 distribution network types, each with different cost, service, and inventory trade-offs.
| # | Network Type | How it Works | Best For |
|---|---|---|---|
| 1 | Manufacturer Storage (Drop Shipping) | Manufacturer ships directly to customer. | High-value, low-demand, wide variety |
| 2 | Manufacturer Storage + In-Transit Merge | Items from different manufacturers merged at a carrier hub. | Multi-part orders |
| 3 | Distributor Storage with Carrier Delivery | Inventory held at distributor; carrier does the last leg. | Medium-demand products |
| 4 | Distributor Storage with Last-Mile Delivery | Distributor or retailer delivers using their own fleet. | Bulky goods, grocery delivery |
| 5 | Storage with Customer Pickup | Customer collects from a designated pickup point. | Dense urban areas |
| 6 | Retail Storage with Customer Pickup | Inventory stored locally at retail stores. | High-demand, fast-moving products |