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UAA College of Business and public Policy

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Simply put, logistics is the art

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and science of managing time, physical

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space and location.  A related aspect to

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logistics is supply chain management.

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Which is about how organizations link

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together such that the value of the

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whole, supply chain, is higher than the

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sum of individual parts; and the two

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concepts, logistics and supply chain

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management, are intimately related.  Supply

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chain management is like a structure

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like a skeleton.  Logistics is about the

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flow of blood and oxygen to give

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vitality that structure.  You can't have

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one without the other, it's a symbiotic

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relationship.  The other piece that's very

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important is logistics recognizes that

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the world is round not flat.  For example

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when you look at the physical distance

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between Chicago, Illinois and Tokyo, Japan

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it goes through Alaska, but if you look

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on a flat earth map it would look like

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it goes right across the Pacific Ocean.

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We are very much aware that the earth is

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round and that has great implications for all businesses.

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When you think like a logistician and a supply chain manager,

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you are aware of trade-offs and we

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always have to think about how to manage

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trade-offs, that's our great contribution

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to all businesses. For example, if you

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were looking at holding inventory you

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have to bring in items via

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transportation, there's a trade-off there.

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If I want to bring in inventory in a

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just-in-time basis in little increments

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I'm going to have very frequent and high

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transportation costs well maybe you want

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to bring things in therefore in

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infrequent shipments where you're

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bringing it in in bulk so lower your

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transportation costs.  Well then you're

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going to have a lot of inventory to hold

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and draw down so your inventory costs go

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up, there is a trade-off.  Another trade

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off do I want to have centralized

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production or decentralized production?

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If I have centralized production I'm

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going to have to

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bring in a lot of material from far

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distances.  If I have decentralized

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production I may have all of my material

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near my production centers, but I may

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have to distribute over a variety of

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different areas.  I have to think about

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one versus the other; and the biggest of all

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should I source close to me or should I

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outsource?  Should I source from China or

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should I source from somewhere in the

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United States?  These are trade-offs that

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all logisticians and supply chain

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managers think about in terms of how to

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manage.

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When you think about logistics it's needed for every

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business organization that's out there, unless all

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of your production facilities, all of

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your customers, all of your workers, all

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of your resources are all in one place,

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then you need logistics because

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something is going to be spread out

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somewhere.  This represents a transaction

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cost to doing business, logistics is an

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important transaction costs in any

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business.  Take transportation for example

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you're moving something from point A to

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B, how does it mysteriously go from point

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A to B?  There's a transaction cost

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involved there.  Once we understand the

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transaction cost, we might ask can we

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lower that transaction cost?  Are there

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efficiencies to be had or do we have to

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live with it and that is part of the

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cost of doing business?  That is what

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logistics is all about, managing this

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very important transportation or this

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very important transaction cost in all

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businesses.

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An important fundamental principle of logistics is, you

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have to think about the whole system and not

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individual pieces of the system in

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isolation.  Let me give you an example,

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suppose we decided to adjust the Port of

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Los Angeles such that containers from

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China could come in faster, but suppose

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the rail infrastructure that's going to

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get the containers out of the Port of

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Los Angeles and deliver them into the

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Midwest of the United States they're not

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equipped to take on the extra containers

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that are coming out faster. All you're

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going to do is move the congestion point

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away from Los Angeles onto the rail

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system you might even make the

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congestion problem worse.  So it's very

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important to look at the whole system,

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and how we can make the whole system

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flow better, as opposed to just one piece

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in isolation a

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fundamental principle in any business.

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Since logistics and supply chain

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management is necessary for any business

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organization out there.  Let's consider

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the types of jobs you would have in

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going up the supply chain from one end

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to the other.  You have to procure

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resources, inputs, you have to have a

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purchasing manager involved in acquiring

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these items.  Then the items have to be

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stored in inventory, now we're talking

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about an inventory control manager, a

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production manager to take the items and

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turn them into finished products.  Once

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that's done transportation, a

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transportation manager to make sure they

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get to retail outlets, distribution

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centers and then the marketing manager

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to make sure that the final customer is

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aware of what these products are.  Every

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one of these jobs requires a knowledge

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of logistics and supply chain management

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to inform what is going on as something

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has value added as it moves along the

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supply chain from origin to destination.

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Visit us at business.uaa.alaska.edu