Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

1.1.4 The Supply Chain, Supply Chain Management, and Integral Logistics Management

Intended learning outcomes: Differentiate between a logistics network, a production network, a procurement network, a distribution network, and a service network. Describe the concept of the supply chain. Produce an overview on supply chain management and on integral logistics management.


For products of a certain complexity, design and manufacturing are often distributed among several companies or among different organizational units within a company. From the perspective of the individual manufacturer, the reasons for this are, for example:

  • Quality: Some technologies or processes may not be mastered successfully enough (pro­blem of effectiveness, that is, achieving the given or expected quality standard).
  • Costs: Certain technologies or processes cannot be implemented economically (problem of efficiency, that is, the actual output com­pared with the output expected, with regard to the use of means).
  • Delivery: Some processes are not rapid enough, or they are unstable over time.
  • Flexibility: Customer demand may show rapid variation; the company’s own competencies or capacity cannot be adapted quickly enough.

As a result, a network is formed of the sublogistics of a number of companies that participate in design and manufacture. The simplest form of such a network is a sequence or chain. A tree structure leading to an assembled product is not uncommon.

A logistics network is the joining of the logistics of several organizational units, that is, companies or parts of companies, to form comprehensive logistics. 
Production network, or production system, and procurement network can be used as synonyms of logistics network.

The end user of a logistics network is the consumer.

Figure 1.1.4.1 shows an example where three organizational units form a logistics network. Here it is a logistics chain.

Fig. 1.1.4.1        Three organizational units in a logistics chain.

The logistics chain between two stores is crucial. The logistics of the second organi­zatio­nal unit in Figure 1.1.4.1 must not be viewed in isola­tion. The logistics of the first organizational unit and the logistics of the third organizational unit will have a direct influence on the logistics of the second organizational unit, since there is no buffer between the two stores.

From the perspective of the end user, distribution and service networks also belong to value-added, for only with delivery and possibly service is the customer order fulfilled.

A distribution network, or distribution system, is a group of interrelated facilities — manufacturing and one or more levels of warehousing — linking the production, storage, and consumption activities for spare parts and finished goods inventory [APIC16].

A service network is a group of interrelated facilities for performing all services in connection with material or nonmaterial goods.

This leads us to the following general and comprehensive terms used today for all of the types of networks mentioned above:

A supply chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical goods, and cash [APIC16]. A comprehensive defini­tion of supply chain also includes the networks for disposal and recycling. 

A supply chain community is the set of all partners that define the complete supply chain (cf. [APIC16]).

With investment goods, supply chains do not appear in isolation. Figure 1.1.4.2 shows that in the case of investment goods, multi­dimensional supply chains arise.

Fig. 1.1.4.2        Multidimensional supply chains for the design and manufacturing of investment goods.

One dimension is the multilevel nature of the network. The user is in turn part of another supply chain. That network may produce other investment goods, and so on. For example, with a tool machine, products may be manu­factured that are used as tools or as components in the manufacture of other machines.

Another dimension is the product life cycle. A close look shows that reverse logistics, that is, a supply chain dedicated to the reverse flow of the product, such as through returns, disassembly, and recycling, can lead to a further life cycle — through redesign and remanufacturing to reuse — as another product, if need be.

Supply chain management (SCM) is the design, planning, execution, con­trol, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging world­wide logistics, synchronizing supply with demand, and measuring perfor­mance globally ([APIC16]). 

Integral logistics management is the management of the comprehensive supply chain, that is, along the entire product life cycle, within and across companies.


Course section 1.1: Subsections and their intended learning outcomes

  • 1.1 Basic Definitions, Issues, and Challenges

    Intended learning outcomes: Produce an overview on terms of the working environment and of business life. Explain service orientation in the classical industry, product orientation in the service industry, and the industrial product-service system. Disclose the product life cycle, the synchronization of supply and demand, and the role of inventories. Produce an overview on supply chain management, the role of planning and control as well as the SCOR model.

  • 1.1.1 Important Terms of the Working Environment and of Business Life

    Intended learning outcomes: Produce an overview on terms of the working environment, such as work, task, process, method, object, etc. Explain terms of business life, such as value-added, business process, material, product, service, classical (or conventional) industry, etc. Present terms of the service domain such as customer service, service in the originary sense, service industry, etc.

  • 1.1.2 Service Orientation in the Classical Industry, Product Orientation in the Service Industry, and the Industrial Product-Service System (IPSS)

    Intended learning outcomes: Differentiate between a (primary, ore core) product, a product in a broad sense, and a product in the most comprehensive sense. Produce an overview on industrialization of service. Present the industrial product-service system. Explain product-oriented, use-oriented, and result-oriented services as well as their degree of intangibility.

  • 1.1.3 The Product Life Cycle, Logistics and Operations Management, the Synchronization of Supply and Demand, and the Role of Inventories

    Intended learning outcomes: Produce an overview on the product life-cycle. Differentiate between terms such as logistics, operations, logistic management, operations management, and value-added management. Describe supply, demand, lead time, and costomer tolerance time. Explain the problem of temporal synchronization between supply and demand as well as the role of various kinds of inventories in solving this problem.

  • 1.1.4 The Supply Chain, Supply Chain Management, and Integral Logistics Management

    Intended learning outcomes: Differentiate between a logistics network, a production network, a procurement network, a distribution network, and a service network. Describe the concept of the supply chain. Produce an overview on supply chain management and on integral logistics management.

  • 1.1.5 The Role of Planning and Control and the SCOR Model

    Intended learning outcomes: Produce an overview on planning, in partcular on supply chain planning. Differentiate between production planning and control (PPC) and a PPC system. Present the Supply Chain Operations Reference (SCOR) model. Describe levels 1 and 2 of the actual SCOR model.

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