UNIT 1 : INTRODUCTION

Logistics is the
process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. ---------- ---------------------------Council of Logistics Management The latest definition for logistics by CSCMP: Logistics is that part of SCM that plans, implements, and controls the efficient, effective, forward and reverse flow and storage of goods, services, and related information between the point of origin and point of consumption in order to meet customers requirements

Supply Chain
Focus on the flow of physical products from suppliers through manufacturing and distribution all the way to retail outlet and customers
Suppliers Manufacturer s Distributers/Whol esalerss Retailers Customers

Key activities/components of Logistics

The logistics activities can be classified into a) core and b) supporting The core activities take place in every supply channel(Eg Transportation) . They contribute the most to the total cost of logistics or they are essential to the effective coordination and completion of the logistics task. These are mentioned below: 1. Customer service 2. Transportation

3. Inventory management 4. Information flows and order processing

Support activities vary based on company A comprehensive list includes: 1. Warehousing (Space determination, stock layout, configuration, stock placement) 2. Materials handling (equipment selection & replacement policies, order-picking procedures, stock storage & retrieval) 3. Purchasing (supply source selection, purchase timing, purchase quantities) 4. Protective packaging (designed for handling, storage, protection from loss/damage) 5. Cooperate with production/operations (specify aggregate quantities, sequence & time production output, schedule supplies) 6. Information maintenance (info collection, storage & manipulation, data analysis, control procedures)

Supply Chain Activities can be further classified based on the level Strategic level:
Decisions that have a long lasting effect of firm. Product design, what to make/buy, supplier selection, partnership decision, no of ware houses, location and capacity of ware houses, manufacturing plant, flow of material in network.

Tactical Level
Decision that are monthly/quarterly. Purchasing decisions, inventory policies, transport strategies.

Operational level
Day to day scheduling lead time quotation, routing truck loads.

Key Components of Logistics

Source Rushton A ,Croucker P, Baker p, The hand book of logistics and distribution management 3d Edition

Logistics Strategy
The three main objectives are Minimizing the variable costs assocaiated with movement of storage Evaluate alternative courses of action: choosing among different warehouse locations, or evaluate alternative transport modes Capital Reduction Minimizing the level of investment in the logistics system. Maximizing the return on logistics assets Shipping direct to customers to avoid warehousing, selecting a just-in-time supply approach rather than stocking to inventory Service Level Provide different and better services than the competition

The Systems and Total Cost Approaches to Logistics

Systems approach indicates that companys objectives can be realized by recognizing the mutual interdependence of the major functional areas of the firm, such as marketing, production, finance, and logistics. Implications of the systems approach: One logistics system does not fit all companies Stock-keeping units (SKUs) or line items of inventory (stocks of goods that are maintained for a variety of purposes) From logistics perspective the proliferation of SKUs means more items to identify, store, and track. Inbound Logistics: Movement and storage of materials into the firm. Materials Management: Movement and storage of materials and

components within a firm. Physical Distribution: Storage of finished product and movement to the customer.

Logistics Managers use the total cost approach to coordinate inbound logistics, materials management, and physical distribution in a cost-efficient manner. This means that all relevant activities should be considered as a whole, not individually. Use of this approach requires understanding of cost trade-offs, in other words, changes to one logistics activity can cause some costs to increase and other to decrease. This is also referred to as a total logistics concept.

A system, which may constitute an integrated mix of components (e.g., equipment, software, people, facilities, data, information, etc.) must have a functional purpose and be directed to the accomplishment of some designated mission objective. If a system is to ultimately accomplish its intended purpose,

there must be a logistic support infrastructure in place and dedicated to the fulfillment of mission objectives. Further, this overall support infrastructure must be addressed from the beginning in the life cycle when system requirements are initially defined and the early stages of planning and conceptual design are in progress. Including life-cycle considerations (and the elements of logistics) in the decision-making Process from the beginning is critical. When addressing the system life cycle, it can be assumed that the different phases will include design and development, construction and/or production, utilization (system operation and support), and retirement (material phase-out and recycling/disposal)

System operation and maintenance flow

Logistics activities in production

Source Blanchard, B.S., Logistics Engineering and Management, 5th Ed., Prentice-Hal(the figures and concept from this text).

Logistics Design Strategy

Logistics System Design & Planning The main issue of the logistics design strategy is that a company needs to link the logistics directly with the corporate strategy. This is best achieved by ensuring that logistics is an integrated part of the corporate plan and that factors related to these functions are used as inputs in the overall planning process

Logistics Information System Design

This strategy should include all of those information-related factors that are vital to support the processes and the physical structure of the operation. Enterprise resource planning ERP), which may support logistics process and network design. Typical information systems that may support logistics process/network design Electronic point of sale (EPOS) Electronic data interchange (EDI) between companies Barcodes / radio frequency identification (RFID) Warehouse management systems Forecasting & Inventory management systems Vehicle routing / scheduling softwares / Fleet management system

Logistics Network Design

These planning issues include aspects related to the physical flow of the product through acompanys operation, such as The manufacturing location from which a product should be sourced The inventory that should be held The selection of the proper distribution network The number and location of ware houses

Logistics Process Design

Logistics planning concerning the processes tackles four (4) major problem areas: Customer service levels Facility location Inventory Decisions Transportation Decisions

Factors affecting Logistics

Competition via customer service Order Cycle shorter order cycle, less inventory required Substitution more substitutable product, higher customer service level required Inventory Effect increase inventory, reduce cost of lost sales but increases cost of inventory and risk

 Transportation Effect: Faster mode increase transportation costs, reduce cost of lost sale lost. Full truck loads have to be ensured Product factors Modular or Integrated Added value to customer Dollar Value - product value increases, cost of warehousing, transportation and inventory increases Density- higher the density, more efficient use of warehouse and transportation space Damage -greater the risk of damage, higher the transportation and warehousing cost Special Handling Requirements Spatial Relationships Distance Factor

Approaches to Analyzing Logistics Systems Materials Management versus Physical Distribution Balanced System Where the inbound logistics is equal to out bound logistics Heavy Inbound Inbound logistics is significant but outbound logistics is

simple Eg Air Craft Manufacturing Heavy Outbound Inbound Simple but heavy Outbound flow Eg :Fertiliser Reverse Systems Cost centers Trade offs Nodes versus links nodes - points where goods stop for processing links - transportation connecting nodes Logistics Channels - network of intermediaries that contribute to efficient flow of goods

Elements of the Supply Chain A simple supply chain is made up of several elements that are linked by the movement of products along it. The supply chain starts and ends with the customer The customer starts the chain of events when they decide to purchase a product that has been offered for sale by a company. The customer contacts the sales department of the company, which enters the sales order for a specific quantity to be delivered on a specific date. If the product has to be manufactured, the sales order will include a requirement that needs to be fulfilled by the production facility. To ensure that the supply chain is operating as efficient as possible and generating the highest level of customer satisfaction at the lowest cost, companies have adopted Supply Chain Management processes and associated technology. Supply Chain Management has three levels of activities that different parts of the company will focus on: Strategic Tactical Operational.