Learning Outcomes

Understand the origin and importance of logistics as

a functional area
The various functional Interface between logistics

and other areas

Understand the importance of logistics and customer

service along with other related concepts.

What is Logistics
The part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption inorder to meet customer requirements
- Council of Supply Chain Professional and Management

Logistics is the information based activity of material movement

from suppliers to manufacturer and finished goods to the customer.

Martin Christopher

Logistics System Components

Order Processing Customer Service Inventory Planning

Information System

LOGISTICS

Packaging

Warehousing

Transportation

Procurement

Reference: Supply Chain Management ; V.V. Sople, 2011

Logistics Chain

Reference: Supply Chain Management ; V.V. Sople, 2011

Logistics Chain
Inbound Logistics Operation preceding manufacturing. This includes movement of raw materials and components from supplier to the plant. Process Logistics Operations directly related to processing. This includes storage and movement of raw materials and components within the factory premises as per the manufacturing schedule.
Outbound Logistics Operations following the manufacturing. This includes warehousing, transportation and inventory management of finished goods.

Logistics in Practice
Gulf war in 1991: largest military operation lasting for four days. - Planning processed months before actual war executed - 1,25,000 ground troops to defend the area - Area to defend stretching from 175 km long and 300 km deep into the desert. - 500 tactical cargo trucks and 200 wheeled vehicles - 35,000 tones of ammunition / 5.6. million gallons of fuel, ration on 2million meals, 1 million gallons of water

Class Activity : Logistics in Practice Dominos Pizza The Kitchen

Conceptual Difference between Logistics and SCM

Logistics : Connects the Source of Supply with the Source of Demand To achieve this, all components of the logistics system and supporting information

system are put into operation with the objective of delivering the right product at
the right place and at the right time with the least cost Logistics makes it possible to deliver a product to the customer anywhere, irrespective of its manufacturing location. When these gaps tend to be larger and the risk of dilution of service level is high, an integrated system is needed to make the operations seamless for product and information flow.

Conceptual Difference between Logistics and SCM

Supply Chain Management helps to close this gap by enhancing and the
aligning the capabilities through enablers such as Technology collaboration and human resource Skills. The Supply Chain banks on the relationship with suppliers for performance cycle reduction, quality improvement, freight minimization and reduction in cost of material and transactions. The supply Chain tries to understand the demand signals and profiles the target

customer base to adjust itself for planning and execution of customer requirement
in accordance with desired service level.

Conceptual Difference between Logistics and SCM

Logistics capabilities supplement supply chain operations
The efficiency and effectiveness of inventory movement across the supply chain is largely dependent on the capability of logistics management. Cost reduction and customer service enhancement in the supply chain are not possible without efficient logistics operations such as warehousing, material handling, inventory control, etc. Thus the success of the supply chain is dependent on logistics The degree of success depends on the level of integration between the enablers.

Logistics Integration

Reference: Supply Chain Management ; V.V. Sople, 2011

Physical supply materials management inbound logistics

Physical distribution outbound logistics

Importance of Logistics
Backbone of trade and business

Leads to customer satisfaction

Integrator

Competitive edge
Wins or losses wars

Logistical cost

OPERATIONAL OBJECTIVES OF LOGISTICS

Rapid Response: Satisfy customer response Minimum Variance: Imperative to improve overall productivity Minimum Inventory Movement Consolidation : Transportation cost Quality : Consistent and continuous quality improvement Life Cycle Support : Reverse Logistics.

COMPONENTS / FUNCTIONS OF LOGISTICS

LOGISTICS FUNCTIONS

Scope of Logistics
The logistics activities for which the logistics manager might be responsible are as under:

Transportation Warehousing and storage Industrial packaging Materials handling Inventory control Order fulfillment Demand forecasting Production planning / scheduling Procurement Customer service Facility location Return goods handling Parts and Service support

Business Process Impacted by Logistics

Customer order fulfillment Manufacturing flexibility Product development Reverse logistics Customer relationship Supplier relationship Customer service Demand management

Factors Influencing Growth of Logistics Industry

Investment in infrastructure sector

Streamlining of indirect tax structure

Trade growth (National and Global)

Globalization of manufacturing system

Customer Order Cycle and Order Processing Cycle

Customer order cycle includes: Order preparation Order Transmit Order entry Order filling Order status reporting ORDER PROCESSING CYCLE

1- Need for a product 2- Place the order with supplier 3- Supplier: Quantity ordered is available in stock / start production / 4- Receipt of order given to the customer 5- Picking and Packaging instructions are issued 6- Products are transported and delivered to customer 7- Customer verifies the product.

Logistics Interface
Logistics by nature focuses on processes that cut across traditional functional boundaries

Logistics and Manufacturing Interface:

Relates to the length of the production run Manufacturing decisions requires managers to carefully weight the advantages and disadvantages of long versus short production runs and their impacts on inventories. The trend is towards pull systems as opposed to push manufacturing systems inorder to lower inventory levels Interface between logistics and manufacturing is critical due to global sourcing. Logistics and Finance Interface:

Finance and accounting systems provides authenticate the quality of logistics data and analysis. It is
critical for measuring supply chain tradeoffs and performance

Logistics Interface

Logistics and Marketing Interface: Place implies the right product at the right time. Logistics and marketing interface is gaining importance due to the following reasons: Brand Loyalty is Decreasing Customers are willing to accept substitutes

All about developing a client and retaining them

Logistics: Success Factors

Close coordination with the suppliers Reduce the inventory levels Faster replenishment cycle Flexible in the system Innovations in value additions in customer service

Achievement of Competitive Advantage Through Logistics

Triangular linkages of the three Cs Customers Seek Benefits at acceptable cost Value Cost Differential Value

Asset Utilization

Asset Utilization

Factors achieving commercial success Commercial success

Cost Advantage

Value Advantage

Achievement of Competitive Advantage Through Logistics

Productivity and value advantage matrix

Value Advantage

Productivity Advantage

Value Chain activities

Value Chain Activities Primary Activities Secondary Activity

Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Infrastructure HRM Technology Development Marketing and Sales Procurement

Achievement of Competitive Advantage Through Logistics

Factors affecting value and productivity advantages

Value Advantage: Customized Services Reliability Responsiveness

Productivity Advantage: Capacity Utilization Asset Utilization Inventory Reduction Integration with Suppliers

The 7Rs of Purchasing / Customer Expectations

Right Material
Concept of Lead Time How long the customer has to wait Characterized as speed and responsiveness Volkswagen calls this time : Customer to customer lead time Lead times can vary from 0 to years Customers are prepared to pay a premium for a shorter

Right Quantity

Right Condition
Right Time Right Source

Right Service
Right Price

lead time
Consequences: Stock out rates 3 components of lead time: Review time ; manufacture time ; transit time

Logistics Evolution
4 Party Logistics
Alliance with 3 PL Service provider IT Organization IT/Logistics Consultant

3 Party Logistics

Outsourcing Warehousing Transportation Inventory Order processing

In-house logistics

Self-reliant Organization performing all logistics operation

STRATEGIC ALLIANCES:3PL AND 4PL CONCEPTS

Third Part Logistics Service Provider 3PL companies are strategic partners with the OEMs

External to the company

3PL activities include: warehousing , multi modal transportation, inventory management, packaging,etc The company which provides the complete logistics service is called the integrators. The objectives of 3PL are reduction in risk and liability ; value added services to customer, Sources of process improvement; wider market coverage

STRATEGIC ALLIANCES:3PL AND 4PL CONCEPTS

Fourth Party Logistics Service Provider: Originated from Accenture consulting company Due to complex supply chain network no single company can manage the complete network. Need for an organization who comes together with the OEM to manage and integrate the complete end to end supply chain. Key components of 4PL are as under: Architect / Integrator: Change Leaders / supply chain visionary/ Project management / continuous innovation Control Room : Decision Makers/ continuous improvement/ manage multiple 3PL/ Experiences Logistician Supply Chain Infomediary: IT System Integration/ Real time data capture/Convert data into information/technical support Resource providers: Transportation asset provider / Warehouse / cross-docking / procurement service / packaging Service

Logistics Performance Cycle Structure

Integrated logistics can be analyzed by means of performance cycle which emphasizes on the interface and links between the suppliers, the firm and the customers. It is integral t marketing and sales performance since it provides timely and economic product availability and delivery to customers
Material Source

Components parts Plant Assembly Plant Distribution Warehouse Customer

Performance cycle

Transaction creating Activities Advertising and selling

Physical fulfillment activities Physical distribution

Physical Distribution Performance Cycle Structure

Order Processing

Order Transmission

Customer Order

Order Selection

Order Transportation

Customer Delivery

Manufacturing Support Performance Cycle Structure

Manufacturing Support Performance cycle provides Production Logistics Positioned between physical distribution and procurement operations Objective is to facilitate the what, where and when of the production and not how After the completion of the manufacturing cycle the finished goods are allocated and deployed directly to the customer or the distribution warehouse.

Procurement Performance Cycle Structure

Objective is to : Conform to expected/ standard time as delayed performance results in disruption To establish Safety stock Ensure operational consistency by reducing the planned performance cycle, faster

order cycles, reduced inventory risk and improved inventory turnover performance.

Ways to reduce the Performance cycle uncertainty: Use of EDI Monitoring daily changes in the workload Ensuring consistency in operations.

Procurement Performance Cycle Structure

Sourcing

Order Placement and Expediting

Receiving

Transportation

S U P P L I E R

Summary of Chapter 1
Understand the concept of Logistics Military Origin of the Concept of Logistics Importance of Logistics Operational Objectives of Logistics Components of Logistics Scope Of Logistics Customer Order Cycle Order Processing Cycle Lead Time Achievement of competitive advantage through Logistics 3PL and 4 PL concepts Interface between logistics and other areas 7 Rs of customer expectation Performance cycle Structure