Logistics and Supply chain Management

Dr. A.Shakuntala

Logistics and Supply chain Management

Logistics is defined as the process of anticipating customer needs and wants, acquiring the capital, materials, people, technologies and information necessary to meet those needs.

Logistics and Supply chain Management

Logistics management 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.

Logistics and Supply chain Management

Logistics Management includes the design and administration of system to control the flow of materials, work-in-process, and finished inventory to support business unit strategy.

Logistics and Supply chain Management

Major features of Logistics Management: It ensures a smooth flow of all goods such as raw materials, work-in-process and finished goods. It has the ability to meet the customer expectations and requirements of goods. It ensure the delivery of quality product.

Logistics and Supply chain Management

It offers the best possible customer service at the least possible cost. It is an integration of various managerial functions for optimization of resources. It deals with movement and storage of goods in appropriate quantity. It enhances productivity and profitability.

Logistics and Supply chain Management

Components of Logistics Management: Generic component -Customer service - Corporate vision - Service expectations

Logistics and Supply chain Management

Primary components: Network design Transportation Inventory management Order processing

Logistics and Supply chain Management

Supportive components: Storage and warehousing Materials handling Protective packaging Procurement Information Forecasting

Logistics and Supply chain Management

Logistics Functions: Procurement function Production function Physical distribution

Logistics and Supply chain Management

Procurement Function: ensures a smooth flow of raw materials, parts and components of specified quality and quantity from quality certified suppliers to the production centers. Inputs need Sources study Quality Negotiations and supply contracts Order placement Shipment

Logistics and Supply chain Management

Production Function : deals with efficient and effective management of work-in-process inventory and its flow between the different stages of manufacturing. Inputs Production schedule Inventory management Storage Packaging Material handling

Logistics and Supply chain Management

Physical Distribution Function: refers to the movement of finished goods from the last point of production to customers or end users. Output inventory Protective packaging Customer Order processing Distribution warehousing Transport

Logistics and Supply chain Management

Integrated Logistics System:
To ensure better customer service by appropriate value addition for superior customer values To ensure higher productivity To avoid a repetition of similar types of logistical functions by different departments at different levels To properly monitor the performance of existing logistics system so that a continuous improvement in the system can be made possible in time.

Logistics and Supply chain Management

Supply chain refers to the way that materials flow through different organisations, starting with raw materials and ending with finished products delivered to the ultimate consumer.

Logistics and Supply chain Management

Supply chain may involve the following stages: Customers Retailers Wholesalers/distributors Manufacturers Component/raw material supplier

Logistics and Supply chain Management

Decision Phases in a Supply Chain: Supply chain strategy or design Supply chain planning Supply chain operation

Logistics Positioning
Logistics Positioning is concerned with alternative ways that logistics can be deployed as a core competency of a firm.

Logistics Positioning
The various topics relevant to logistics positioning are: 1. Logistics reengineering 2. Logistics environment assessment 3. Time based logistics 4. Alternative logistics strategies 5. Strategic integration and 6. Logistics time-based control techniques.

Logistics Reengineering
It provides a framework for implementing system integration principles. Its basic idea is to identify and study the steps required to perform specific work so as to increase the possibility of integrating performance.

Logistics Reengineering
All Logistics Reengineering initiatives have four common factors. System Integration The logic of systems analysis forms the foundation for logistics reengineering.

Logistics Reengineering
Benchmarking consists of a systematic procedure for identifying the best practice and modifying actual knowledge to achieve superior performance. Activity Based Costing it is critical to develop meaningful metrics to measure existing practice and evaluate the relative attractiveness of alternatives. Quality initiatives

Logistics Reengineering
The standard six-step procedure to guide a firms reengineering initiative: 1. Target identification 2. Detailing and developing metrics 3. Internal analysis 4. External benchmarking 5. Evaluation 6. Implementation

Logistics Environmental Assessment

The purpose of considering environmental impact, when formulating logistical strategy is to assess the varied direction and the rate of change related to planned logistical operations. A range of forces external to the enterprise limit the flexibility of logistical operations.

Logistics Environmental Assessment

The type of environmental factors that should be considered are: 1. Inflation 2. Interest rates 3. Energy 4. Population 5. Households 6. Transportation regulations 7. Productivity

Logistics Environmental Assessment

These forces include 1. Industry- competitive assessment 2. Geo market differentials 3. Technology assessment 4. Material-energy assessment 5. Channel structure

Logistics Environmental Assessment

6. Economic-social projections 7. Service industry trends and 8. Regulatory posture.

SOURCING
Sourcing Decisions in Supply Chain Management: Sourcing decisions are high level, strategic decisions regarding what products or services to provide internally and what products to obtain from external supply chain partners. Purchasing includes all those activities associated with identifying needs , locating and selecting suppliers negotiating terms and follow up to ensure supplier performance.

SOURCING DECISIONS
Sourcing decisions that address which products and services will be provided using resources within the firm (known as insourcing) and which will be provided by a firms supply chain partners (known as outsourcing). The sourcing decision is also called as make-or-buy decision.

SOURCING DECISIONS
Purchasing or procurement is the process by which firms acquire raw materials, components, products, services or other resources from suppliers to execute their operations, sourcing refers to the entire set of business processes required to purchase goods and services.

Insourcing
Advantages: High degree of control Ability to oversee the entire process Economies of scale and/or economies of scope.

Insourcing
Disadvantages: Reduced strategic flexibility High capital investment Loss of access to superior products/services offered by potential suppliers.

Outsourcing
Advantages: High strategic flexibility Low investment risk Improved cash flow Access to state-of-the-art products services

Outsourcing
Disadvantages: Possibility of choosing a bad supplier Loss of control over the process and core technologies Communication and coordination may be difficult

Key Sourcing Related Process

Supplier scoring and assessment Supplier selection Design collaboration Procurement Sourcing planning and analysis

Sourcing Strategies
Once the decision has been made to outsource a product or service, the buying firm has to choose between 1. single sourcing 2. multiple sourcing

Sourcing Strategies
In single sourcing, the buying firm depends on a single supplier for all or nearly all of a particular item or service. In multiple sourcing, the buying firm shares its business across multiple suppliers for the same item or service.

Guidelines for Sourcing

Product lifecycle duration Product variations Labour content Intellectual property content Transportation cost Product value Security

TRANSPORTATION
Transportation refers to the movement of products from one location to another, from the beginning of a supply chain to the final customer. Transportation cost is a significant component of the total costs incurred by most supply chain.

TRANSPORTATION
The selection mode of transportation or service offering within a mode of transportation depends on a variety of service characteristics such as Freight rates Reliability Transit time Loss, damage, claims processing and tracing

TRANSPORTATION
Shipper market considerations and Carrier considerations

TRANSPORTATION
The Role of Transportation in Logistics: The movement of materials from one place to another adds value to materials which is referred to as place utility. Time utility is created by warehousing and storing materials and finished goods until they are needed.

TRANSPORTATION
Transportation determines how fast and how consistently a product or material moves from one place to another. This is known as time-intransit and consistency of service.

Characteristics of Transportation
Characteristics of Transportation Modes and Selection: The choice of transportation mode depends on the : Nature of goods Access to carriers Price Speed or transit time Security of goods Government regulations Safety and fit with integrated logistics strategy.

Carrier Characteristics and Selection

The general criteria for carrier selection are discussed below: Price Accessibility Responsiveness Claims Record Reliability

Revenue Management
The use of pricing to increase the profit generated from a limited supply of supply chain assets is known as revenue management. Two forms of supply chain assets are: 1. Capacity and 2. Inventory

Revenue Management
Firms use targeted differential pricing to be successful in revenue management. The value of the product varies in different market segments. The product is highly perishable or product wastage occurs. Demand has seasonal and other peaks The product is sold both un bulk and on the spot market.

Revenue Management
Using Pricing and Revenue Management in Practice: 1. Evaluating the Firms Market Carefully 2. Quantifying the Benefits of Revenue Management 3. Implementing a Forecasting Process 4. Applying optimisation to obtain the Revenue Management Decision

Revenue Management
5. Involving both sales and operations in Revenue Management 6. Understanding and Informing the Customer 7. Integrating Supply Planning with Revenue Management.