Logistics

Management
Section 1
Preeti Nigam
 Section 1
• Introduction
• Concepts and Significance
• Functions
• Physical Distribution
• Transportation
• Inventory Control
• Warehousing
• Packaging
• Material Handling
• Order Processing
• Location Analysis
 1.1
Introduction,
Concepts and
Significance
 LOGISTICS
• Word, ’Logistics’ is derived from
French word ‘loger’, which means art
of war pertaining to movement and
supply of armies
 Definition
• According to Council of logistics management:
• “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 the customer requirement”.
Logistics Evolution
 CONCEPT OF LOGISTICS
There are two main phases that are important in the
movement of materials:
1. material management and
2. physical distribution; �

Materials management is the timely movement of

raw materials, parts, and supplies. �
The physical distribution is the movement of the
firm's finished products to the customers.

Both phases involve every stage of the process

including storage.
 What is Logistics
Inbound logistics + Material Management + Physical
Distribution =Logistics

• Inbound logistics covers the movement of materials received

from suppliers
• Material management describes the movements of material
& components within a firm
• Physical distribution refers to movement of goods outward
from the end of the assembly line to the costumer
• Supply- chain management is somewhat larger than
logistics and it links logistics more directly within the user’s
total communication network & with the firm engineering staff.
It includes manufacturer and suppliers but also transporters,
warehouses, retailers and customers themselves
Importance of logistics

• Transportation cost rose rapidly due to the rise in fuel

prices
• Production efficiency was reaching a peak
• Fundamental change in inventory philosophy
• Product line proliferated
• Computer technology
• Increased use or computers
• Increased public concern of products Growth of
several new, large retail chains or mass merchandise
with large demands & very sophisticated logistics
services, by pass traditional channel & distribution
• Reduction in economic regulation
• Growing power of retailers
• Globalization
 OPERATING OBJECTIVES

1. rapid response
2. minimum variance
3. minimum inventory
4. movement consolidation
5. Quality
6. life-cycle support
 Terms
• Rapid Response Rapid response is
concerned with a firm's ability to
satisfy customer service
requirements in a timely manner.

• Minimum Variance Variance is any

unexpected event that disrupts
system performance.
 Terms
• Minimum Inventory The objective is to reduce
inventory deployment to the lowest level consistent
with customer service goals to achieve the lowest
overall total logistics cost.

• Movement consolidation One of the most

significant logistical costs is transportation.
Transportation cost is directly related to. the type of
product, size of shipment, and distance.
 Terms
• Quality improvement A fifth logistical
objective is to seek continuous quality
improvement.

• Life-Cycle support The final logistical

design objective is life-cycle support. Few
items are sold without some guarantee that
the product will perform as advertised over
a specified period.
 Logistics Functions

• Customers Service
• Demand forecasting
• Distribution communication
• Inventory Control
• Material Handling
• Order Processing
• Part & Service Support
• Plant and Warehouse side selection
• Procurement
• Packaging
• Return goods handling
• Salvage & scrap disposal
• Traffic & transportation
• Warehousing & Storage
 Introduction
• The underlying philosophy behind
the logistics concept is that of
planning and coordinating the
materials flow from source to user as
an integrated system
 Goal
• Thus under a logistics management
regime the goal is to link the
marketplace, the distribution
network, the manufacturing process
and the procurement activity in such
a way that customers are serviced at
higher levels and yet at lower cost.
 COMPETITIVE
ADVANTAGE
• A simple model is based around the
triangular linkage of the company, its
customers and its competitors - the
‘Three C’s’
• The ‘Three C’s’ in
– the customer
– the competition
– the company
 COMPETITIVE
ADVANTAGE
• the most profitable competitor in any industry sector
tends to be the lowest cost producer or the supplier
providing a product with the greatest perceived
differentiated values.

• Value chain activities (shown in Figure 1.5) can be

categorized into two types –
1. primary activities
– inbound logistics, operations
– outbound logistics, marketing and sales, and service
2. support activities (infrastructure, human resource management,
technology development and procurement).
 COMPETITIVE
ADVANTAGE
• To summarize, those organizations
that will be the leaders in the
markets of the future will be those
that have sought and achieved the
twin peaks of excellence:
they have gained both cost
leadership and service leadership.
 MISSION OF LOGISTICS
MANAGEMENT
• The mission of logistics management
is to plan and co-ordinate all those
activities necessary to achieve
desired levels of delivered service
and quality at lowest possible cost.
 Relationship with
Manufacturing & Marketing
• Manufacturing priorities and objectives have
typically been focused on operating efficiency,
achieved through long production runs, minimized
set-ups and changeover and product
standardization.
• On the other hand marketing has sought to
achieve competitive advantage through variety,
high service levels and frequent product changes.