Logistic Management

An Supply Chain I mperative

By
Rajeev Sharma
Asstt. Prof.
Center of Business Management
Bimtech
rajeev.sharma@bimtech.ac.in
LOGISTICS
Defined
Planning implementing and controlling the
physical flow of material and finished goods from
point of origin to point of use to meet customer`s
need at a profit
By Philip Kotler
It is essentially a planning process and an
information activity
So A integrative process that optimizes the flow of
material and supplies through the organization
and its operations to the customer
The word logistic has originated from Greek word
Logistikos and the Latin word Logisticus which
means science of computing & calculating
In ancient times it was used more in connection with
moving armies, the supplies of food & armaments to
the war front.
During World War II logistics gained importance in
army operations covering the movement of supplies ,
men & equipment across the border
Today
It has acquired the wider meaning and is used in the
business for the movement of material from suppliers
to the manufacturer and finally the finished goods to
the consumers
Scope of Logistic
It is of critical importance to the organization how it delivers
products & services to the customer , whether the product is tangible
or intangible.
Effective & efficient Physical movement of the tangible product will
speak of intangible services associated with the product and the
organization which is delivering it.
In Case of intangible product , the delivery of tangibles at the right
place & right time will speak about its quality.
On the macro level infrastructure such as Various modes of
transport , transportation equip., storage facilities, connectivity &
information processing are contributing to a larg3e extent in the
physical movement of goods produced in manufacturing , mining &
agriculture Sectors.
Scope of logistics
This speed & reliability in distribution of products &
services contribute to a great extent in the growth of a
country`s domestic & international trade . Logistic cost
as a percentage of GDP across the world is shown in the
following table
Country Logistic cost as a percentage of GDP
Korea 16
China 15
Japan 14
India 13
France 12
UK 11
USA 10

Scope of logistics
India spent nearly $ 50 billion to move material from
one use to another.
So the Public distribution system in the country needs
logistical support for delivering goods at right place on time
and the lowest cost.
At Micro Level logistic plays a critical role in the value
delivery system of business organization to provide superior
customer service i.e. to achieve a desired level of delivered
services and quality at the lowest possible cost.
In a nutshell any productivity improvement that could be
achieved in any part of logistic system,at the micro or macro
level would help in cost reduction and proper deployment of
scare national resources to the productive purposes.
Fact
In a manufacturing org. the business process starts with the
flow of material from the suppliers, progress to the plant, then
to the customer through the distribution channel the
department may excel in their respective function but org. as a
whole their performance may be dismal.
Reason
Lack of Co ordination in their activities
They have different goal to cherish
There is no single agency that coordinates their functions and
homogenizes them.
How to overcome ?
Use of Logistic as a system
Logistic A system approach
Logistic recognizes that all the activities of material
movement across the business process are interdependent
and needs close coordination and these are to be
maintained as a system and not the functional Silos.
System is shown as logistic Mix including following
functional Areas
Order Processing
Information Flow
Warehousing
Inventory control
Packaging
Transportation

Order Processing
Involve following activities
Order checking for any deviation in agreed on negotiated term
Technical details;price;delivery period;payment terms;taxes etc
Checking the availability of material in stock (material
requisition)
Production & material scheduling for shortage
Acknowledging the order, indicating deviation if any
It is routine operation but require great deal of planning training
of people involved and investment to bring about efficiency &
accuracy
In a large organization a system capable of handling thousands of
voluminous orders with minimum human involvement or without
human involvement is a must involving shortened order fulfillment
cycle to have edge over rivals


Information Flow
It is basically information based activity of inventory movement
across the supply chain. Hence role of information system plays a
vital role in delivering superior customer service
This function is required to facilitate the following information
needs
Order Registration
Order checking & editing
Order processing
Coordination means to integrate the total supply chain of the
company with informational needs as to time ,quantity, value e.g
Lead time, rate of consumption , delivery schedule & price of the
material , Transportation time & cost etc.

Warehousing
A storage place wherein finished goods are stored till they are
sold.Effectiveness of an organization`s marketing strategy
depends on making the right decision regarding warehouse.
Nowadays
Warehouse are treated as switching facilities rather than
storage place.It is a major cost center, many customer
problem are the direct result of improper warehousing
management.
Major decision of ware house are as follows:-
Location ,Size & Number of warehousing facilities
Warehouse layout
Design of building
Ownership of the warehouse


Inventory management
Point order problem
That is
How much to order When to order
For this we require
Dependable IMS Independent IMS

Purchase Control Stores control Issue
management
ABC Analysis
VED Analysis Level Management
EOQ & EBQ Analysis MRP System
Perpetual inventory system JIT System
Packaging
It is also a critical element in physical
distribution of the product , which influences
the efficiency of the logistic system this is done
with the view of following :-
Foe handling and damage prevention
For communications
For inter modal transportation
Storage space economy
Thus to reduce packaging cost
Transportation
Foe the movement of goods from supplier to buyer ,
transportation is the most fundamental and important
component of logistic.
E.g. for low unit value products the transportation cost
component is 20% of the product cost.
In logistic cost its share varies up to 65-70% in case of
mass consumed very low unit price products.
Mode of transportation ( Cost & time factor)
Own fleet or Outsourcing
Route Planning
Vehicle scheduling
Are the few decision which are involved in transportation
Three Forces
Which have change the perspective of logistics

Globalization

Focus on Supply chain Management

Outsourcing of Non Core
Competency Functional Area
Globalization
The entire world has become a global village for
marketers because of the liberalization of
economics of most countries and the emergence
of WTO which is forcing business organizations
to supply products beyond the national
boundaries wherever there is a market
opportunity.
In such conditions the role of
LOGISTICS
Will be to provide time and place time and place
utility of the product to the customer
Focus on Supply Chain Management

Business the world over are striving for competitiveness.
In their struggle for survival their focus has shifted to the
supply chain
I.e.
Integrating the process of Procurement , processing &
distributing to deliver value for money to the customer
Two key roles logistics planning & support
are
Value delivery process success of supply
chain management
Outsourcing of Non Core Competency functional
Area
Outsourcing is a acceptable trend in business.
Corporation have realized that doing everything by
themselves does not result in effective & efficient use of
scare resources available to them.
It is better to outsource functional area to experts who can
do job at the lowest cost and that to efficiently &
Effectively.
LOGISTICS
Is one such area where most of business org. do not have
enough expertise thus needs to be outsourced
Thus Logistics have shaped into different service industry
offering complete & customized logistics solutions
Value Chain
It is understood now that an organization`s
competitive Success could only come through either
cost leadership or offering differentiated product and
services
LOGISTIC MANAGEMENT
Can provide both the benefits simultaneously
Through its value chain activities
Which can be categorized into different types
Inbound logistics
operations
Out bound logistics
Support activates e.g HR, Accounts & finace, IT & MIS
etc.




Services
In bound
logistics

O
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r
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t
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s
Out bond
Logistics
operations
S & M
Customer Value
HR
M&M Technology
A&F
Infrastructure
Supply Chain
Procurement
Stores
Stores
Vendor
Operations
Warehouse
Customer
Inbound Logistics
Out Bound
Logistics
Supply Chain

Vendor
Purchase
Stores
RM
Customer
Warehousing
Stores
FG
Inbound Logistics
Out bound logistics
OPERATIONS
P
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t
D
is
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Material flow
Material flow
Information flow
Logistics for Business Excellence
For Business Excellence logistics operation need to be
integrated on the following two fronts
integration of logistic into business

Integration of components of logistics
To achieve the objective of making available right
product at the right place and at a right time at low cost
, every business is required to integrate logistics into the
business process.
For logistic operation to run smoothly, proper
integration amongst the component of logistic process is
a must.

Logistic
HR A/Cs Finance Utilities Marketing PPC QC
Mat. Mng.
IT Others
Organizational Functions
Suppliers Procurement Processing Distribution Customer
Logistic System Component
Order Processing
Inventory Mang.
Warehousing
Transportation Material Handling & Storage Logistical Packaging
Information
In Bound Log.
Out Bound Logistic
In process Log.
LOGISTIC FUNCTION
Objectives of Logistic management


Inventory Reduction
Reliable and consistent delivery performance
Freight economy
Minimum product damage
quick Response
NOTE:
Amongst most of the Indian companies logistics
outsourcing
Has now become an accepted trend for the
following reasons:

Cost Saving
Focus on core Business
Paucity of funds
Reduction in liabilities
Wider Geographical coverage
Cross pollination of better available practice

Warehousing
Nowadays warehousing is used as a switching
facility rather than as a long term storage house.
Attention is paid to

Higher lower shorter
inventory turnover operating cost
cycle time
And in light of these warehouse`s performance is
judged by its productivity and cost performance
while trying to achieve 2 polemic goals.

Customer`s satisfaction lower cost of operation
1
2 3
1
2
We have to decide on 2 factors
Whether to have
Centralized decentralized
warehouse warehouse


It ensures tight control multiple distribution
On inventories and can centers
Operate on EOS
location of sites

Objective
Main
better customer service low operating cost
Ancillary objective

Maximum utilization of storage space
Higher labour productivity
Maximum Asset utilization
Reduction in material handling
I ncrease in inventory turnover
Reduce order filing time
Warehousing Function
3 Functions

Material Storage Function

Material Handling Function

Information Handling Function
Material Storage function
Due to non synchronization of Manufacturing cycle
with that of the consumption cycle of the material ,
storage of the material remains a big hurdle
So material storage is required to accommodate the
following functions:
Holding
Consolidation
Postponement
Break Bulk
packing
Cross Docking
Mixing

Material Handling function

This involves three function


1. Loading & unloading

2. Material Movement

3. Order filing
Information handling function
For this following information is required
Goods inward
Inspection & auditing
Goods outward
Excess Stock
Invoicing
Warehouse expenses
Transit damage & Breakage
Consignment tracking
This all information facilitate quick decision