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LOGISTICS

LOGISTICS
DEFINITION
According to Philip Kotler Logistics is 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
It is a integrative process that optimizes the flow of material and
supplies through the organization and its operations to the
customer
The mission of logistics is getting the right amount of the right
products to the right place at the right time at the lowest
possible price.
Logistics Management may be defined as the practice of
organizing the cost-effective flow of raw materials, in-process
inventory, finished goods, and related information from point of
origin to point of consumption to satisfy customer requirements.

LOGISTICS
ORIGIN
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

LOGISTICS
Scope
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.

LOGISTICS
Scope
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
Korea
China
Japan
India
France
UK
USA

Logistic cost as a percentage of GDP


16
15
14
13
12
11
10

LOGISTICS
Objectives of Logistic management
Inventory Reduction
Reliable and consistent delivery performance
Freight economy
Minimum product damage
Quick Response

LOGISTICS- SYSTEM APPROACH


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.

Logistic Mix includes the following functional areas


Order Processing
Information Flow
Warehousing
Inventory control
Packaging
Transportation

LOGISTICS-FUNCTIONAL AREAS
ORDER PROCESSING
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

LOGISTICS-FUNCTIONAL AREAS
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.

LOGISTICS-FUNCTIONAL AREAS
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

LOGISTICS-FUNCTIONAL AREAS
INVENTORY

The raw materials, work-in-process goods and completely


finished goods that are considered to be the portion of a
business's assets that are ready or will be ready for sale.
It is a point order problem, that is- How much to order? &
When to order? For this we require
Purchase Control
Stores control
Issue management
ABC Analysis
VED Analysis
EOQ & EBQ Analysis
Perpetual inventory system
JIT System

LOGISTICS-FUNCTIONAL AREAS
PACKAGING

Packaging can be described as a coordinated system of


preparing goods for transport, warehousing, logistics, sale,
and end use

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 : For handling and damage prevention
For communications
For inter-modal transportation
Storage space economy
Thus to reduce packaging cost

LOGISTICS-FUNCTIONAL AREAS
TRANSPORTATION
For the movement of goods from supplier to buyer ,
transportation is the most fundamental and important
component of logistics. For example 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.

Decisions involved in transportation includes


Mode of transportation ( Cost & time factor)
Own fleet or Outsourcing
Route Planning
Vehicle scheduling

FORCES OF CHANGE
Three Forces which have change the perspective of logistics
Globalization
Focus on Supply chain Management
Outsourcing of Non Core Competency Functional Area

FORCES OF CHANGE
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

FORCES OF CHANGE
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
Supply Chain Management is an integrating function
with primary responsibility for linking major business
functions and business processes within and across
companies into a cohesive and high-performing business
model.

FORCES OF CHANGE
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

LOGISTICS AND SCM


Supply chain management (SCM) is the management of
a network of interconnected businesses involved in the
provision of product and service packages required by the
end customers in a supply chain
Logistics is that part of that supply chain process that
plans, implements, and controls the efficient flow and
storage of goods, services, and related information from the
point of origin to the point of consumption in order to meet
customers requirements.
SCM is focused on the integration of all business processes
Logistics is focused on moving and storing activities

SUPPLY CHAIN MANAGEMENT

LOGISTICS
Logistics activities can be categorized into different types
Inbound logistics
Operations
Out bound logistics
Support activates e.g. HR, Accounts & finance, IT & MIS etc.

Supply Chain
Material flow

Stores
RM

Purchase

Vendor

OPERATIONS
P
r
o
c
u
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e
m
e
n
t

Inbound Logistics

Information
flow

Stores
D
FG
i
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t
ri
Warehousing
b
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ti
o
n
Customer

Out bound logistic

BULL WHIP EFFECT


The bullwhip effect (or whiplash effect) is an observed
phenomenon in forecast-driven distribution channels. It
refers to a trend of larger and larger swings in inventory in
response to changes in demand, as one looks at firms
further back in the supply chain for a product.
This happens because Demand information is distorted as it
travels within the supply chain, so that different stages have
different perspectives and estimates of the chain demand.
Results
Excessive inventory
Dissatisfied customers
Lost revenues
Ineffective production schedules

BULL WHIP EFFECT

BULL WHIP EFFECT


Remedies
Sharing point of sale data
Collaborative forecasting and planning
Single stage control of replenishment
Continuous replenishment programs (CRP)
Vendor managed inventory (VMI)

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