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Logistics and Supply Chain Management Lecture Notes-1: Introduction

The document discusses logistics and supply chain management. It defines logistics as linking procurement, manufacturing, distribution and the marketplace to provide high customer service at low cost. The objectives of logistics management are rapid response, low inventory, quality and life cycle support. Supply chain management aims to maximize overall value by balancing customer value and supply chain costs. Logistics delivers value through inbound, process and outbound logistics. Competitive advantages come from lower costs and greater value through differentiation.

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ADAM ISMAIL
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160 views5 pages

Logistics and Supply Chain Management Lecture Notes-1: Introduction

The document discusses logistics and supply chain management. It defines logistics as linking procurement, manufacturing, distribution and the marketplace to provide high customer service at low cost. The objectives of logistics management are rapid response, low inventory, quality and life cycle support. Supply chain management aims to maximize overall value by balancing customer value and supply chain costs. Logistics delivers value through inbound, process and outbound logistics. Competitive advantages come from lower costs and greater value through differentiation.

Uploaded by

ADAM ISMAIL
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Lecture Notes-1: Introduction

Logistics Concept:
Objectives: The objective of logistics is to link the market place, the distribution network,
the manufacturing process and procurement activity, so as to provide higher levels of
service to the consumers yet at a lower cost.

The operational objectives are the primary determinants of logistical performance. These
include:
 Rapid response
 Minimum variance
 Minimum inventory
 Movement consolidation
 Quality
 Life cycle support

Scope: From the total systems viewpoint, scope of logistics management encompasses
management of raw materials and other inputs through the delivery of the final product.

Supply Chain:
The objective of every supply chain should be to maximize the overall value generated. The
value (also known as supply chain surplus) a supply chain generates is the difference
between what the value of the final product is to the customer and the costs the supply
chain incurs in filling the customer’s request.

Supply Chain Surplus = Customer Value – Supply Chain Cost

Value Chain of a Company:


 The value chain begins with new product development, which creates specifications
for the product.
 Using new product specifications, operations transforms inputs to outputs to create
the product.
 Marketing and sales generate demand by publicizing the customer priorities that the
products and services will satisfy. Marketing also brings customer input back to new
product development.
 Distribution either takes the product to the customer or brings the customer to the
product.
 Service responds to customer requests during or after the sale. These are core
processes or functions that must be performed for a successful sale.

Dr.Stephan Thangaiah.I.S, VIT, Vellore Page 1


 Finance, accounting, information technology, and human resources support and
facilitate the functioning of the value chain.

Customer Value Delivery Chain:


The primary activities represent the functional areas like arranging inputs for transforming
then into output, and managing distribution, marketing, sales and services.
The support activities facilitate integration of all the functions across the entire
organization.

Logistics deliver value to the customer through three logistical phases:


 Inbound Logistics: Operations preceding manufacturing. This includes movement of
raw materials and components for processing from suppliers
 Process Logistics: Operations directly related to processing. This includes storage and
movement of raw materials and components within the manufacturing premises as
per manufacturing schedules.
 Outbound Logistics: Operations following the production process. This includes the
warehousing, transportation and inventory management of finished products.

Competitive Advantage:
Competitive advantage can be explained as the ability of an organization to differentiate
itself in the eyes of customer, from its competition, and to operate at a lower cost and
hence greater profit.

Competitive advantage helps organizations to achieve commercial successes which mainly


depends upon two factors:
 Productivity advantage
 Value advantage
Productivity advantage is in terms of lower cost profile, while value advantage is in terms of
a product offering a differential ‘plus’ over competitive offerings.

Productivity advantage is characterized by low cost of production due to greater sales


volume, economies of scale enabling fixed costs to be spread over a greater volume, and the
impact of the ‘experience curve’.

Value advantage is based on the marketing concept the ‘customers don’t buy products, they
buy benefits’. But benefits may be intangible, i.e. they may relate not to specific product
features but to things like image or reputation. Hence, alternatively, offerings must be
perceived to outperform its rivals in some functional aspects.

Dr.Stephan Thangaiah.I.S, VIT, Vellore Page 2


Productivity & Value Advantage Matrix:
Commodity Market: For companies in quadrant (1), the market is an uncomfortable place as
their products cannot be differentiated from their competitors’ offerings and they do not
have any cost advantage. These are commodity markets.
Cost Leader: Companies in quadrant (2), adopt cost leadership strategies. Traditionally,
these are based on economies of scale gained through volume. Also, a significant route to
achieving cost advantage is through logistics management. In many industries logistics
constitutes a major proportion of total costs, hence by reengineering logistics processes
substantial cost reduction can be achieved.
Service Leader: For companies in quadrant (3), seek differentiation through service
excellence since markets are becoming more and more service sensitive. Customers expect
greater responsiveness and reliability from suppliers, reduced lead times, just-in-time
delivery, and value-added services. Service strategies can be developed through enhanced
logistics management.
Cost and Service Leader: Companies in quadrant (4), are distinctive in the value they deliver
and are not cost competitive. Thus, competitors find it extremely hard to attack these
companies which try to excel in the value chain activities.

Achieving Value Differentiation:


Adding value through differentiation is extremely powerful means of achieving competitive
advantage in the market. Another method of adding value is service. Service relates to the
process of developing relationship with the customers through provision of an augmented
offer. Augmentation takes many forms such as delivery services, after-sales services,
financial packages, technical support and so forth.

Achievement of value differentiation strategy is based upon added value which in turn
requires segmented approach to the market. This is because segmentation helps in
identifying opportunities for creating differentiated appeals for specific segments.

Customer Service Phases:


Pre-transaction elements:
 Written customer service policy
(Is it communicated internally and externally? Is it understood? Is it specific and
quantified where possible?)
 Accessibility
(Are we easy to contact/do business with? Is there a single point of contact?)
 Organisation structure
(Is there a customer service management structure in place? What level of control do they
have over their service process?)
 System flexibility
(Can we adapt our service delivery systems to meet particular customer needs?)

Dr.Stephan Thangaiah.I.S, VIT, Vellore Page 3


Transaction elements:
 Order cycle time
(What is the elapsed time from order to delivery? What is the reliability/variation?)
 Inventory availability
(What percentage of demand for each item can be met from stock?)
 Order fill rate
(What proportion of orders are completely filled within the stated lead time?)
 Order status information
(How long does it take us to respond to a query with the required information? Do
we inform the customer of problems or do they contact us?)

Post-transaction elements:
 Availability of spares
(What are the in-stock levels of service parts?)
 Call-out time
(How long does it take for the engineer to arrive and what is the ‘first call fix rate’?)
 Product tracing/warranty
(Can we identify the location of individual products once purchased? Can we
maintain/extend the warranty to customers’ expected levels?)
 Customer complaints, claims, etc.
(How promptly do we deal with complaints and returns? Do we measure customer
satisfaction with our response?)

Value added Logistical Services:


 Customised transportation
 Payment collection on delivery
 Price marking and labelling
 Product mixing and packaging (for co-promotional schemes of two products from
two different companies)
 Cross-docking (product storage for not more than 48 hours in the warehouse)
 Inventory management
 Web based consignment tracking and tracing
 Frequent deliveries in small lots
 Reverse logistics
 Load cobbling

Dr.Stephan Thangaiah.I.S, VIT, Vellore Page 4


Web Sources:

https://book.akij.net/eBooks/2018/March/5ab0f141210e1/Essentials-of-Supply-Chain-
Management.pdf

https://base-logistique-services.com/storage/app/media/Chopra_Meindl_SCM.pdf

https://www.pfri.uniri.hr/knjiznica/documents/Supply_Chain_Management.pdf

https://library.ku.ac.ke/wp-
content/downloads/2011/08/Bookboon/Magement%20andOrganisation/fundamentals-of-
supply-chain-management.pdf

https://www.tutorialspoint.com/supply_chain_management/supply_chain_management_t
utorial.pdf

http://ptgmedia.pearsoncmg.com/images/9780133993349/samplepages/9780133993349.p
df

https://www.itf-oecd.org/sites/default/files/docs/02logisticse.pdf

Dr.Stephan Thangaiah.I.S, VIT, Vellore Page 5

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