Logistics & Supply

Chain Management
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 Logistics management consists of the
process of planning, implementing and
controlling the efficient flow of
raw-materials, work-in-progress and

Definition finished goods and related

information-from point of origin to
point of consumption; with a view to
providing satisfaction to the customer.
History of Logistics

● Logistics’ has a military origin, and used to be associated with the

movement of troops and their supplies in the battlefield..
● In trade Logistics being performed since the beginning of the
civilisation.
● Logistics is unique.It never stops.
● However implementing best practice of logistics has become one of the
most exciting and challenging operational areas of business and public
sector management.
How logistics operate…...
7 R’s of Logistics……….
 Key Elements of logistics

Storage,Warehousing Inventory Transport Packaging &

& Material handling Unitisation
 ● Manufacturers need to operate at
peak efficiency, but consumers
tend not to demand goods at the
same rate as a manufacturer
supplies them.
● Imbalance between supply.
Storage,Warehousing & Material
● Demand is unpredictable.
handling ● Storage of materials.
● Warehouse buildings.
● Specialist storage equipment such
as shelving or racks and material
handling equipment.
 ● Closely Related to storage &
Inventory.
● How much stock to hold?
Inventory ● Very difficult to anticipate.
● Done on the basis of past
sales.
● Various mathematical &
statistical tools are also used.
Transport

● Most crucial element.

● road vehicles, freight trains, cargo shipping and
air transport.
 ● One of the R’s of logistics is
right condition of the product.
● packaging and unitisation attempts to
Packaging & Unitization
take all different sizes and shapes of
product and pack them as near as
possible into a cuboid shape.
● Unitization-The consolidation of a
quantity of individual items into one
large shipping unit for easier
handling. – Loading one or more
large items of cargo onto a single
piece of equipment, such as a pallet
Information & ● Information and control’s role

Control
is to help design information
systems that can control
operational procedures.
● Helps in forecasting demand.
 Cost Reduction & Profit
Maximisation

Efficient flow of
manufacturing
Objectives of Operations

logistics Competitive Edge

Management Sound Inventory

Management

Effective
Communication System
 ❖ Improved material handling

❖ Safe, speedy and economical

Cost Reduction & Profit
transportation
Maximisation
❖ Optimum number and convenient

location of warehouses etc

Efficient flow of manufacturing On-time delivery of materials, proper
Operations
utilisation of materials and semi-finished

goods in the production process and so on.

 ➔ Increasing sales by providing better

customer service.

➔ Arranging for rapid and reliable

Competitive Edge
delivery.

➔ Avoiding errors in order processing; and

so on.
Sound Inventory Management
Sound inventory management is a
by-product of logistics
management
 helps in developing effective
Effective Communication System
communication system for continuous
interface with suppliers and rapid response
to customer enquiries.
Logistics
Process
 Types of Logistics
● Inbound
● Outbound
● Reverse logistics
● 3PL
● 4PL
Inbound Logistics

● Inbound logistics refers to the transport, storage and delivery of

goods coming into a business.
● Creation of value in the products depends upon availability of inputs
on time.
● Making available these inputs on time at minimum cost is the
essence of Inbound Logistics.
● Part of procurement performance cycle.
● Transportation during procurement operation, storage, handling
and overall management of inventory of inputs
 Outbound Logistics

● All the activities in which the value added goods are to

be made available in the market for customers are
called as outbound logistics activities.
● Success of the firm depends upon the supply of
products to the customer on time. Supplying the
products of firm at marketplace at minimum cost is
the essence of Outbound Logistics.
● Activities of distribution performance cycle come
under the scope of Outbound Logistics. They are order
management, transportation, warehousing, packaging,
handling etc.
Reverse Logistics

● Reverse logistics is also known as Product Recall.

● Process of moving goods from their place of use, back to
their place of manufacture for re-processing, refilling,
repair, and recycling or waste disposal.
● The goods move from the end user back to the seller or
manufacture.
Reasons for Reverse Logistics

1. Rigid quality standards- it is critical in case of contaminated products, which can cause
environmental hazard.
2. Rigid laws prohibiting unscientific disposal of items
3. Rigid laws making recycling mandatory
4. Transit damage – e.g. leaking containers containing hazardous material.
5. Product expiration.
6. Erroneous order processing by supplier
7. Exchange of new product for the old ones.
8. Return for repair or refill.
Drivers in Reverse Logistics

● Product location
● Product collection
● Recycling/Disposal centres.
● Proper Documentation
Third-Party Logistics (3PL)

In order to keep the costs of inbound and outbound logistics activities

under control, an outside agency appointed to perform these logistics
functions is called “Third Party Logistics”.
Forth-Party Logistics (4PL)

Forth Party Logistics is a complete outsourcing of manufacturing and

logistics functions including selection of Third Party service provider.
Need for 4PL:

1. Ever-increasing customer requirements.

2. Competitive and complex market scenario
3. Rising globalisation, liberalization and privatisation.
4. Rising accessibility of supply chain technology.
5. Inclination of companies to enter into higher margin business
4PL…..

1. Procurement and storage of materials.

2. Manufacturing of products.
3. Selection of 3PL companies
4. Transportation and warehousing management
5. Collection of payment and cash flow management
6. Risk management and insurance.
7. Sharing of information, IT solution.
Green Logistics
Green Logistics
● All attempts to measure and minimize the ecological impact of logistics
activities.

● Aim of green logistics is to find a balance between ecology and economy

● Consumers are becoming more aware of product-specific carbon footprints.
● The society prefers green products and packaging that is friendly to the
environment and it is even willing to pay more for environmentally friendly
products.
● This helps the company to gain Competitive advantage by implementing green
logistics.
Why Green Logistics…..

● Green logistics policies represent a strategic advantage over the

competition. Not only do they revalue your brand and set it apart, but they
also prepare your company for the future, which inevitably must be
sustainable.
● Energy saving measures are an effective strategy for coping with rising
supply costs.
● They ensure that a company is prepared to comply with environmental
regulations
 How to
implement ➔ buying eco-friendly packaging
and limiting the use of plastic in

green logistics….. ➔
packaging.
Eco friendly manufacturing
process.
1.Eco-friendly criteria in your ➔ Suppliers location.
procurement policies
 ● Transport is a major carbon
footprint area in the logistics
How to chain.
Systems that assist delivery
implement
●
route planning and

Green logistics
prioritize load pooling.

2.Optimize transport fleet

management
 ● 4.0 logistics buildings:their design and construction incorporate
environmental protection measures that guarantee sustainable

How to
management of the building.

implement
● The Breeam or Leed certifications are two of the seals that
endorse logistics warehouse sustainability.

Green logistics ● These certifications are granted by analyzing issues such as the
water and energy consumption efficiency, the use of alternative
energy sources, the selection of construction materials and waste
management throughout the entire process.
3.Have a warehouse that
follows sustainable
construction and ● Use as little packaging as possible on products to limit resource
wastage, or to make use of adaptive packaging options which are
management standards more versatile.
 ● waste sorting process according to
materials to be recycled

How to
implement
● Implementing IT solutions .

Green logistics ● Appropriate recycling procedures.

4.Enable measures to
reduce and recycle the
waste produced in your
warehouse
 How to ● Scale down movements within
warehouse through a combination of good
your

implement storage location management and optimized

picking plans.

Green logistics
● Prevent stock damage caused by manual
handling of goods. Deploying robots and
automated systems in your warehouse
resolves this issue.
5.Improve stock ● In the case of perishable goods, accurately
management and reverse manage the FIFO criterion to control
expirations and prevent goods from spoiling.
logistics processes
● Establish quality control processes for
returned products that leverage reverse
logistics management.
Scope of logistics…...
Order Processing
● Important task in functions of logistics operations.
● The purchase order placed by a buyer to a supplier is an
important legal document of the transactions between the two
parties.
● Order checking for any deviations in agreed or negotiated
terms
● Prices, payment, and delivery terms.
● Checking the availability of materials in stock.
● Production and material scheduling for shortages.
● Acknowledging the order indicating deviations if any.
Inventory Control

Inventory management is to keep enough inventories to meet customer requirements, and

simultaneously its carrying cost should be lowest.

It is basically an exercise of striking a balance between the customer service for not losing the
market opportunity and the cost to meet the same.

Huge carrying cost eats away the profits. It consists of the cost of financing the inventory, insurance,
storage, losses, damages, and pilferage.

The average cost of carrying inventory varies from 10 to 25 percent of the total inventory per year
depending on the products.
Warehousing

● Warehousing is the storing of finished goods until they are sold. It plays
a vital role in logistics operations of a firm.

The major decisions in warehousing are:

● Location of warehousing facilities
● Number of warehouses
● Size of the warehouse
● Warehouse layout
● Design of the building
● Ownership of the warehouse
●
Transportation

● For movement of goods from the supplier to the buyer, transportation is the
most fundamental and important component of logistics.
● Availability of transport facility in the region & customer urgency are the
decisive factors in selection of transport.
●
Material handling & Storage system

● The speed of the inventory movement across the supply chain depends on
the material handling methods.
● An improper method of material handling will add to the product damages
and delays in deliveries and incidental overheads.
● Mechanization and automation in material handling enhance the logistics
system productivity.
● The storage system is important for maximum space utilization (floor and
cubic) in the given size of a warehouse.The material handling system should
support the storage system for speedy movement (storage and retrieval) of
goods in and out of the warehouse.
●
Logistics Packaging

● Logistical or industrial packaging is a critical element in the physical distribution of a

product, which influences the efficiency of the logistical system.

● It differs from product packaging, which is based on marketing objectives.

● However, logistical packaging plays an important role in damage protection, material

handling and storage space economy
Information

Logistics is basically an information-based activity of inventory movement across a

supply chain.

Information system plays a vital role in delivering a superior service to the customers.

Use of IT tools for information identification, access, storage, analysis, retrieval

and decision support which is vital among the functions of logistics is helping
business firms to enhance their competitiveness.
Integrated logistics

● Integrated logistics, deals with everything related to traditional logistics, also

connects with the departments of production, marketing and all other
departments of the company.
● Integrated logistics is therefore even more oriented towards optimising
production costs and times, as well as improving quality.
● Integrated logistics is a unique business management process that governs the
flow of materials, information and goods from the point of origin to the point of
arrival, in which all management activities are interconnected and
interdependent».
Integrated logistics

Integrated logistics on the one hand provides for the correct management of
warehouses, transport and materials. On the other hand, it integrates with
different functions of the business process-

● Production function
● Supply Function
● Marketing function
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Logistics Performance Cycle

● The performance cycle represents the various elements of work necessary

to complete various logistics related activities.

● In the performance cycle,the supplier,the firm & its customers are linked
together by communication & transportation.

● Location where the performance cycle links are called as nodes.

Logistics Performance Cycle

● There are three performance cycles-

➔ Procurement performance cycle
➔ Manufacturing support performance cycle.
➔ Physical distribution performance cycle
Procurement Performance Cycle

● It means all activities related with

procurment of raw materials from the
vendor.
● Operations performed under procurement
performance cycle is called as inbound
logistics.
● Main objective of PPC is to perform
inbound logistics activities at minimum
cost.
 Manufacturing Support
Performance Cycle
● It provides production logistics.
● This cycle can be viewed as positioned
between physical distribution &
procurement performance cycle.
● It manages WIP as it flows between
different stages of manufacturing.
● It includes-
➔ Making timely availability of
materials,components etc.
➔ Managing WIP
➔ Transfering finished goods from
manufacturing plant to factory warehouse.
Distribution performance Cycle.

● Once the product is manufactured it has to

be made available to the customers.

● Outbound logistics.

● Main Objective is to make available goods

where & when they are needed.
Logistics Competency
● Logistical competency is a relative assessment of a firm’s capability to offer
competitively superior customer service at the lowest possible total cost.
● The strategy is to provide superior service at a total cost below industry
average.
● The characteristics of firms having superior logistics performance or
competency are: (i) alternative logistical capabilities, (ii) emphasis on
flexibility, (iii) time-based performance, (iv) operational control and (v)
commitment to perfect customer service performance.
Logistics Competency

● Firms seeking strategic positioning focus on how to compete on the basis

of four processes essential to success. These processes are: (i) creation of
customer value, (ii) planning, (iii) control and (iv) succession generation.
● A firm must perform all these processes for long-term survival and growth.
● Creation of customer value is essential to gain and retain a loyal customer
base.
● Logistics is one of several competencies required to create customer value.
Logistics must be managed as a core competency of the firm seeking
creation of superior customer value.
Logistics competency

The strategy is to provide superior service at a total cost below industry average.
The characteristics of firms having superior logistics performance or
competency are: (i) alternative logistical capabilities, (ii) emphasis on flexibility,
(iii) time-based performance, (iv) operational control and (v) commitment to
perfect customer service performance. Firms seeking strategic positioning focus
on how to compete on the basis of four processes essential to success. These
processes are: (i) creation of customer value, (ii) planning, (iii) control and (iv)
In process logistics

Also known as production logistics, the term describes logistics process within a
value adding system (e.g., a factory) . Product logistics aims to ensure that each
machine and workstation receives the right product in right quantity and quality
at the right time
Logistics in Changing Environment.

● Business environments change constantly.

● Four forces drive business environment change: the market, competition,
technological evolution and government regulation.
● The most pressing challenges at present are:
● (i) The customer service explosion
● (ii) Time compression
● (iii) Globalisation of industry
● (iv) Organisational integration
(i) The Customer Service Explosion :

● Customer in today’s market is more demanding, not just of product quality,

but also of quality service.
● Customer service is one prime source to create the added value since
customer perceives little technical difference between competitive offers .
● It involves on-time delivery and after-sales support.
● Companies giving high priority for their logistics performance can achieve
recognition for service excellence and thus establish a differential
advantage over their competition .
(ii) Time Compression :

Time has become a key issue in management today because of the following
reasons:

(a) Product life-cycles are shorter than ever.

(b) Industrial customers and distributors require just-in-time deliveries.

(c) End users are more willing to accept a substitute product if their choice is
not readily available.

(d) New product introduction to the market should be done in the minimum
possible lead time.
(iii)Globalisation of Industry :

● In the current era of globalisation, changes in customers expectations or

geographical locations continually transform the nature of markets and in
turn, generate constraints that modify the flows of goods within companies.
● In the global business, materials and components are sourced world wide,
manufacturing is outsourced off shore and finished products are sold in
many different countries perhaps with local customisation.
● The global company is compelled to seek to achieve competitive advantage
by identifying global markets for its products/services and then developing
a manufacturing and logistics strategy to support its marketing strategy.
(iv) Organizational Integration :

● In traditional organisations functional departments such as materials management,

production, marketing etc., function rather independently without systems
approach and integration among various functions.
● But in todays competitive environment, to achieve a position of sustainable
competitive advantage, organisations have to dispense with the out-moded
functional organisational structures and instead have managers who are
broad-based integrators and are oriented towards the achievement of market place
success based upon managing processes and people that deliver service.
● For example, materials management must be integrated with production
management which in turn must be integrated with marketing management. Hence,
knowledge of systems theory and behavioural science will be a key prerequisite for
managers of today. Also the managers need to be market oriented with a sharp
focus upon customer service as the primary source of competitive advantage
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