Operations and supply chain management

UNIT – 2nd
Logistics
Planning, organizing, and controlling the movement of goods and services between points of
origin and consumption constitute logistics management. It includes a range of operations,
including shipping, warehousing, inventory control, and order fulfilment. It is impossible to
overstate the role logistics management plays in the effective and efficient delivery of goods to
customers. Logistics is a crucial part of the business world, and it involves managing the flow
of goods and services from creation to delivery. Some objectives and evolutions of logistics
includes:

Inventory management

Involves maintaining an overview of a company's inventory, which is a critical part of the

supply chain.

Cost reduction

Businesses can save money by optimizing transportation routes, minimizing inventory carrying
costs, and streamlining warehouse operations.

Deliver

Focuses on getting finished goods to consumers, and includes doorstep delivery.

Demand forecasting

Uses past data and existing models to predict demand and maintain a balance between demand
and supply.

Efficient transportation

Businesses can gain a competitive edge by redesigning their logistics management for faster
product delivery.

Reverse logistics

An adaptation to the needs of the market made by traditional logistics companies.

Transportation
Focuses on defining and deploying different modes of transport such as sea, air, rail, and road.

Supply chain management

Includes the coordination and optimization of every activity involved in the creation and
delivery of goods and services.

The Evolution of Logistics Management

Logistics Management in its Early Stages

Focusing on transportation and storage was a defining feature of logistics management's early
stages. With little thought given to other aspects of the supply chain, the main objective was to
move goods from one location to another as quickly and efficiently as possible. However, as
industries become more globalised and complex, new problems appear that necessitate a more
comprehensive approach to logistics management. Here are some examples of logistics
management's initial phases:

1. Military logistics in ancient times

Military operations, where the effective movement of personnel, equipment, and supplies was
essential to battles and campaigns, are the origin of logistics management. Military logistics
can be traced to ancient Persia, where Cyrus the Great set up a network of supply points and
transportation routes to support his armies. This is the first documented example of military
logistics.

2. The Industrial Revolution and its impact on logistics management

Significant modifications to logistics management were brought about by the industrial

revolution in the 18th and 19th centuries. Businesses now have new opportunities to move
goods over long distances swiftly and effectively thanks to the development of steam power,
railroads, and mass production methods. As a result, businesses started upgrading their storage
and transportation systems to satisfy consumers' rising expectations.

3. Development of transportation systems and logistics infrastructure

Transport and logistics infrastructure made significant strides in the 20th century. The
development of trucking, air cargo, and container shipping revolutionised the movement of
goods. This made it simpler and more affordable to move goods across international boundaries
and continents. Building warehouses, distribution centres, and other logistics facilities
contributed to supply chain effectiveness improvement by cutting lead times and inventory
costs.

Modern Logistics Management

A more integrated and team-based approach to supply chain management is the hallmark of
modern logistics. While globalisation has created new challenges that call for a more
sophisticated approach to logistics management, technology has played a significant role in
improving logistics efficiency and effectiveness. The following are significant events that have
affected modern logistics management:

1. Emergence of supply chain management

The term "supply chain management" first appeared in the 1980s and 1990s as a more
comprehensive method of managing logistics. From locating raw materials to delivering
finished goods to customers, supply chain management includes the coordination and
optimization of every activity involved in the creation and delivery of goods and services. For
this strategy to succeed, suppliers, manufacturers, distributors, and retailers will all need to
work together and communicate more effectively.

2. Adoption of technology in logistics management

Recent years have seen a significant change in logistics management due

to technology adoption. The effectiveness and precision of logistics operations have increased
with the use of cutting-edge software systems for inventory control, warehouse management,
and transportation management. Monitoring real-time supply chain activities is also possible
via real-time tracking and monitoring systems, improving visibility and control.

3. Globalization and its impact on logistics management

As businesses become more globalised, logistics management faces new challenges. A more
sophisticated approach to logistics management is necessary to manage complex supply chains
across numerous nations and regions. When managing global supply chains, businesses must
consider elements such as customs laws, international trade agreements, and cultural variances.

Current Trends in Logistics Management

Today's trends in logistics management are centred on adapting to consumers' changing needs,
enhancing sustainability, and utilising technology to optimise logistics processes. Current
logistics management trends include:
1. E-commerce and last-mile delivery

Since more consumers choose to shop online and have their purchases delivered to their
doorsteps, e-commerce has had a significant impact on logistics management. This has caused
more emphasis on last-mile delivery, which is the last phase of the delivery process from
the warehouse or distribution centre to the customer's location. In response to e-commerce
demands, companies are exploring a variety of delivery options, including drones, autonomous
vehicles, and crowdsourced delivery services.

2. Sustainability and green logistics

A growing emphasis on sustainability in logistics management is a result of public awareness

of environmental issues. Companies are looking at ways to reduce waste throughout the supply
chain and cut back on their carbon footprint. This entails using eco-friendly transportation
methods, such as electric vehicles, enhancing delivery routes to save on fuel, and putting
sustainable packaging strategies into practice.

3. Big data analytics and predictive modelling

Big data analytics and predictive modelling in logistics management have grown in
significance. With these technologies, businesses can analyse enormous amounts of data to find
trends and patterns, improving decision-making and logistics operations. Businesses can also
forecast future demand with predictive modelling, which can then be used to modify their
supply chain.

Challenges in Logistics Management

Managing logistics involves a number of difficulties that require businesses to be flexible and
agile. Businesses must overcome the following obstacles to succeed in today's cutthroat
business environment:

1. Global Supply Chain Disruptions

Global supply chains interrupted by calamities, unstable governments, and pandemics are one
of the biggest problems facing logistics management today. These interruptions may result in
material shortages, shipping delays, and higher transportation costs. This could have a big
effect on both businesses and customers.

2. Labour Shortages and Workforce Management

Logistics management must also deal with the lack of skilled labour, especially in the trucking
industry. This could lead to higher salaries and more competition for workers, which would
raise company costs. Management of a diverse workforce of full-time employees, part-time
employees, and contractors is becoming harder for businesses.

3. Regulatory Compliance

Logistics management is governed by local, national, and international laws. Businesses must
stay informed and ensure compliance because these laws can be complicated and change
frequently. Regulation violations may result in penalties, legal action, and reputational harm to
a company.

4. Environmental Sustainability

Businesses are under pressure to adopt more sustainable practices as consumers' awareness of
logistics' environmental impact grows. This may entail spending money on eco-friendly
transportation options, planning delivery routes more efficiently, and using eco-friendly
packaging materials. However, putting these practices in place can be expensive and time-
consuming. Additionally, suppliers and customers unwilling to pay more for sustainable
products may oppose businesses.

Components and functions of logistics management

Logistics comprises five essential components. Logistics companies are responsible for
executing each one of these components to the highest degree of accuracy. Here are the five
key components of any logistician’s job.

1. Demand planning

To guarantee customer order fulfilment, demand planning is an essential logistics function.

By ordering merchandise in the correct quantities and at the right price and mobilising
suitable transport, customer demand is met and profits protected.

2. Storage and materials

Because demand is unpredictable, it’s important to have surplus goods on standby until
consumers demand them. Warehouses are responsible for the storage, care, retrieval,
packaging, and unitisation of merchandise. Warehouse management systems (WMS) optimise
storage capacities, equipment (forklifts, for example), retrieval speeds, and warehousing
processes.

3. Inventory management

Inventory management controls the flow of goods in and out of a warehouse. It dictates how
much stock to hold and where to locate it using targeted data to predict consumer demand.

4. Transportation management

Logistics involves mobilising different modes of transport to move merchandise from one
stage of the supply chain to the next. Merchandise might need to travel via road vehicles,
freight trains, shipping, or even air travel for long-distance supply chains using transportation
management software.

Consolidation is the process by which shipping companies or carriers combine multiple

smaller shipments in one. This speeds up deliveries and keeps costs low.

5. Control

Logistics is a complex operational procedure that requires a lot of precise information to be

effective. Forecasting demand, transportation times, and inventory are crucial to keeping the
operations to a tight timescale.
Functions of logistics

The five components of logistics help with the execution of key logistical functions. But on
top of planning, storing and transporting, logistics encompasses numerous other very
important operations. These include everything from network design to order processing and
procurement to sustainability targets.

Design

Management professionals design precision logistics networks covering different locations that
make up the supply chain. They optimise routes between manufacturers, warehouses,
transportation service providers and final retailers to ensure an efficient service.

Orders

Logistics management also involves processing customer orders. And a lot of them, at that.
Orders have to be received, sorted, filed, recorded, and then fulfilled promptly. Keeping this
process reliable and efficient is an essential logistical function.

Procurement

For products to reach the shelves, someone has to deal with the raw materials. Logistics
management involves obtaining high-quality raw materials from external suppliers and
negotiating the best price for the manufacturer.

Reverse logistics

Reverse logistics plans and executes the reuse or proper disposal of products and materials. In
short, this process works backwards to ensure excess or used merchandise is dealt with
sustainably. Some companies even have sustainability targets for which it is the responsibility
of logisticians to execute.

Distribution related Issues and challenges

Transportation Issues

The majority of freight in India is transported by road, accounting for roughly 60 percent of
total freight movement, with rail accounting for 32 percent. Since there are too many trains on
the network and exorbitant rail fees. Poor road infrastructure, many checks, and traffic
congestion make road transit ineffective for moving goods.
High Order Intensity Ratio

To keep up with the supply-chain timetable, every Indian logistics company has had to deal
with getting a large number of orders that would break their backs. With so many orders coming
in, it’s becoming more difficult to keep track of what has to be sent when. The problem is
exacerbated when the organization is strapped for cash as a result of lengthy payment cycles.
As a general rule, festival season is the greatest time to see massive delays in delivery schedules
and an overall failure of the ETA system.

Reducing Transportation Costs

We can confidently state that this is the industry’s most pressing issue. Transportation expenses
may account for up to half of a product’s worth in certain situations. Shippers’ needs are
increasing, however, at a rate that matches the rise in the cost of gasoline. Even if there is a lot
of labor, there does not seem to be enough money for everyone to do it.

Transportation Roadblocks

Unreliable shipping may occur even if the packing and drops are completed on time. India is a
vast nation that encompasses a wide range of landscapes and climates. At the interior of the
nation, the roads are in bad condition, while the Ghats are plagued by landslides and accidents.

Logistics firms waste time and money because of traffic jams, several checkpoints, and toll
booths. Even after factoring in further delays, there’s still room for more backlog.

The Shortage of The Drivers

This is the second logistical issue that we’d want to address: driver shortages. It seems that
there are not enough drivers to meet the demands of the sector at this time. There are also rules
from the government that compel corporations to be more stringent in employing their drivers.
As a result, the hiring process is lengthy and costly, and it will continue to be so for some time.
You have no choice but to play by the rules. Alternatively, you may make better use of your
drivers’ time by planning better routes. At the very least, you’ll gain some clout from this move.

Port Sector Issues

India’s logistics firms bear an unfair burden as a result of excessively long turnaround times
for ships due to overcrowding at docks and delays in the unloading of goods. It is difficult to
employ coastal shipping in India on a wide scale because of inadequate landside and port
infrastructure, as well as insufficient depth at ports that deter large boats.
Improving Supply Chain Visibility

Logistics firms must have complete insight into the supply chain in order to ensure accurate,
on-time deliveries every time. Send warnings and alerts when anything goes wrong with a
shipment so that immediate action may be done if the shipment isn’t arriving on time.
Customers must be able to monitor their goods online and get reminders about when they will
arrive, such as shipping notifications and ETAs. Logistics firms must be able to track the full
process of inventory receiving, storage, order management and fulfilment, and shipping from
a single location. Plus, they can see what is coming their way so that they may adjust the size
of their personnel.