logistics

							 LOGISTICS
MANAGEMENT
DEFINITION

• According to the Council of Logistics
  Management (CLM) “Logistics is the process of
  planning, implementing and controlling the
  efficient and effective flow of goods, services
  and related information from point of origin to
  point of consumption in order to meet
  customer requirements”.
             Logistical Management?
• Performing physical movement of materials
efficiently and effectively

• Ensuring availability of resources at minimum
cost for production

• Ensuring availability of finished products at
minimum cost to the customer

• A Function Of Business Management
VENDOR               SUPPLIER   CUSTOMER




         What?
         Where?
         When?
         Who?
         How much?
         How?
                                           4
           What is Supply Chain?

Vendor’s                                  Customer’s
 vendor
           Vendor   Supplier   Customer
                                           customer


Source of raw
                                   End users
  materials




                                                       5
6
               What Causes Bad Logistics?
1.   Infrastructure
         • Bad roads, inefficient railways, poor
           communication lines, congested ports
2.    Government policies
        • Octroi
3.    Information
        • Inadequate information, bad
           communication
4.    Management decisions
        • Bad management decisions like carrier
           selection, outsourcing etc.
                                                   7
      What Does Bad Logistics Cause?
  Costly products - Poor logistics adds costs.
                     HOW?
 • Higher cost of capital (delayed deliveries)
 • Damaged products (bad roads, bad vehicles, bad
                   packaging)
• Excessive movement costs (wrong deliveries)
 Shortages as product/service delivery fails
 • PDS and FCI stocks

  Deteriorating economy
    • Law and order problems

                                                    8
OPERATING OBJECTIVES OF LOGISTICS
• Rapid Response
  – firm’s ability to satisfy customer’s requirement in a
    timely manner.
• Minimum Variance
  – any unexpected event that disrupts system
  – operations are disrupted by events like delays in
    order receipt, disruption in manufacturing, goods
    damaged at customer’s location and delivery to an
    incorrect location
  – Traditional solution-safety stock or use high cost
    transportation.
• Minimum Inventory
  – asset commitment and inventory turnover
  – reduce the inventory without sacrificing customer
    satisfaction.
• Movement Consolidation
  – grouping small shipments together in order to reduce
    transportation cost.

• Quality Improvement
  – Logistics is a prime part of developing and
    maintaining continuous TQM improvement.

• Life-Cycle Support
  – also called cradle-to-cradle logistical support
  – going beyond reverse logistics and recycling to
    include the possibility of after sale services, product
    recalls and product disposal.
  – Eg: Cold drink industries use their glass bottle again
    and again whereas the cans are reused in making of
    paper dishes.
What are logistical functions?




                                 12
13
              Inventory Management
• Neither stock-out nor stockpiling of inputs or
  outputs

• Minimum cost by minimum stock & high turns

• Just In Time to customer (internal and
  external)

• Inventory policies, models, systems
                                                   14
15
            Information management
 Importance in competitive business
             Response to customer
               Customer service
The role Information Management function
              Accurate information
             Real time information
          Choice of Information technology –
           phone, fax, internet, satellites, RFID
         (Radio Frequency Identification Device),
                            EDI


                                               16
17
             Transportation
   Physical movement of materials
 The most visible function of Logistics
High contributor to costs of logistics
          Movement costs
         Preservation costs
         Cost of idle asset
        Administration costs



                                           18
19
               Net work analysis
Analysis of Logistical Network to retain or gain
               competitive edge
  Number of facilities and their locations
          Communication systems
            Operational decisions
                    What?
                    Who?
                 How much?
                   Where?

                                               20
21
                  Warehousing
Strategic storage – storage as an activity in W/H
    Value Adding Activities in warehouses
 Switching facility rather than a storage facility
 Economic benefits (cost reduction) & service
           benefits (customer service)



                                                 22
23
              Material handling
   Receiving, moving, storing, dispatching
                   activities
             Cost adding activity
 High capital cost as well as high running cost



                                                   24
25
                     Packaging
                Product Protection
Facilitation of transportation & material handling
                Types of packaging
               Consumer packaging
               Logistical packaging




                                                26
LOGISTICAL PERFORMANCE CYCLES

Cycles are sets of logistical activities in logistical
value chain

Types of Logistical Performance Cycles
1. Procurement

2. Manufacturing support

3. Physical distribution

                                                         27
            VENDOR
                         PROCUREMENT
                            CYCLE

          COMPONENTS
            PLANT


                          MANUFACTURING
                          SUPPORT CYCLE
          ASSEMBLY
           PLANT




          DISTRIBUTION       PHYSICAL
SYSTEM
             CENTER        DISTRBUTION
OUT PUT
                              CYCLE




           CUSTOMER      SYSTEM IN PUT   28
                             INPUT            28
               Important features

1. Logistical performance cycles link all
   participating firms (facilities) and
   organizations in the value chain up and down
   by information and product movement

2. Input sensitive (customer order) & dynamic

3. Sensitiveness determines efficiency of
   operating system
                                                29
          TYPES OF LOGISTICS
• Inbound Logistics             (Nov. 06)

• Outbound Logistics            (Nov. 06)

• Reverse Logistics             (May 06,07)

• Third-Party Logistics (3PL)

• Forth-Party Logistics (4PL)   (Nov. 06)
Inbound logistics (procurement cycle)

                          Order
    Sourcing              placement
                          & expediting

       Issue
 (to user department)

                                           Vendor
     Storage                                (For
   (Identification,                      processing)
   documentation)



    Receiving
  (Documentation,
  material handling,
                        Transportation
     inspection)

                                    Inbound Logistics
                                                  31
Inbound Logistics                          (Nov. 06)
• All the activities related to the material movement till
  the dispatch of the products out of the factory gate are
  called as inbound logistics activities.
• 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.
• Activities of a procurement performance cycle come
  under the scope of Inbound Logistics. They are
  transportation during procurement operation, storage,
  handling and overall management of inventory of
  inputs.
  INBOUND LOGISTICS (PROCUREMENT
                     CYCLE)
Logistical operations in procurement cycle
Potential avenues for reducing systems costs
• Value of inventory is low (capital blocked is low)
• Trade off between inventory cost reduction
(inventory in house & in transit) and transportation
cost reduction
                                                  33
Important in Input Intensive industries


• Complexity


• Large number of inputs & vendors




                                           34
                  Outbound Logistics



  Order
                        Order                  Customer
processing
                     transmission               order




   Order                                       Customer
                          Order
  Selection                                     delivery
(Documentation,       transportation
  packaging)


                                       Outbound Logistics
                                                      35
Outbound Logistics                          (Nov. 06)
• 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.
 OUTBOUND LOGISTICS (DISTRIBUTION
          PERFORMANCE CYCLE)


• Value added goods are to be made available in
the market distributed through the network of
warehouses and retailers’ shops
• Value of the inventory is very high as during
conversion value is added
                                                  37
• Trade off between transportation cost
  reduction and customer service


• Trade off between inventory cost reduction
 and transportation cost reduction


• Important in Output Intensive industries
                                             38
Reverse Logistics
• Reverse logistics is also known as Product
  Recall.

• It may be defined as a 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.
       Reasons for Reverse Logistics
• Rigid quality standards- it is critical in case of
  contaminated products, which can cause
  environmental hazard.
• Rigid laws prohibiting unscientific disposal of items
• Rigid laws making recycling mandatory
• Transit damage – e.g. leaking containers containing
  hazardous material.
• Product expiration.
• Erroneous order processing by supplier
• Exchange of new product for the old ones.
• Return for repair or refill.
Drivers in Reverse Logistics
                      (Nov. 03, May 04)
• The success of reverse logistics depends upon the efficiency of
  following subsystems:
• Product Location: For product recall it is necessary to identify the
  product location in the physical distribution system of the firm. It is
  difficult in case of consumer goods but easier in case of industrial
  goods.
• Product Collection System: After the product location is identified,
  product collection is to be done through company’s field force or
  third party.
• Recycling / Disposal Centers: This may be company’s plant,
  warehouse or any other location. Called back products must be
  inspected before recycling or disposal etc.
• Documentation System: Proper documents should be maintained
  at each level, this would help in tracing the product location.