Concepts

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Logistical performance cyclesCycles are sets of logistical activities in logistical

value chain Types of Logistical Performance Cycles

1. Procurement2. Manufacturing support

3. Physical distribution

VENDOR

COMPONENTS PLANT

ASSEMBLY PLANT

DISTRIBUTION CENTER

CUSTOMER

PROCUREMENT CYCLE

MANUFACTURING SUPPORT CYCLE

PHYSICAL DISTRBUTION

SYSTEM IN PUT INPUT

SYSTEM OUT PUT

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

Operating Objectives Of Logistics

1. Rapid response

Ability to respond rapidly to customer’s order

High flexibility

Short lead-times

SMED and Kanban

Real time information

IT supported systems

2. Minimum variance

Any event that disrupts flow of supplies to

customer is variance

Problems in information flow, traffic snarls, acts

of god, wrong dispatches, transit damage

• Interrupts product delivery

• Undermines OTD Objective

How to maintain smooth, undisturbed flow of

supplies to customer?

• Traditional approach – stock piling

• Modern approach – Minimum Variance

3. Minimum inventory

• Low inventory volume by high inventory turns

• Kanban as an inventory control tool

• Single piece flow as practiced by JIT companies

4. Movement consolidation

Movement planning to reduce costs

• Bulk volume, same product or collection

• Long runs, eliminating broken short runs

• Integrating interests of several players in

business

5. Quality

Quality of logistics performance - complete

fulfillment of order, product, place, time and

quantity

6. Life cycle support [cradle to cradle logistical

support to product]

After sales service

1. Product delivery (cradle)

2. Fault free installation

3. Training (how to use)

4. Repairs and maintenance

5. Product replacement (cradle)

Reverse Logistics

Logistics in reverse direction

Customer to supplier

Supplier to vendor

1. Rigid quality standards (Q)

2. Transit damage (Q)

3. Product expiration dating (Q)

4. Product recall (Q)

5. Law against unscientific disposal (L)

6. Law making recycling mandatory

7. Erroneous order processing by supplier (L)

8. Reuse of packaging material (C)

9. What are the drivers of reverse logistics?

• Quality

• Cost

• law

Subdivisions of logistics management

Subdivisions of logistics management [The

Management of Business Logistics by Coyle,

Bardi, Langley Page # 39]

Business Logistics

• Procuring, moving and storing of R/M & F/G

• Facilitation of relevant manufacturing and

marketing

•Providing competitive edge in commodities

market

Event logistics

The net work of activities, facilities and personnel

required to

• Organize

• Schedule

• And deploy the resources for

•An event to take place and to

• Efficiently withdraw after the event

Service logistics - the acquisition, scheduling

and management of the facilities/assets, personnel

and materials to support and sustain a service

operation – medical service to tribal areas

Military logistics - design and integration of all

aspects of support for the operational capability of

the military forces [deployed or in garrison] and

their equipment to ensure readiness, reliability and

efficiency

Questions I V

1.What are performance cycles?

2.Explain each cycle

3.What are logistical functions?

4.Explain each function

5.Evolution of modern logistics and SCM

Some more concepts

Logistical mission

[Logistics & SCM by Martin Christopher, Page #

13, L/M by Bowersox Page #9]

Achievement of business objectives at minimum

logistical cost

• Set of goals to be achieved responsive to

competition

•Logistics Mission is achieved by performing

logistical functions as per ‘single plan’ for the

entire organization • Mission of logistics is providing a means by

which customer satisfaction is achieved

“A”High Value

“B”Brittle

“C”Low value

Customer-Service Goals

[QCD]At market type

Customer Service Goals

[QCD]At market type

Customer Service Goals

[QCD]At market type

Transp

Warehouse

Functional Inputs to Logistical Management SINGLE PLAN

1. Logistical Mission

Inventory Mgt

PackgInfo

Inbound logistics (procurement cycle)

Sourcing Order placement & expediting

Vendor (For

processing)

Transportation

Receiving (Documentation,

material handling, inspection)

Storage (Identification, documentation)

Issue (to user department)

2. Inbound Logistics

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

Important in Input Intensive industries

• Complexity

• Large number of inputs & vendors

Outbound Logistics - continued

Customer order

Order transmission

Order processing

Order Selection

(Documentation, packaging)

Order transportation

Customer delivery

3. Outbound Logistics

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

• Trade off between transportation cost reduction

and customer service

• Trade off between inventory cost reduction and

transportation cost reduction

• Important in Output Intensive industries

Interface with marketing

PRODUCT

PROMOTION

LOGISTICS

MARKETING

4. Logistical interfaces

Interface with marketing

A common wall, surface or area with another

body, concept or function - area of common

interest or concern

• Four Ps of marketing and logistical interface

1.Price - marketing can re offer the price to beat

the competition with superior logistical support

2. Product (& Packaging)- size shape &

weight/volume ratio of the product has

major impact on logistical cost

Gillette story of floor displays –

3. Promotion - promotional strategies of

marketing need to be decided by working

closely with logistics

# Push/Pull strategy

4. Place - whether to distribute through

wholesalers or through retailers is a marketing

decision with impact on logistics

# wholesalers’ demand & retailers’ demand

Customer Service - another area of interface

between marketing & logistics

Interface with operations

SHORT RUNS

SEASONAL DEMAND

SUPPLY SIDE INTERFACE

PACKAGING

LOGISTICS

OPERATIONS

Interface with operations

1. Short production runs

• Very strong logistical support is needed to

operate at small batches (short runs) of large

variety

• In JIT production is in Short runs

2. Seasonal demand

• Inventory of R/M or F/P?

• How much & where?

• Inventory should be mutually accepted

3. Supply side interface

• Procurement cycle

• Logistics of the vendor and supplier

• Prevent shortages & reduce cost

4. Packaging

• A logistical function to protect the output of

operations

• Protective packaging & Logistical

packaging

• Where? When? Who? How?

5. Role of planning in logistics management

Role of planning in logistics management

• Planning is a core activity in Logistical

Management

Mission of logistics (?) is achieved by

planning

Concept of single plan

Logistical Management makes one plan, that

replaces traditional concept of planning in

pockets

6. 3Cs in business

“C” customers Look for value [benefit] at lowest price

“C” company By effective utilization of assets tries to create and offer value to customers

“C” competition By effective utilization of assets tries to create and offer value to customers

Value Value

Cost differentials

Importance of 3Cs & Logistics

What is result of the interaction of 3Cs?• Productivity improvement

• Gradual commoditization of products• Logistics assume the role of providing the

competitive edge

SERVICE LEADER

SERVICE & COST LEADER

HAPPY HAPPY COMPANY

COST LEADER OK

C O S T

S E R V I C E

Whom shall I buy from?

CUSTOMER

LOWHIGH

What can Logistics do?

Questions V

Q1. What is interface?

Q2. Explain one of the marketing interfaces

Q3. Explain one of the operations interfaces

Q4. What are the 3 Cs?

Q5. What advantages are created by logistics?

7. Integrated Logistics

Integrated Logistics

Integration of logistics of product and service

(consolidated logistics mix to deliver product and

service)

Modern logistics is integrated logistics

A result of evolution

Factors responsible for the evolution

Consumer awareness 1960s

Introduction of computer 1960s

Global recession of 1970s & 1980s

JIT manufacturing 1980s

Integrated logistics evolved from the status of

“economy’s dark continent” in early 1960s to a

crucial management function of today

Significant developments during the evolution

Internal integration

Functional integration

(Integration with other management functions)

Single plan concept to coordinate flows of

information & inventory

customers’ demand for service

Integration of Logistics [infrastructures] of

Services and Products

PRODUCTT DELIVERY

SERVICE DELIVERY

(Lead time mgt)(Allocating resources-Creating capacity)

(Selecting channels)

8. Logistical competency

Inventory flow

Physical distribution

Manufacturing support

Procurement

Information flow

Customer

Suppliers

Logistical competency

Logistical Competence (Capability)

Required standards of skills and ability for

performing logistical functions & to coordinate

flows in logistical network

Logistical infrastructure, physical and

informational

Logistical Competency

The ability to convert capability into

performance

How it is achieved?

Internal integration

Functional Integration

Performing integrated logistics

What is Logistical competency?

1. Level of performance of logistical functions

2. Level of coordination in flows

3. Relative assessment of the firm by customers

to perform logistical functions

4. It is a strategy of the firm to attract customers

5. Its aim is to exploit logistics as a core

competency to fit into a firm’s overall

strategic positioning

Definition: Logistical Competency is the relative

assessment of a firm’s capability to provide

competitively superior customer service at the

lowest possible total cost

Questions VI

Q1. What is logistical competency?

Q2. How do customers measure logistical

competency?

Q3. What is integrated logistics?

Q4. What factors are responsible for evolution of

integrated logistics?

Q5. What is functional integration? 58

9. Logistical strategy

Logistical strategy and planning What is Logistical strategy?

Long term plan to distribute goods to market at

minimum cost while achieving service level

objectives

Strategic Decisions in Logistical Strategy

The core of Logistical strategy

complex and data intensive

1. Facilities (Distribution centers, factories,

vendors & so on) how many and where?

2. Inventory /service trade-offs

3. Network options

4. Transportation equipment

5. New material handling technology

6. Information technology

10. Logistical planning

What is logistical planning? Use of scientific planning tools to make

strategic decisions Methodology for logistical planning

Phase I• A current assessment (SWOT analysis) to

determine the need & desirability for change in strategy

• Problem definition and analysis

Phase II

Develop strategic alternatives

Phase III

Recommendation to management about the best

alternative

Formulate implementation plan

11. Some misc concepts

• First Party Logistics (1PL)

Supplier company

• Second Party Logistics (2PL)

Customer or vendor company

• Third Party Logistics (3PL)

Outsourced company

Fourth Party Logistics (4PL)

A consultant company

Fifth Party Logistics (5PL)

A financial consultant

• Cobbling

• Hub and spokes network

Focused factories

A Focused Factory strives for a narrower

range of products, customers or processes

The result is a factory that is smaller

has fewer Key Manufacturing Tasks

(specialization)

It optimizes performance in selected areas

Costs are less, customer service is better

Attributes of Logistics function (Department)

Attributes of Logistics Department

1. Scope is wide spread- functions of logistics are

spread across various stages of value chain in the

organization

2. Provides interface between marketing and

customers, marketing and operations, operations

and supplier

3. Provides competitive edge to business in

the current environment

4. Handles flow of information and materials

5. Large avenue for cost reduction

6. Cost advantage and value advantage

through logistics

Cost advantage through logistical cost

reduction

Value advantage through superior customer

service

How value advantage is created?

By delivering utility value

Form utility

Time utility

Place utility

Possession utility

Questions VII

Q1. What is logistical strategy and planning?

Q2. What is 3PL?

Q3. What is 4PL?

Q4. What are focused factories? Focused

logistics?

Q5. What is Possession utility?74

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