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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
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VENDOR
COMPONENTS PLANT
ASSEMBLY PLANT
DISTRIBUTION CENTER
CUSTOMER
PROCUREMENT CYCLE
MANUFACTURING SUPPORT CYCLE
PHYSICAL DISTRBUTION
CYCLE
SYSTEM IN PUT INPUT
SYSTEM OUT PUT
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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
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Operating Objectives Of Logistics
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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
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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
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How to maintain smooth, undisturbed flow of
supplies to customer?
• Traditional approach – stock piling
• Modern approach – Minimum Variance
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3. Minimum inventory
• Low inventory volume by high inventory turns
• Kanban as an inventory control tool
• Single piece flow as practiced by JIT companies
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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
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5. Quality
Quality of logistics performance - complete
fulfillment of order, product, place, time and
quantity
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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)
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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)
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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
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Subdivisions of logistics management
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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
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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
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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
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Some more concepts
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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
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•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
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“A”High Value
“B”Brittle
“C”Low value
Customer-Service Goals
[QCD]At market type
A
Customer Service Goals
[QCD]At market type
B
Customer Service Goals
[QCD]At market type
C
Transp
Warehouse
M/H
Functional Inputs to Logistical Management SINGLE PLAN
1. Logistical Mission
Inventory Mgt
PackgInfo
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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
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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
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Important in Input Intensive industries
• Complexity
• Large number of inputs & vendors
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Outbound Logistics - continued
Customer order
Order transmission
Order processing
Order Selection
(Documentation, packaging)
Order transportation
Customer delivery
3. Outbound Logistics
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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
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• Trade off between transportation cost reduction
and customer service
• Trade off between inventory cost reduction and
transportation cost reduction
• Important in Output Intensive industries
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Interface with marketing
PRICE
PRODUCT
PROMOTION
PLACE
LOGISTICS
MARKETING
4. Logistical interfaces
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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
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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
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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
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Interface with operations
SHORT RUNS
SEASONAL DEMAND
SUPPLY SIDE INTERFACE
PACKAGING
LOGISTICS
OPERATIONS
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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
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2. Seasonal demand
• Inventory of R/M or F/P?
• How much & where?
• Inventory should be mutually accepted
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3. Supply side interface
• Procurement cycle
• Logistics of the vendor and supplier
• Prevent shortages & reduce cost
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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
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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
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“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
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SERVICE LEADER
OK OK
SERVICE & COST LEADER
HAPPY HAPPY COMPANY
SAD
COST LEADER OK
C O S T
S E R V I C E
Whom shall I buy from?
CUSTOMER
HIGH
LOW
LOWHIGH
What can Logistics do?
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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
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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
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Factors responsible for the evolution
Consumer awareness 1960s
Introduction of computer 1960s
Global recession of 1970s & 1980s
JIT manufacturing 1980s
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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)
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Single plan concept to coordinate flows of
information & inventory
customers’ demand for service
Integration of Logistics [infrastructures] of
Services and Products
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PRODUCTT DELIVERY
SERVICE DELIVERY
(Lead time mgt)(Allocating resources-Creating capacity)
(Selecting channels)
8. Logistical competency
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Inventory flow
Physical distribution
Manufacturing support
Procurement
Information flow
Customer
Suppliers
Logistical competency
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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
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Logistical Competency
The ability to convert capability into
performance
How it is achieved?
Internal integration
Functional Integration
Performing integrated logistics
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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
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5. Its aim is to exploit logistics as a core
competency to fit into a firm’s overall
strategic positioning
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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
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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?
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2. Inventory /service trade-offs
3. Network options
4. Transportation equipment
5. New material handling technology
6. Information technology
10. Logistical planning
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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
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Phase II
Develop strategic alternatives
Phase III
Recommendation to management about the best
alternative
Formulate implementation plan
11. Some misc concepts
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• First Party Logistics (1PL)
Supplier company
• Second Party Logistics (2PL)
Customer or vendor company
• Third Party Logistics (3PL)
Outsourced company
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Fourth Party Logistics (4PL)
A consultant company
Fifth Party Logistics (5PL)
A financial consultant
• Cobbling
• Hub and spokes network
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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)
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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
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3. Provides competitive edge to business in
the current environment
4. Handles flow of information and materials
5. Large avenue for cost reduction
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6. Cost advantage and value advantage
through logistics
Cost advantage through logistical cost
reduction
Value advantage through superior customer
service
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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