Welingkar’s Distance Learning Division

CHAPTER-1

Introduction to Logistics Functions

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Distribution Definition

• Distribution Management can be defined as that arm or wind of management which serves as a link between procurement, manufacturing, marketing/sales, and finance, proper functioning of which synergizes the effects of all the activities, and absence of which cannot only reduce efficiencies but can lead to chaos in the organization

Logistics

• Logistics can be defined as the science of organizing the Distribution Function.

• Any marketing organization, makes its profits through a combination of activities which includes sales , cost of sales, gross margins, and distribution.

Marketing Organization Activities

• Sales Rs. XXXXXX• Less Cost Of Sales Rs. YYYYYY• Gross Margins Rs. ZZZZZZ• Less marketing Cost Rs. SSSSSS• Net Margins Rs. PPPPPP

Analysis of Marketing Activities

• Sales is a function of Volume X Net Realization• Volume is dependent on Marketing Inputs Viz.

Advertising, promotions, and sales efforts.• Net Realization is dependent on price, taxes

and levies• Cost of Sales is an aggregate of Cost of

Production

Analysis of Marketing Activities

• Advertising spends have to keep on increasing, consumers have to be constantly indulged with promotions, cost of inputs keep on increasing

Scope for Reducing Costs

A. Process OptimizationB. Optimization of TransportationC. Locating Distribution CentersD. Reducing the overall InventoryE. Improving the turn around of InventoryF. Effective DistributionG. Increasing Customer service levels

Overview of Logistics Management

Porter’s Value Chain

Value Chain

• Inbound Logistics– Receiving, storing, and forwarding inputs to the

manufacturing process

• Operations– Activities associated with transforming inputs into the

finished goods

• Out bound Logistics– Collecting, storing, physically distributing products to the

subsequent links in the supply chain

Value Chain

• Marketing & Sales– Providing the condition in which the customers

can buy or pick up the products, inducing and encouraging them to buy the products.

• Service– Providing service to enhance, maintain the value

of the product, involving activities such as installation, repair, parts supply, training etc.

Role of Logistics Manager

• Improve profits• Increase market share• Improve cash flows• Introduce new products• Rapid coverage,• Better customer service• Materials Management, transportation,

warehousing, distribution, inbound logistics etc.

Logistics Interface

More

Less

More

Fewer

High

Low

Functional Interests Logistics Interface Business Impact

Sales

Production

Finance

Customer Service

ProductionConstraints

AssetInvestments

Distribution Planning

How dowe knowarrived?

Designdistribution

controls

How do weget

There? DevelopDistri.

Strategy

Where do We

WantTo be?

DefineDistribution

Mission

Auditdistribution

performance

Where arewe

now?

Introduction to Logistics Functions

Distribution Mission

• The distribution mission can be described as a set of goals to be achieved by the system within a specific product/market context will get shaped by– The product– Production method– Nature of the product– The channel– Outlets– Customer service levels

Distribution Strategy

Corporateobjectives

What biz. are we in?

Marketingstrategies

Customerservice

strategies

Costeffectiveness

appraisals

Product/marketdecisions

Inventorystrategies

Warehousingstrategies

Transportstrategies

CustomerCommunication

strategy

Distribution Planning Cycle

StrategicPlanningProductsMarketschannels

PerformancemeasurementActual Vs. PlanMidcoursecorrections

DistributionmanagementInventorycontrolTransport

OperationalplanningManufacturingCustomer serviceBudgets

Summary

• Distribution Management serves as a link between different organizational department

• Logistics can be defined as the science of organizing the Distribution Function.

• Porter’s Value chain discusses inbound logistics, operations, out bound logistics, marketing and service and support as well as primary activities

Summary

• The distribution mission can be described as a set of goals to be achieved by the system within a specific product/market context

• In case of distribution strategies one has to examine the options in terms of cost effectiveness