Logistics and Supply Chain Managment

8/3/2019 Logistics and Supply Chain Managment

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Learning Objectives• Principles of materials management, logistics

and supply chain management • Logistics interface with other functions • Inventory management principles and

systems • Warehousing management fundamentals • Transportation management practices • How IT enables the logistics function • Understand about the performance

measurement of the logistics function



Materials Management

• Materials forms the largest single cost item inmost manufacturing companies – needs to be

carefully managed

• Materials management function includesplanning and control, purchasing and storesand inventory control

• Materials management is the precursor to logistics and supply chain management



Logistics Defined

• Logistics means having the right thing, atthe right place, at the right time

• The procurement, maintenance, distributionand replacement of personnel and materials – Webster’s Dictionary

• The science of planning, organizing and

managing activities that provide goods orservices – Logistics World, 1997



Logistics

• Functions: planning, procurement,transportation, supply and maintenance

• Processes: requirements determination,acquisition, distribution and conservation • Business: science of planning, design and

support of business operations of

procurement, purchasing, inventory,warehousing, distribution, transportation,customer support, financial and humanresources



Scope of Logistics

• Choice of markets • Procurement • Plant location and layout

• Inventory management • Location and management of warehouses • Choices of carriers, mode of transport • Packaging decisions

• Relevant to all enterprises: manufacturing,

Government, Institutions, serviceorganisations



Components of LOGManagement

• NaturalResources

(land,facilities

Equipment) • HR

• Finance • Informati

on

• MarketingOrientation

(competitiveAdvantage) • Time andPlace utility • Efficient

move to customer

Customer service Demand forecasting

Distribution Communications Inventory control

Materials handling Order processing

Parts and service support Plants and warehouse selection

Procurement Packaging

Return goods handling Salvage and scrap disposal Traffic and transportation Warehouse and storage

Input OutputLogistics Activities



Links and Flows

Customer’s

customer

Supplier’s supplier

SupplierLead FirmCustomer

General cash flow

Information flow

Information flow

General material flow/ service flow

Inbound / Upstream logisticsOutbound / Downstream logistics

Source: ICFAI



SDM – Ch 15 Tata McGraw Hill Publishing

Logistics and Marketing

• Interface on:

o Product design and pricing o Customer service policies o Sales forecasts and order processing o Inventory policies and location of warehouses o Channels of distribution and despatch planning o Transportation to reach products to customers

• Production wants larger production runs tominimise time spent on set up changes on the

machines. Marketing wants smaller runs of avariety of products.




The Value Chain

Company Infrastructure

Organisation, people, methods

Systems & technology

Procurement

Inbound logistics Operations

Outbound logistics

Marketing & sales

Service

Primary activities

S U P P P O

R T

margin

margin

Source: Michael Porter




Logistics Plan Outline• Internal analysis (current position)

o Organisation o Human resources o Transportation o Relations with internal customers o

Quality of product

o Quality of Service • External / situation analysis

o Competitor logistics performance o Trends o External environment / economy o Public, private and contract warehouse o Public, private and contract carriage




Principles of Logistics Excellence

Alling & Tyndall

Strategic Operational

Link logistics to corporatestrategy Organise comprehensively Use the power of information Emphasise human resources Form strategic alliances

Focus on financialperformance Target optimum service levels Manage the details Leveraging logistics volumes Measure and react to

performance



Logistics Focus Areas

Customer service related Operations related

Packaging

Order processing Spare parts and service support After sales Customer servicesupport Demand forecasting Distribution communications Return goods handling

Plant and warehouse site location ProcurementInventory control Materials handling Salvage and scrap disposal Traffic and transportation Warehousing and storage

Logistics may be confined to the company whereasSCM extends beyond



Supply Chain Management

• Business context: o Globalization of the market place o Advances in technology o Increasingly demanding, informed customer base o

Purchase decisions on dimensions of quality, priceand time • Innovative supply chain:

o To meet customer driven challenges o To reduce costs o Improve service levels o Enhance speed to market



Supply Chain Integration

• Optimising the supply chain requiressupplier and customer involvement to

integrate processes, policies, systems,database and strategies betweendiverse trading partners



Integrated Supply Chain Management

Manufacturing/ Re-

manufacturing/ Assembly

Demand & LeadTime Management

Storage &Transportation

Materials

Management

Inventory Managementand control

CustomerAnalysis

Purchasing/SupplierPartnering

Order Fulfillment

Supply Chain Integration



Functions

Warehouses

Materialhandling Storage

functionCustomer

serviceInformation

transfer

Temporary

Permanent

Receive goods Identify goods

Sort goods Despatch to

storage Hold inventory Recall, select

goods Marshal theshipment

Despatch theshipment

Prepare records

and

advices



Purpose of Warehousing

• To provide desired level of customerservice at the lowest possible total cost

• It is that part of the firm’s logistics system thatstores products (RM, Packing Materials, WIP,FG) at and between point of origin and pointof consumption and provides info tomanagement on the status, condition anddisposition of items being stored

• Distribution warehousing relates mainly to FG



Reasons for WarehousingService related Cost related

Maintain source of supply Support customer service policies Meet changing market conditions Overcome time and spacedifferentials Support JIT programs of suppliersand customers Provide customers with the rightmix of products at all times Temporary storage of materials tobe disposed or re-cycled

Achieve production economies Achieve transportation economies Take advantage of QuantityPurchase discounts and forwardbuys Least Logistics cost for a desiredlevel of customer service



Warehouses

• Support manufacturing • Mix products from multiple facilities for

shipment to a single customer • Break-bulk • Aggregate • Used more as a ‘flow-thru’ point than as

a ‘hoarding’ point



Reverse Logistics

• Movement of goods from the market orcustomer back to the company

• The need: o Increased awareness of the environment o Stringent legislationo For some it is part of the business o Profitability of dealing with scrap, surplus

• Surplus, obsolescence can result due to: o Over optimistic sales forecasts, change in product

specs, errors in estimating material usage, lossesin processing or overbuying based on incentives



• THANK YOU

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Logistics and Supply Chain Managment

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