Logistic ManagementLogistic Management
An Supply Chain ImperativeAn Supply Chain Imperative
ByBy
Subhash Raje Subhash Raje
Asstt. Prof.Asstt. Prof.
Academy of e-learning solutions Pvt. Academy of e-learning solutions Pvt. Ltd Ltd [email protected]
9028007445,94050303009028007445,9405030300
LOGISTICSLOGISTICS
DefinedDefined
Planning implementing and controlling Planning implementing and controlling the physical flow of material and the physical flow of material and
finished goods from point of origin to finished goods from point of origin to point of use to meet customer`s need at point of use to meet customer`s need at
a profita profit
By “Philip Kotler”By “Philip Kotler”
It is essentially a planning process and It is essentially a planning process and an information activityan information activity
So A integrative process that optimizes So A integrative process that optimizes the flow of material and supplies the flow of material and supplies through the organization and its through the organization and its
operations to the customeroperations to the customer
The word logistic has originated from The word logistic has originated from Greek word ‘Logistikos’ and the Latin Greek word ‘Logistikos’ and the Latin
word ‘Logisticus’ which means science of word ‘Logisticus’ which means science of computing & calculatingcomputing & calculating
In ancient times it was used more in In ancient times it was used more in connection with moving armies, the connection with moving armies, the
supplies of food & armaments to the war supplies of food & armaments to the war front.front.
During World War II logistics gained During World War II logistics gained importance in army operations covering importance in army operations covering
the movement of supplies , men & the movement of supplies , men & equipment across the borderequipment across the border
Today Today
It has acquired the wider meaning and is It has acquired the wider meaning and is used in the business for the movement used in the business for the movement
of material from suppliers to the of material from suppliers to the manufacturer and finally the finished manufacturer and finally the finished
goods to the consumersgoods to the consumers
Scope of LogisticScope of Logistic
It is of critical importance to the organization how It is of critical importance to the organization how it delivers products & services to the customer , it delivers products & services to the customer , whether the product is tangible or intangible. whether the product is tangible or intangible.
Effective & efficient Physical movement of the Effective & efficient Physical movement of the tangible product will speak of intangible services tangible product will speak of intangible services associated with the product and the organization associated with the product and the organization
which is delivering it. which is delivering it.
In Case of intangible product , the delivery of In Case of intangible product , the delivery of tangibles at the right place & right time will speak tangibles at the right place & right time will speak
about its quality.about its quality.
On the macro level infrastructure such as Various On the macro level infrastructure such as Various modes of transport , transportation equip., storage modes of transport , transportation equip., storage
facilities, connectivity & information processing facilities, connectivity & information processing are contributing to a larg3e extent in the physical are contributing to a larg3e extent in the physical movement of goods produced in manufacturing , movement of goods produced in manufacturing ,
mining & agriculture Sectors.mining & agriculture Sectors.
Scope of logisticsScope of logisticsThis speed & reliability in distribution of This speed & reliability in distribution of products & services contribute to a great products & services contribute to a great
extent in the growth of a country`s extent in the growth of a country`s domestic & international trade . Logistic domestic & international trade . Logistic cost as a percentage of GDP across the cost as a percentage of GDP across the world is shown in the following table world is shown in the following table
CountryCountry Logistic cost as a percentage Logistic cost as a percentage of GDPof GDPKoreaKorea 1616
ChinaChina 1515
JapanJapan 1414
IndiaIndia 1313
FranceFrance 1212
UKUK 1111
USAUSA 1010
Scope of logisticsScope of logisticsIndia spent nearly $ 50 billion to move India spent nearly $ 50 billion to move
material from one use to another.material from one use to another.So the “ Public distribution system in the So the “ Public distribution system in the
country needs logistical support for country needs logistical support for delivering goods at right place on time and delivering goods at right place on time and
the lowest cost.the lowest cost.
At Micro Level logistic plays a critical role in At Micro Level logistic plays a critical role in the value delivery system of business the value delivery system of business
organization to provide superior customer organization to provide superior customer service i.e. to achieve a desired level of service i.e. to achieve a desired level of
delivered services and quality at the lowest delivered services and quality at the lowest possible cost. possible cost.
In a nutshell any productivity improvement In a nutshell any productivity improvement that could be achieved in any part of logistic that could be achieved in any part of logistic
system,at the micro or macro level would system,at the micro or macro level would help in cost reduction and proper help in cost reduction and proper
deployment of scare national resources to deployment of scare national resources to the productive purposesthe productive purposes..
FactFactIn a manufacturing org. the business process In a manufacturing org. the business process
starts with the flow of material from the starts with the flow of material from the suppliers, progress to the plant, then to the suppliers, progress to the plant, then to the
customer through the distribution channel the customer through the distribution channel the department may excel in their respective department may excel in their respective
function but org. as a whole their performance function but org. as a whole their performance may be dismal.may be dismal.
ReasonReason Lack of Co ordination in their activitiesLack of Co ordination in their activitiesThey have different goal to cherishThey have different goal to cherishThere is no single agency that coordinates There is no single agency that coordinates their functions and homogenizes them.their functions and homogenizes them.
How to overcome ? How to overcome ?
Use of Logistic as a systemUse of Logistic as a system
Logistic –A system approachLogistic –A system approachLogistic recognizes that all the activities of Logistic recognizes that all the activities of
material movement across the business material movement across the business process are interdependent and needs close process are interdependent and needs close coordination and these are to be maintained coordination and these are to be maintained
as a system and not the functional Silos.as a system and not the functional Silos.
System is shown as logistic Mix including System is shown as logistic Mix including following functional Areasfollowing functional Areas
Order ProcessingOrder ProcessingInformation FlowInformation Flow
WarehousingWarehousingInventory controlInventory control
PackagingPackagingTransportationTransportation
Order ProcessingOrder Processing
Involve following activitiesInvolve following activitiesOrder checking for any deviation in agreed on Order checking for any deviation in agreed on negotiated termnegotiated termTechnical details;price;delivery period;payment Technical details;price;delivery period;payment terms;taxes etcterms;taxes etcChecking the availability of material in stock Checking the availability of material in stock (material requisition)(material requisition)Production & material scheduling for shortageProduction & material scheduling for shortageAcknowledging the order, indicating deviation if Acknowledging the order, indicating deviation if anyany
It is routine operation but require great deal of It is routine operation but require great deal of planning training of people involved and planning training of people involved and
investment to bring about efficiency & accuracyinvestment to bring about efficiency & accuracy
In a large organization a system capable of In a large organization a system capable of handling thousands of voluminous orders with handling thousands of voluminous orders with
minimum human involvement or without human minimum human involvement or without human involvement is a must involving shortened order involvement is a must involving shortened order
fulfillment cycle to have edge over rivalsfulfillment cycle to have edge over rivals
Information FlowInformation Flow
It is basically information based activity of It is basically information based activity of inventory movement across the supply chain. inventory movement across the supply chain. Hence role of information system plays a vital Hence role of information system plays a vital role in delivering superior customer servicerole in delivering superior customer service
This function is required to facilitate the This function is required to facilitate the following information needsfollowing information needs
Order RegistrationOrder RegistrationOrder checking & editingOrder checking & editingOrder processingOrder processingCoordination means to integrate the total Coordination means to integrate the total supply chain of the company with informational supply chain of the company with informational needs as to time ,quantity, value e.g Lead time, needs as to time ,quantity, value e.g Lead time, rate of consumption , delivery schedule & price rate of consumption , delivery schedule & price of the material , Transportation time & cost etc.of the material , Transportation time & cost etc.
WarehousingWarehousingA storage place wherein finished goods are A storage place wherein finished goods are stored till they are sold.Effectiveness of an stored till they are sold.Effectiveness of an
organization`s marketing strategy depends on organization`s marketing strategy depends on making the right decision regarding making the right decision regarding
warehouse.warehouse.
Nowadays Nowadays
Warehouse are treated as switching Warehouse are treated as switching facilities rather than storage place.It is a facilities rather than storage place.It is a
major cost center, many customer problem major cost center, many customer problem are the direct result of improper are the direct result of improper
warehousing management.warehousing management.
Major decision of ware house are as Major decision of ware house are as follows:-follows:-
Location ,Size & Number of warehousing facilitiesLocation ,Size & Number of warehousing facilitiesWarehouse layoutWarehouse layoutDesign of buildingDesign of buildingOwnership of the warehouseOwnership of the warehouse
Inventory managementInventory managementPoint order problemPoint order problem
That is That is
How much to order How much to order When When to orderto order
For this we requireFor this we require
Dependable IMSDependable IMS Independent Independent IMSIMS
Purchase Control Stores control Purchase Control Stores control Issue Issue
managementmanagement
ABC AnalysisABC Analysis
VED Analysis Level VED Analysis Level ManagementManagement
EOQ & EBQ AnalysisEOQ & EBQ Analysis MRP SystemMRP System
Perpetual inventory system Perpetual inventory system JIT System JIT System
PackagingPackaging
It is also a critical element in It is also a critical element in physical distribution of the physical distribution of the
product , which influences the product , which influences the efficiency of the logistic system efficiency of the logistic system
this is done with the view of this is done with the view of following :-following :-
Foe handling and damage Foe handling and damage preventionpreventionFor communicationsFor communicationsFor inter modal transportationFor inter modal transportationStorage space economyStorage space economy
Thus to reduce packaging costThus to reduce packaging cost
TransportationTransportationFoe the movement of goods from supplier Foe the movement of goods from supplier
to buyer , transportation is the most to buyer , transportation is the most fundamental and important component of fundamental and important component of
logistic.logistic.
E.g. for low unit value products the E.g. for low unit value products the transportation cost component is 20% of transportation cost component is 20% of
the product cost.the product cost.
In logistic cost its share varies up to 65-70% In logistic cost its share varies up to 65-70% in case of mass consumed very low unit in case of mass consumed very low unit
price products.price products.Mode of transportation ( Cost & time Mode of transportation ( Cost & time factor)factor)Own fleet or OutsourcingOwn fleet or OutsourcingRoute PlanningRoute PlanningVehicle schedulingVehicle scheduling
Are the few decision which are involved in Are the few decision which are involved in transportationtransportation
Three ForcesThree ForcesWhich have Which have changechange the perspective of the perspective of
logisticslogistics
GlobalizationGlobalization
Focus on Supply chain Focus on Supply chain ManagementManagement
Outsourcing of Non Core Outsourcing of Non Core Competency Functional Competency Functional
AreaArea
GlobalizationGlobalizationThe entire world has become a The entire world has become a
global village for marketers because global village for marketers because of the liberalization of economics of of the liberalization of economics of most countries and the emergence most countries and the emergence
of WTO which is forcing business of WTO which is forcing business organizations to supply products organizations to supply products beyond the national boundaries beyond the national boundaries
wherever there is a market wherever there is a market opportunity. opportunity.
In such conditions the role of In such conditions the role of
LOGISTICSLOGISTICSWill be to provide time and place Will be to provide time and place
time and place utility of the product time and place utility of the product to the customerto the customer
Focus on Supply Chain ManagementFocus on Supply Chain Management
Business the world over are striving for Business the world over are striving for competitiveness. In their struggle for competitiveness. In their struggle for survival their focus has shifted to the survival their focus has shifted to the
supply chain supply chain
I.e. I.e.
Integrating the process of Procurement , Integrating the process of Procurement , processing & distributing to deliver value processing & distributing to deliver value
for money to the customerfor money to the customer
Two key roles logistics planning & supportTwo key roles logistics planning & support
areare
Value delivery processValue delivery process success of success of supply chain supply chain managementmanagement
Outsourcing of Non Core Competency Outsourcing of Non Core Competency functional Areafunctional Area
Outsourcing is a acceptable trend in Outsourcing is a acceptable trend in business.business.
Corporation have realized that doing Corporation have realized that doing everything by themselves does not result in everything by themselves does not result in effective & efficient use of scare resources effective & efficient use of scare resources
available to them.available to them.
It is better to outsource functional area to It is better to outsource functional area to experts who can do job at the lowest cost experts who can do job at the lowest cost
and that to efficiently & Effectively.and that to efficiently & Effectively.
LOGISTICSLOGISTICS
Is one such area where most of business Is one such area where most of business org. do not have enough expertise thus org. do not have enough expertise thus
needs to be outsourcedneeds to be outsourced
Thus Logistics have shaped into different Thus Logistics have shaped into different service industry offering complete & service industry offering complete &
customized logistics solutionscustomized logistics solutions
Value ChainValue ChainIt is understood now that an It is understood now that an
organization`s competitive Success organization`s competitive Success could only come through either cost could only come through either cost leadership or offering differentiated leadership or offering differentiated
product and services product and services
LOGISTIC MANAGEMENTLOGISTIC MANAGEMENT Can provide both the benefits Can provide both the benefits
simultaneouslysimultaneously
Through its value chain activitiesThrough its value chain activities
Which can be categorized into different Which can be categorized into different typestypes
Inbound logisticsInbound logisticsoperationsoperations
Out bound logisticsOut bound logisticsSupport activates e.g HR, Accounts & Support activates e.g HR, Accounts &
finace, IT & MIS etc.finace, IT & MIS etc.
ServicesIn bound logistics
Operations
Out bond Logistics
operations
S & MCustomer Value
HR M&MTechnology
A&F
Infrastructure
Supply ChainSupply Chain
Procurement
Stores Stores
Vendor
Operations
Warehouse
Customer
Inbound Logistics
Out Bound Logistics
Supply ChainSupply Chain
Vendor
Purchase
StoresRM
Customer
Warehousing
StoresFG
Inbound Logistics Out bound logistics
OPERATIONSProcurement
Distribution
Material flow Material flow
Information flow
Logistics for Business ExcellenceLogistics for Business ExcellenceFor Business Excellence logistics operation For Business Excellence logistics operation need to be integrated on the following two need to be integrated on the following two
frontsfronts integration of logistic into businessintegration of logistic into business
Integration of components of logisticsIntegration of components of logistics
To achieve the objective of making To achieve the objective of making available right product at the right place available right product at the right place and at a right time at low cost , every and at a right time at low cost , every business is required to integrate logistics business is required to integrate logistics into the business process.into the business process.
For logistic operation to run smoothly, For logistic operation to run smoothly, proper integration amongst the proper integration amongst the component of logistic process is a must.component of logistic process is a must.
LogisticLogisticHR A/Cs FinanceUtilitiesMarketingPPC QC Mat. Mng. IT Others
Organizational Functions
Suppliers Procurement Processing Distribution Customer
Logistic System Component
Order Processing
Inventory Mang.
Warehousing
Transportation Material Handling & StorageLogistical Packaging
Information
In Bound Log. Out Bound Logistic
In process Log.
LOGISTIC FUNCTION
Objectives of Logistic managementObjectives of Logistic management
Inventory ReductionInventory Reduction
Reliable and consistent delivery Reliable and consistent delivery performanceperformance
Freight economyFreight economyMinimum product damageMinimum product damage
quick Responsequick Response
NOTE:NOTE:Amongst most of the Indian Amongst most of the Indian
companies logistics outsourcing companies logistics outsourcing
Has now become an accepted trend Has now become an accepted trend for the following reasons:for the following reasons:
Cost Saving Cost Saving
Focus on core BusinessFocus on core Business
Paucity of fundsPaucity of funds
Reduction in liabilitiesReduction in liabilities
Wider Geographical coverageWider Geographical coverage
Cross pollination of better available Cross pollination of better available practicepractice
WarehousingWarehousing
Nowadays warehousing is used as a Nowadays warehousing is used as a switching facility rather than as a long switching facility rather than as a long
term storage house.term storage house.
Attention is paid to Attention is paid to
HigherHigher lower lower shortershorter
inventory turnover operating inventory turnover operating cost cycle timecost cycle time
And in light of these warehouse`s And in light of these warehouse`s performance is judged by its productivity performance is judged by its productivity
and cost performance while trying to and cost performance while trying to achieve 2 polemic goals.achieve 2 polemic goals.
Customer`s satisfactionCustomer`s satisfaction lower cost of lower cost of operationoperation
1 2 3
1 2
We have to decide on 2 factorsWe have to decide on 2 factors
Whether to have Whether to have
Centralized Centralized decentralized warehousedecentralized warehouse
warehouse warehouse
It ensures tight controlIt ensures tight control multiple multiple distribution distribution
On inventories and canOn inventories and can centers centers
Operate on EOSOperate on EOS
location of location of sitessites
ObjectiveObjective
MainMain
better customer service low better customer service low operating costoperating cost
Ancillary objectiveAncillary objective
Maximum utilization of storage spaceMaximum utilization of storage space
Higher labour productivityHigher labour productivity
Maximum Asset utilization Maximum Asset utilization
Reduction in material handlingReduction in material handling
Increase in inventory turnoverIncrease in inventory turnover
Reduce order filing timeReduce order filing time
Warehousing FunctionWarehousing Function
3 Functions3 Functions
Material Storage Function Material Storage Function
Material Handling FunctionMaterial Handling Function
Information Handling FunctionInformation Handling Function
Material Storage functionMaterial Storage function
Due to non synchronization of Due to non synchronization of Manufacturing cycle with that of the Manufacturing cycle with that of the consumption cycle of the material , consumption cycle of the material ,
storage of the material remains a big storage of the material remains a big hurdle hurdle
So material storage is required to So material storage is required to accommodate the following functions:accommodate the following functions:
HoldingHolding
ConsolidationConsolidation
PostponementPostponement
Break Bulk Break Bulk
packing packing
Cross DockingCross Docking
MixingMixing
Material Handling functionMaterial Handling function
This involves three functionThis involves three function
1.1. Loading & unloadingLoading & unloading
2.2. Material MovementMaterial Movement
3.3. Order filingOrder filing
Information handling functionInformation handling function
For this following information is For this following information is requiredrequired
Goods inwardGoods inwardInspection & auditingInspection & auditing
Goods outwardGoods outwardExcess Stock Excess Stock
InvoicingInvoicingWarehouse expensesWarehouse expenses
Transit damage & BreakageTransit damage & BreakageConsignment trackingConsignment tracking
This all information facilitate quick This all information facilitate quick decisiondecision