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Module 7
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LogisticsLogistics: It is the art & science of managing & controllingthe flow of goods, energy, information and other resources.
Objectives of logistics:
1. Improving the customer service
2. Reduce total distribution cost
3. Minimum product damages
4. Generating additional sales
5. Creating time & place of utilities
6. Price stabilization
7. Quality improvement
8. Inventory reduction
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Logistics in the firm- A macro
dimensiony Logistics plays a very important role in the economy of
a country.
y Two significant ways:1. Logistics is major expenditures for business
2. Logistics supports the movement and f low of manyeconomic transactions.
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Logistics in the firm A micro
dimensiony Firm tend to move through 4 different stages of
development:-
1. View logistics as an area of cost minimization only.2. Firm tend to look upon logistics as a profit center.
3. Utilizing as both a profit center and key marketsegmentation variable.
4. Logistics is seen as a central area of strategic activitywithin the firm.
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Logistical interface with other areasy Interface between finance & accounting with logistics
is straight forward.
y Logistics manager need to prepare the detailed budgetexplaining why & where money is needed.
y Finance responsible for keeping track of costs andprocurement of needed resources.
y Good logistics practice increases gross profit andreduces assets required to sustain the business.
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Approach to Analyzing Logistics Systems
Material managementversus physical
distribution
Logistics channelsNodes versus links
Cost centers
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Logistics and system analysisy Logistics concept is based on the system approach.
A) Cost perspective:
1. Measuring the efficiency of the system by cost.2. Decisions about logistics have their effect on inventories,on packaging , on materials handling & on purchasingand marketing decisions.
3. Organizations goal is to provide good service to the
customers- in terms of quantity, quality, timely delivery.4. So, inventory control, service levels, package design,
warehousing, the mode, frequency and routes of transport will have to be considered.
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Logistics and system analysisB)Level of optimality:1) Firm should not optimize at one activity at the expense of other activity.
2) Overall firm is a system that should be optimized.
3) Example: logistics mgr want to give 5 day delivery service to customers whenthe competition is giving 3 day delivery service in the same sales area.
Marketing
FinanceOther
functionlogistics
Production
Vendors Customers
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Techniques of logistics system analysisy Short run or static analysis:1. Comprised of a matrix like table which presents each of the logistics
and other relevantcosts for two or more alternative logistics systems.
2. The major downside is that it presents a solution which is notnecessarily the correctone at all possible volume levels or every time.
y Long run/ Dynamic analysis:
1. Project the optimum is to mathematically calculate
the point of equality between the systems.
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Factors affecting the cost & importance of
logistics
A. Competitive relationship of logistics
B. Product relationships of logistics
C. Spatial relationship of logistics
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