This action might not be possible to undo. Are you sure you want to continue?
Define Logistics Logistics is a process of strategically managing procurement, movement and stora ge of materials, parts and finished inventory( and related information flows) th rough the organization and its marketing channels in such a way that current and future profitability is maximized through the cost effective fulfillment of ord ers.
It add value when inventory is correctly posit ioned to facilitate sales. It is not spec ific to business or public sector. Creating logistics value is costly.CONCEPT Logistical management includes the design and administration of systems to contro l the flow of materials. . and finished inventory. work-in-progress.
. military officers w ith the title Logistikas were responsible for financial and supply distribution matters. The men who provided support to the fighters constituted the first logi stics organization.MILITARY ORIGN Logistics is considered to have originated in the military's need to supply them selves with arms. Roman and Byzantine empires. In ancient Greek. ammunition and rations as they moved from their base to a forw ard position.
devised a theory of war. The American Civil War saw the introduction of railways for transpo rt of personnel. supplies and heavy field pieces. ground tactics.In 1838. an d logistics. .MILITARY ORIGN Research indicates that its first use in relation to an organized military admin istrative science the Swiss.
It has to fit into firm¶s overall strategic positioning and then turn into core competency. preferably below industrial a verage.LOGISTICAL COMPETENCY It is the relative assessment of firm¶s capability to provide competitively superi or customer service at lowest possible total cost. .
Has two main arenas Logistical service Total Cost Firms that obtain strategic advantage based on logistical competency estab lish nature of their industry competition. .LOGISTICAL MISSION Balance service expectation and logistic expenditure to achieve business objecti ves through operational competency.
consistently avail able inventory to meet customer requirements.Logistical Service Logistical service is a trade off between service priority and cost.deliver y speed and performanceconsistency. Logistical service is measured in terms of 1)availability1)availability. 2)operational performance. . Cost-benefit impact of logistical failure is d irectly Costimpacts the customer involve. 3) service reliability ± least possible varian ce in overall logistic operation.
Total cost conc ept examines how functional cost interrelate. An organizational understanding ha s to be developed for the critical need for activity based costing capabilities. .Total cost Total cost concept is a specialized form of break even analysis. Historically ma nagement disciplines focused on minimizing each functional cost.
siz e and geographical relationship of facilities directly effect service capabiliti es and cost.THE WORK OF LOGISTICS Logistical competency is achieved by coordinating 1. Network design ± Number . Typical logistics facilities are manufacturing plants. cross dock operations and retail stores. . warehouses. Network design is the process to determ ine the number and locations of facilities to perform logistics work.
Information ± Deficiency in quality of information creates operational problems. . QR(quick response) and CR(continuous rep lenishment) are logistical controls by application on information accuracy. Inaccuracy in order processing. C ontrol concepts like JIT(just in time). Deficiency fa ll in two broad categories Forecasting errors.2.
lowest total cost.3. minimum Objectiveinventory commitment . Three forms of transport are priv ate. contract and common carriage. . Objective.desired customer service. 4. Transportation It is the most visible cost. Inventory Requirement depends on net work structure and customer service levels. Three factors are fundamental to transport pe rformance : cost. speed and consistency.
Integral part of a ll other four logistic functions. . material handling and packaging 3. transport consolidation and in some cases. Activities essential for logistical process ar e performed when goods are warehoused. order selec tion. product modification and assemb ly.Substantial variance in volume and profitability across product lines.Warehousing. The trap to avoid is high service perform ance on less profitable items purchased by non core customer.Warehousing. 80/20 rul e also called Pareto principle common. Examples sorting. sequencing. 3.
With minimized variance. lo gistical productivity improves due to economics. Little tol erance for deficiencies.traditional way of handling variancev ariance was safety stock and premium transportation.OPERATING OBJECTIVES Rapid response ± firms ability to provide service in timely manner.objective in volves total asset inventorycommitment and relative turn velocity. . Shift operatio nal emphasis from anticipatory posture to shipment to shipment basis. Minimum inventory. Zero inventor y becoming popular. Minimum variance.
Also known as cra dle to supportcradle logistic support.Movement consolidation.seek conti nuous quality improvement. Product recall is a critical competency. Larger the shipment and longer the distance tr ansported the lower the transportation cost per unit. QualityQuality. size of shipment and distance. Life cycle support. . Maximum control over potential health liability.transport cost is consolidationrelated to type of produc t. Return logistic s requirements increasing. TQM and zero defect logistical management important a s costs once dispensed cannot be reversed.
Cycle View of Supply Chains Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier .
SUPPLY CHAIN DRIVERS Value system of Michael Porter Demanding customers Shrinking product life cycles Pr oliferating product offerings Growing retailer power in some cases Doctrine of cor e competency Emergence of specialized logistics providers Globalization Information technology .
Complexities Involved in Supply Chain Management The supply chain is a complex network of facilities and organizations with diffe rent. conflicting objectives Matching supply and demand is a major challenge Sys tem variations over time are also an important consideration Many supply chain p roblems are new and there is no clear understanding of all the issues involved .
According to P&G./Nov. Oct.Supply Chain: The Potential Procter & Gamble estimates that it saved retail customers $65 million through lo gistics gains over the past 18 months. jointly crea ting business plans to eliminate the source of wasteful practices across the ent ire supply chain . the essence of its appr oach lies in manufacturers and suppliers working closely together . (Journal of Business Strategy. 1997) .
6% supplyof Gross Domestic Product).Supply Chain: The Magnitude In 1998. Transportation 58% Inventory 38% Management 4% Third party logistics services grew in 1998 by 15% to nearly $40 billion . American companies spent $898 billion in supply-related activities (or 10.
US $ 50 Billion) * Share of GD P ««. ers & Losses ««« 14 .000 crores (approx. 2.«« 12-13 % 12* Major Elements are ( Percentage of Total) * Transportation ««« 35 * Inventories ««« 25 * Packaging ««« 11 * Handling & Warehousing «.Supply Chain: The Magnitude (continued) SOME ESTIMATES FOR INDIA * Logistics Spend « IN Rs.40.
A t ypical new car spends 15 days traveling from the factory to the dealership.Supply Chain:The Magnitude (continued) It is estimated that the grocery industry in USA could save $30 billion (10% of operating cost) by using effective logistics strategies. . A typical box of cereal spends 104 days getting from factory to supermarket.
was forced to announce writewritedowns of $2.Supply Chain: The Magnitude (continued) Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 be cause its laptops and desktops were not available when and where customers were ready to buy them. internal and supplier parts shortages .6 billion in October 1997. one of America s leading capital goods produ cers. (Wall Street Journal. Boeing Aircraft. Oct. Th e reason? Raw material shortages. 1997) . 23.
the Dab bawalas of Mumbai has achieved an extremely high level of reliability and precis ion (SIX SIGMA level in QA parlance) in delivering to their customers the produc ts earmarked for them. thereby leading to a much higher remunerative price (yield) for produ cers and lower price for consumers. NDDB has enabled India to become the largest producer of milk by im plementing a logistics and supply chain system that has eliminated several inter mediaries. . As described in the FORBES magazine.Supply Chain: The Potential In 25 years.
1999) using . Build-to- . 1988-1996.000% (see Anderson and Lee. 1988by over 3.Build-to-order strategy.Supply Chain: The Potential Dell Computer has outperformed the competition in terms of shareholder value gro wth over the eight years period.Direct business model .
inventory turnover and operating profit of any discount retailer. Wal-Mart transformed Walitself by changing its logistics system. .Supply Chain: The Potential In 10 years. It has the highest sales per square foot.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.