PRINCIPLES OF LOGISTICS

ABB 10402

TOPIC: HISTORY AND EVOLUTION OF LOGISTICS

READING ASSIGNMENT 1

NAME : SASI KUMAR A/L KIRUBAGARAN

ID: 53212119025

CLASS: 1BAVM SEM 2

1.0 Definition of logistics

Logistics is used more broadly to refer to the process of coordinating and moving
resources people, materials, inventory, and equipment from one location to storage at
the desired destination. The term logistics originated in the military, referring to the
movement of equipment and supplies to troops in the field. Logistics refers to the
overall process of managing how resources are acquired, stored, and transported to
their destination. Logistics management involves identifying prospective distributors
and suppliers and determining their effectiveness and accessibility. Logistics
managers are referred to as logisticians.
Logistics" was initially a military-based term used about how military personnel
obtained, stored, and moved equipment and supplies. The term is now used widely in
the business sector, particularly by companies in the manufacturing sectors, to refer to
how resources are handled and moved along the supply chain.

2.0 Definition of supply chain

A supply chain is a network between a company and its suppliers to produce and
distribute a specific product to the final buyer. This network includes different
activities, people, entities, information, and resources. The supply chain also
represents the steps it takes to get the product or service from its original state to the
customer.
In Malaysia, Companies develop supply chains so they can reduce their costs and
remain competitive in the business landscape. Supply chain management is a crucial
process because an optimized supply chain results in lower costs and a faster
production cycle. Example, Malaysian company Airasia is collaborating with Unikl
Miat to produce best pilots.

3.0 History of logistics

It is believed that logistics essentially became what is primarily thanks to ancient

militaristic operations. Military logistics focused on the process of managing the
transport of ammunition/weaponry and provisions to troops. It was the military
logistics of Alexander the Great that earned him the title of quite possibly being the
greatest logistics genius of all time. This was due to the way in which he utilized his
knowledge of the terrain, location of enemies, and the approach he took in regard to
moving provisions. It would be his near-flawless logistical planning that ultimately
attributed to his empire’s successful expansion to the lands of Eastern Asia.

Transportation in Malaysia started to develop during British colonial rule, and

the country's transport network is now diverse and developed. Malaysia's road
network is extensive, covering 250,023 kilometers, including 1,956 km of
expressways (in 2019). The main highway of the country extends over 800 km,
reaching the Thai border from Singapore. Peninsular Malaysia has an extensive road
network, whilst the road system in East Malaysia is not as well-developed. The
main modes of transport in Peninsular Malaysia include buses, trains, cars and to an
extent, commercial travel on airplanes.

Malaysia has six international airports. The official airline of Malaysia

is Malaysia Airlines, providing international and domestic air service alongside two
other carriers. Most of the major cities are connected by air routes. The railway
system is state-run, and covers a total of 1,849 km. Popular within the cities
are commuter rail and rapid transit, which reduces the traffic load on other systems,
and is considered safe, comfortable and reliable

4.0 Evolution of logistics

Years 1930 “Military logistics”

After the Second World War, the interest of business by the logistics process
arises and an analogy is established between military logistics and technical material
supply and military logistics is begun to be related to industrial production.

Years 1950 “Conceptualization of logistics”

Logistics becomes more important due to the transition that goes through the
most developed countries, from an economy characterized by excessive demand to an
economy with excess supply, with these being their main characteristics: First
developments of the total cost of logistics operations. It focuses on the concern to
satisfy the customer. Distribution channels are of importance. You want to sell any
product anywhere. Increase new products, as a result the product lines are originated.
Years 1960 “Outsourcing”
Logistics took a new approach where “outsourcing” was the most appropriate
mechanism to reach customers, since it had as its main objective the subcontracting of
other companies because the flow of goods or information was efficient and reached
all parts That were within the reach of the company.

Years 1970 “The concept of trial logistics”

Customer service becomes an indispensable requirement to continue competing
with market leaders. Progress in the concept of physical distribution. There are
periods of recession and growth in the world economy. Development of the inventory
management strategy.

The technology for the industrial revolution that occurred during these times
began to emerge, and the cost of information technology was reduced to improve the
quality, which brought about an improved mechanism for the supply of the goods Or
information accurately and precisely at the time the customer made their order, this
mechanism is called “Just in Time”, that is just in time

Year 1980’s “Modification of preferences”

The energy crisis of the moment drives the movement towards the improvement
of transport and storage.Just in Time’s approach was modified by Quick Response
(QR) and Efficient Consumer Response (ECR) with the sole purpose of seeking a
precise delivery with the exact amount, when and where needed, to meet To the
customer.
Changes in supply chain preferences where special attention is paid to suppliers,
distributors and customer service, defining the end-user’s demand. Inventories, total
logistics costs are reduced, and delivery times are shorter. Logistics operations are
energy-intensive: environmental-ecological concern is born.

Years 1990 “Promotion of logistics”

Logistics went on to become a more integrated process in terms of its external
and internal environment, in other words, its internal processes within the company
were managed according to the relationships that were with its customers and
suppliers. This process of integration causes logistics management to begin with a
strategic plan regarding the design of how to reach the final customers, in order to go
out and minimize competition, establishing efficient plans for the supply of the
products. Technology continues to position itself in conventional Logistics processes
and Distribution channels , Outsourcing services and Demand for logistics services
expands.

After Year 2000

Day by day it is observed that to put into practice a good business logistics
management is essential, it has developed over time and is now a basic aspect. A
perfectly designed logistics project is the most strategic tool to compete with the
demanding current market, achieving customer loyalty.

All these changes that were adapted over time in the administration of the
logistics caused not only to administer an internal process that goes from the
manufacture of the product until it acquires the client, but now it is ‘They analyze a
whole network of supplies that involve various process flows, which is now known as
the supply chain management, which must also take into account intermediate
customers such as distributors and retailers in the process What is done because the
product arrives at the customer.

4.1 Evolution of Malaysian logistics

Managing the logistics industry has been a neglected area of business activity in
Malaysia. In the past, companies are not aware of the advantage of having an
effective distribution system and thus have not given sufficient priority to the
development of effective distribution strategies.

However, the transformation of economy from agriculture-based to a trade-

driven based as well as the development of international trade within the last decade
has stimulated awareness that transport and logistics sector plays a critical role in
facilitating the country’s economy (MIMA, 2004). A recent report highlighted that
Malaysia has the opportunity to create an additional value of about RM9-11 billion
over the next decade, which contributes approximately 12.1% to the GDP, if
the supply-chain competitiveness is improved through more efficient transport and
logistics services. The report also emphasized that by reducing the supply chain cost
will ultimately stimulate further national growth as the World Bank has estimated that
a 10% reduction in transportation costs can increase trade by 20%
(Anonymous, 2003). Similarly, McKinsey Global Institute who studied productivity
improvements in various industry sectors around the world, indicate that such
efficiency improvements are likely to translate into a GDP growth effect of at least the
same order. Consequently, this creates a virtuous and perpetuates effect on the
economy.

Various incentives have also been introduced by the government. One of the
incentives is Integrated Logistics Services (ILS) incentives. The purpose is to
encourage logistics service providers to consolidate or integrate their activities to
include other services as well as encouraging them to venture into business abroad
(MITI, 2007, 2008). As of December 2007, a total of 20 companies have been
granted the Integrated Logistics Services (ILS) incentives, which amounted to RM 4.1
billion (MITI, 2008).

5.0 Types of logistics

Based on the flow of materials, logistics are classified in to two ways

i) Inbound Logistics: It is the management of materials from suppliers

and vendors into production process or storage facilities.
ii) Outbound Logistics: It is the process related to the storage and movement of
the final product and related information flows from the end of the production
process to the end users. Waste disposal plans which are major threats to the

industrial sector in all economies are also include in this type of logistics.

Logistics can be split into five types by field: procurement logistics, production
logistics, sales logistics, recovery logistics, and recycling logistics. Each of these is
explained in detail, but first we should learn about logistics fields and types. For
recovery logistics and recycling logistics, both types are the same up to the recovery
of goods from consumers, but recycling logistics is the type that recycles the goods
that are collected.

6.0 Importance of logistics in the economy

 Advances in technological changes

 Significant opportunities presented by e-commerce potential
 Development of the systems approach and total costs analysis concept
 Recognition of the role of logistics in a company’s customer service program
 Profit leverage resulting from increased logistics efficiency
 General Economic conditions since the 1950s
 Recognition of the role of logistics in creating competitive advantage in the
 market place, particularly in the face of domestic and foreign competitors
 Customer requirements for value –added services continuing to drive costs up
 Increasing interest in third party providers that handle all or part of a
 company’s logistics functions
 Customer service activates continues to be centralized and consolidated
 Increased focus on computer technology and distribution software
 Globalization
(Malaysia)

“Logistics services as one of “drivers of growth” to propel the country into high
income economy”1 . The transportation and logistics industry forms the backbone of
modern global supply chains. Airlines and airports, shipping companies, logistics
service providers and other transportation companies are all part of the process to
keep people and products on the move. Ultimately, an efficient and dynamic logistics
system is crucial to delivering a world-class economy, well integrated with other
countries and delivering high growth.

Logistics is a crucial contributor to Malaysia’s trade and economic growth. The

importance of an efficient logistics system to facilitate cross border trade (growth)
cannot be overemphasized. The demand for logistics services and facilities in
Malaysia stem from the capability of companies to be competitive by delivering the
right products, in the right quantity, to the right place, at the right time, and at the
lowest cost possible. The productivity of logistics is influenced not only by the quality
infrastructure and effective management but also by good regulatory practices which
otherwise may slow the movement of goods and/or reduce their marketability. An
important issue in Malaysia is whether duty-free zones and similar arrangements
has improved logistics and the competitiveness of Malaysian products.

Malaysian Government has allocated RM3 billion to stimulate the development

of the logistics industry under the Third Industrial Master Plan 2006-2020 (IMP3)2 .
The Plan has set a target of 36 million TEU or 751 million tonnes of cargo to be
handled by Malaysian ports as the growing trade volumes and strong economic
performance over the years. For as long as the nation’s economy remains robust and
its trade volumes grow, the logistics sector continues to have a bright future. The
outlook for the demand for Integrated Logistics Services (ILS) and multimodal
transport is especially bright as the country capitalises on growing intra-regional
and international trade.

7.0 Logistics in air transportation industry

It is the gift of twentieth century to the world and is the most modern, the
quickest and the latest addition to the modes of transport. It is the fastest mode of
transport for long-distance passengers and high-value light goods. As far as the world
trade is concerned, it is still dominated by sea transport because air transport is very
expensive and is also unsuitable for carrying heavy, bulky goods. However,
transportation of high value light goods and perishable goods is increasingly being
carried out by air transport. Air transport is mainly used for international transport and
in emergency rather than in normal times. With an increasing globalized economy
countries and companies are exporting and importing all kinds of goods from
everywhere in the world. So the importance of air transport increases and plays a very
significant role in countries economic growth. Both passenger and freight are the two
backbones of air transport. Example of Malaysian Air logistics are: