EVOLUTION OF Logistics and SCM

PHASE-1 Independent Business Function Era (1950s)

It refers to that era of industrialization wherein, all movement related activities of all types of
goods such as raw-material, work-in-process and finished products are/were undertaken and
managed independently.
Objective: Maximization of the profit by large scale volume by means of aggressive selling

Manufacturin OBJECTIVE
g Maximization of profit by
Distributio sales volume
n
Inventory
Control Sales
OUTCOME

Aggressive selling and

Purchasing preaching skills

PHASE-2 Limited Internally Integrated Business Function Era (1960s-70s)

In this, era, there was INTERNAL INTEGRATION of various activities in three broad heads,
namely- Material,
Manufacturing, and
Physical distribution management
primarily for three types of goods, namely- Raw-material
Work-in-process
Finished goods, respectively
Objective: Cost control to gain price based advantage.

Manufacturin OBJECTIVE
g
Cost Control
Physical
Distribution
Management OUTCOME
Materials
Management Price Based Competition

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PHASE-3 Fully Internally Integrated Business Function Era (1980s)
This era lead to FULL INTEGRATION of all activities of the enterprise for the smooth flow and
storage of all types of goods in a synchronized manner given impetus to the term LOGISTICS
Objective: Maximization of profitable sales volume and cost reduction by increase in
productivity and market share.

OBJECTIVE

Maximization of
Manufacturin Profitable Sales Volume
g Mgmt
& Cost Reduction
OUTCOME
Materials Marketing &
Mgmt Distribution
Mgmt Increased Productivity &
Market Share

PHASE-4 Fully Externally Integrated Business Function Era (1990s)

In this era there is an extension of various logistics activities of the firm with outside business
partners that have given birth to the concept and philosophy of SUPPLY CHAIN
MANAGEMENT.
The beginning of 1990s saw many changes in Business Environment such as-
- Liberalization of almost all the economies of the world
- Popularity of TQM, JIT etc
- Focus was on EFFECIENCY and EFFECTIVENESS of logistic activities in the form of
external integration (giving rise to the concept of SCM)

OBJECTIVE

Core Competency

Vendors Logistics Customer

s

OUTCOME

Customer Value2 and

Harmonious
Relationship
COMPONENTS OF LOGISTICS
According to Martin Christopher logistics covers the following FUNCTIONAL AREAS and are termed
as LOGISTICS MIX

INFORMATION
SYSTEM
Internal & External
Information flow

NETWORK DESIGN WAREHOUSING

Suppliers, Storage, handling,
operations, packing and
warehouses distribution

LOGISTIC
FUNCTION

TRANSPORTATION INVENTORY

Water, road, rail, When to order

pipeline and air How much to order

1. INFORMATION FLOW
- Order Registration
- Order Checking
- Order Processing
- Co-ordinating
2. INVENTORY CONTROL
- Material Requirement Planning
- Inventory Level Decisions for Customer Service Objective
3. WAREHOUSING
- Material Storage
- Load Utilization and Material Handling
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 - Site Selection & Network Planning
- Order Picking and Filling
- Dispatch Documentation

4. PACKAGING
- Better Handling and Damage Prevention
- Communication
5. TRANSPORTATION
- Route Planning
- Mode Selection
- Vehicle Scheduling
Thus,
Logistics involves the integration of information, transportation, inventory, warehousing, material-
handling, and packaging, and occasionally security
Logistics delivers VALUE to customers through THREE logistical phases or process
1. Inbound Logistics (are the operations preceding manufacturing)
2. Process Logistics (are operations directly related to manufacturing)
3. Outbound Logistics (are operations following the production process)

Inbound and Outbound Logistics

Inbound and outbound logistics are the vital part of the supply chain process. Once a good is produced, it
must be shipped to its final destination

INBOUND LOGISTIC
 Are the operations preceding manufacturing
 It includes movement of raw materials and components, for processing, from suppliers
Thus,
Inbound logistics includes RECEIVING, STORING and DISSEMINATING incoming goods and
material for use.
Inbound Logistics Process
Sourcing Order Placement & Expediting Vendor Supplier

Receiving Transportation

Objectives of Inbound Logistics

1. Ensure that MATERIAL RECEIVED AND RELATED INFORMATION are processed and
made available promptly to production, storage and other department.

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 2. Completely and accurately DOCUMENT goods received and goods returned.
3. Accept only those items that were PROPERLY ORDERED
4. Accept only those materials that meet PURCHASE ORDER SPECIFICATION.
5. SAFEGUARD goods received.
6. Ensure that vendor, inventory and purchase order information is ACCURATELY UPDATED TO
REFLECT RECEIPT
7. Return rejected items PROMPTLY
8. Completely and accurately DOCUMENT ALL TRANSFER to and from storage.
9. PROPERLY TRANSFER all materials requisitioned.
10. Maintain SAFE WORKING CONDITIONS and storage of hazardous materials

OUTBOUND LOGISTICS
 Are the operations FOLLOWING the production process
 It includes warehousing, transportation and inventory management OF FINISHED PRODUCT
Thus,
Outbound logistics includes movement of material associated with storage, transportation, and
distribution of a firm's goods to its customers
Outbound Logistic Process or Activities in distribution performance cycle
Customer Order Order Transimission Order Processing Order Selection
Order Transportation Customer Delivery
Benefits
•Timely delivery
•Meeting customer demand with perfection
•Balance between supply and demand
Inbound and Outbound Logistics covers and supports the following processes and options:
 They cover ALL processes in the warehouse from goods receipt to goods issued.
 Maintain complete stock transparency, to allow companies to know what is in the warehouse.
 Trace and track the history of the warehouse processes in Detail for each individual article
 Improve the accuracy of deliveries, thereby increasing customer satisfaction.
 Support the option to use mobile data entry and work in a paper-free environment.
 Build optimal loads with the routing and scheduling, thus allowing a close collaboration between
shipper and carrier (via optimized carrier selection and tendering)
 Support transparency in operational shipping, freight costing, freight settlement, and foreign trade
are always transparent to company