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What is Logistics? ¶ Can you visualize the production function of a business process? ¶ What is the most accessible of all production functions you can visualize? ¶ Now what activities make production happen? * Procurement • Sourcing • Moving or Transportation • Handling • Storage
Elements of Logistics Management - continued *Conversion * Distribution • Transportation • Warehousing
Logistical Management Making inputs and outputs available when they are needed, where they are needed and in the quantities they are needed * Inputs from market [domestic or import] are needed for production * Out puts of production process [Industrial products, engineering, chemical & pharmaceutical products are needed in the market [domestic or export] * Battle fronts need troops * Troops need supplies *People need agricultural products * Agriculture needs fertilizers *11/27/2012 needs food grains PDS 3
Logistical Management - continued • Without logistics no value adding process can run • Logistics is a facilitator of trade & business • Age old practice • Modern logistics is scientific • Logistics is a planning function • Genesis of logistics is in military planning • Origin of many OR techniques like Value analysis, PERT, CPM etc.. is the crucible of war
Logistical History of India • India was a maritime power since about 300 BC • Goods Made in India, steel, textiles etc. • Trade and prosperity • Gradual degeneration Some logistical feats in history: • Berlin Air Lift – A study in logistics • Indians in the Gulf countries - 1991 • Operation Overlord, II World War1945 • 1962 war with China • 1776 American war of Independence [4th July1776]
poor communication lines. out sourcing etc.] 11/27/2012 6 .What causes bad logistics? • Infrastructure: bad roads. Octroi • Information: Inadequate information. congestion in ports • Taxation: e.g. inefficient railways. bad communication • Management: Bad management decisions [carrier selection.
V1 V2 V3 V5 Receiving stores V4 Procurement Outbound Logistics Inbound Logistics Operation Finished Goods Stores W1 W2 W3 R1 11/27/2012 R2 R3 R4 R5 R6 7 Market .
Importance of Logistics Why should we learn logistics? Why is logistics important for management students? • Logistics is the bed rock of trade and business • Leads to customer satisfaction. D&F expectations of customers • Integrates logistical activities • Competitive edge in a commodities market • Logistics wins or loses wars • Supports critical functions like operations and marketing to be JUST IN TIME by providing Interface with marketing 11/27/2012 8 .
• Crucial to survival and prosperity in global business • logistics experts are moving up in corporate ladder • leads to the concept of supply chain management • Indian market is changing. internal & external • concept of lean management 11/27/2012 9 .continued • Logistical costs are 5% to 35% of sales depending on type of business.shift from seller’s market to buyer’s market • changing customer • expanding business. geographical areas of operation etc.Importance of Logistics . global trade • competition.
Minimum variance • D-Objective as OTD • Any event that disturbs the supply chain is variance • Problems in information flow.Objective: Ability to respond rapidly to customer’s order • Role of Information Technology • Concept of SMED and Kanban 2. acts of god.Operating Objectives Of Logistics 1. transit damage • Traditional approach Vs costs 11/27/2012 10 .Rapid response • F. wrong dispatches. traffic snarls.
Movement consolidation • Integrating interests of several players in the supply chain.Operating Objectives Of Logistics -continued 3. Minimum inventory • Concept of Inventory Turns • Increase these turns without sacrificing customer satisfaction • Single piece flow as practiced by JIT companies 4. • Planning several small shipments together [of different types of shipments] 11/27/2012 11 .
Quality • Quality of logistics performance complete fulfillment of order 6.Operating Objectives Of Logistics -continued 5. Life cycle support [cradle to cradle logistical support] • After sales service • Reverse logistics # Rigid quality standards # transit damage # product expiration dating # law against unscientific disposal 11/27/2012 12 .
Operating Objectives Of Logistics -continued # law making recycling mandatory # erroneous order processing by supplier 11/27/2012 13 .
Road. Handling. Pipeline & Air INVENTORY When to order? How much to order? Just In Time 11/27/2012 14 . Rail. Packing & Distribution TRANSPORTATION Water.Logistical Functions INFORMATION SYSTEMS Internal & External Information flow NETWORK DESIGN LOGISTICS FUNCTIONS WARE HOUSING Storage.
Logistical Functions components of logistics or elements of logistics • Information management * Role of technology. order processing and order management * Erroneous information will result into product recall and reshipment 11/27/2012 15 . fast & accurate information * Real time logistics in competitive business * Notification to customer * Role of information in logistical forecasting & logistical operations.
Cost of idle asset.Logistical Functions . Administration costs * Transportation is accomplished in three ways.Private carriage.continued * Inventory control * Neither stock-out nor stockpiling * Inventory policies * Inventory models * Inventory systems • Transportation * the most visible of all elements * High contributor to costs logistics . contract carriage. Preservation costs. common carriage 11/27/2012 16 .Movement costs.
Logistical Functions . Break bulk. stock piling[seasonal storage] * Service benefits . consistency in speed • Warehousing * Switching facility rather than a storage facility * Ownership can be private. Cross Dock.spot stocking.Consolidation. processing postponement. market presence 11/27/2012 17 . production support. mixing. Assortment. public or third party contract. *Economic benefits .continued * Expectations from carrierminimum cost. speed of transport.
ropes. conveyers. carousels. pulley blocks.Logistical Functions . robotics • Packaging * Types of packaging.consumer packaging and industrial packaging 11/27/2012 18 .forklifts. trolleys. moving. dispatching activities * Impact on cost [capital as well as running]. railroad cars. EOT Cranes. hoists.continued • Material handling * Receiving. slings. Quality and safety * One of the principles of material handling is minimum movement * Commonly used material handling equipment. storing. sortations.
tubes 11/27/2012 19 . communication of recipe. hazard. sprays ° Dispensing . special care ° Ease of opening ° Convenience .continued *Consumer packaging °Attracts attention ° single most important factor in purchasing decisions made at point of sale * Industrial packaging . spays. easy identification. taps.attraction.spouts.flexi tubes.makes logistical activities of handling storage moving easy * Sales functions of packaging ° Display .Logistical Functions .
flexible tubes. mangos in crates # Cube minimization . bubble pack.flattened cans.physical damage.continued * Functions of packaging # Protection . square shaped whisky bottles. milkbags # Facilitating handling & using fruity packs. corrugated sheet cartons.plastic bottles.Logistical Functions . plastic crates. furniture in knocked down condition # Weight minimization . aerosol pacs # Facilitating storage & reuse corrugated boxes 11/27/2012 20 . soft drink concentrates.
cola bottles.mango boxes.continued # Grouping goods into convenient unit for distribution .pallets.Logistical Functions . warehouses # What is to be performed in these facilities? • 11/27/2012 21 . wire rope coils # Pilfer proofing .production facilities. straps Net work design [Location analysis] .bisleri caps. cotton bales. cola caps # Handling .to minimize overall system cost of delivering value to the customer # Number of facilities .
are some of the salient features of net work design. 11/27/2012 22 .Logistical Functions .to minimize overall system cost # Who operates these facilities? outsourcing decisions # Communication between these facilities .continued # Their location .
• Idea of total system cost of several activities • Trade off situations between costs 11/27/2012 23 .Some important concepts # Logistics and supply chain management Logistics and Supply Chain Management by G. Bardi.Raghuram.post war1950s. N. The Management of Business Logistics by Coyle. Langlely Page # 31 ] • Focus on costs and benefits in physically moving the goods to customers . Page #15.Rangaraj.
Some important concepts continued • Selection of modes of transport • 1960s .Emergence of Physical distribution management logistics .Electronic era. information as an element of Physical distribution management • 1970 .some aspects of financial subsystem integrated & focus on activities of inbound logistics until considered to be vendors’ concern 11/27/2012 24 .integration of activities of outbound .
Focus on logistical operations. TPM & JIT • 1990 . internally integrating all activities of inbound and out bound logistics . application of TQM.Gradually concept is encompassing entire value chain as Supply Chain Management • Henry Ford’s [early 1990s] idea of control on supply chain • No firm can be self sufficient 11/27/2012 25 .Some important concepts continued • 1980s .Concept of Logistics as a management function.
end user 11/27/2012 26 .Supply chain profitability by value creation • Focus .all upstream & downstream organizations & linkages • How is this created in business? external integration • Concept of supply chain as a pipe line • Main objective .Some important concepts continued • Scope .Source of raw materials to end user .
Some important concepts continued • Origin - extension of scope of logistics management • Definition .Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole • breaking the organizational barriers to deliver value 11/27/2012 27 .
Some important concepts continued * Sharing of sales information in real time .compresses value chain by slashing lead-times thereby quickening cash flow 11/27/2012 28 .reduces inventories by reducing uncertainties .
Mgt [outbound logistics] Customers 11/27/2012 29 .vendors M/M Incoming materials stores Inbound logistics Conversion process [WIP] O/M FG stores Supply Chain Magt Logistics management network Warehouses Physical distrib.
resources across the pipeline 11/27/2012 30 Inbound logistics.particulars Logistics management Supply chain management Scope All players in the supply chain from raw material source to finished product consumer. their vendors. customers. their customers How this is created By internal By external in business? integration of integration of roles logistics functions of various players handled by various in the supply chain. outbound logistics . vendors. service providers. supplier organization [shipper]. Warehouses. in process inventory. management functions within organization Main objective Logistics cost Supply chain reduction by profitability by integrating value creation.
extension of logistics management 11/27/2012 31 . definition Origin A very old concept As a logical in military planning.focus L/M tries to take the product to the consumer at minimum logistical cost. part and finished inventory [and related information flow] through organization and its marketing channels in such a way that current and future profits are maximized through cost effective fulfillment of order SCM focuses on value creation in the supply chain. Hence it is supply driven. Logistics is the process of strategically managing procurement and storage of material . Hence this is customer focused or demand driven. Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.
military functions & post war march into business • procuring.Some important concepts continued Business functions of logistics management ……[physical distribution * management by K. Langlely Page # 39] • military origin. Bardi. moving and storing of R/M and industrial F/G • making inputs available for value addition to a conversion process • facilitation of relevant manufacturing and marketing 11/27/2012 32 . The Management of Business Logistics by Coyle.Khanna – page # 13.K.
facilities and personnel required to organize. moving and storing of agricultural products • Food Corporation of India • importance of logistics function in commodities market * Event logistics . schedule and deploy the resources for an event to take place and to efficiently withdraw after the event 11/27/2012 33 .making finished goods available to the customers in the market • procuring.The net work of activities.Some important concepts continued .
design and integration of all aspects of support for the operational capability of the military forces [deployed or in garrison] and their equipment to ensure readiness. personnel and materials to support and sustain a service operation * Military logistics . scheduling and management of the facilities/assets.the acquisition.Some important concepts continued * Service logistics . reliability and efficiency 11/27/2012 34 .
creating customer value at minimum cost • set of goals to be achieved at a particular type of market responsive to competition 11/27/2012 35 . Page # 13. i. L/M by Bowersox Page #9] • Achievement of business objectives at minimum logistical cost [delivering.Some important concepts continued *Logistical mission ………[Logistics & SCM by Martin Christopher.e.QCD expectations of customers at minimum logistical costs.
Some important concepts continued • mission focus Vs individual function • Mission of logistics is providing a means by which customer satisfaction is achieved 11/27/2012 36 .
mode of transport are different from O/B logistics 11/27/2012 37 .Some important concepts continued *Inbound logistics Procurement operations in procurement cycle • potential avenues for reducing systems costs • value of inventory is low • trade off between cost of maintaining inventory in transit and low cost transport exists • Delivery time. size of shipment.
Inbound logistics .continued Sourcing Order placement & expediting Supplier Receiving Transportation 11/27/2012 38 .
Some important concepts continued *Outbound Logistics • Value added goods are to be made available in the market distributed through the network of warehouses and retailers’ shops • Value of the inventory is very high as during conversion value is added • Delivery time. size of shipment. mode of transport are different from I/B logistics 11/27/2012 39 .
continued Activities in distribution performance cycle Order processing Order transmission Customer order Order selection Order transportation Customer delivery 11/27/2012 40 .Outbound Logistics .
• Incremental cost to the system on account of changes to the system like introduction of a warehouse and the impact on the system • Impact of decisions at various levels on the system 11/27/2012 41 .Some important concepts continued *Total cost analysis Conventional approach • No information on the impact of cost of an individual function on the system • Apportionment of Logistics costs • Costs get submerged • Competitive edge is lost by the organization.
cost of returned vehicle • Cost cutting is fragmented so doesn’t reduce system cost • Focus is on input function. Hence attempt is to reduce function cost in isolation • Customer dissatisfaction * Total cost approach • Modern approach to logistical costing 11/27/2012 42 . cost elements tend to get hidden out of fear that they expose functional weakness • Costs in no man’s land are never owned .like tube lights on passages.Some important concepts continued • Cost information is biased.
further areas of improvement 11/27/2012 43 .Some important concepts continued • Focus on reduction of cost of output of the system • Provides competitive edge to the company • Several trade off points in the system.
Some important concepts continued *Mission based costing [or budgeting] in logistics • input focused costing • output focused costing • mission goals and costs are set • functional inputs are worked out to meet the system deliverables Purchasing Sales Production Mission A Mission B Mission C Transportation Marketing Etc Customer service goals [QCD] At market type A Customer service goals [QCD] At market type B Customer service goals [QCD] At market type C 290 11/27/2012 44 .
continued transportation Ware housing Mission A Mission B Mission C 15 5 5 C1 =Rs.155/- Functional Inputs to Logistical Management Fig. 25/C1 =Rs. 30/10 10 10 70 50 35 Rs. 100/- Customer service goals [QCD] At market type A Customer service goals [QCD] At market type B Customer service goals [QCD] At market type C 45 35 20 C1 =Rs.8 11/27/2012 45 .Mission based costing .
Interface with marketing PRICE LOGISTICS PRODUCT MARKETING PROMOTION PLACE 11/27/2012 46 .
concept or function area of common interest or concern • Four Ps of marketing and logistical interface • Price .surface or area with another body.size shape & weight/volume ratio of the product has major impact on logistical cost.Some important concepts continued *Interface with marketing • a common wall. # Gillette story of floor displays 11/27/2012 47 .marketing can re offer the price to beat the competition with superior logistical support • Product & Packaging.
promotional strategies of marketing need to be decided by working closely with logistics # Push/Pull strategy Place .Some important concepts continued.whether to distribute through wholesalers or through retailers is a marketing decision with impact on logistics # wholesalers’ demand & retailers’ demand Customer Service .another area of interface between marketing & logistics 11/27/2012 48 . Interface with marketing Promotion .
Some important concepts continued Interface with operations SHORT RUNS LOGISTICS SEASONAL DEMAND OPERATIONS SUPPLY SIDE INTERFACE PACKAGING 11/27/2012 49 .
Some important concepts continued Interface with operations * Short production runs • Very strong logistical support is needed to operate Just In Time • Short runs lead to inventory reduction * Seasonal demand • Inventory should be mutually accepted * Supply side interface • Prevent shortages * Packaging • Protective packaging • Third party alternatives 11/27/2012 50 .
Logistics makes one plan.Some important concepts continued Role of planning in logistics management • Role of planning is central to logistics management Mission of logistics is to achieve desired levels of service and quality at lowest possible cost. that replaces traditional concept of planning in pockets 11/27/2012 51 .
Importance of 3Cs “C” customers Value Look for value [benefit] at lowest price Value “C” company By effective utilization of assets tries to create and offer value to customers Cost differentials “C” competition By effective utilization of assets tries to create and offer value to customers HIGH SERVICE LEADER SERVICE & COST LEADER Whom shall I buy from? OK S E R V I C E HAPPY COMPANY COST LEADER CUSTOMER LOW SAD OK 11/27/2012 HIGH COST LOW 52 .Some important concepts continued 8.
functions of logistics are spread across various stages of value chain in the organization # Provides interface between marketing and customers.Some important concepts continued *Integrated logistics •Attributes of Logistics Department # Scope is wide spread. materials & recovery cycle # Tackles cost reduction 11/27/2012 53 . operations and supplier # Provides competitive edge to business in the current environment # Handles flow of information. marketing and operations.
• It is a strategy to provide a superior service at a total cost below industry average. • Its aim is to view how logistics can be exploited as a core competency so that fits into a firm’s overall strategic positioning 11/27/2012 54 .Some important concepts continued • Logistical competency • What is logistical competency? • Definition: Logistical Competency is the relative assessment of a firm’s capability to provide competitively superior customer service at the lowest possible total cost.
customers and suppliers 11/27/2012 55 .Some important concepts continued Inventory flow Physical distribution Manufacturing support Suppliers Procurement Customer Information flow •How can this be achieved? • By integrated performance of logistical functions # jigsaw puzzle # What is the big picture? • What are the parameters needed to achieve this integrated performance? # Information flow. organization. Inventory flow.
Supply Chain Management] # functions in coordinated fashion # One operational command Performance in isolation loses sight of overall picture. 11/27/2012 56 .• Concept of Integration in Logistics Operation • Internal & External Integration Some important concepts continued • Internal Integration # First Stage of Internal Integration Materials management & Physical distribution Management # Second Stage of Internal Integration .Logistics Management • [ External Integration .
Some important concepts continued # Picture before you to solve the jigsaw puzzle # Links the enterprise with customers and suppliers # Information flowing into the enterprise is converted into schedules and plans & value added products reach the customers # Integrated logistics is interrelated efforts of managing information flow & inventory flow 11/27/2012 57 .
Some important concepts continued • Value added role of Logistics # form utility. unpacking • Place and Time Utility is given by logistics functions • Possession Utility: Marketing creates Possession Utility by promoting the product • But logistics makes finally possession by customer happen 11/27/2012 58 . mixing. place and time utility and possession utility add value to a product • Form Utility is given by Production • How logistics also adds form utility processing postponement.
• Primary activities of LIS • data flow from external sources • processing and storage of information within the firm • communication to the decision maker in the form of reports • communication to customers and suppliers and their feedback 11/27/2012 59 .Some important concepts continued * Logistical Information System.
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