LOGISTICS AND SUPPLY

CHAIN MANAGEMENT
 Definition of Logistics

• Logistics is the process of

planning,implementing,and controlling the
efficient cost effective flow and storage of Raw
materials, Semi-finished, Finished goods and
related information from point of origin to point
of consumption for the purpose of conforming to
Customersrequirements
- AmericanCouncilof Logistics management
 7 R’s of Logistics management

• Logistics management is concerned with

getting the Right product, in the Right
quantity, in the Right condition, to the Right
place, at the Right time, to the Right
Customer and at the Right cost.
 Objectives of Logistics

• Reduction in Inventory costs

• Economy of freight-Reduce Transportation

costs

• Timely delivery to customers

• Minimum damage to products

• Quicker and faster response tocustomers
• Lower the cost of distribution tomake
• the selling price more competitive
• Efficiency in warehousing and perfectstock
maintenance
 Function of Logistics
• Processing of orders received fromthe
customers
• Inventory planning, control andmanagement
• Warehousing
• Logistical Packaging
• Transportation
• Material handling and storage
• Information
 Logistics in three stages
• Inbound Logistics before manufacturing

• Process logistics-Storage and movement

• Outbound Logistics after manufacturing-

 3 PartyLogisticsservices
• Transportation
• Warehousing
• Freight forwarding
• Customs Clearance
• Material handling
• Shipping
• Invoicing and Delivery
• Many other value addedservices
Competitive Advantage means

Something that places a company

or a person above the competition
 The reason of enterprise
have a competitive advantage

Resource/Performance

1. Customer satisfaction and loyalty increase, Increase of profit

, Increase of market share
→ bring market perfomance
2. The product offering which is value in the market
→ competitive advantage offering valuable product and service

3. various size and scope and profitability of company

→ The competitive advantage makes the base will be able to
expan
d the enterprise which is various.
 Cost advantage

Competitive
Advantage

Differentiation
Advantage
 A Model of Competitive advantage

Resources

Distinctive Cost advantage

Value
Competencies Or
Creation
Differentiation advantage

Capabilities
 Logistics Intelligence +Efficiency =
Competitive Advantage
An intelligent supply chain creates competitive advantage through
seamless integration that meets business requirements. the key performance
indicators (kpi) that define this efficiency are familiar to and regularly
measured by all companies in the beauty industry, emphasizing
preparation for on-time delivery with minimal delays and maximum
shipment control. by contrast, inadequate preparation, reflecting
incomplete information about shipments and shipping requirements, is the
most costly and preventable cause of logistics inefficiencies. using supply
chain intelligence to know what to plan for defines competitive
advantage.
Logistics and Competitive Strategy

•Throughout the history of mankind wars have been won or lost through logistics
strengths and capabilities.

• It has been argues that the American War of Independence was lost by the British since
they did not have proper supply lines and relied heavily on Britain.

•This resulted in poorly equipped and demoralized troops. Proper supply lines were
established only in 1781 by which time it was too late to have any impact on the war.

•Whilst Generals and Field Marshalls from the earliest times understood the importance
of logistics it is only recently that organizations have come to realize the importance
of managing logistics.
Competitive Advantage
•A central theme of these series of articles is to show that effective logistics management
can provide a major source of competitive advantage.

• The source of competitive advantage is found firstly in the ability of the organization to
differentiate in the eyes of the customer, from its competition and secondly from operating
at lower cost and hence at lower cost and greater profit.

• Put simply, successful companies either have a productivity advantage or they have a
value advantage or a combination of the two.

•The productivity advantage gives a lower cost profile and the value advantage gives the
product or offering a differential over competitive offerings .

•Let us take a brief look at the two methods of competitive advantage.

Productivity advantage

•In any industry we will find that there is one company that is able to achieve highest sales
and thereby also achieve the lowest cost per unit due to economies of scale.

•There is substantial evidence to prove that in these cases that big is beautifulwhen it
comes to cost advantage. The experience curve has its root in the earlier concept of the
learning curve.

•The learning curve effect was discovered in the second world war where is was seen that
as the number of units produced increased every additional unit produced could be
created using less time and resources.

• Subsequently Bruce Henderson of the Boston Consultancy Group extended this concept
to state that all costs - production related or not reduced and the volume of output
increased.
Value advantage
•It has long been an axiom in marketing that customers don't but products they buy
benefits this means that the product is not purchased for itself but for what it will
deliver.

•The benefits may be intangible such as image or reputation. Unless the product can
be differentiated in some way from the competition.

• It will be seen as generic and will get only commodity prices.

•The values of the market can only be fully realized by segmenting the market and
creating distinct value segments.

• In other words different groups in different markets place different values to benefits.

•Adding value through differentiation is a powerful way of achieving a defensible

advantage in the market.
Gaining Competitive Advantage through logistics

•One of the distinguishing features of the value chain is to postpone the final creation
of the product as much as possible.

•The idea behind this is that maximum flexibility can be achieved through
postponement by obtaining time place and form utility. This can be achieved by
aggregating production systems rather than catering to individual customer
requirements.

•Competitive advantage cannot be understood by looking at a firm as a whole. It

stems from the many discrete activities a firm performs in designing, producing,
marketing, delivering, and supporting its product.

•Each of these activities can contribute to a firm's relative cost position and create a
base for differentiation
Here are a number of solutions that if used will help a company gain the
competitive advantage:

•Shipper Associations :
By being a part of a shippers association, a business can benefit from lower transportation
rates due to the competitive negotiations and economies of scale.

•Transportation Management Systems (TMS):

Such platforms allow a business to manage their data flow more efficiently and allows for
visibility of performance and cost.
Keeping an eye on costs, transit times, delivery performance, freight claims, and compliance
will allow for strategic thinking and put a company a step in front of its competitors.

•Auto-Tender Functionality:
This feature allows freight to be tendered directly to carriers, greatly reducing the time spent
scheduling a shipment. When set up using a least cost carrier, the savings combined with the
efficiency gain provide a great advantage.
•Advanced Tracking: Visibility and transparency are becoming more and more
important in business. Advanced tracking features have been adopted to give
customers real-time information on where their goods are.
These best in class features help companies gain the competitive advantage with
lower costs and increased productivity. The resulting higher quality of service, will
help gain new clients and retain existing ones. If you would like more information as
to how to gain the competitive advantage .
•Information technology with trace-back capability is essential for supply chain intelligence.
•Such computerized tracking must give businesses along the supply chain a common platform to
capture and report on shipment information and history.
•The latest logistics software uses “cloud computing” solutions through web-native architecture,
optimizing the entire transportation process so carriers can exchange information, regardless of the
format used, in order to combine shipments for lower cost, and share shipment status with carries
and trading partners.

Sustainability
Comprehensive electronic tracking that aggregates loads and routes is a planning solution that
reduces fuel consumption and cost. It facilitates up-to-the-minute route and load scheduling to take
account of everything from weather conditions to just-in-time shipment adjustments. An intelligent
supply chain will use cutting-edge electronic systems to improve both fuel efficiency and cost
effectiveness, by eliminating guesswork and backtracking to find misplaced shipments. It affords
maximum flexibility in route and load planning so that delivery problems and energy consumption
are minimized, saving fuel, resources and time
What is Logistics Management? 1

It is the process of planning, implementing, and

controlling the efficient ,effective flow and storage
of goods, services and related information from the
point of origin to the point of consumption for the
purpose of customer requirements.
Mission of Logistics Management

•It will be apparent that the mission of logistics management is to plan and co-ordinate all
those activities necessary to achieve desired levels of delivered service and quality at lowest
possible cost.

•Logistics must therefore be seen as the link between the marketplace and the supply base.
The scope of logistics spans the organization, from the management of raw materials
through to the delivery of the the final product.

•Logistics management, from this total systems viewpoint, is the means whereby the needs
of costumers are satisfies through the co-ordination of the materials and information flows
that extend from the marketplace, through the firm and its operations and beyond that to
suppliers.

•To achieve this company-wide integration clearly requires a quite different orientation than
the typically encountered in the conventional organization.
For example, for many years marketing and manufacturing have been seen as largely
separate activities within the organization. At the best they have coexisted, at worst
there has been open warfare. Manufacturing priorities and objectives have typically
been focused on operating efficiency, achieved through long productions runs,
minimized set-ups and change-overs and product standardization. On the other hand,
marketing has sought to achieve competitive advantage through variety, high service
levels and frequent product changes.

•In today’s more turbulent environment there is no longer any possibility of

manufacturing and marketing acting independently of each other.

• The internecine disputes saunter-productive to the achievement of overall corporate

goals.
•It’s no coincidence that in the recent years both marketing and manufacturing have
become the focus of renewed attention.

•Marketing as a concept and philosophy of costumer orientation now enjoys a wider

acceptance than ever.

•It is now generally accepted that eh need to understand and meet costumer
requirements is a prerequisite for survival.

• At the same time, in the search for improved cost competitiveness, manufacturing
management has been the subject of a massive revolution.

•The last decade has seen the rapid introduction of flexible manufacturing systems
(FMS), of new approaches to inventory based on materials requirements planning (MRP)
and just-in-time (JIT) methods, perhaps most important of all, sustained emphasis on
total quality management (TQM).
•Equally there has been a growing recognition of the critical role that procurement
plays in creating and sustaining competitive advantage as apart of an integrated
logistics process.

•Leading-edge organizations now routinely include supply-sides issues in the

development if their strategic plans.

•Not only is the cost of purchased materials and supplies a significant part of total
costs in most organizations, but there is a major opportunity for leveraging the
capabilities and competencies of suppliers through closer integration of the buyers’
and suppliers’ logistics processes.

•In this scheme if things, logistics is therefore essentially and integrative concept
that seeks to develop a system-wide view of the firm.
•It is fundamentally a planning concept that seeks to create a framework through
which the needs of the marketplace can be translated into a manufacturing strategy
and plan, which in turn links into a strategy and plan for procurement.

• Ideally there should be a ‘one-plan’ mentality within the business which seeks to
replace the conventional stand-alone and separate plans of marketing, distribution,
production and procurement. This, quite simply, is the mission of logistics
management.
 Just In Time - JIT
A good example would be a car manufacturer that operates with very
low inventory levels, relying on their supply chain to deliver the parts
they need to build cars. The parts needed to manufacture the cars do
not arrive before nor after they are needed, rather they arrive just as
they are needed.
 GPS (Global Positioning System):
A person equipped with this receiver can locate and move on
land, sea, air or space around the Earth.
The GPS system has experienced great success in the civilian
and created a huge commercial development in many areas:
shipping, road, location of trucks.
• the efficient ,effective flow and storage of goods,
services and related information from the point of origin
to the point
• paperless of consumption for the purpose of customer
processing
requirements.
• sthe
the process
availability of planning,
of information implementing,
online and in real time and controlling
can largely
the efficient
eliminate the need,effective
to print outflow and
paper storage
reports of goods,
and forms that create
services
inefficiency,and
delayrelated
and waste. information from the point of origin
to the point of consumption for the purpose of customer
requirements.
Supply Chain And Competitive Performance

•Logistics management is term used to describe the planning, implementation, and movement of goods, services and
related information from the point of origin to the point of consumption.

•Increasingly, in the modern business environment logistics management involves supply chain management (SCM),
for the purpose of this paper we shall attempt to demonstrate the concept of supply chain and competitive
performance and how it relates to logistics.
•
A Supply Chain encompasses all activities in fulfilling customer demands and requests. These activities are associated
with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the
associated information and funds flows.

•There are four stages in a supply chain: the supply network, the internal supply chain (which are manufacturing
plants), distribution systems, and the end users. Moving up and down the stages are the four flows: material flow,
service flow, information flow and funds flow. A supply chain consists of all parties involved, directly or indirectly, in
fulfilling a customer request.

• The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and
customers themselves. Within each organization, such as manufacturer, the supply chain includes all functions
involved in receiving and filling a customer request. These functions include, but are not limited to, new product
development, marketing, operations, distribution, finance, and customer service.
•The business buyers are increasingly involved in supply chain management or “the integration of business
processes from end user through original suppliers that provides products, services and information that add value
for customers.

•Supply Chain Management as the coordination of strategic and long-term cooperation among co-makers in the
total supply chain for the development and production of products, both in production and procurement and in
product and process innovation.

•The chief criteria when choosing co-makers is their potential contribution towards realization of short lead times
(time to market).

•The demand for short product innovation times (time to market) has come to the fore especially in buyer’s
markets.

•Cross-company product and process development with co-makers can be advantageous to logistic management.
When product development becomes more and more costly, entrepreneurial risk may in this way be more widely
distributed. Reducing the time for product innovation and production demands more intensive business
collaboration with co-makers and this can be done at all levels of the supply structure.
•This type of cooperation gives co-makers insight into the participating companies. Entrepreneurial
cooperation thus becomes intensive.
One absolute prerequisite is the long-term formation of trust which gives competitive advantage to
the co-makers.

•According to Kotler and Keller supply chain management yields several insights. Firstly, the company
can estimate whether more money is made upstream or downstream, in case it might want to
integrate backward or forward. Secondly, the company is more aware of disturbances anywhere in
the supply chain that might cause costs, prices, or supplies to change suddenly. Thirdly, companies
can go online with their business partners to carry on faster and more accurate communications,
transactions, and payments to reduce costs, speed up information, and increase accuracy using SCM
software.

•We may define competitive advantage as an edge, i.e., a process, and patent, management
philosophy, or system that enables the company to have a larger market share or profit than it would
have without that advantage. Product differentiation is a strategy of making a product different, the
best or unique from the competition with regard to at least one feature or goal of a target area.
In today’s environment the ideas of collaborative planning, forecasting, and replenishment of co-makers
is a source of major competitive advantage through well organized logistics management.

Effective supply chain collaboration is increasingly seen as a major competitive advantage viewing the
business process as something that extends beyond the enterprise, and understanding the impact of
decisions on key customers and suppliers will become a critical success factor.

The ability to effectively collaborate with several other stakeholders outside your organization will
become increasingly important.

Successful players will operate comfortably in virtual and perhaps even transient cross-functional teams,
providing domain expertise to some and leadership skills to others.

The ability to rapidly process information, filtering out the noise while gleaning the relevant pieces is the
key to understanding that disconnected pieces of information are indeed part of a larger event.
•This knowledge can then be used to proactively plan several potential decision
scenarios and to execute one or more of them in a pre-emptive mode.

•In conclusion it can be said that logistics management is of great importance to any
enterprise in order to achieve competitive advantage in an attempt to reduce
production costs and enhance relationships with co-makers such as suppliers and
distributors. In a nut-shell the lesson is obvious, a well-run supply chain can give a huge
competitive advantage and help achieve success; a badly run one leads to dissatisfied
customers and commercial failure.
The Multi-Dimensions of SCM

SUPPLY
CHAIN
MANAGEMENT

Activity and process

administration
 7 Trends Driving Change in Logistics

Global trends bring about transformation and growth in

the logistics industry. Specifically, Industry 4.0 is producing
uneasy waves in industrial and production processes. 7
trends that are paving the way for our industry are: a
growing customer base, the rise of the digital consumer,
political and economic developments, the performance of
the logistics industry since the 2008 financial crisis, the
Internet of Things (the third age of the Internet), rise of the
platforms, and 3D printing and driverless vehicles.
A Growing Customer Base
The world’s population is rising and expected to reach 9 billion in 2050. Augmentation of internet access and growing e-
commerce demand will require logistics providers to deliver to remote locations in emerging economies. At the mean time,
the logistics industry will be affected by demographic shifts as well.

The Rise of The Digital Consumer

The number of Smartphone subscriptions is predicted to approximately double to 4 billion by 2025. With the increased use
of digital services, people will begin to expect similar service quality in other industries. As such, logistics companies will
strive to serve their retail and corporate customers through multiple platforms.

Political and Economic Developments

Similar to any industry, the logistics industry is affected by geopolitical and economic developments. Oil prices, trade
harmonization, and growing concern in relation to the environment top the list. Accordingly, logistics companies will seek
out methods to utilize greener methods of transportation.

The Performance of The Logistics Industry Since The 2008 Financial Crisis
The logistics industry commenced to generate revenues across diverse segments following the economic crisis of 2008.
Trucking revenues and transport support services recorded the highest average annual growth.

The Internet of Things (The Third Age of The Internet)

Described as a smart network in which devices connect and exchange information with each other through various
communication protocols, the IoT trend will positively impact the logistics industry. By 2020, IoT is expected to grow to
almost 50 billion objects. This trend provides potential for improved efficiency in the logistics industry. The big data
collected by this technology will offer instant analysis and supply chain information to logistics providers and customers.
The Performance of The Logistics Industry Since The 2008 Financial Crisis
The logistics industry commenced to generate revenues across diverse segments following the economic
crisis of 2008. Trucking revenues and transport support services recorded the highest average annual
growth.

The Internet of Things (The Third Age of The Internet)

Described as a smart network in which devices connect and exchange information with each other
through various communication protocols, the IoT trend will positively impact the logistics industry. By
2020, It is expected to grow to almost 50 billion objects. This trend provides potential for improved
efficiency in the logistics industry. The big data collected by this technology will offer instant analysis and
supply chain information to logistics providers and customers.

Rise of The Platforms

Giant internet platforms such as eBay, Amazon and Alibaba are among the most major latest trends.
These platforms enable startups and small firms to operate in a global market and customers –
businesses or consumers – benefit from having a broad range of alternative suppliers to select from.
3D Printing and Driverless Vehicles
These have the potential to revolutionize the logistics industry. These technologies will contribute to
render delivery services even faster. Autonomous vehicles are ideal for the logistics industry – so much so
that Mercedes is already pioneering digital trucks, while Amazon is testing delivery drones.
Previous Year Questions
1.How logistics help in achieving competetive advantage?
2. Just In Time Production System?
3. What is meant by competetive advantage. How logistics help in
achieving competetive advantage?
4.Features of changing Logistics environment?