UNIT –I

CHAPTER 1
INTRODUCTION TO LOGISTICS MANAGEMENT

Philip Kotler defines logistics as “planning, implementing, and controlling the physical
flows of materials and finished goods from point of origin to point of use to meet the
customer’s need at a profit”.
 logistics is concerned with getting the
products and services where they are 1.1 MEANING OF LOGISTICS
needed and when they are needed.
 logistics involves integration of various
functions such as transportation,
warehousing, packaging, material
handling, inventory management,
information management , etc.
logistics is the management of the flow of
things between the point of origin and the
point of consumption in order to meet
requirements of customers or corporations.
 logistics is the process of planning,
implementing and controlling procedures Mumbai’s Dabbawalas : Reliable, foolproof
for the efficiently and effectively. logistics system of delivering lunch boxes to over
Logistics also includes inbound, outbound, 5,00,000 office goers every day without letting the
wrong lunch box reaching the wrong office and also
internal and external movements.
ensuring the boxes reach on time.
 1.2 Importance of logistics
1. Logistics is the bedrock of trade and business:
Example: amazon and flipkart
 Trade and business is not possible without buying and selling of goods.
 It is possible only when goods are physically moved into the market or away from the
market.
 If there is no logistical support, trade and business will collapse.
2. Leads to customer satisfaction:
 Customers satisfaction is the most important
elements in todays words.
 Objectives like productivity, good quality,
damage-free delivery, on-time delivery, etc are
set to meet customer’s satisfaction.
 Providing right quality of goods, at right time,
at right place, in right quantity and right
condition(4R’S).

3. Integrated logistical activities:

Process for developing material and a
support strategy that optimizes functional
support and guides the system engineering
process and lower life cycle cost and
making the system easier to support.
4. Competitive edge:
A commodity market is the market
where there is no product
differentiation in terms of price or
quality, what actually matters is the
availability of the product at right
place and in the right quantity.
5. Logistics wins or loses war:
 British lost American war of
independence due to poor logistics.
6. Supports critical functions like
operations and marketing:
 logistics supports manufacturing
operations by maintaining adequate
inventory of raw materials to ensure
uninterrupted production.
 4P’S for marketing activities.

7. Logistical costs:
 logistics expenditures are 5 % to 35% of
sales depending on type of business,
geographical areas of operation, etc.
 1.3 Objectives of logistics
1. Reduction of inventory:
Inventory is one of the key factors, which can
affect the profit of an enterprise to a great
extent.
 Logistics helps in maintaining inventory at the
lowest level, and thus achieving the customer
goal.

2. Economy of freight:
Freight is a major source of cost in logistics.
This can be reduced by selecting the proper
mode of transport, route planning, long
distance shipments etc.
3. Reliability and consistency in
delivery performance:
Material required by the customer must
be delivered on time, not ahead of the
schedule or behind the schedule.
Proper planning of the transportation
modes, with availability of inventory
will ensure this.
4. Minimum damage to products:
Sometimes products may be damaged
due to improper packing, frequent
handling of consignment, and other
reasons.
 The use of proper logistical packaging,
mechanized material handling
equipment, etc will reduce this damage.
5. Quicker and faster response:
A firm must have the capability to
extend service to the customer in
the shortest time frame.
By utilizing the latest
technologies in processing
information and communication
will improve the service.
6. Movement consolidation:
Types of products
 Size of products
Distance
 1.5 Scopes of logistics /logistical functions/logistics mix
1. Order Processing:
It involves steps like checking the
order for any deviations in the agreed
or negotiated terms, price, payment
and delivery terms, checking if the
materials is available in stock,
producing and scheduling the material.
2. Inventory Planning and
management:
Activities like inventory forecasting,
engineering the order quantity,
optimization the level of service,
proper deployment of inventory etc.
are involved in this.
3. Warehousing:
This serves as the place where
the finished goods are stored
before they are sold to the
customers finally.
This is a major cost center and
improper warehouse management
will create a host of problems.
4. Transportation:
Helps in physical movement of
the goods to the customers place.
 Cost , speed and consistency
This is done through various
modes like rail, road, air, sea etc.
5. Material handling:
Material handling cycle starts from receiving of materials ,
following by storage of materials, followed by moving the
materials to production unit, followed by moving of
finished goods to the warehouse and then it reaches to final
customer.
Around 10% to 20% of the cost of the product is spent on
material handling.
6. Packaging:
A critical element in the physical distribution of the
product, which also influences the efficiency of the
logistical system.
The basic objective behind packaging is to prevent damage
to the product during storage, transportation and handling.
7. Information Management:
Demand forecasting and order processing are two areas of
logistical work dependent on information.
1.6 Inbound logistics & Outbound logistics
 Inbound logistics(Upstream logistics)
Inbound logistics is an integral element of business operations for a manufacturing firm,
involving the processes of receiving, storing and distributing raw materials for use in
production.
 Activities involves :sourcing, order placement, transportation, receiving, storage etc.
 Outbound logistics(Downstream logistics)
 Once the product is manufactured, it has to be made available to the customers.
 Outbound logistics involves all activities associated with physically distributing the
product to the customers.
Outbound logistics refers specifically to the planning and implementation of the
distribution of goods to a business buyer or consumer.
 1.7 logistical performance cycle
 The performance cycle represents elements of
work necessary to complete various logistics
related activities.
At a basic level, suppliers, the firm and its
customers are linked together by
communications and transportation.
 Basically, there are three logistical performance
cycles.
i. Procurement performance cycle.
ii. Manufacturing performance cycle.
iii. Physical distribution performance cycle.
 1. Procurement performance cycle.
Procurement is concerned with purchasing and
arranging inbound movement of materials, parts
and/or finished inventory from supplier to
manufacturing and assembly plants, warehouses
or retail stores.
These activities includes-
(i) Resource planning,
(ii) Supply sourcing, negation,
(iii)Order placement,
(iv) Quality assurance,
(v) Inbound transportation,
(vi) Receiving and inspection
(vii) Storage and handling.
 2. Manufacturing performance cycle.

 Manufacturing can be viewed as being

positioned between the physical distribution and
procurement operations of firm.
Manufacturing logistical support has the
primary objective of establishing and
maintaining an orderly and economic flow of
materials and work in process inventory to
support production schedules.
It is important to once again stress that the
mission of logistics manufacturing support is to
facilitate the what, where, and when of
production, not the how.
 3. Physical distribution performance cycle.
Physical distribution operations involve
processing and delivering customer order.
Physical distribution is integral to marketing and
sales performance because it provides timely and
economical product availability.
From the logistical prospective physical
distribution links a firm with its customers.
The expectation is that zero defect service will be
achieved and customer focused
marketing efforts will be supported.
 1.8 Integration logistics
Logistics is viewed as a competency that links an enterprise with its customers and
suppliers.
Information from the customers flows in the form of sales activity, forecasts and others.
Information is then translated into manufacturing and purchasing plans.
Raw materials are procured and converted into finished products.
The entire logistical process is viewed in terms of two inter-related activities.
i. Inventory flow
 Procurement.
 Manufacturing supports.
 Physical distribution.
ii. Information flow
 Planning and co-ordination
 Operational flow
 1.9 Logistical competency/Five pillars/Five parameters
1. Network design:
Logistical network includes various facilities such as manufacturing plant, warehouses,
distribution centers and retail stores.
Proper network analysis will result in reduction in overall cost and better customer service.
2. Information management:
Timely information and accurate data are
the key to the better logistical
performance.
Demand forecasting and order
processing are two area of logistical
work that depend on information.

3. Transportation:
 It acts as a physical link that connects
the company to its suppliers and
customers.
 determination of effective transport
system:
i. Cost:
ii. Speed:
iii. Consistency:
4. Inventory management:
Inventory management involves decision to be
taken on various aspects such as:
i. Safety stock
ii. Lead time
iii. Replenishment of stock

5. Warehousing, material handling &

packaging:
 1.10 Reverse logistics
 Reverse logistics involves the process of moving a product from its point of
consumption to the point of origin.
 To remain competitive and differentiation most of the companies offer speedy and
reliable reverse logistical services such as:
i. Replacement of defective products.
ii. Repairing the used products.
iii. Recalling substandard and harmful products.eg; Samsung note 7
 Scope of reverse logistics:
Reverse logistics arises due to following reasons:
i. Return of unsold goods: eg; Newspaper and magazines
ii. Refilling/reusable packaging: eg; coca cola glass bottles/filter water bottles 20L
iii. Repairs: eg; Mobile parts.
iv. Products Recall: eg; 75,419 units of maruti suzuki Baleno and 1,961 units of Swift Dzire
were recalled due to faulty airbags.
v. Recycling: eg; Many countries government have devised laws making recycle mandatory.
vi. waste products: eg; European countries have to ensure proper disposal of electronic goods.
 1.11 Green logistics
Meaning:
Green logistics describes all attempts to measure and minimize the ecological impact
of logistics activities.
This includes all activities of the forward and reverse flows of products, information and
services between the point of origin and the point of consumption.
Background:
Economic growth, industrialization and advancement of technology have resulted in increased
waste, poor dumping and poor disposal.
This has an adverse impact on the environment resulting in air pollution, deforestation, reduced
air quality, land degradation etc.
How to achieve green logistics: