Logistic Management

Supply Chain Management

By:- Israr Khan Raja
Preston University, Islamabad
Logistic Management
Logistics Management
Process of moving and positioning inventory to meet
customer’s requirements at the lowest possible cost.
Difference between logistics and SCM?
Business Application of Logistics
Physical Distribution
Distribution Management
Proper movement and storing of finished goods
Marketing and Logistic
Closer to customers
The process of planning, implementing and
controlling the efficient effective flow and storage of
goods and services and related information from the
point of origin to the point of consumption for the
purpose of conforming to customer’s requirement
Business Application of Logistics
Material Management
Distribution Management
Elements of Logistic Management
Customer Order process
Location Analysis
Inventory Control
Material Handling
Packaging
Transportation
Customer Service
Distribution Management
The movement of material, usually finished goods or
parts from suppliers to customers.
All activities related to physical distribution need to
be managed
Impact of DM on
Impact of Distribution Management on
Product margins and profit
Marketing budget
Final retail pricing
Sales management practices
Distribution Channels
Retail
Wholesale
Direct mail
Telemarketing
Cyber marketing
Sales force
Inventory Management
Reactive Inventory system
Planning Approach
Distribution Strategies
Cross Docking
Milk Run
Direct Shipping
Hub and Spoke Model
Cross Docking
Milk Run
Hub and Spoke Model
Pool Distribution VS Normal LTL
Pool distribution is the
distribution of product
to numerous destination
points within a
particular geographic
region.
LTL direct shipped to
the regional terminals in
truck load quantities.
 LTL
LTL is the transportation of relatively small freight.
The alternatives to LTL carriers are parcel carriers or
full truckload carriers parcel carriers usually handle
small packages and freight that can be broken down
into units less than 150 pounds (68 kg). Full truckload
carriers move freight that is loaded into a semi-trailer.
Semi trailers are typically between 26 and 53 feet (7.92
and 16.15 m) and require a substantial amount
of freight to make such transportation economical.
Pool Distribution
TRANSPORTATION MANAGEMENT
A transportation management system (TMS) is a
subset of supply chain management concerning
transportation operations and may be part of an
enterprise resource planning system.
 The management of transportation operations of
all types, including tracking and managing every
aspect of vehicle maintenance, fuel costing, routing
and mapping, warehousing, communications, EDI
implementations, traveler and cargo handling, carrier
selection and management, accounting.
Transportation in SCM
Suppliers
Transportation- Product Movement
Stores-Factory- Product Storage
Transportation- Product Movement
Manufacturing process 1
Transportation- Product Movement
Manufacturing process 2
Transportation- Product Movement
Warehouse-Distributors- Product Storage
Transportation- Product Movement
Dealer-Retailers- Product Storage
Customer
Participation in Transportation
Public
Government
Shipper-Sender
Carrier
Consignee
The Basic Modes of Transportation
The basic modes available to the logistics manager are
Rail
Motor
Water
Pipeline
Air
The Basic Modes of Transportation
Railroads
Capable of carrying a wide variety of products, much more so that other modes.
Very small number of carriers; likely only one will be able to serve any one
customer location.
Trend is to merge smaller companies into larger ones with ultimate goal of
having perhaps two transcontinental rail carriers.
Rail is a long haul, large volume system (high fixed costs; own rights-of-way).
Accessibility can be a problem.
Transit times are spotty, but are generally long.
Reliability and safety are improving and are generally good.
Premium intermodal services
Straight piggyback and containerized freight
Double stacks
Road Railer service
Motor Carriers-By Road
The motor carrier industry is characterized by a large number of small firms. In 1999, there
were 505,000 registered motor carriers.
Low cost of entry causes these large numbers.
Used by almost all logistics systems and account for 82 percent of U.S. freight expenditures.
Consists of for-hire and private carriers.
The motor carrier industry is characterized by a large number of small firms. In 1999, there
were 505,000 registered motor carriers.
Low cost of entry causes these large numbers.
Used by almost all logistics systems and account for 82 percent of U.S. freight expenditures.
Consists of for-hire and private carriers.
High accessibility
Transit times faster than rail or water.
Reliability can be affected greatly by weather.
Relatively high cost compared to rail and water; trade-off is faster service.
Water Carriers-By Sea
General cargo ships
Large high capacity cargo holds
Engaged on a contract basis
Many have self-contained cranes for loading/unloading
Tankers
 Specially designed for liquid cargoes
 Largest vessels afloat, some VLCCs at 500k+ tons
Container ships
 High speeds for ships; increasingly more common and important
 Larger vessels can handle up to 5,000 containers.
.
Air Carriers-By Air
Limited number of large carriers earn about 90% of the
revenue.
Any of the air carriers can carry air freight although some haul
nothing but freight.
Cost structure is highly variable; do not own rights-of-way.
Transit times are fastest of the modes, but rates are highest.
Average revenue per ton mile 18 times higher than rail; twice
that of motor carriers.
Seek goods with a high value to weight ratio.
Accessibility is low as is capability.
Reliability subject to weather more than other modes.
Pipelines
Refers only to the oil pipelines, not natural gas
Not suitable for general transportation
Some research has been performed to move minerals in
a liquid medium, but outside of a few attempts to
transport slurried coal via pipeline, no real successes
have occurred.
Accessibility is very low.
Cost structure is highly fixed with low variable costs.
Own rights-of-way much like the railroads.
Major advantage is low rates.
Pipelines
How To Select Mode of Transportation
Transit Time: Boat takes a lot longer than air but is
cheaper.
Predictability: The estimated transit time and the actual
transit time can vary. Receiving a product before the
expected arrival date can be as bas as receiving it late.
Airfreight is generally more predictable and less variable.
Cost of Transportation: Airfreight is the most expensive
mode of transportation but may be justified when
products are critical or perishable.
Non-economic factors: Foreign governments might give
preferential treatment to certain national transportation
company or limit the amount of usage for a certain mode
of transportation. Customers may demand specific mode.
How To Select Mode of Transportation
Cost
Speed
Consistency
Distance
Volume-cost per unit
Density
Stowability-dimensions
Handling
Transport Documentation
Bill of Lading
Freight Bill
Shipping Manifest
Bill of Lading
Intermodal Transportation
Refers to use of two or more modes of transportation
cooperating on the movement of
shipment by publishing a through rate.
Logistics managers are looking for
the best way to move shipments and these often
attempt to take advantage of multiple modes of
transportation, each of which has certain useful
characteristics.
Intermodal Transportation
Warehousing
A warehouse is a location with adequate facilities
where volume shipments are received from a
production centre, broken down re-assembled into
combinations representing a particular order or orders
and shipped to the customer’s location/s.
Number of warehouse
Types of warehouse
Location of the warehouse
 Third Party Logistics
A third-party logistics provider (abbreviated 3PL, or
sometimes TPL) is a firm that provides service to its
customers of outsourced (or "third
party") logistics services for part, or all of their supply
chain management functions.
3PL Vs. Transportation Services
Benefits of 3PL
Benefits of 3PL
Save time
Don’t need to invest in:
 Trucks
 Training

 Development

Help expand
New markets
International
 No roads
Narrow your focus
Allows you to focus on your strengths
Don’t get spread too thin
Reach more customers more effectively
Can ensure delivery times
can help a company run leaner
Services Provided By 3PL’s
Lead Logistics
4% Other
Transportation
5%
Integrated Mgt
9% 21%
International
9%

Private Fleets
7%
Value Added Intermodal
20% 4%
Warehousing
21%
Savings Potential of 3 PL of 3 PL
Route Design & Optimization
Closed Loop Dedicated Operations
Mode Conversion
Core Carrier Management
Rate Negotiation & Audit
Inbound Consolidation
Reverse Logistics
DC Location Realignments
Reduced Inventory
Short comings of 3PL
Lack of Direct Oversight
One of the downsides of using 3PL services is that the
client businesses have no direct control over their
operation. They are relying on the 3PL company to
consistently come through in delivering the promised
services. This lack of direct control means that client
companies are at the mercy of any problems the 3PL
company faces. Beyond the possible loss of business, the
damage that results from 3PL services failing to deliver
certain products on time are the client company's
problem, not the 3PL service's.
Short comings of 3PL
Dependency
Handing over logistics to a 3PL service is a large commitment.
Businesses need a reliable structure to function. Logistical downtime
can translate into large amounts of lost productivity and revenue.
Consequently, while the free market dictates that a business which is
dissatisfied with its 3PL service could always find another, or develop
its own logistical infrastructure, the reality is not so simple. Switching
the nature of a company's logistical support can cost the company a
great deal in unforeseen costs resulting from the transition. When
businesses contract with 3PL services it creates a dependency which is
no small matter to change. This dependency puts the client company
in uncomfortable situations if pricing schemes or service reliability
from the 3PL service is not working out as expected.
10 Commandments of Outsourcing Logistic
1. Develop a strategy for outsourcing
2. Establish a rigorous provider selection process
3. Clearly define expectations
4. Develop a good contract
5. Establish sound policies and procedures
6. Identify and avoid potential points of friction
7. Communicate effectively with your partner
8. Measure performance and communicate results
9. Motivate and reward provider
10. Be a good Partner
The Move to 4PL