Learning Outcomes

Understand the origin and importance of logistics as

a functional area
The various functional Interface between logistics

and other areas

Understand the importance of logistics and customer

service along with other related concepts.

The part of the supply chain process that plans, implements and

controls the efficient, effective flow and storage of goods, services

and related information from point of origin to point of consumption

inorder to meet customer requirements

- Council of Supply Chain Professional and Management

“Logistics is the information based activity of material movement

from suppliers to manufacturer and finished goods to the customer”.

Martin Christopher
Logistics System Components
Customer
Service
Order Inventory
Processing Planning

Information Packaging
System LOGISTICS

Transportation
Warehousing

Procurement

Reference: Supply Chain Management ; V.V. Sople, 2011

 Logistics Chain

Reference: Supply Chain Management ; V.V. Sople, 2011

Logistics Chain
Inbound Logistics
Operation preceding manufacturing. This includes movement of
raw materials and components from supplier to the plant.

Process Logistics
Operations directly related to processing. This includes storage
and movement of raw materials and components within the
factory premises as per the manufacturing schedule.

Outbound Logistics
Operations following the manufacturing. This includes
warehousing, transportation and inventory management of
finished goods.
Gulf war in 1991: largest military operation lasting for four days.

- Planning processed months before actual war executed

- 1,25,000 ground troops to defend the area

- Area to defend stretching from 175 km long and 300 km deep into the desert.

- 500 tactical cargo trucks and 200 wheeled vehicles

- 35,000 tones of ammunition / 5.6. million gallons of fuel, ration on 2million

meals, 1 million gallons of water

Class Activity : Logistics in Practice

Dominos Pizza
The Kitchen
•Logistics : Connects the Source of Supply with the Source of Demand
•To achieve this, all components of the logistics system and supporting information
system are put into operation with the objective of delivering the right product at
the right place and at the right time with the least cost
•Logistics makes it possible to deliver a product to the customer anywhere,
irrespective of its manufacturing location.
•When these gaps tend to be larger and the risk of dilution of service level is high,
an integrated system is needed to make the operations seamless for product and
information flow.
•Supply Chain Management helps to close this gap by enhancing and the
aligning the capabilities through enablers such as Technology collaboration and
human resource Skills. The Supply Chain banks on the relationship with suppliers
for performance cycle reduction, quality improvement, freight minimization and
reduction in cost of material and transactions.

•The supply Chain tries to understand the demand signals and profiles the target
customer base to adjust itself for planning and execution of customer requirement
in accordance with desired service level.
•Logistics capabilities supplement supply chain operations
•The efficiency and effectiveness of inventory movement across the supply chain is
largely dependent on the capability of logistics management.

•Cost reduction and customer service enhancement in the supply chain are not
possible without efficient logistics operations such as warehousing, material
handling, inventory control, etc.
•Thus the success of the supply chain is dependent on logistics
•The degree of success depends on the level of integration between the
enablers.
 Logistics Integration

Reference: Supply Chain Management ; V.V. Sople, 2011

Physical supply Physical distribution
materials management outbound logistics
inbound logistics
Backbone of trade and business
Leads to customer satisfaction
Integrator
Competitive edge
Wins or losses wars
Logistical cost
Rapid Response: Satisfy customer response

Minimum Variance: Imperative to improve overall

productivity
Minimum Inventory

Movement Consolidation : Transportation cost

Quality : Consistent and continuous quality improvement

Life Cycle Support : Reverse Logistics.

COMPONENTS / FUNCTIONS OF LOGISTICS

LOGISTICS FUNCTIONS
 Scope of Logistics

The logistics activities for which the logistics manager might be responsible are as under:
Transportation
Warehousing and storage
Industrial packaging
Materials handling
Inventory control
Order fulfillment
Demand forecasting
Production planning / scheduling
Procurement
Customer service
Facility location
Return goods handling
Parts and Service support
Business Process Impacted by
Logistics
• Customer order fulfillment
• Manufacturing flexibility
• Product development
• Reverse logistics
• Customer relationship
• Supplier relationship
• Customer service
• Demand management
Factors Influencing Growth of
Logistics Industry

• Investment in infrastructure sector

• Streamlining of indirect tax structure
• Trade growth (National and Global)
• Globalization of manufacturing system
 Customer Order Cycle and Order Processing Cycle
Customer order cycle includes:

Order preparation
Order Transmit
Order entry
Order filling
Order status reporting
ORDER PROCESSING CYCLE

1- Need for a product

2- Place the order with supplier

3- Supplier: Quantity ordered is available in stock / start production /

4- Receipt of order given to the customer

5- Picking and Packaging instructions are issued

6- Products are transported and delivered to customer

7- Customer verifies the product.

 Logistics Interface

Logistics by nature focuses on processes that cut across traditional functional

boundaries

Logistics and Manufacturing Interface:

•Relates to the length of the production run
•Manufacturing decisions requires managers to carefully weight the advantages and disadvantages of
long versus short production runs and their impacts on inventories.
•The trend is towards pull systems as opposed to push manufacturing systems inorder to lower
inventory levels
•Interface between logistics and manufacturing is critical due to global sourcing.

Logistics and Finance Interface:

•Finance and accounting systems provides authenticate the quality of logistics data and analysis. It is
critical for measuring supply chain tradeoffs and performance
 Logistics Interface

Logistics and Marketing Interface:

• Place implies the right product at the right time. Logistics and marketing interface

is gaining importance due to the following reasons:

•Brand Loyalty is Decreasing

•Customers are willing to accept substitutes

•All about developing a client and retaining them

Logistics: Success Factors

• Close coordination with the suppliers

• Reduce the inventory levels
• Faster replenishment cycle
• Flexible in the system
• Innovations in value additions in customer service
 Achievement of Competitive Advantage Through Logistics

Triangular linkages of the three C’s

Customers
Seek Benefits at acceptable cost
Value Value

Cost Differential
Asset Utilization Asset Utilization

Factors achieving commercial success

Commercial success

Value
Cost Advantage
Advantage
 Achievement of Competitive Advantage Through Logistics

Productivity and value advantage matrix

Value Advantage

Productivity Advantage

Value Chain activities

Value Chain Activities

Primary Activities Secondary Activity

•Inbound Logistics •Infrastructure

•Operations •HRM
•Outbound Logistics •Technology Development
•Marketing and Sales •Marketing and Sales
•Service •Procurement
 Achievement of Competitive Advantage Through Logistics

Factors affecting value and productivity advantages

Value Advantage:
•Customized Services
•Reliability
•Responsiveness

Productivity Advantage:
•Capacity Utilization
•Asset Utilization
•Inventory Reduction
•Integration with Suppliers
 The 7R’s of Purchasing / Customer Expectations

Right Material
Concept of Lead Time
Right Quantity
How long the customer has to wait Right Condition
Characterized as speed and responsiveness
Right Time
Volkswagen calls this time : Customer to customer lead
time Right Source
Lead times can vary from 0 to years Right Service
Customers are prepared to pay a premium for a shorter
Right Price
lead time
Consequences: Stock out rates
3 components of lead time: Review time ; manufacture
time ; transit time
Logistics Evolution
Alliance with
4 Party 3 PL Service provider
Logistics IT Organization
IT/Logistics Consultant

Outsourcing
Warehousing
3 Party Transportation
Logistics Inventory
Order processing

Self-reliant
In-house Organization performing all
logistics logistics operation
 STRATEGIC ALLIANCES:3PL AND 4PL CONCEPTS

Third Part Logistics Service Provider

•3PL companies are strategic partners with the OEM’s

•External to the company
•3PL activities include: warehousing , multi modal transportation, inventory
management, packaging,etc
•The company which provides the complete logistics service is called the integrators.
•The objectives of 3PL are reduction in risk and liability ; value added services to
customer, Sources of process improvement; wider market coverage
 STRATEGIC ALLIANCES:3PL AND 4PL CONCEPTS

Fourth Party Logistics Service Provider:

•Originated from Accenture consulting company
•Due to complex supply chain network no single company can manage the complete network.
•Need for an organization who comes together with the OEM to manage and integrate the
complete end to end supply chain.
•Key components of 4PL are as under:
•Architect / Integrator: Change Leaders / supply chain visionary/ Project management /
continuous innovation
•Control Room : Decision Makers/ continuous improvement/ manage multiple 3PL/ Experiences
Logistician
•Supply Chain Infomediary: IT System Integration/ Real time data capture/Convert data into
information/technical support
•Resource providers: Transportation asset provider / Warehouse / cross-docking / procurement
service / packaging Service
 Logistics Performance Cycle Structure
Integrated logistics can be analyzed by means of performance cycle which emphasizes on the interface and
links between the suppliers, the firm and the customers. It is integral t marketing and sales performance since
it provides timely and economic product availability and delivery to customers

Material Source

Components parts Plant

Assembly Plant

Distribution Warehouse

Customer

Performance cycle

Transaction creating Activities Physical fulfillment activities

Advertising and selling Physical distribution

 Physical Distribution Performance Cycle Structure

Order Processing Order Transmission Customer Order

Order Selection Order Transportation Customer Delivery

 Manufacturing Support Performance Cycle Structure

Manufacturing Support Performance cycle provides Production Logistics

Positioned between physical distribution and procurement operations

Objective is to facilitate the what, where and when of the production and not how

After the completion of the manufacturing cycle the finished goods are allocated and

deployed directly to the customer or the distribution warehouse.

 Procurement Performance Cycle Structure

Objective is to :

Conform to expected/ standard time as delayed performance results in disruption

To establish Safety stock
Ensure operational consistency by reducing the planned performance cycle, faster
order cycles, reduced inventory risk and improved inventory turnover performance.

Ways to reduce the Performance cycle uncertainty:

Use of EDI
Monitoring daily changes in the workload
Ensuring consistency in operations.
 Procurement Performance Cycle Structure

Order Placement and

Sourcing S
Expediting
U
P
P
L
I
E
Receiving Transportation R
 Summary of Chapter 1

 Understand the concept of Logistics

 Military Origin of the Concept of Logistics
 Importance of Logistics
 Operational Objectives of Logistics
 Components of Logistics
 Scope Of Logistics
 Customer Order Cycle
 Order Processing Cycle
 Lead Time
 Achievement of competitive advantage through Logistics
 3PL and 4 PL concepts
 Interface between logistics and other areas
 7 R’s of customer expectation
 Performance cycle Structure