Logistics Management

• "Logistics means having the right thing, at the right place,

at the right time."
• Word, ’Logistics’ is derived from French word ‘loger’, which
means art of war pertaining to movement and supply of
armies.
• “Logistics means the art of managing the flow of raw
materials and finished goods from the source to the user”
Logistics Management

• According to Americian Council of logistics

management:
“Logistics is the process of planning, implementing
and controlling the efficient, effective flow and
storage of goods, services and related information
from point of origin to point of consumption for the
purpose of conforming the customer requirement”.
Logistics Management
• Logistics of an company includes movement of raw
materials, coordinating flows into and out of
different countries, choices of transportation, and
cost of the transportation, packaging the product for
shipment, storing the product, and managing the
entire process.
Functions of Logistics Management
1. ORDER PROCESSING
2. INVENTORY MANAGEMENT
3. WAREHOUSING
4. TRANSPORTATION
5. MATERIAL HANDLING AND STORAGE SYSTEM
6. LOGISTICAL PACKAGING
7. INFORMATION
Functions of Logistics Management
1. ORDER PROCESSING
The purchased order placed by the buyer on the supplier is an
important legal document of the transactions between the two
parties.
2.INVENTORY MANAGEMENT
It is maintaining the requisite inventory stocks to meet customer
requirements while ensuring that its carrying cost is low. There are
two approaches to the inventory management- i. Cost Approach ii.
Customer Satisfaction.
Functions of Logistics Management
3. WAREHOUSING
The effectiveness of an organisation’s marketing strategy depends on
making the right decision regarding warehousing.
4. TRANSPORTATION
For movement of goods from supplier to buyer, and to customer’s
place transportation is important.
5. MATERIAL HANDLING AND STORAGE SYSTEM
An improper method of material handling will lead to product
damage and delay in deliveries.
Functions of Logistics Management
6. LOGISTICAL PACKAGING
It helps in damage protection, ease of material handling, and storage
space economy.
7. INFORMATION
Logistics is an information based activity of inventory movement
across the supply chain.
Objectives of Logistics Management
• The primary objective of the logistics system is to effectively and
efficiently move the inventory in a supply chain.
1. INVENTORY REDUCTION:
• Inventory is one of the prime factors that can adversely affect the
bottom lines of an enterprise.
• The funds invested are blocked and cannot be used for any other
purpose. •Hence, inventory is maintain at minimum level.
2. RELIABLE AND CONSISTENT DELIVERY PERFORMANCE:
•Timely delivery is crucial to the customer to keep up his production
schedule.
Objectives of Logistics Management
3. FREIGHT ECONOMY:
•Freight is a major cost element in logistical cost.
•This can be reduced by freight consolidation, transport mode selection, route
planning , packaging and transporting goods in manner for easy handling by
material handling department , long distance shipments.
4. MINIMUM PRODUCT DAMAGE:
•The use of mechanised material handling equipment and proper logistical
packaging will reduce product damages.
5. QUICK RESPONSE:
•This aspect is related to the capability of the firm to extend service to the
customer in the shortest time.
Logistics Solution
•Traditionally, manufacturing organisation used to have their in-house logistics
department.
•But this job needs to be handed over to somebody who can do it with greater
effectiveness and efficiency at a lower cost.
•Today, successful business corporations across the world are outsourcing logistics.
•A single unit, which can handle all logistic segments to provide hassle free logistics
service to the clients, can provide a complete logistics solution.
•The success of a logistics service providing company depends on the conceptualization
and implementation of the logistics solution and tuning to the needs of the customer.
Value Chain

• A value chain is a concept describing the full chain of a business's

activities in the creation of a product or service -- from the initial
reception of materials all the way through its delivery to market,
and everything in between.
• The value chain framework is made up of five primary activities
a. inbound operations,
b. operations,
c. outbound logistics,
d. marketing and sales, service
e. four secondary activities -- procurement and purchasing, human resource
management, technological development and company infrastructure.
Value Chain

• A value chain analysis is when a business identifies its primary

and secondary activities and sub activities, and evaluates the
efficiency of each point. A value chain analysis can reveal
linkages, dependencies and other patterns in the value chain.
• The value chain concept was first described in 1985 by Harvard
Business School professor Michael Porter, in his
book Competitive Advantage: Creating and Sustaining Superior
Performance.
How do value chains work?

• The value chain framework helps organizations identify and

group their own business functions into primary and secondary
activities.
• Analyzing these value chain activities, sub activities and the
relationships between them helps organizations understand
them as a system of interrelated functions. Then, organizations
can individually analyze each to assess whether the output of
each activity or subactivity can be improved -- relative to the
cost, time and effort they require.
How do value chains work?

Primary activities
Primary activities contribute to a product or service's physical creation,
sale, maintenance and support. These activities include the following:
• Inbound operations. The internal handling and management of
resources coming from outside sources such as external vendors
and other supply chain sources. These outside resources flowing in
are called "inputs" and may include raw materials.
• Operations. Activities and processes that transform inputs into
"outputs" -- the product or service being sold by the business that
flow out to customers. These "outputs" are the core products that can
be sold for a higher price than the cost of materials and production to
create a profit.
How do value chains work?
How do value chains work?

• Outbound logistics. The delivery of outputs to customers.

Processes involve systems for storage, collection and
distribution to customers. This includes managing a company's
internal systems and external systems from customer
organizations.
• Marketing and sales. Activities such as advertising and brand-
building, which seek to increase visibility, reach a marketing
audience and communicate why a consumer should purchase a
product or service.
• Service. Activities such as customer service and product
support, which reinforce a long-term relationship with the
customers who have purchased a product or service.
How do value chains work?

Secondary activities
The following secondary activities support the various primary
activities:
• Procurement and purchasing. Finding new external vendors,
maintaining vendor relationships, and negotiating prices and other
activities related to bringing in the necessary materials and
resources used to build a product or service.
• Human resource management. The management of human
capital. This includes functions such as hiring, training, building
and maintaining an organizational culture; and maintaining positive
employee relationships.
How do value chains work?

• Technology development. Activities such as research and

development, IT management and cybersecurity that build and
maintain an organization's use of technology.
• Company infrastructure. Necessary company activities such
as legal, general management, administrative, accounting,
finance, public relations and quality assurance.
Benefits of value chain

• Support decisions for various business activities.

• Diagnose points of ineffectiveness for corrective action.
• Understand linkages and dependencies between different
activities and areas in the business. For example, issues in
human resources management and technology can affect
nearly all business activities.
• Optimize activities to maximize output and minimize
organizational expenses.
• Potentially create a cost advantage over competitors.
• Understand core competencies and areas of improvement.
Customer Service
Value added service in logistics

• Value Added Logistics (VAL) is the creation of a higher added value in

the logistics chain.
• Every transport company can move products from A to B, but it is
difficult to stand out with that in a market full of competition.
• Carriers therefore provide an increasing number of services: not
only do they organise transport, they also pack, weigh and label the
products.
Value added service in logistics
• Form Utility
• Place Utility
• Time Utility
• Possession Utility
Form Utility
• It refers to the value added to goods through a manufacturing,
production or assembling process. For example, form utility results
when raw materials are combined in some predetermined manner
to make a finished product.
• The simple process of adding the raw materials together to produce
the soft drink represents a change in product form that adds value
to the product.
Place Utility
• Logistics provides place utility by moving goods from production
surplus points to points where demand exists. Logistics extends the
physical boundaries of the market area, thus adding economic value
to the goods. This addition to the economic value of goods and
services known as place utility.
Time Utility
• Not only must goods or services be available whenever consumers
need them, but they must also be at that point when customers
demand them. This is called time utility or the economic value
added to a good or service by having it at a demand point at a
specific time.
• Logistics creates time utility through proper inventory maintenance
and the strategic location of goods and services. For example,
logistics creates time utility by having heavily advertised products
and sales merchandise available in retain stores at precisely the
time promised in the advertising effort.
Possession Utility

• It is primarily created through the basic marketing activities related

to the promotion of products or services. We may define promotion
as the effort, through direct and indirect contact with the customer,
to increase the desire to possess a good or to benefit from a service.
• The role of logistics in the economy depends upon the existence of
possession utility, for time or place utility make sense only if
demand for the product or service exists.
Value added service in logistics
Efficient logistics contributes to added-value in four major interrelated ways:
• Production costs. Derived from the improved efficiency of manufacturing with appropriate
shipment size, packaging and inventory levels. Thus, logistics contributes to the reduction of
production costs by streamlining the supply chain.
• Location. Logistics adds value by taking better advantage of various locations, implying access
to expanded markets (more customers) and lower distribution costs.
• Time. Added value derived from having goods and services available when required along the
supply chain (e.g. lower lead times) with better inventory and transportation management.
• Control. Added value derived from controlling most, if not all, the stages along the supply
chain, from production to distribution. By better synchronizing cycles and lead times, logistics
enables better marketing and demand response, thus anticipating flows and allocating
distribution resources accordingly.