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Logistics Management

Prepared by: Narendra Singh Chaudhary

"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 To get goods from where they arise to the right place in the right form, at the right time, at the right cost, Logistics or physical distribution or distribution logistics is an integral part of Marketing Process.


Application of management principles to logistics operations for efficient and cost effective movement of goods and personnel. Management of the activity of transporting goods to customers or to places where they are bought or sold

Definition Of LM

According to 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.

Logistical management includes the design and administration of systems to controls the flow of material, work- in process, and finished inventory to support business unit strategy. Logistics is the designing and managing of a system in order to control the flow of material throughout a corporation.

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.

Fragmentation 1960-This era was known as fragmentation because every thing that done was disintegrated Evolving Integration-At this stage of time new concepts of Logistical management were evolving Total integration-In the present scenario because of technological advances logistics has evolved as part of management

There are two main phases that are important in the movement of materials: material management and physical distribution. Materials management is the timely movement of raw materials, parts, and supplies. The physical distribution is the movement of the firm's finished products to the customers. Both phases involve every stage of the process including storage. The ultimate goal of logistics is: "To coordinate all efforts of the company to maintain a cost effective flow of goods."

Inbound logistics covers the movement of materials received from suppliers. Material management describes the movements of material & components within a firm. Physical distribution refers to movement of goods outward from the end of the assembly line to the costumer. Supply- chain management is somewhat larger than logistics and it links logistics more directly within the users total communication network & with the firm engineering staff. It includes manufacturer and suppliers but also transporters, warehouses, retailers and customers themselves.

Importance of logistics

Transportation cost rose rapidly due to the rise in fuel prices Production efficiency was reaching a peak Fundamental change in inventory philosophy Product line proliferated Computer technology Increased use or computers

Increased public concern of products Growth of several new, large retail chains or mass merchandise with large demands & very sophisticated logistics services, by pass traditional channel & distribution Reduction in economic regulation Growing power of retailers Globalization The interrelation of different logistics element and their costs should be based on total cost rather than individual costs.

The objectives of Logistics

Rapid Response-Rapid response is concerned with a firm's ability to satisfy customer service requirements in a timely manner. Minimum Variance-Variance is any unexpected event that disrupts system performance. Variance may result from any aspect of logistical operations. Delays in expected time of customer order receipt, an unexpected disruption in manufacturing, goods arriving damaged at a customer's location, or delivery to an incorrect location-all result in a time disruption in operations that must be resolved.

Minimum Inventory-The objective of minimum variance involves asses commitment and relative turn velocity. Total commitment is the financial value of inventory deployed throughout the logistical system. Turn velocity involves the rate of inventory usage over time. High turn rates, coupled with inventory availability, means that assets devoted to inventory are being effectively utilized. The objective is to reduce inventory deployment to the lowest level consistent with customer service goals to achieve the lowest overall total logistics cost.

Movement consolidation-One of the most significant logistical costs is transportation. Transportation cost is directly related to the type of product, size of shipment, and distance. Many Logistical systems that feature premium service depend on highspeed, small-shipment transportation.

Quality improvement-A fifth logistical objective is to seek continuous quality improvement. Total quality management (TQM) has become a major commitment throughout all facets of industry. Life-Cycle support-The final logistical design objective is life-cycle support. Few items are sold without some guarantee that the product will perform as advertised over a specified period. In some situations. The normal value-added inventory flow toward customers must be reversed.

Essence of logistics in marketing

Marketing Process is successfully completed when Products are produced and priced to satisfy the identified needs of the segment of buyers Arrangements are made to supply these goods through selected distribution channels An awareness is created among the buyers about the availability of the goods through information facilitation & Goods are physically supplied to the buyers at the place & time selected by them. Besides satisfying the customers need, the marketing process must be profitable to the seller.

Basic logistical service is measured in terms of

Availability-Availability means having inventory to consistently meet customer material or product requirements. Operational performance-Operational performance deals with the elapsed time from order receipt to delivery. Operational performance involves delivery speed and consistency. A firm's operational performance can be viewed in terms of how flexible it is in accommodating unusual and unexpected customer requests. Service reliability-Service reliability involves the quality attributes of logistics. For logistics performance to continuously meet customer expectations, it is essential that management be committed to continuous improvement

There are four logistics concepts

The systems concept-The systems concept is based on all functions of a organization working together in order to maximize benefits. This concept sometimes requires certain components of the organization to operate sub optimally in order to achieve maximum goals of the system.

The total cost concept-The total cost concept is based on the systems concept; however goal achievement is measured in terms of cost. After-tax concept-A variation of the total cost concept is the after-tax concept. This goal of this concept is after-tax profit. This concept is becoming very popular because of the many different national tax policies. The trade-off concept links the system together in a way that is very efficient, but can have trade-offs that might be inefficient. The advantages of such high efficiency must be weighed against the risk.

Logistics sub-systems

Physical Supply or Management of flow of raw materials, spare parts, consumable stores and machinery & tools from suppliers. Physical distribution or management of finished goods from the factory to the buyers & Logistical Controls for managing the logistics system, it helps an efficient co-ordination of physical supply & distribution sub-systems.

Primary Activities

Inbound logistics: materials handling, warehousing, inventory control, transportation; Operations: machine operating, assembly, packaging, testing and maintenance; Outbound logistics: order processing, warehousing, transportation and distribution; Marketing and sales: advertising, promotion, selling, pricing, channel management; Service: installation, servicing, spare part management

Support activities:

Firm infrastructure: general management, planning, finance, legal, investor relations; Human resource management: recruitment, education, promotion, reward systems; Technology development: research & development, IT, product and process development; Procurement: purchasing raw materials, lease properties, supplier contract negotiations.

Importance of Inbound and Outbound logistics

Inbound and Outbound Logistics covers and supports the following processes and options: All of the processes in the warehouse from goods receipt through goods issue. Option to use RFID to support goods Issue and goods receipt processes Complete stock transparency, to allow companies to know what is in the warehouse. Trace and track the history of the warehouse processes in Detail for each individual article

Improve the accuracy of deliveries, thus increasing customer satisfaction. Option to use mobile data entry and work in a paperfree environment. Build optimal loads with the routing and scheduling allowing a close collaboration between shipper and carrier via optimized carrier selection and tendering Operational shipping, manifesting, freight costing, freight settlement, and foreign trade are always transparent to company

Objective of an ideal logistic system is to ensure flow of supply to the buyer

In Correct Quantity At Desired location At Required time At useable condition At the lowest total cost Thus the objectives encompass efforts to coordinate physical distribution and material management in order to save money or improve service.

Elements of logistics system

Transportation Warehousing Inventory Management Packing & Utilization & Information & Communication

Forms of logistics management.

Centralized logistics management-Centralized logistics management provides that managers that also head other divisions of the company head the logistics operations. This type of management helps avoid internal problems by having a central manager that ultimately decides how logistics and operations are coordinated. Decentralized logistics management-Decentralized logistics management is based on the fact that a company needs to have a division that helps control the local-adaptation needs. Dealing with different cultures requires input from the local branch. The managers that deal with the cultural differences on a daily basis normally know what works and what dont.

Outsourcing-Outsourcing is the final option for logistics management. When this happens, transportation firms concentrate on logistics, and the company can concentrate on it's production. There are many cost savings using this type of program, however that lack of control can negatively effect many companies.

Logistical competency is achieved by coordinating

Network design Information Transportation Inventory Warehousing Material handling Packaging Work

Logistics Cost

Logistics Cost

As companies continue to manufacture and source materials from overseas, controlling costs remains a top priority for those involved in international trade. One key factor that should be monitored more closely is logistics management, which covers all activities relating to the procurement, transport, transshipment and storage of goods. Depending on the industry sector, supply chain logistics costs account from 5% to 50% of a products total landed cost.

Some issues effecting logistics costs: Fuel prices remain high and ports continue to experience delays, resulting in higher transportation fees. Increasingly complex international trade laws and security measurements threaten to lengthen delivery times and increase warehousing costs.

10 tips on to reduce supply-chain costs

Understand the true costs of sourcing overseas- Calculate freight, duty, brokerage, and inventory-carrying costs to support these lengthened supply chains. Factor in such items as the costs of flying engineers overseas. Once you understand the true total landed cost and total impact to the business, buying domestically may look a lot better.

Focus on eliminating the variability from transit times-The more variable the transit times are, the more likely it is that the receiving party is using more premium freight, building buffers of inventory or ordering more often and more quantity than necessary to compensate for the uncertainty. Understanding these dynamics can lead to the conclusion that paying higher freight costs to ensure higher variability actually saves your company in total costs.

Tariff engineering-Strategically source and manufacture products to take advantage of classification duty rates and eligibility for special trade programs such as the North American Free Trade Agreement. Consolidate-If you have multiple suppliers in one country, consolidate their goods into one shipment. In addition, if you always have less-thancontainerload shipments out of one country, try to find another Less than Container Load(LCL) importer of goods from that country. You may be able to partner and consolidate to a more cost-effective fullcontainerload shipment.

Informed decision-making-Provide to the decisionmakers/customers of your logistics network the cost of freight for each service level, the reliability of each lane for each service level, and the true cost of carrying inventory so they can make informed decisions Sometimes insurance doesnt pay-When a company has a shipment of premium goods, they often tend to use the carriers insurance, which is very expensive. If the company is selfinsured, as most companies are, it should check its insurance policy to see if it covers shipment of goods. If it does, the company does not need to add the extra cost of carriers insurance.

Automate compliance processesCompanies that implement software solutions to automate trade compliance are able to speed the cycle times associated with tasks being performed manually, such as document preparation, and eliminate the associated errors. Automated compliance procedures also bring fewer delays at border crossings, resulting in on-time delivery, adequate inventory levels, increased customer satisfaction, and the avoidance of fines.

Control your express shipping costs-When a company runs into a supply-chain issue, it typically will have an entire shipment sent on an express/expedited (highest-cost) service basis. Panicking often results in higher costs. A little bit of calculating can help the company determine the amount of goods needed immediately. It can then have that amount sent using express/expedited services, while the balance of the shipment can be sent using a standard (lower-cost) service.

Planes, trains and automobiles-Which is cheapest? In general, rail is more cost-effective than trucking or air. Water is cheaper than air shipment. No matter the mode of delivery, always try to get three quotes for movements. Be aware of non-tariff trade barriers -Companies need to be more aware of the increasing level of non-tariff trade barriers that are in force to reduce sweatshop labor and support human rights and animal welfare issues. These restrictions can bring importers increased liability and compliance costs.

Distribution & Warehousing Mgmt

A warehouse management system, or WMS, is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, put away and picking. The systems also direct and optimize stock put away based on real-time information about the status of bin utilization.

Warehousing, material handling, and packaging are an integral part of other logistics areas. For example, merchandise typically needs to be warehoused at selected times during the logistics process. Transportation vehicles require material handling for efficient loading and unloading. Finally, the individual products are most efficiently handled when packaged together into shipping cartons or other types of containers.

When warehouses are required in a logistical system, a firm can choose between obtaining the services of a specialist or operating its own facility. The decision is broader than simply selecting a facility to store inventory, since many activities essential to the overall logistical process are typically performed while products are warehoused. Examples of such activities are sorting, sequencing, order selection, transportation consolidation and, in some cases, product modification and assembly. Within the warehouse, material handling is an important activity. Products must be received, moved, sorted, and assembled to meet customer order requirements.

Physical Distribution

The area of physical distribution concerns movement of a finished product to customers. In physical distribution, the customer is the final destination of a marketing channel. The availability of the product is a vital part of each channel participant's marketing effort. Even a manufacturer's agent, which typically does not own inventory, must depend on inventory availability to perform expected marketing responsibilities. Unless a proper assortment of products is efficiently delivered when and where needed, a great deal of the overall marketing effort can be jeopardized.

It is through the physical distribution process that the time and space of customer service become an integral part of marketing. Thus physical distribution links a marketing channel with its customers. To support the wide variety of marketing systems that exist in a highly commercialized nation, many different physical distribution systems are utilized. All physical distribution systems have one common feature: they link manufacturers, wholesalers, and retailers into marketing channels that provide product availability as an integral aspect of the overall marketing process.