Logistics

Rajesh M M Tech (IE &M)

Logistics vs. SCM
• Logistics deals with strategy and coordination between marketing and production • Supply chain management focuses more on purchasing and procurement • Logistics management is a part of the supply chain management that plans and implements the flow and storage of goods, services in order to meet the demands of the consumers

Definitions
• Logistics can be simply defined as the management of the flow of goods and the services between the point of origin and the point of consumption in order to meet the requirements of customers • American council of logistics management:
– The process of planning, implementing & controlling the efficient, cost effective flow & storage of raw materials, in-process inventory, finished goods & related information from point of origin to point of consumption for the purpose of conforming to customers requirement

Example
• Transport from Hyderabad to Vishakapatnam
– Garibrath 500 – Sleeper Class 350 – Pvt Travels 800 – Car 2000 – RTC 550 – Flight 3500

Objectives
• The main purpose of logistics is to provide materials for smooth operation where & when needed at lowest possible cost • Reduction in inventory • Economy of freight • Reliability and consistency in delivery performance • Minimum damage to products • Quicker and faster response • Example DELL laptops

Elements of logistics
• • • • • • • Test & support equipment Supply support (spares & repair parts) Personnel & training Technical data Facilities Transportation & handling Maintenance planning

Standardization
• Standards are the base of all mass production • Standards convey the sense that there are only certain sizes made and sold • They are specifications of products from minimum variety of materials, parts, tools, & processes • By standardization the quality, quantity, value, performance etc can be measured & compared

Classification
• Aims at systematically grouping items together by their common features & subdividing them by their special features • Helps in
– Identify and locate identical items – Identify substitutes – Improves part location in store

Classification procedure
• Define all the terms • Classify according to basic characteristics • Identify each item by code number
– A code consists of letters & numbers – Example: coding of computers
• The computer in sujatha degree college can be coded as Suj\Sys\101\119 • DL 01 C 1111, DL delhi, C category of vehicle, 01 district, 1111 vehicle number

Advantages of standardization
• • • • • • • • • • Easy availability of spare parts Fewer drawings & specifications Better resource utilization Lesser design mistakes & design alterations Better inspection & quality control Efficient tool design Fewer tool changes & process setups Supervision of process is easy while manufacturing Reduction in wastages Ultimately total cost is reduced

Disadvantages
• • • • Reduced variety Loss of business opportunities Cannot meet customer requirements Becomes less flexible to manufacture a new product

Applications
• Finished products cars, tvs, mobiles, computers etc • Subassemblies & components, e.g. automobile gearbox, keyboards, remotes etc • Material standardization • Production equipment standardization, e.g. machine tools, presses, welding equipments etc

Simplification
• The process of reducing variety of products manufactured • Is reduction product range, assemblies, parts, materials & design • Simplification makes a product less complicated

Advantages
• Reduced parts, varieties & changes in products, this reduces manufacturing operations • Provides quick delivery & better after sales service • Helps in better inventory control • Reduction in price of a product • Example: Phillips bulbs “Sense and Simplicity” • Chairs

Make or Buy decisions
• The make-or-buy decision is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier). The buy side of the decision also is referred to as outsourcing. • Example: many car manufacturers purchase tyres from MRF or other tyre manufacturers and assemble it with their vehicles

Factors affecting make or buy decisions
• Quantitative factors
– Opportunity costs – Incremental costs – Idle facilities

• Qualitative factors
– Product quality – Patents – Skills & materials – Long term planning

Lead time
• Lead time is the period between a customer's order and delivery of the final product • This is the time elapsed between the receipt of a requisition & receipt of goods required • Time to obtain quotations + time to place orders + vendor manufacture time + transportation time = lead time

Lead time
• Internal lead time • Within control of organisation • External lead time • Within control of vendor

Long lead time
• • • • • Increases cost of materials or services Machine and men are idle Underutilization of facilities Payment delays Leads to excessive work-in-process inventories

Value analysis
• Developed in USA in 1947 by Lorry D Miles @ GE • Concept is to make cheaper & to sell cheaper products with same utility • Value is cost proportionate to function or utility of product
– Value = Function or Utility Cost

• The value of the product can be increased by increasing utility of the product at same cost or reducing the cost of the product with same utility

Function of product

Function Primary Secondary Tertiary

Value Cost Use Esteem Exchange

Value approach
• Value analysis • Examines design, function & cost of each & every component in order to produce it economically without decreasing its utility, functionality or reliability • Value engineering • Is an application of value analysis at design or pre-manufacture stage

Packaging
• Packaging is the use of containers & components to contain, protect, preserve, promote, identify & facilitate distribution of products in factory fresh condition from manufacturer stage to ultimate consumer stage • E.g. packaging of electronic appliances

• Packaging is done to protect goods from
– Accidental hazards – Mechanical vibrations – Heat, light, dust, pressure etc

Cost effectiveness of packaging
• It is a concept which determines how effectively has cost been incurred in packing a product • Packaging should be as simple & inexpensive as possible with desired performance • E.g. packaging of magazines • Packaging of goods such as oils, soaps, coffee, tea etc., give identification to product & is a means of storage

Packaging cost
• • • • • Packaging material cost Storage & handling cost Packaging operation cost Loss & damage cost Effect of packaging on sales

Import substitution
• Inadequacy of natural resources • Rapid industrial growth • Criteria for import substitution
– Source development – Standardization of equipment – National technology policy

National technology policy
Strategy for achieving technological self reliance Selective buying of technology Import substitution Development of new technology Development of indigenous technology

• • • •

Wastage control
• Prevention of wastage of materials • Waste of materials = loss of money • Concentrates on why wastage occurs and how to prevent or minimize it

Stages of wastages
• • • • • Planning & design stage Purchasing stage Transportation & handling stage During storage During production

Planning & design wastage
• Improper design & specifications • Wrong forecasting • Remedy
– Perform better market survey & apply value analysis

Wastage in transportation & handling
• Remedy
– Improve packing – Improve/change method of transport – Better material handling equipment – Better storage locations & areas

Wastage during storage
• Pilferage
– Means packing things of one component with other material components

• • • •

Breakages & damages in handling Corrosion during storage Losses due to climate changes Remedies
– Usage of good storage area – Proper planning & storage

Wastage during production
• High wastage in scraps • Improper design • Remedies
– Change in design – Improvement in manufacturing processes – Giving training to operators – Provision of good facilities

Material handling
• It is a process of handling a good or a product from its initial stage to final finished good stage • It involves movements of materials manually or mechanically within the plant

Material handling functions
• Choose production machinery & assist in plant layout to eliminate material transfer as far as possible • Choose most appropriate material handling equipment which is safe & can fulfill material handling requirements at minimum cost

Principles of MHE
• Minimize movements in production operations • Aiming at moving optimum number of pieces in one batch • Minimizing distance moved • Employing technology instead of manpower for movement of materials • Utilize gravity assisting material where ever possible • MHE must be maintained properly

Selection of MHE
• • • • • • • • Material to be moved Plant buildings & layouts Type of production machines Type of material floe pattern Type of production Cost of MHE Handling costs Life of equipment

Maintenance of MHE
• Preventive maintenance
– Failure is prevented

• Steps involved
– Inspection – Repair – Overhaul

Types of MHE
• • • • • • • Industrial trucks Cranes Hoists Monorails Conveyors Lifts Tractors etc.

Budget & budgetary control
• Budget: is a financial statement prepared prior to a defined period of time with the purpose of attaining a given objective • A summary of intended expenditure along with proposal for how to meet them • It is a plan showing control purposes • Represents financial requirements • It is based on past statistical data & predicts management requirements for future

Budgeting requirements
• He process of making budget is budgeting • Requirements
– Proper organization of budget – It must mark responsibilities of each section – It must be error proof in estimation – It must be flexible

Budgetary control
• Makes use of budgets for planning & controlling all aspects of producing or selling products or services • Shows the plans in financial terms • Planning of business expenditure to control business

Objectives
• Should specify units to be produced & cost of production • It must facilitate planning within the company • It should harmonize departmental programme • It serves as medium of propagating policies through business enterprise • It must be flexible • It must help in smooth production & sales programme

Advantages
• • • • • • • Helps in incorporating a system Over expenditures are controlled Optimum utilization of resources Targets & goals are defined It provides management as support tool Helps in smooth running of production It facilitates financial control

Limitations
• Prediction of budget may or may not be correct • Budget doesn’t work until desire to make it work is established in workers

Types of budget

Budget Fixed Variable Functional

Types of functional budget
• • • • • Sales budget Production & manufacturing budget Capital expenditure budget Materials & purchase budget Direct labor budget

Social auditing
• Detection of fraud • Detection or errors • Finally remove them

Types of audit
• • • • • • Financial audit Operation audit Compliance audit Cost audit Management audit Social audit

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