37090595 1 Logistics Management

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LOGISTICS MANAGEMENT

INTRODUCTION


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LOGISTICS INTRODUCTION

THE TERM LOGISTICS IS DERIVED FROM MILTARYORGANISATION AND IT WAS IN USE IN THE DAYS OF LOUISXIV OF FRANCE.

IT WAS EVEN FELT THEN THAT THE EFFECTIVENESS OFMILTARY ORGANISATION DID NOT MERELY DEPEND ON THEWEAPONS, FIGHTING SKILLS AND THE FIGHTING SPIRIT OFTHE SOLDIERS.

IT WAS ALSO EFFECTED BY THE EFFICIENCY OFTRANSPOTATION AND SUPPLY OF AMMUNITION AND FOOD.

LOGISTICS WAS THE TERM TO MEAN FOR THIS MILTARYSUPPORT (I,E, TRANSPORTATION AND SUPPLY OF FOODMATERIAL AND AMMUNITION)

MILTARY SUCCESSES OF THAT TIME WERE ATTRIBUTED TO

LOGISTICS.


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LOGISTICS MANAGEMENT WHEN CONSIDERED IN THE CONTEXTOF INDUSTRIAL ACTIVITY, REFLECT SIMILAR KIND OFAPPROACH TO IMPROVE FLOW OF PRODUCT FROM SOURCEOF ORIGIN THROUGH DIFFERENT STAGES AND FINALLY TOCUSTOMER.

IN INDIA THE CONCEPT IS GAINING GROUND.

CURRENT MARKET FORCES - INCREASED COMPETION, HIGHCOSTS OF ACQUISITION AND DISTRIBUTION OF PRODUCTSINCLUDING RAW MATERIALS INCREASED SERVICE LEVELS

DEMANDED BY THE CUSTOMERS AND SHRINKING PROFITS HAVE FORCED THE MANAGEMENT TO REALIZE THE NEED ANDIMPORTANCE OF EFFICIENT MANAGEMENT OF PHYSICAL FLOWOF RAW MATERIAL, COMPONENTS/ PARTS, SPARES, WORK IN PROCESS AND FINISHED GOODS FROM SUPPLIERS, THROUGHTHE ORGANISATION AND FINALLY TO THE CUSTOMER.


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EVERY ORGANISATION, BE IT IN THE MANUFACTURINGOR NON MANUFACTURING SECTOR, REQUIRES ATOOL/SYSTEM FOR THE INTEGRATION AND CO-ORDINATION OF DIFFERENT FUNCTIONAL ACTIVITIES TOSMOOTHEN THE FLOW AT MINIMUM COST.

LOGISTICS MANAGEMENT HAS BEEN EVOLVED TOACHIEVE SUCH AN INTEGRATION.

LOGISTICS MANAGEMENT HAS ALSO BEEN KNOWN BYVARIOUS OTHER NAMES SUCH AS TOTAL PHYSICAL

DISTRIBUTION, COMPLETE FLOW MANAGEMENT, ANDSUPPLY MANAGEMENT.

ANOTHER TERM WHICH IS BEING WIDELY USED IN USAAND IS GAINING GROUND IN OTHER COUNTRIES ISINTEGRATED LOGISTICS MANAGEMENT.


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DEFINITION OF THE

LOGISTICS IN THE INDUSTRY

LOGISTICS MANAGEMENT ENCOMPASSES ALL MATERIALS FLOWSMANAGEMENT,

FROM THE FLOW OF PURCHASED MATERIALS INTO WORKS

MATERIALS PLANNING OF RAW MATERIALS, COMPONENTS ANDOTHER PRODUCTS,

TRANSPORT OF MATERIALS FROM SUPPLIERS TO WORKS

RECEIVING AND INSPECTION

STORAGE OF MATERIALS.

MATERIAL FLOW THROUGH MANUFACTURING PROCESSES I, E,MATERIAL ISSUES AND MATERIAL HANDLING.

MATERIAL FLOW TO CUSTOMERS I,E, PHYSICAL DISTRIBUTION


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FACTORS AFFECTING LOGISTICS

FUNCTIONS

FOLLOWING FACTORS AFFECTS LOGISTICS FUNCTION

1. LACK OF STANDARDIZATION. IF NEW COMPONENTS ARESPECIFIED FOR EACH NEW PRODUCT, THE TIME FOR THEIRPLANNING AND PROCUREMENT WILL INCREASE.

2. TOO CLOSE TOLERANCES AND HIGH FINISHES, TEND TORESTRICT PROCUREMENT FROM A FEW SUPPLIERS ANDTHEREBY RETARD THE EFFICIENCY OF THE LOGISTICSMANAGEMENT.

3. EFFICIENCY OF PRODUCTION FUNCTION AFFECTS LOGISTICS

FUNCTION TO A LARGE EXTENT.

4. EFFECTIVENESS OF PRODUCTION, PLANNING AND CONTROLAFFECTS MATERIALS FLOW.


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RELATIONSHIPS BETWEEN LOGISTICS AND

OTHERS

SUPPLIER INBOUNDLOGISTICS

PRODUCTION OUTBOUNDLOGISTICS

CUSTOMER

MATERIALSMANAGEMENT

PHYSICALDISTRIBUTION

LOGISTICS

MANAGEMENT


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SCHMIDT (1986) DESCRIBES LOGISTICS MANAGEMENT AS :

THE MANAGEMENT I.E. THE PLANNING, EXECUTION AND CONTROL, OFALL FACTORS THAT AFFECT THE MATERIALS FLOW AND THEINFORMATION ABOUT IT, SEEN FROM THE PERSPECTIVE OF CUSTOMERREQUIREMENTS FOR THE PURPOSE OF ACHIEVING A HIGH DELIVERY,A HIGH RELIABILITY, A HIGH DEGREE OF COMPLETENESS AND A

SHORT DELIVERY TIME.

INSTITUTE OF PURCHASE AND SUPPLY LOOKS AT LOGISTICS ASUNDER :

LOGISTICS IS THE CONCEPT WHICH SEEKS TO PROVIDE FOR THEMANAGEMENT AND CO-ORDINATION OF THE ACTIVITIES WITHIN THESUPPLY CHAIN FROM SOURCING AND ACQUISITION, THROUGH

PRODUCTION, WHERE APPROPRIATE, AND ON THROUGH DISTRIBUTIONCHANNELS TO THE CUSTOMER.

THE GOAL OF LOGISTICS IS THE CREATION OF COMPETITIVEADVANTAGES THROUGH THE SIMULTANEOUS ACHIEVEMENT OF HIGHCUSTOMER SERVICE LEVELS, OPTIMUM INVESTMENT AND VALUE FORMONEY.


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ACCORDING TO BOWERSOX AND CLOSS:

LOGISTICS MANAGEMENT INCLUDESTHE DESIGN AND ADMINISTRATION OFSYSTEMS TO CONTROL THE FLOW OFMATERIALS, WORK IN PROGRESS AND

FINISHED INVENTORY TO SUPPORTBUSINESS UNIT STRATEGY.


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FROM THE ABOVE DEFINITIONS, WE CAN CONCLUDE

1. LOGISTICS MANAGEMENT IS THE FUNCTION OF MANAGINGTHE TOTAL FLOW OF MATERIALS WHICH INCLUDESMOVEMENT OF RAW MATERIALS FROM SUPPLIERS, INPROCESS WITHIN THE FIRM, AND MOVEMENT OF FINISHED

GOODS TO THE CUSTOMER.

2. LOGISTICS MANAGEMENT COVERS BOTH PHYSICAL FLOW OFPRODUCTS AS WELL AS INFORMATION FLOWS COVERINGREPORTS AND DOCUMENTATION RELATING TO GOODSMOVEMENT.

3. LOGISTICS MANAGEMENT EVOLVES PROCEDURES THATMEET CUSTOMER SERVICE AT THE MINIMUM COST.

4. LOGISTICS MANAGEMENT ACHIEVES COST REDUCTION BYSPEEDING THE FLOWS OF MATERIALS, WORK IN PROGRESS AND FINISHED PRODUCTS.


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OBJECTIVES OF


BASIC OBJECTIVES OF A GOODLOGISTICS SYSTEM IS TO GET

RIGHT GOODS OR SERVICES.

TO THE RIGHT PLACE.

AT THE RIGHT TIME.

IN THE RIGHT CONDITION.

AT THE RIGHT COST.

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OBJECTIVES OF

LOGISTICS MANAGEMENTTHE OBJECTIVES OF LOGISTICS MANAGEMENT INCLUDE TO :

1. ENSURE THE HIGHEST LEVEL OF CUSTOMER SERVICE ANDSATISFACTION BY ACHIEVING THE RIGHT COMBINATION OF PRODUCTAVAILABILITY AND DEPENDABILITY.

2. MINIMISE THE OPERATING COSTS OF PHYSICAL MATERIALS SYSTEM.

3. REDUCE TIME SPENT AT EVERY STAGE OF LOGISTICS PIPELINE.4. ADD VALUE AT EVERY STAGE OF LOGISTICS PIPELINE.

5. CONTROL AND REDUCE WHEREVER POSSIBLE, INVENTORY OF RAWMATERIALS, WORK IN PROGRESS AND FINISHED GOODS.

6. TO RAISE COMPANYS IMAGE AND IMPROVE ITS COMPETITIVEPOSITION IN THE MARKET.

7. IMPROVE COMPANYS COMMUNICATION BOTH INTERNALLY ANDEXTERNALLY.

8. IMPLEMENT THE PRINCIPLES OF JUST IN TIME.

9. PROMOTE CO-OPERATION AND CO-ORDINATION AMONG SUB-SYSTEMS BY MAKING THEM REALISE THAT THEIR ACTIVITIES AREINTER-RELATED AND INTER-DEPENDENT.


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ACTIVITIES OF

LOGISTICS FUNCTIONS

LOGISTICS FUNCTION CONSISTS OF FOLLOWING SETS OFACTIVITIES:

1. ORDER PROCESSING.

THOUGH THIS ACTIVITY DOES NOT CONTRIBUTE MUCH TOTOTAL COSTS, YET IT IS TREATED IMPORTANT BECAUSE OFITS CONTRIBUTION TO LEAD TIME.

2. TRANSPORTATION MANAGEMENT.IT INVOLVES

FIRMS OWN TRANSPORT ( IF GOODS ARE TO BECOLLECTED)

HIRING OF THE TRANSPORT ( IF THE SERVICES OFEXTERNAL FIRM ARE TO BE USED)

ROUTING AND LOAD PLANNING. SELECTION OF MOST SUITABLE MODE OF TRANSPORT I.E.

RAIL, ROAD, SEA OR AIR. PACKAGING NEEDED I.E. LOOSE, PALLETS OR SPECIAL. DOCUMENTAION REQUIRED ( ESPECIALLY IF GOODS ARE

ARRIVING FROM OVERSEAS)


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ACTIVITIES OF

LOGISTICS FUNCTIONS

3. INVENTORY MANAGEMEN

INVENTORIES REQUIRE TO BE MAINTAINED TO TAKE CAREOF NEEDS BETWEEN THE TIME OF DEMAND AND TIME OFSUPPLY.

INVENTORY MANAGEMENT INVOLVES DECISIONS CONCERNING-

BUFFER STOCKS LEAD TIME REPLENISHMENT OF STOCKS

4. WAREHOUSING

THIS IS CONCERNED WITH MANAGEMENT OF SPACE TOHOLD INVENTORIES AND INVOLVES SUCH PROBLEMS AS :

SITE SELECTION SPACE DETERMINATION LAYOUT AND DESIGN RECEIPTS AND ISSUES AND STORAGE. PRESERVATION.


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ACTIVITIES OF

LOGISTICS FUNCTIONS

5. MATERIAL HANDLING

THIS IS CONCERNED WITH MOVEMENT OF PRODUCT AT THESTOCKING POINT AND IT INVOLVES SUCH DECISIONS AS :

SMOOTHENING OF MATERIALS FLOW. SELECTION OF MATERIALS HANDLING EQUIPMENT. MAINTENANCE OF MATERIALS HANDLING EQUIPMENT

6. PACKAGING

THIS IS CONCERNED WITH DESIGN OF PACKAGING OF THEPRODUCT THAT ENSURES DAMAGE FREE MOVEMENT OFTHE PRODUCT AND IS CODUCIVE TO EFFICIENT HANDLINGAND STORAGE.

7. ACQUISITION

THIS IS CONCERNED WITH SOURCING, PLANNING ANDORDERING OF THE PRODUCT IN ORDER TO ENSURE ITSAVAILABILITY IN THE RIGHT QUANTITY, AT THE RIGHT TIME,AT THE RIGHT PLACE AND AT THE RIGHT COST.

ACQUISITION, HOWEVER, DOES NOT INCLUDE OTHERPURCHASING ACTIVITIES SUCH AS PRICE NEGOTIATION,VENDOR RATING ETC.


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ACTIVITIES OF

LOGISTICS FUNCTIONS

8. PRODUCT SCHEDULING

THIS IS CONCERNED WITH PREPRARATION OFSCHEDULES OF AGGRIGATE QUANTITIES TOBE PRODUCED IN ACCORDANCE WITHDEMANDS, ACTUAL AS WELL AS PROJECTED.

PRODUCT SCHEDULING, HOWEVER, DOES NOTINCLUDE DAY TO DAY DETAILEDSCHEDULING CARRIED OUT BY PRODUCTIONPLANNER.

9. INFORMATION SYSTEM

THIS IS A MUST FOR THE SUCCESSFULIMPLEMENTATION OF LOGISTICS FUNCTION.DATABASE ON CUSTOMER LOCATION, SALESVOLUME, INVENTORY LEVELS, LEAD TIMESETC. MUST BE MAINTAINED.


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IMPROVING EFFECTIVENESS

OF

LOGISTICS MANAGEMENT FIVE PILLARS TO THE EFFECTIVE LOGISTICS ARE :

1. LOGISTICAL NETWORK

THIS INCLUDE FACILITIES AS MANUFACTURING,WAREHOUSES, DEALERS AND RETAIL STORES. THE

LARGER THE GEOGRAPHICAL SPREAD, THE MORE

COMPLEX WILL BE THE FIRMS LOGICAL NETWORK.

SUPERIOR LOGICAL NETWORK, BASED ON

SYSTEMATIC ANALYSIS AND DETERMINATION OFNUMBER OF EACH TYPE OF FACILITIES, THEIR

GEOGRAPHICAL LOCATIONS, SPECIFIC WORK

ALLOCATIONS ETC. CAN BE VERY BIG COMPETITIVE

TOOL.


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2. INFORMATION

ACCURATE FORECASTING AND GOOD ORDERMANAGEMENT ARE ESSENTIAL FOR SYSTEMATIC

INVENTORY MANAGEMENT. JIT AND CONTINGENCY REPLINISHMENT (CR) AND

QUICK RESPONSE (QR) TO THE CUSTOMER.

TIMELY INFORMATION THUS IS THE KEY TO THELOGISTICAL PERFORMANCE.

MODERN INFORMATION TECHNOLOGY, IN THE FORMOF BOTH HARDWARE ( TELEPHONES, FAXES, MOBILEPHONES, E- MAILS ) AND SOFTWARE ( ENTERPRISERESOURCE PLANNING ) HAVE REMOVED THEDEFICIENCIES IN INFORMATION.


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3. TRANSPORT

COST, SPEED, AND RELIABILITY ARE KEYDETERMINANTS OF THE EFFECTIVENESS, BEIT WAR OR BUSINESS.

SINCE THE TIME IS ESSENCE, QUALITY OFTRANSPORT PERFORMANCE BECOMES THECRITICAL FACTOR.

FURTHER, AS SPEED AND THE COST OFTRANSPORT ARE INTER-RELATED, CAREFUL

SELECTION OF THE TRANSPORT BECOMESESSENTIAL FOR OPTIMUM COST.

FOR EXAMPLE, FASTER TRANSPORT COSTSMORE MONEY BUT REDUCE INVENTORIESAND IMPROVE CUSTOMER SERVICE.


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4. SOUND INVENTORY MANAGEMENT

GOOD INVENTORY MANAGEMENT SYSTEMMUST BE PUT INTO PLACE TO ACHIEVEDESIRED CUSTOMER SERVICE WITH MINIMUM

INVENTORY INVESTMENT. INVENTORY POLICIES MUST BE CAREFULLY

DEVISED.

EXCESSIVE INVENTORIES HIDE DEFICIENCIES(E.G. DEFICIENCIES OF LOGISTIC NETWORK,

POOR QUALITY OF SUPPLIERS, INTERIORPURCHASE ORDER MANAGEMENT ETC.)

WHILE TOO LOW INVENTORIES CAUSE DELAYIN ORDER EXECUTION, SLOW RESPONSEAND DEFICIENT CUSTOMER SERVICE.


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SELECTIVE TREATMENT BASED ON FOLLOWING PRINCIPLESGENERALLY LEAD TO EFFECTIVE INVENTORY MANAGEMENT :

ENOUGH QUANTITY OF HIGH PROFIT HIGH VOLUME PRODUCTS,DEMANDED BY THE CORE CUSTOMERS, MAY BE CARRIED INSTOCK WHILE SMALL OR NEGLIGIBLE INVENTORY MAY BEKEPT OF LOW PROFIT, LOW VOLUME PRODUCTS PURCHASED

BY A FRINGE OF CUSTOMERS. CORE CUSTOMERS MAY BE SERVICED BY FAST RELIABLE AIR

SERVICE WHILE ORDERS OF OTHER CUSTOMERS MAY BEDESPATCHED BY SURFACE TRANSPORT.

COMMITMENT TO DELIVER PRODUCT RAPIDLY AND TIMELYMUST BE BASED ON COMPANYS CAPABILITY. IMPROVEDCUSTOMER SERVICE COMMITMENTS MUST BE PRECEDED BYENHANCED CAPABILITIES OF LOGISTIC NETWORK.

COMMITMENT OF RAPID AND CONSISTENT DELIVER SHOULDBE INTENDED TO GAIN CUSTOMER SERVICE ADVANTAGE ANDTO NEUTRALISE THE STRENGTH THAT COMPETITOR MIGHT BEENJOYING.


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5. WAREHOUSING, MATERIALS HANDLINGAND PACKAGING :

THE CHOICE AND LOCATION OF THE

WAREHOUSE SHOULD BE WITH A VIEWTO GET CLOSER TO THE CORECUSTOMERS.

MATERIALS HANDLING WITHIN THEWAREHOUSE SHOULD BE PLANNED TOENSURE SAFE AND SPEEDY RECEIPT,MOVEMENT, STORAGE AND PACKAGINGOF CUSTOMERS REQUIREMENTS.


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TRADITIONAL ORGANIZATION

CHIEF

EXECUTIVE

PRODUCTION

CONTROLPURCHASING STORE TRANSPORTMARKETINGFINANCE


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ORGANIZATION CHART WITH

LOGISTICS MANAGEMENT SYSTEM

CHIEF

EXECUTIVE

PRODUCTION MARKETING FINANCE LOGISTICS

MATERIALS

MANAGEMENT

PHYSICAL

DISTRIBUTION

MANAGEMENT

PURCHASINGPRODUCTION

CONTROLTRANSPORT DESPATCHDISTRIBUTION

STOREMANAGEMENT


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37090595 1 Logistics Management