Elements of Logistics

Elements of LogisticsElements of LogisticsLogistics and Supply Chain Logistics and Supply Chain

Management by P D KulkarniManagement by P D Kulkarni 11

Logistics and Supply Chain Management--- Course Content Logistics and Supply Chain Management--- Course Content and Reference text- MMS IIIand Reference text- MMS III Logistics & Supply Chain Management 100 MarksLogistics & Supply Chain Management 100 Marks

Course ContentCourse Content

1. Basics of Logistics1. Basics of Logistics2. Forecasting2. Forecasting3. Transportation3. Transportation4. Warehousing4. Warehousing5. DRP / MRP5. DRP / MRP6. Application of IT in LSCM6. Application of IT in LSCM7. Inventory Planning / Inventory Control7. Inventory Planning / Inventory Control8. Logistics Organization8. Logistics Organization9. Logistics Measurement9. Logistics Measurement10. Logistic Costing (Activity Based Costing)10. Logistic Costing (Activity Based Costing)11. Basics of Supply Chain Management11. Basics of Supply Chain Management12. Integrated Supply Chain Management12. Integrated Supply Chain Management13. Barriers to integration13. Barriers to integration14. Outsourcing14. Outsourcing

Reference TextReference Text

1. SCM by Rahul Altekar1. SCM by Rahul Altekar2. Logistics Management by S.C. Ailawadi & Rakesh Singh2. Logistics Management by S.C. Ailawadi & Rakesh Singh3. Logistics Management by K. Sridhara Bhatt3. Logistics Management by K. Sridhara Bhatt4. Supply Chain Management - Sahay4. Supply Chain Management - Sahay5. Logistical Management by Donald J Bowersox & David J Closs5. Logistical Management by Donald J Bowersox & David J Closs

6 SCM by Chopra Meindel6 SCM by Chopra Meindel



Definition of Logistics:

Logics Management is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory, and the related information flows through the organization and its marketing channels in such a way that the current and future profitability are maximized through the cost effective fulfillment of orders.

Logistics is defined as the practice of scheduling , implementing and controlling the well organized , cost effective flow and storage of raw material , in process inventory and finished products and related information from the point of origin to the point of consumption as per customer demand.



The competitive Advantage and the The competitive Advantage and the three Csthree Cs

Customers: Seek benefits at acceptable costs

Competitors: Asset Utilization Competitors: Asset Utilization

Value

Cost Differential



Factors affecting commercial Factors affecting commercial successsuccess

Commercial Success

Cost Advantage Value Advantage

•Cost /Productivity advantage•Value Advantage•Combination of both



The experience CurveThe experience Curve

Cumulative volume

Real

cost

Per

unit



Productivity and value advantage Productivity and value advantage matrixmatrixProductivity V/S ValueProductivity V/S Value

Service Leader(3)

Commodity Market(1)

Cost and Service Leader

(4)

Cost Leader(2)

Productivity Advantage

Value Advantage



Value Chain ActivitiesValue Chain Activities

Value Chain Activities

Primary Activities Secondary Activities

•Inbound Logistics•Operations•Outbound Logistics•Marketing & Sales•Service

•Infrastructure•HR Management•Technology Management•Marketing & Sales•Service



Michael Porter’s concept of value chainMichael Porter’s concept of value chain

Margin

Support

Activities

Primary Activities



Factors affecting value & productivity Factors affecting value & productivity advantageadvantage

The goal: Superior customer

value(4)

(3)

(1) (2)

Value Advantage•Customized Services•Reliability•Responsiveness

Productivity Advantage•Capacity utilization•Asset Utilization•Inventory deduction•Integration with suppliers



Philosophy behind logistics Philosophy behind logistics conceptconcept

Procurement Operations Distribution CustomersSuppliers

Materials Flow

Information flow



An example of supply chain An example of supply chain networknetwork

Retailers Shirt manufacturers

WeaversOf

Fabrics

Manufacturers Of

YarnCustomers

Supply chain can be defined as the network of organizations that are having Linkages, both upstream & downstream, in different processes and activitiesthat produce and deliver the value in the form of the products and servicesIn the hands of ultimate customers.•SCM is not the same as vertical integration. Companies focus on core business

Down Stream Up Stream



Necessity for integrating & coordinating logistic Necessity for integrating & coordinating logistic functionsfunctions

• Achieving cost reduction not at the expense of Achieving cost reduction not at the expense of supply chain partnerssupply chain partners

• Discourage transferring of cost upstream/ down Discourage transferring of cost upstream/ down stream as all costs reflect in final market pricestream as all costs reflect in final market price

Implications of SCM on Logistics ManagementImplications of SCM on Logistics Management

Difference between logistics & SCM:Difference between logistics & SCM:

Logistic concerns with optimizing flows within org. Logistic concerns with optimizing flows within org. while SCM deals with integration of all partners in while SCM deals with integration of all partners in value chain.value chain.



Supply Chain Integration: 4 Stages to Supply Chain Integration: 4 Stages to achieveachieve

Purchasing Mtl Control Production Sales Distribution

Material Flow Customer Service

Stage1: Baseline

Stage2: Functional Integration

MaterialManagement

ManufacturingManagement Distribution


MtlMgt

MfgMgt Distribution

Stage 3: Integral Integration


Stage 4: External Integration

SuppliersInternal

Supply Chain Customer




Impact of logistics & customer service on marketingImpact of logistics & customer service on marketing

CustomerFranchise

CustomerFranchise

Supply Chainefficiency

MarketingeffectivenessX X =

•Brand Values•Corporate image•Availability

•Customer Services•Partnership•Quick response

•Flexibility•Reduced inv.•Low cost Supplier

•Market Share•Customer retention•Superior ROI



The work of LogisticsThe work of Logistics

Coordination of following functional Coordination of following functional areasareas

• Network designNetwork design

• InformationInformation

• TransportationTransportation

• InventoryInventory

• Warehousing, material handling & Warehousing, material handling & packagingpackaging



Network DesignNetwork DesignFactors influencing network designFactors influencing network design

• Change in demand & supplyChange in demand & supply

• Product assortmentsProduct assortments

• Changes in suppliers’ SuppliesChanges in suppliers’ Supplies

• Manufacturing requirementsManufacturing requirements



Impact of information:Impact of information:

Deficiencies in quality of information

Incorrect Info.w.r.t. trends

Incorrect Info.w.r.t.specific customers

requirement

•May cause inventory shortage•Over commitment

•Processing of incorrect order creates additional cost•Does not result in sales



Factors affecting transportation Factors affecting transportation performanceperformance

Transportation Performance

Cost•Payment for movement•Admin cost•Maintaining in-transit inventory

Speed•Reduces in transit inventory

Consistency•Variations in time•Inconsistency increases Safety stock requirement



Factors to be considered in Factors to be considered in formulating Inventory formulating Inventory management policy:management policy:

Inventory management

Policy(Selective-deployment)

CustomerSegmentation

Product Requirements

TransportationIntegration

Time-baseRequirement

CompetitivePerformance



Integrated Logistic ConceptIntegrated Logistic Concept

PhysicalDistribution

ManufacturingSupport

Procurement SuppliersCustomers

Inventory Flow

Information flow



Constituents of information flow:Constituents of information flow:

Information Flow

Planning & coordination Flows•Strategic objectives•Capacity Constraints•Logical Req.•Inventory deployment•Mfg requirements•Procurement requirements•Forecasting

Operational Flows•Order management•Order processing•Distribution operations•Transportation & shipping•Procurement



Barriers to integral Barriers to integral integration:integration:

• Org. structureOrg. structure

• Measurement systemsMeasurement systems

• Inventory ownershipInventory ownership

• Information technologyInformation technology

• Knowledge transfer technologyKnowledge transfer technology



Next Topic:Next Topic:

Forecasting:Forecasting:

• Nature of demandNature of demand

• Forecast componentsForecast components

• Forecast approachesForecast approaches

Thank YouThank You

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Elements of Logistics