LOGISTICS CONCEPTS

Lt Gen D V Kalra, PVSM, AVSM (Retired)

ORIGINS OF SUPPLY CHAIN MANAGEMENT

• Military origins and connotations of logistics

• Systems of maintenance of armies

• Logistics-a bridge between Strategy and Tactics

• Logistics and Supply Chain Management as integral parts of strategic planning

LOGISTICS (MILITARY DEFINITION)

“THE SCIENCE OF PLANNING AND CARRYING OUT THE MOVEMENT AND MAINTENANCE OF FORCES.... THOSE ASPECTS OF MILITARY OPERATIONS THAT DEAL WITH THE DESIGN AND DEVELOPMENT, ACQUISITION, STORAGE, MOVEMENT, DISTRIBUTION, MAINTENANCE, EVACUATION AND DISPOSITION OF MATERIAL; MOVEMENT, EVACUATION, AND HOSPITALIZATION OF PERSONNEL; ACQUISITION OF CONSTRUCTION, MAINTENANCE, OPERATION AND DISPOSITION OF FACILITIES; AND ACQUISITION OF FURNISHING OF SERVICES”. -- (JCS PUB 1-02 EXCERPT)

LOGISTICS “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 TO CUSTOMER REQUIREMENTS."

– NOTE THAT THIS DEFINITION INCLUDES INBOUND, OUTBOUND, INTERNAL, AND EXTERNAL MOVEMENTS, AND RETURN OF MATERIALS FOR ENVIRONMENTAL PURPOSES. -- (REFERENCE: COUNCIL OF LOGISTICS MANAGEMENT).

LOGISTICS (BUSINESS DEFINITION)

“LOGISTICS IS DEFINED AS A BUSINESS PLANNING FRAMEWORK FOR THE MANAGEMENT OF MATERIAL, SERVICE, INFORMATION AND CAPITAL FLOWS. IT INCLUDES THE INCREASINGLY COMPLEX INFORMATION, COMMUNICATION AND CONTROL SYSTEMS REQUIRED IN TODAY'S BUSINESS ENVIRONMENT”. -- (LOGISTIX PARTNERS OY, HELSINKI, FI, 1996)

BUSINESS LOGISTICS

“THE SCIENCE OF PLANNING, DESIGN, AND SUPPORT OF BUSINESS OPERATIONS OF PROCUREMENT, PURCHASING, INVENTORY, WAREHOUSING, DISTRIBUTION, TRANSPORTATION, CUSTOMER SUPPORT, FINANCIAL AND HUMAN RESOURCES”. -- (MDC, LOGLINK / LOGISTICSWORLD, 1997)

EVOLUTION OF SUPPLY CHAIN MANAGEMENT

• MATERIALS MANAGEMENT (TILL 70s)

– PURCHASING AND STOCK KEEPING– ALLOCATION AND SCHEDULING

• EXTENDED MATERIALS MANAGEMENT (80s)

– PRODUCTION PLANNING AND CONTROL

• INTEGRATED MATERIALS MANAGEMENT (Early 90s)

– Order Processing Control and Distribution

SUPPLY CHAIN MANAGEMENT

SUPPLY CHAIN MANAGEMENT (Mid 90s onwards)

– To include Supplier / Customer Relations Management-an end to end approach

IMPORTANCE OF LOGISTICS

“BUSINESSES CANNOT HOPE TO WIN IN WORLD MARKETS UNLESS THEY GET THEIR LOGISTICS RIGHT”Michael Heseltine, President Board of Trade UK

“THE CORRECT APPLICATION OF THE PRINCIPLES OF MODERN LOGISTICS REPRESENTS NOT ONLY AMONG A NUMBER OF POSSIBLE ROUTES TO SUCCESS, BUT THE CENTRAL, DECISIVE ONE” Hansjoerg Bendel, President European Logistics Association

LOGISTICSSCOPE AND OPPORTUNITY

“PHYSICAL DISTRIBUTION IS TODAY’S FRONTIER IN BUSINESS. IT IS ONE AREA WHERE MANAGERIAL RESULTS OF GREAT MAGNITUDE CAN BE ACHIEVED AND IS STILL LARGELY UNEXPLORED”

Peter Drucker

ALLIED TERMS

• PHYSICAL DISTRIBUTION

• BUSINESS LOGISTICS

• PROCUREMENT AND SUPPLY

• MANUGISTICS

• MARKETING LOGISTICS

• SUPPLY CHAIN MANAGEMENT

WHAT IS LOGISTICS?

“LOGISTICS MEANS HAVING THE RIGHT THING, AT THE

RIGHT PLACE, AT THE RIGHT TIME."

LOGISTICS

SUPPLY

PLUS

MATERIALS MANAGEMENT

PLUS

DISTRIBUTION

LOGISTICS COST FOR KEY REGIONS (%AGE OF GDP)

• NORTH AMERICA 10.77 (9.9 in 2007)*• EUROPE 11.79• ASIA PACIFIC 11.64• REMAINING 11.74• INDIA 13.00** * 8.6 in 2006

** UNVERIFIED

COMPONENTS OF LOGISTICS COSTS

REGION TPT S&WH ICC ADM

US 46% 22% 22% 10%

EU 41% 23% 21% 15%

ELEMENTS OF LOGISTICS AND DISTRIBUTION

• STORAGE AND WAREHOUSING• MATERIALS HANDLING• TRANSPORT• INVENTORY• INFORMATION AND CONTROL• PACKAGING AND UNITISATION

DISTRIBUTION &LOGISTICS

• DEEP SEA CARRIERS

• SHORT SEA CARRIERS

• AIR TRANSPORT

• RAIL TRANSPORT

• ROAD TRANSPORT

• INLAND WATER TRANSPORT

• PARCEL TRANSPORT

DISTRIBUTION &LOGISTICS

• FREIGHT FORWARDERS

• BROKERS

• INTER-MODAL HUBS

• PORTS

• RAIL HUBS

INTERNATIONAL LOGISTICS

For the international firm, customer locations and sourcing opportunities are widely dispersed. The firm can attain a strategically advantageous position only if it is able to successfully manage complex networks, consisting of its vendors, suppliers, other third parties, and its customers.

INTERNATIONAL LOGISTICS

• Logistics costs comprise between 10% and 30% of the total landed costs of an international order. Thus, international logistics is a competitive tool.

• Effective international logistics and supply-chain management can produce higher earnings and greater corporate efficiency.

INTERNATIONAL LOGISTICS

International Logistics is design and management of a system that controls the flow of materials into, through, and out of the international corporation.