logistics simple notes-study material

7/25/2019 Logistics Simple Notes-Study Material

1/24

After this unit you should be able to answer following questions

A. Concept Questions1. Commodities market

2. Concept of Supply Chain Management is a favorable out come of Integration of internal functions

in an organization

3. Co!operation is better than competition" is an outdated concept in current environment

#. $otal Cost %pproach leads to ignoring of individual inputs to Supply Chain

&. 'ogistical Competency is competitive 'ogistical Information System

(. 'ogistical function is significant in global business

). 'ogistical Mission is irrelevant to Customer satisfaction

*. Marketing has nothing to offer in the absence of logistics

+. 'ogistics Interface ,ith Marketing

1-. unctions /f 'ogistics Management

11. Importance /f 3Cs

B. Short notes Questions

0ole of planning in logistics management

'ogistics interface ith marketing

Material handling euipment

Inbound logistics

Importance of 3Cs

,hat is SCM4'ogistics management'ogistics overvie and its implications

5ifferent attributes of logistics management and need of coordination

of different organizational departments ith that of logistics

/utbound and inbound logistics

Military logistics

C. Section II descriptive questions [1 !ar"s each#questions #

67plain in detail various parameters to achieve logistical competency

67plain the concept of integration in logistics operation'ogistics interaction ith other departments 8 its contribution to the

bottom line

,hat are operational ob9ectives of logistics 67plain briefly.

Impact of cooperatives on inbound logisticslogistics competency can be achieved by coordinating information:

transportation: inventory into netork design

1


2/24

,hat is integrated logistics 5istinguish beteen logistics 8

SCM

'ist don basic ork involved in logistics. 67plain any one

67plain the concept of SCM;from activity centered functional organization to Consumer ocused


3/24

%&%'%()S *+ &*,IS)ICS 'A(A,%'%()

,B%$ IS '/@IS$ICS

'ogistics is concerned ith getting the products and services here they are needed and hen they

are desired. It is difficult to accomplish any marketing or manufacturing ithout logistical support. It

involves the integration of information: transportation: inventory: arehousing: material handling:

and packaging.

$he operating responsibility of logistics is the geographical repositioning of ra materials: ork in

process: and finished inventories here reuired at the loest cost possible.

$he formal definition of the ord logistics" as per the perception of Council of &ogistics

'anage!ent is the process of planning- i!ple!enting and controlling the efficient- effective

flow and storage of goods- services and related infor!ation fro! the point of origin to the point

of consu!ption for the purpose of confor!ing to custo!er require!ents.

Mission of logistics is providing a means by hich customer satisfaction is achieved. %rt of moving:

lodging and supplying troops: supplies and euipment is logistics. Concept of logistics has moved

into business to move: lodge and supply inputs and outputs.

'ogistics is practiced for ages since organized activity began. ,ithout logistics support no activity

can be performed to meet defined goal. $he current challenge is to perform logistics scientifically in

order to optimize benefits to the organization.

'ogisticsis aplanning functionof management. 'ogistics function is concerned ithtaking

products and services where they areneededandwhen they areneeded.

'ogistics ensures that the reuiredinputs [what# to avalue addingprocess are madeavailable:

where they are needed:whenthey are needed and in the quantities [how !uch# they are needed. It

also ensures that theoutputs of the value adding process are made availablewherethey are needed

when they are needed and in the quantities [how !uch# they are needed.

$here are many ays of defining logistics but the underlying concept might be defined as follosA

&ogistics is the process of strategically !anaging the procure!ent- !ove!ent and storage of

!aterials- parts and finished inventory through the organi/ation and its !ar"eting channels in

such a way that current and future profitability are !a0i!i/ed through the costeffective

fulfill!ent of orders.2

,%(%SIS *+ '*$%3( &*,IS)ICS

Several Modern Management concepts are born or refined in the crucible of II 4orld4ar. ?ou

may remember several /0 techniues like 5alue Analysis 6 7%3)8C7'have their origin in the II

,orld ,ar. 0esources come under pressure in a ar: like no other time and one is e7pected to

deliver results in spite of all odds. $hese trying situations forced the !ilitary plannersto evolve

3


4/24

solutions to their problems. %fter the ar these concepts traveled to business here resource crunch

is usual. In business there is no enemy: but there are competitors ho pose threat to the organizations

survival.

ield Marshall 0ommel"s ords that before they are fought: battles are on or lost by

uartermasters" speak about the importance of logistics.

$here are several e7amples here battles are lost due to long 8 ineffective supply lines.

'ogistics received great importance in military planning and subseuently became a very important

management function in the course of last #- years.

'ogistical management includes the design and administration of systems to control the flo of

material: ork in process and finished inventory to support business unit strategy

*5%35I%4 *+ &*,IS)ICS +9(C)I*(

&ogistical :istory of India; India as a maritime poer since about 3-- DC: trading ith several

countries of the orld bringing prosperity home. $raders of Surat brought riches to the country by

e7tensive maritime trade. 'ike many of our e7cellent practices: logistical efficiency also faded aay

over a period of time.

So!e i!portant logistical feats in history;

1. Berlin Airlift < 1=>?;A study in logistics. ,hen the city of Derlin as blockaded by Soviets

and all supply lines ere cut off: %mericans planned and e7ecuted a ma9or logistics operation to

feed the city from air.

@. Indians in the ,ulf countries < 1==1;

1n 1++1: hen gulf ar broke out: Indian @overnment evacuated thousands of Indians from the

gulf countries and brought them home in a massive e7ercise employing Indian airlines planes.

. *peration *verlord1=>?;%llies" invasion of 6urope and subseuent victory In II ,orld ,ar.

>. A!erican war of Independence

Eeeping 12:--- soldiers armed and fed from 6ngland as a big taskF Dritish lost the %merican

ar of independence due to bad logistics.

4hat causes bad logistics

a. Infrastructure; Dad roads: inefficient railays: poor communication lines: and congestion in the

ports.

b. )a0ation;e.g. /ctroi

c. Infor!ation;Inadeuate information

d. 'anage!ent;


5/24

I'7*3)A(C% *+ &*,IS)ICS.Gyou may also read $IM6production system

for survival in a highly competitive market

&


6/24

aO Interface ith marketing

$hese days marketing a product is increasingly on the strength of availability and fle7ibility as e

discussed earlier. Stronger emphasis is on the last of four $IM6 production system.

a. change in the customerA demanding: knoledgeable: conscious of rights: lacking in brand loyalty:

changes preferences very fast: e7pects very high degree of service

b. many products are moving toards commodities marketA product differentiation in terms of

uality of performance is vanishing and brands are losing their magic.

%s a result of above e find that availability is an important determinant of purchasing decision.

). 'ogistical costsA or individual businesses logistics e7penditures are &P to 3&P of sales

depending on type of business: geographical areas of operation: eight4value ratios of products

and materials. $his is an e7pensive operation. Improvement in the efficiency of logistics function

yields savings as ell as customer satisfaction

4: S:*9&$ 4% &%A3( &*,IS)ICS

B/, /0 ,B? 5/6S '/@IS$ICS D6C/M6 IM$ /0 M%>%@6M6>$

S$N56>$S

1. Impact on cost of creating and delivering of product to the customer

2. provides competitive edge to business

3. crucial to survival and prosperity in global trade and business

#. many products have short life cycles

&. more 8 more logistics e7perts are going up the hierarchical ladder

(. leads to the concept of supply chain management

). 'ogistics is important in the Indian market due to the seeping changes: hich are taking place.

a. CompetitionA Internal as ell as e7ternal

b. Shift from seller"s market to buyer"s market

c. Changing customer

d. 67panding business: groing e7ports

e. Corporate mangements" Shift toards modern management concepts like 'ean management: ust

In $ime: $otal Luality Management etc.:

(


7/24

I'7*3)A(C% *+ &*,IS)ICS 'A(A,%'%() I( I($IA

G67plain the groing importance of logistics management in India in today"s conte7t

L# 2--1J

I. 'iberalization and opening our door to competition

II. @lobal business has long supply 8 distribution lines

III. Changing Indian customer: aare: demanding and less brand loyal

IQ. Competition ensures that product differentiation in terms of uality is difficult

Q.


8/24

%ny event that disrupts a system is variance. 'ogistics operations are disrupted by events like

delays due to obstacles in information flo: traffic snarls: acts of god: rong dispatches: damage

in transit. $raditional approach is to keep safety stocks and transport the goods by high cost mode.

$he cost of this approach is huge. 'ogistics is e7pected to minimize these events: thereby

minimize and improve on /n $ime 5elivery.

. 'ini!u! inventory

$his is component ofcost ob9ective of a company. Inventory is associated ith a huge baggage of

costs. It is termed as a necessary evil. /b9ective of minimum inventory is measured as Inventory

$urns or Inventory $urnover 0atio. %mericans call this measure as turn velocity. 'ogistics

management reduces these turns ithout sacrificing customer satisfaction. 'oer turns ensure

effective utilization of assets devoted to stock. GConcept of single piece flo as practiced by I$

companies in apan or elsehereJ. 'ogistical management should keep the overall ell being of a

company in vie and fi7 a minimum inventory level ithout trying to minimize the inventory

level as an isolated ob9ective

>. 'ove!ent consolidation

$ransportation is the biggest contributor to logistics cost. $ransportation cost depends on product

type: size: eight: distance to be transported etc. for transporting small shipments 9ust in time

Greduction in inventory costsJ e7pensive transport modes are used hich again tend to hike the

costs. 'ove!ent consolidationis planning several such small shipments together Gof different

types of shipmentsJ by integrating interests of several players in the supply chain. @enerally: large

shipment size and long distances reduce transportation cost per unit. Movement consolidation shall

result into reduction in transportation costs.

Quality

If the uality of product fails logistics ill have to ship the product out of customers premises and

repeat the logistics operation again. $his adds to costs and customer dissatisfaction. Bence

logistics should contribute to $LM initiative of management. In fact: commitment to $LM has

made the managements orld over ake up to the significance of logistics function. 'ogistics can

play a significant role in total uality improvement by improving the uality of logistics

performance continuously and continually.

&. &ife cycle supportGcradle to cradle logistical support! produce: pack cradleO and repackcradleOJ

'ogistics function is e7pected to provide life cycle support to the product after sale. $his includes

a. After sales serviceA the service support needed by the product once it is sold during its life cycle

b. 3everse logistics Gconcept /ct"-3J or


9/24

- rigid uality standards Gcritical in case of contaminated products hich can cause

environmental hazardJ

- transit damage Gleaking containers containing hazardous materialJ

- product e7piration dating

- rigid las prohibiting unscientific disposal of items associated ith product GpackagingJ

- 0igid las making recycling mandatory

- 6rroneous order processing by supplier

- 0everse logistics is an important component of logistics planning

-

+

&*,IS)ICS

+9(C)I*(S

4A3%

:*9SI(,

Storage-

:andling-

7ac"ing 6

$istribution

I(+*3'A)I*(

SS)%'S

Internal 6

%0ternalInformation flo

I(5%()*3

4hen to order

:ow !uch to

order ust In

)i!e

)3A(S7*3)A)I*

(

4ater- 3oad- 3ail-

7ipeline 6 Air

(%)4*3D$%SI,(

Suppliers-

operations-

warehouses


10/24

&*,IS)ICA& +9(C)I*(S [co!ponents of logistics or ele!ents of logistics#

Gunctions of 'ogisticsshort notes 2--1J

Infor!ation !anage!ent

Management is appreciating importance of information as an element of logistics of late: no. $he

role of information is vital in order processing. Luality of information is critical as error in

composition of information reuirement creates potential disturbance in the supply chain. Incorrect

order processing due to erroneous information ill result into product recall and reshipment if the

sales opportunity still e7ists.

aster and uality information flo from customer to processor results into cost effective logistics.

orecasting and order management are to areas of logistical ork dependent on information.

orecasting is an effort to estimate future reuirements to position inventory or assets devoted to

inventory. %s forecasting becomes unreliable in a fast changing environment: control strategieslike I$: Luick 0esponse and Continuous 0eplenishment came into being. >o it is the task of the

logistics function to use information technologyto strengthen operation controland forecasting

to the best advantage of the organi/ation.

'eading firms typically have information systems capable of monitoring logistical performance on

a real time basis giving them the capability to identify potential operational breakdons and take

corrective actions prior to customer service failure. In situations here timely corrective action is

1-


11/24

not possible: customers can be notified in advance and thereby taking the surprise out of

forthcoming service failures

1. Inventory control

Eeeping the stock levels in such a position: so that neither stock out nor stock piling takes place is

Inventory control. ,hile formulating inventory policies find out 2-P of the products marketed

that account for *-P of the profit.

@. )ransportation

$ransportation is the most visible of all elements of logistics and high contributor to logistics

e7penditure. Costs of transportation are mainly as follos

a. 'ove!ent costsA money paid for moving material across geographical terrain

b. 7reservation costs;money spent on preserving the material during transit

c. Cost of idle asset; inventory is unavailable for conversion during transit. $his results into costs

for organization

d. Ad!inistration costs;money spent on administration

)ransportation is acco!plished in three ways

a. /ne"s on fleet H private carriage

b. Contract ith specialists on long term basis H contract carriage

c. Contract on individual shipment basis H common carriage

%0pectations fro! transportation service are

a. !ini!u! costH transportation costs are e7plained earlier

b. Speed;speed of transport means the speed ith hich goods reach the destination.

c. Consistency;consistency in speed is achieving the same speed over a long period of time.

Consistency reflects on the reliability of carrier. %ny une7pected variance can play havoc ith

logistics. Modern information technology has made continuous tracking of consignments possible.

$his takes the element of surprise out. I$ has helped logistics managers to seek out ays and

means to improve speed and consistency. ,hat is becoming important is a combination of speed

and consistency.0euirement of speed depends on type of industry. In some situations speed may not be important.

$hen transportation service offering high speed increases cost. So logistics managers have to strike

a balance beteen service and cost. $hree important aspects of transportation are facility location:

transportation cost and consistency.

5esign of logistics system should consider total costs rather than elemental cost of transportation

. 4arehousing

11


12/24

,arehousing is holding material before dispatch after it is produced. %lthough arehousing is

conventionally considered to be a storage facility: it plays a much higher role from logistics

viepoint. It is perceived to be a sitching facility rather than a storage facility. ,arehouse

onership can be private: public or third party contract. ,arehouse provides economic and service

benefits to the logistical system.

%cono!ic benefitsare Movement Consolidation:Dreak!bulk: Cross!dock:


13/24

S*'% I'7*3)A() C*(C%7)S

&ogistics 'anage!ent and Supply Chain 'anage!entFFF$evelop!ent of &ogistics and

Supply Chain 'anage!ent Concept['ogistics and Supply Chain Management by

@.0aghuram: >.0angara9. D/N>5

'/@IS$ICS

/

5IS$0IDN$I/>


14/24

% ne management function called 7hysical $istribution 'anage!ent emerged integrating various

activities on the outbound side like transportation: arehousing: packaging: customerservice etc.

%dvent of electronic era of 1+(-s made information a strong component of physical distribution

management. Inbound logistics as still considered to be a concern of vendors and did not receive

the attention of management.

b. In 1=Gsstrengthened by I$: physical distribution management started looking into some

aspects of financial management subsystems. Monitoring and planning for efficient completion of

cash cycle became attached to physical distribution management. %round the same time

importance of inbound logistics as appreciated. c. In 1=Hsphysical distribution management

function came to be called logistics !anage!ent encompassing inbound and outbound logistics.

5uring this time this function started looking closely into logistical operations adopting modern

concepts like $LM 8 $


15/24

Benry ord visualized the importance of this flo in early 1++-s G'4M: Doerso7 H page **J and

e7panded his business to cover ra materials: their deposits: forests: plantations and even

transportation activities like shipping lines. Bis business interests e7tended beyond the frontiers.

$his diverse e7panse of business gave him final control on the supply chain but became nonviable

due to labor problems and unieldy bureaucracy. Be realized that smaller independent

organizations ere more efficient and cost effective in delivering value and shifted his focus to a

netork of competent dealers.

Idea of supply chain !anage!ent

Supply Chain Management aims at breaking don organizational barriers

aJ to share sales infor!ation on real time" basis that reduces inventories and need for safety

stocks. $his is called supply chain co!pressionresulting into inventory reductionand larger

inventory turns. 5ell Computers considered to be leaders in computers business have recorded &-

inventory turns in 1++): IQ L: hereas Compa could manage only 1- turns.

bJ Smoothen the flo of information both waysGorders reaching the suppliers: and products

reaching the that results into reduced delivery time or reduction of lead!time resulting into

shortened cashflowcycle

3ef fig.E

particulars &ogistics !anage!ent Supply chain !anage!ent

Scope Inbound logistics: in process

inventory Gmovement from one

plant to anotherJ: outbound

logistics

%ll players in the supply chain

from ra material source to

finished product consumer:

vendors: their vendors: supplier

organizationGshipperJ:

,arehouses: service providers:

customers: their customers

Bo this is

created in

business

Dy internal integration of logistics

functions handled by various

management functions ithin

organization

Dy e7ternal integration of roles of

various players in the supply

chain.

Main

ob9ective

'ogistics cost reduction by

integrating resources across the

pipeline

Supply chain profitability by value

creation.

definition 'ogistics is the process of

strategically managing

procurement and storage of

Management of upstream and

don stream relationships ith

suppliers and customers to deliver

1&


16/24

material : part and finished

inventory Gand related information

floJ through organization and its

marketing channels in such a ay

that current and future profits are

ma7imized through cost effective

fulfillment of order

superior customer value at less

cost to the supply chain as a

hole.

/rigin % very old concept in military

planning.

%s a logical e7tension of logistics

management

focus '4M tries to take the product to

the consumer at minimum

logistical cost. Bence it is supply

driven.

SCM focuses on value creation in

the supply chain. Bence this is

customer focused or demand

driven.

@. Business functions of logistics !anage!ent Gphysical distribution managementA

logistical approach by E.E.Ehanna H page 13J

%s discussed earlier logistics is a concept of military planners. Dut no it has found its ay into

business.

IJ Dusiness logistics is planning- i!ple!enting and controllingefficient 8 effective flo and

storage of goods: efficient 8 effective flo services: and related information from point of origin

to point of use or consumption in order to meet customer reuirements.

a. ood and agricultural productsA ,e are familiar ith arehouses oned by ood Corporation of

India. $he government in these arehouses stores huge uantities of procured food grains. $hese

stocks are subseuently moved to outlets of


17/24

planning logistical operations at minimum cost. $his can also be called creating customer value at

minimum cost. $he illustration belo shos that

ig. )

1)

2+-

Customer servicegoals GLC5J

%t market type %


%t market type D


%t market type C

$ransportation ,arehouse

unctional Inputs to 'ogistical Management

M4B


18/24

logistical mission cuts across functional lines to achieve business ob9ectives at minimum cost.

'ogistical mission is a set of goals to be achieved at a particular type of market for a particular

type of product. >aturally this is responsive to competition. Bence logistical mission is to achieve

above goals at minimum system cost. ocus is on mission rather than on isolated functions.

Mission of logistics is providing a means by hich customer satisfaction is achieved.3ef +ig.G

>. 3ole of planning in logistics !anage!ent

0ole of planning is central to logistics management

Mission of logistics management is to plan and coordinate all those activities necessary to achieve

desired levels of service and uality at loest possible cost.

'ogistics is fundamentally a planning concept that seeks to create a frame ork through hich

needs of the market place can be translated into a manufacturing strategy and plan

'ogistics makes one plan: integrating various resources of the organization that replaces

traditional concept of planning in pockets

?. &ogistics interface with !ar"etingFFFG'ogistics and Supply ChainManagement by Martin Christopher:


19/24

7roduct; Inputs of logistics manager are uite important as far as the size and shape of the product

are concerned. Size and shape of the product can make logistics nightmarish: thereby adding huge

amount of costs. ,eight4volume ratio plays very important role in deciding economics of logistics.

$he story of @illette is ell knon logistical circle. $he lo eight: unieldy floor display proved

to be a very e7pensive logistical operation. ,hile consumer packaging provides sales push in a

retailers shop: it can make industrial packaging difficult due to its shape and ability to protect the

contents.


20/24

mode is chosen. %s the value of inventory is lo size of shipment is large 8 transit inventory costs

are lo. %s the price of products is loer: trade off beteen cost of maintaining inventory in transit

and lo cost transport e7ists to the benefit of the organization.

Inbound logistics

*utbound &ogistics

Qalue added goods are to be made available in the market for customers to perceive

value. inished goods are to be distributed through the netork of arehouses and

supply lines to reach the consumer through retailers" shops in the market. 5uring

conversion value is added to the ra materials and as a result value of the inventory in

this case is very high unlike inputs. >o the size of shipment: modes of transport and delivery time are different as

compared to inputs. %ctivities of distribution performance cycle come under the scope of /utbound 'ogistics. $hey are

order management: transportation: arehousing: packaging: handling etc.

(. I!portance of CsH competitive advantage by effective logistics management G'ogistics and

Supply Chain Management by Martin Christopher:


21/24

and logistics cost by superior logistics. ,hen this happens customer sees better value in the

products of Supplier Company as compared to competition.

I!portance of Cs

G. &ogistics overview and its i!plications

a. Dirth and development of logistics in post ar business since 1+&-. G0efer our earlier notesJ

b. 67ternal integration of supply chain and concept of Supply Chain management 1++-

c. 6lements of 'ogistical Management function

d.Scope of 'ogistical Management

e. Significance of logistics in Dusiness Management: the time and place

a. /verall goal of 'ogistical Management function

11. $ifferent attributes of logistics !anage!ent and need of coordination of different

organi/ational depart!ents with that of logisticsG'ogistics and Supply Chain Management by

Martin Christopher:


22/24

reuires coordination of all functional departments. If e ant to solve a 9igsa puzzle: e need to

have the complete picture on the bo7. In the absence of this picture solving the puzzle becomes

impossible. /verall coordination of different organizational departments can provide the complete

picture. $his reuires integration of all functions of logistics.

If a firm does not consistently satisfy time and place reuirement it has nothing to sell in the market:

it is simply out of business. @ood logistics alone can enable organizations to do business. $o en9oy

full benefits of logistics: full range of functional ork must be performed on an integrated basis.

67cellence in each aspect of functional ork is relevant only hen it is vieed in terms improving

overall efficiency and effectiveness of integrated logistics. $his reuires that the functional ork of

logistics be integrated to achieve business unit goals.

1@. &ogistical co!petency. G'ogistics Management by Doerso7


23/24

1. Concept of Integration in &ogistics *peration.. G'ogistics Management by Doerso7


24/24

ig. 2&

2#

'A3D%)I(,

7ossession

9tility

&*,IS)ICS

7lace 6

)i!e 9tility

73*$9C)I*(

logistics simple notes-study material

Documents