logistics and wholesaling

8/8/2019 Logistics and Wholesaling

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Logistics and WholesalingLogistics and Wholesaling


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Logistics is the process of getting products andLogistics is the process of getting products and

services where they are required and when theyservices where they are required and when they

are desired.are desired.ItIt involvesinvolves planning,planning, implementingimplementing andand

controllingcontrolling thethe physicalphysical flowflow ofof goods,goods, servicesservices

andand relatedrelated informationinformation fromfrom pointpoint ofof originorigin toto

pointpoint ofof consumptionconsumption toto meetmeet customercustomer inin thetherightright placeplace atat thethe rightright timetime..


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Reasons for emphasis onReasons for emphasis on

logisticslogisticsCompanies can gain a powerful competitive advantageCompanies can gain a powerful competitive advantageimproved logistics can yield tremendous cost saving toimproved logistics can yield tremendous cost saving to

both company and its customer.both company and its customer.

Quickly and efficiently manage the flow of goods,Quickly and efficiently manage the flow of goods,information and finance.information and finance.


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Delivering customers servicesDelivering customers services

Customer must be given more importance than goods and services.Customer must be given more importance than goods and services.

Product and services are of significance to the customers only whenProduct and services are of significance to the customers only when

they are available to them exactly when customers need them.they are available to them exactly when customers need them.

Availability in terms of form, possession , time and place.Availability in terms of form, possession , time and place.


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Objectives of market logisticsObjectives of market logistics

Serving the customer in an efficientServing the customer in an efficientmanner/delivering customer service. (providemanner/delivering customer service. (provideTargeted level of customer services at the leastTargeted level of customer services at the least

cost)cost)Delivering products on time.Delivering products on time.

Least cost.Least cost.

Without damage.Without damage.

Reducing cycle time.Reducing cycle time.


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Reducing total distribution costsReducing total distribution costs

Improved logistics can yield tremendousImproved logistics can yield tremendous

cost saving to both the company and itscost saving to both the company and its

customers.customers.


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Reducing cycle timeReducing cycle time

It refers to the time from which theIt refers to the time from which the

requisition is placed with the vendor to therequisition is placed with the vendor to the

time the product reaches to the finaltime the product reaches to the finalcustomercustomer


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Market logistic decisionMarket logistic decision

Order Processing: it is the processOrder Processing: it is the processwherein inventory is allocated to meetwherein inventory is allocated to meet

the replenishment orders of thethe replenishment orders of the

manufactures. Two methods formanufactures. Two methods for

inventory allocation:inventory allocation:

Real time replenishmentReal time replenishment

Batch methodBatch method


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Real time replenishmentReal time replenishment

It involves an immediate processing of theIt involves an immediate processing of the

order.order.

It has a quick response time.It has a quick response time.


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Batch methodBatch method

The orders are processed at periodic intervals such as atThe orders are processed at periodic intervals such as at

the end of the day, or shift and on on.the end of the day, or shift and on on.

It helps the company to control the inventory in criticalIt helps the company to control the inventory in critical

situations of low inventory because in this method thesituations of low inventory because in this method theorders can be processed to allocate the material fromorders can be processed to allocate the material from

the current stock.the current stock.


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Inventory managementInventory management

It is an effort to integrate the firms value chainIt is an effort to integrate the firms value chain

and its inventory policy.and its inventory policy.

Inventory is effectively managed by using certainInventory is effectively managed by using certain

inventory control tools like: reorder point, orderinventory control tools like: reorder point, orderlead time, usage rate, safety stock, EOQ, JITlead time, usage rate, safety stock, EOQ, JIT

and fixed order interval systemand fixed order interval system


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Reorder pointReorder point

It is used to identify the stock purchase requirement of anIt is used to identify the stock purchase requirement of an

organisation.organisation.

It uses information on the quantum of order and demand forecast.It uses information on the quantum of order and demand forecast.

all the components in the inventory of an organization areall the components in the inventory of an organization are

computerized and have a preset reorder point and reorder quantity.computerized and have a preset reorder point and reorder quantity.When the inventory reaches a certain predetermined minimum level,When the inventory reaches a certain predetermined minimum level,

the reorder point system notifies the purchase department throughthe reorder point system notifies the purchase department through

various procedures such as emails,etc. to issue an order to thevarious procedures such as emails,etc. to issue an order to the

supplier for replenishment of stock.supplier for replenishment of stock.

This system is useful because it automatically alert the purchaseThis system is useful because it automatically alert the purchasedepartment about required quantity.department about required quantity.


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Order lead timeOrder lead time

It is the period between the date an order is placed to theIt is the period between the date an order is placed to thedate the raw material are available for production.date the raw material are available for production.

Supplier need time to manufacture and deliver theSupplier need time to manufacture and deliver thematerialmaterial

So organisation order material before they are actuallySo organisation order material before they are actuallyrequired depending on the time suppliers will take torequired depending on the time suppliers will take tomake delivery.make delivery.


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Usage rateUsage rate

It is the average rate at which the rawIt is the average rate at which the raw

materials are used in the productionmaterials are used in the production

process of an organisation.process of an organisation.


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Safety stockSafety stock

It is the extra stock that is maintained in the inventory at any givenIt is the extra stock that is maintained in the inventory at any given

point of time as a buffer against out of stock conditions,which maypoint of time as a buffer against out of stock conditions,which may

arise due to unexpected customer demands or delays in suppliersarise due to unexpected customer demands or delays in suppliers

deliveries.deliveries.

This level can be reduced by:This level can be reduced by:Maintaining accurate inventory recordsMaintaining accurate inventory records

Ensuring the vendors supplies the materials within few days ofEnsuring the vendors supplies the materials within few days of

reorderingreordering

A higher frequency in planning the inventoryA higher frequency in planning the inventory


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Economic order quantityEconomic order quantity

EOQ is the replenishment order quantityEOQ is the replenishment order quantity

that minimizes the overall cost ofthat minimizes the overall cost of

inventory i.e. the sum of ordering andinventory i.e. the sum of ordering and

carrying.carrying.


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Just in timeJust in time

Japanese developed a time based logistics management system i.eJapanese developed a time based logistics management system i.e

JITJIT

This implies that raw material are delivered in required quantities toThis implies that raw material are delivered in required quantities to

the production plants as and when they are needed without anythe production plants as and when they are needed without any

delay.delay.JIT focuses on the reduction or elimination of inventory in plant.JIT focuses on the reduction or elimination of inventory in plant.

This is based on assumption that whatever inventory is not usedThis is based on assumption that whatever inventory is not used

immediately is a waste.immediately is a waste.


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Fixed order interval systemFixed order interval system

In this system the order period is fixed butIn this system the order period is fixed but

order quantity varies with requirement.order quantity varies with requirement.

The quantity requirement each timeThe quantity requirement each timedepends on the current inventory level ordepends on the current inventory level or

inventory in hand and future inventoryinventory in hand and future inventory

requirement.requirement.


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TransportationTransportation

The process o moving the goods from oneThe process o moving the goods from one

physical location to another.physical location to another.

This involves space and time dimensionThis involves space and time dimensionthat enhance the value of the logistics.that enhance the value of the logistics.

logistics and wholesaling

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