logistics management unit ii

8/3/2019 Logistics Management Unit II

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Logistics Management

Prepared by:

Narendra SinghChaudhary


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"Logistics means having the right thing, atthe right place, at the right time."


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Word, Logistics is derived from French word loger,which means art of war pertaining to movement and

supply of armies. Logistics means the art of managing the flow of raw

materials and finished goods from the source to theuser

To get goods from where they arise to the right placein the right form, at the right time, at the right cost,Logistics or physical distribution or distributionlogistics is an integral part of Marketing Process.


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Definitions

Application of managementprinciples to

logisticsoperations for efficient and costeffectivemovement of goods and personnel.

Managementoftheactivityoftransportinggoodstocustomersortoplaceswherethey

areboughtorsold
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Definition Of LM

According to Council of logistics

management: Logistics is the process ofplanning, implementing and controlling theefficient, effective flow and storage of goods,services and related information from point of

origin to point of consumption for the purposeof conforming the customer requirement.


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Logistical management includes the design

and administration of systems to controls theflow of material, work- in process, andfinished inventory to support business unitstrategy.

Logistics is the designing and managing of asystem in order to control the flow of materialthroughout a corporation.


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Logistics of an company includes movement

of raw materials, coordinating flows into andout of different countries, choices oftransportation, and cost of the transportation,packaging the product for shipment, storing

the product, and managing the entireprocess.


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Fragmentation 1960-This era was known asfragmentation because every thing that done was

disintegrated

Evolving Integration-At this stage of time newconcepts of Logistical management were evolving

Total integration-In the present scenario because of

technological advances logistics has evolved as partof management


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There are two main phases that are important in the movementof materials: material management and physical distribution.

Materials management is the timely movement of rawmaterials, parts, and supplies.

The physical distribution is the movement of the firm's finishedproducts to the customers. Both phases involve every stage ofthe process including storage.

The ultimate goal of logistics is: "To coordinate all efforts of thecompany to maintain a cost effective flow of goods."


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Inbound logistics covers the movement of materials receivedfrom suppliers.

Material management describes the movements of material &components within a firm.

Physical distribution refers to movement of goods outward fromthe end of the assembly line to the costumer.

Supply- chain management is somewhat larger than logisticsand it links logistics more directly within the users totalcommunication network & with the firm engineering staff. Itincludes manufacturer and suppliers but also transporters,warehouses, retailers and customers themselves.


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Importance of logistics

Transportation cost rose rapidly due to the

rise in fuel prices Production efficiency was reaching a peak

Fundamental change in inventory philosophy

Product line proliferated

Computer technology

Increased use or computers


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Increased public concern of products Growth ofseveral new, large retail chains or mass

merchandise with large demands & verysophisticated logistics services, by pass traditionalchannel & distribution

Reduction in economic regulation Growing power of retailers

Globalization The interrelation of different logistics element and

their costs should be based on total cost rather thanindividual costs.


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The objectives of Logistics

Rapid Response-Rapid response is concerned witha firm's ability to satisfy customer service

requirements in a timely manner. Minimum Variance-Variance is any unexpected

event that disrupts system performance. Variancemay result from any aspect of logistical operations.Delays in expected time of customer order receipt,an unexpected disruption in manufacturing, goodsarriving damaged at a customer's location, ordelivery to an incorrect location-all result in a timedisruption in operations that must be resolved.


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Minimum Inventory-The objective of minimumvariance involves asses commitment and relative

turn velocity. Total commitment is the financial valueof inventory deployed throughout the logisticalsystem. Turn velocity involves the rate of inventoryusage over time. High turn rates, coupled withinventory availability, means that assets devoted toinventory are being effectively utilized. The objective

is to reduce inventory deployment to the lowest levelconsistent with customer service goals to achievethe lowest overall total logistics cost.


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Movement consolidation-One of the most

significant logistical costs is transportation.Transportation cost is directly related to thetype of product, size of shipment, anddistance. Many Logistical systems that

feature premium service depend on high-speed, small-shipment transportation.


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Quality improvement-A fifth logistical objective is toseek continuous quality improvement. Total quality

management (TQM) has become a majorcommitment throughout all facets of industry.

Life-Cycle support-The final logistical designobjective is life-cycle support. Few items are soldwithout some guarantee that the product will performas advertised over a specified period. In somesituations. The normal value-added inventory flowtoward customers must be reversed.


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Essence of logistics in marketing

Marketing Process is successfully completed when

Products are produced and priced to satisfy the identified needs

of the segment of buyers Arrangements are made to supply these goods through

selected distribution channels

An awareness is created among the buyers about theavailability of the goods through information facilitation &

Goods are physically supplied to the buyers at the place & timeselected by them.

Besides satisfying the customers need, the marketing processmust be profitable to the seller.


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Basic logistical service is measured interms of

Availability-Availability means having inventory to consistentlymeet customer material or product requirements.

Operational performance-Operational performance deals withthe elapsed time from order receipt to delivery. Operationalperformance involves delivery speed and consistency. A firm'soperational performance can be viewed in terms of how flexibleit is in accommodating unusual and unexpected customerrequests.

Service reliability-Service reliability involves the quality

attributes of logistics. For logistics performance to continuouslymeet customer expectations, it is essential that management becommitted to continuous improvement


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There are four logistics concepts

The systems concept-The systems concept

is based on all functions of a organizationworking together in order to maximizebenefits. This concept sometimes requirescertain components of the organization to

operate sub optimally in order to achievemaximum goals of the system.


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The total cost concept-The total cost concept is based on thesystems concept; however goal achievement is measured interms of cost.

After-tax concept-A variation of the total cost concept is theafter-tax concept. This goal of this concept is after-tax profit.This concept is becoming very popular because of the manydifferent national tax policies.

The trade-off concept links the system together in a way that is

very efficient, but can have trade-offs that might be inefficient.The advantages of such high efficiency must be weighedagainst the risk.


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Logistics sub-systems

Physical Supply or Management of flow of rawmaterials, spare parts, consumable stores and

machinery & tools from suppliers.

Physical distribution or management of finishedgoods from the factory to the buyers &

Logistical Controls for managing the logistics

system, it helps an efficient co-ordination of physicalsupply & distribution sub-systems.


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Primary Activities

Inbound logistics: materials handling, warehousing,

inventory control, transportation; Operations: machine operating, assembly,

packaging, testing and maintenance; Outbound logistics: order processing, warehousing,

transportation and distribution;

Marketing and sales: advertising, promotion, selling,pricing, channel management;

Service: installation, servicing, spare partmanagement


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Support activities:

Firm infrastructure: general management, planning,finance, legal, investor relations;

Human resource management: recruitment,education, promotion, reward systems;

Technology development: research & development,IT, product and process development;

Procurement: purchasing raw materials, leaseproperties, supplier contract negotiations.


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Importance of Inbound and Outbound

logistics

Inbound and Outbound Logistics covers andsupports the following processes and options:

All of the processes in the warehouse from goodsreceipt through goods issue.

Option to use RFID to support goods Issue andgoods receipt processes

Complete stock transparency, to allow companies toknow what is in the warehouse.

Trace and track the history of the warehouseprocesses in Detail for each individual article


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Improve the accuracy of deliveries, thus increasingcustomer satisfaction.

Option to use mobile data entry and work in a paper-free environment.

Build optimal loads with the routing and schedulingallowing a close collaboration between shipper andcarrier via optimized carrier selection and tendering

Operational shipping, manifesting, freight costing,freight settlement, and foreign trade are alwaystransparent to company


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Objective of an ideal logistic system is to ensure flow of supply to thebuyer

In Correct Quantity

At Desired location

At Required time

At useable condition

At the lowest total cost

Thus the objectives encompass efforts to coordinatephysical distribution and material management inorder to save money or improve service.


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Elements of logistics system

Transportation

Warehousing Inventory Management

Packing & Utilization &

Information & Communication


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Forms of logistics management.

Centralized logistics management-Centralized logisticsmanagement provides that managers that also head otherdivisions of the company head the logistics operations. This

type of management helps avoid internal problems by having acentral manager that ultimately decides how logistics andoperations are coordinated.

Decentralized logistics management-Decentralized logisticsmanagement is based on the fact that a company needs tohave a division that helps control the local-adaptation needs.

Dealing with different cultures requires input from the localbranch. The managers that deal with the cultural differences ona daily basis normally know what works and what dont.


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Outsourcing-Outsourcing is the final option forlogistics management. When this happens,transportation firms concentrate on logistics,and the company can concentrate on it'sproduction. There are many cost savings

using this type of program, however that lackof control can negatively effect manycompanies.


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Logistical competency is achieved bycoordinating

Network design

Information

Transportation

Inventory

Warehousing

Material handling Packaging

Work


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Logistics Cost


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Logistics Cost

As companies continue to manufacture and sourcematerials from overseas, controlling costs remains a

top priority for those involved in international trade. One key factor that should be monitored more

closely is logistics management, which covers allactivities relating to the procurement, transport,transshipment and storage of goods. Depending on

the industry sector, supply chain logistics costsaccount from 5% to 50% of a products total landedcost.


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Some issues effecting logistics costs: Fuelprices remain high and ports continue toexperience delays, resulting in highertransportation fees. Increasingly complexinternational trade laws and security

measurements threaten to lengthen deliverytimes and increase warehousing costs.


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10 tips on to reduce supply-chain

costs

Understand the true costs of sourcingoverseas- Calculate freight, duty,

brokerage, and inventory-carrying costs tosupport these lengthened supply chains.Factor in such items as the costs of flyingengineers overseas. Once you understand

the true total landed cost and total impact tothe business, buying domestically may look alot better.


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Focus on eliminating the variability from transittimes-The more variable the transit times are, the

more likely it is that the receiving party is using morepremium freight, building buffers of inventory orordering more often and more quantity thannecessary to compensate for the uncertainty.Understanding these dynamics can lead to the

conclusion that paying higher freight costs to ensurehigher variability actually saves your company intotal costs.


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Tariffengineering-Strategically source andmanufacture products to take advantage of

classification duty rates and eligibility for specialtrade programs such as the North American FreeTrade Agreement.

Consolidate-If you have multiple suppliers in onecountry, consolidate their goods into one shipment.

In addition, if you always have less-than-containerload shipments out of one country, try tofind another Less than Container Load(LCL) importerof goods from that country. You may be able topartner and consolidate to a more cost-effective full-containerload shipment.


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Informed decision-making-Provide to the decision-makers/customers of your logistics network the cost of freightfor each service level, the reliability of each lane for eachservice level, and the true cost of carrying inventory so they canmake informed decisions

Sometimes insurance doesnt pay-When a company has ashipment of premium goods, they often tend to use the carriersinsurance, which is very expensive. If the company is self-

insured, as most companies are, it should check its insurancepolicy to see if it covers shipment of goods. If it does, thecompany does not need to add the extra cost of carriersinsurance.


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Automate compliance processes-Companies that implement software solutions to

automate trade compliance are able to speed thecycle times associated with tasks being performedmanually, such as document preparation, andeliminate the associated errors. Automatedcompliance procedures also bring fewer delays atborder crossings, resulting in on-time delivery,

adequate inventory levels, increased customersatisfaction, and the avoidance of fines.


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Control your express shippingcosts-When acompany runs into a supply-chain issue, it typically

will have an entire shipment sent on anexpress/expedited (highest-cost) service basis.Panicking often results in higher costs. A little bit ofcalculating can help the company determine theamount of goods needed immediately. It can then

have that amount sent using express/expeditedservices, while the balance of the shipment can besent using a standard (lower-cost) service.


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Planes, trains and automobiles-Which ischeapest? In general, rail is more cost-effective thantrucking or air. Water is cheaper than air shipment.No matter the mode of delivery, always try to getthree quotes for movements.

Be aware of non-tariff trade barriers -Companiesneed to be more aware of the increasing level ofnon-tariff trade barriers that are in force to reduce

sweatshop labor and support human rights andanimal welfare issues. These restrictions can bringimporters increased liability and compliance costs.


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Distribution & Warehousing Mgmt

A warehouse management system, orWMS, is a key part of the supply chain and

primarily aims to control the movement andstorage of materials within a warehouse andprocess the associated transactions,including shipping, receiving, put away and

picking. The systems also direct and optimizestock put away based on real-timeinformation about the status of bin utilization.
http://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Warehousehttp://en.wikipedia.org/wiki/Warehousehttp://en.wikipedia.org/wiki/Supply_chain


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Warehousing, material handling, and packaging arean integral part of other logistics areas. For example,

merchandise typically needs to be warehoused atselected times during the logistics process.Transportation vehicles require material handling forefficient loading and unloading. Finally, the individual

products are most efficiently handled whenpackaged together into shipping cartons or othertypes of containers.


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When warehouses are required in a logistical system, a firmcan choose between obtaining the services of a specialist oroperating its own facility. The decision is broader than simply

selecting a facility to store inventory, since many activitiesessential to the overall logistical process are typicallyperformed while products are warehoused. Examples of suchactivities are sorting, sequencing, order selection,transportation consolidation and, in some cases, productmodification and assembly.

Within the warehouse, material handling is an important activity.Products must be received, moved, sorted, and assembled tomeet customer order requirements.


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Physical Distribution

The area of physical distribution concerns movement ofa finished product to customers. In physical distribution,

the customer is the final destination of a marketingchannel. The availability of the product is a vital part ofeach channel participant's marketing effort. Even amanufacturer's agent, which typically does not owninventory, must depend on inventory availability to

perform expected marketing responsibilities. Unless aproper assortment of products is efficiently deliveredwhen and where needed, a great deal of the overallmarketing effort can be jeopardized.


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It is through the physical distribution process that the time andspace of customer service become an integral part ofmarketing. Thus physical distribution links a marketing channel

with its customers. To support the wide variety of marketing systems that exist in a

highly commercialized nation, many different physicaldistribution systems are utilized. All physical distributionsystems have one common feature: they link manufacturers,

wholesalers, and retailers into marketing channels that provideproduct availability as an integral aspect of the overallmarketing process.

logistics management unit ii

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