logistics main
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Logistics mainTRANSCRIPT
04/12/23 1
Elements of Logistics Management
What is Logistics?¶ Can you visualize the production function of a business process?¶ What is the most accessible of all production functions you can visualize?¶ Now what activities make production happen?* Procurement• Sourcing• Moving or Transportation• Handling• Storage
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Elements of Logistics Management - continued
*Conversion* Distribution• Transportation• Warehousing
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Logistical Management Making inputs and outputs available when they are needed, where they are needed and in the quantities they are needed * Inputs from market [domestic or import] are needed for production* Out puts of production process [Industrial products, engineering, chemical & pharmaceutical products are needed in the market [domestic or export]* Battle fronts need troops* Troops need supplies*People need agricultural products* Agriculture needs fertilizers * PDS needs food grains
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Logistical Management - continued
• Without logistics no value adding process can run• Logistics is a facilitator of trade & business • Age old practice• Modern logistics is scientific• Logistics is a planning function• Genesis of logistics is in military planning• Origin of many OR techniques like Value analysis, PERT, CPM etc.. is the crucible of war
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Logistical History of India• India was a maritime power since about 300 BC• Goods Made in India, steel, textiles etc.• Trade and prosperity• Gradual degenerationSome logistical feats in history:• Berlin Air Lift – A study in logistics• Indians in the Gulf countries - 1991• Operation Overlord, II World War-1945• 1962 war with China • 1776 American war of Independence [4th July1776]
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What causes bad logistics?
• Infrastructure: bad roads, inefficient railways, poor communication lines, congestion in ports• Taxation: e.g. Octroi• Information: Inadequate information, bad communication • Management: Bad management decisions [carrier selection, out sourcing etc.]
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Receiving stores
V1 V2
Operation
Finished Goods Stores
W1 W2 W3
R1 R2 R3 R4 R5
V3
V5 V4
R6
Market
Procurement
InboundLogistics
Outbound Logistics
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Importance of Logistics
Why should we learn logistics? Why is logistics important for management students?• Logistics is the bed rock of trade and business• Leads to customer satisfaction, D&F expectations of customers• Integrates logistical activities• Competitive edge in a commodities market• Logistics wins or loses wars• Supports critical functions like operations and marketing to be JUST IN TIME by providing Interface with marketing
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Importance of Logistics - continued
• Logistical costs are 5% to 35% of sales depending on type of business, geographical areas of operation etc.• Crucial to survival and prosperity in global business• logistics experts are moving up in corporate ladder• leads to the concept of supply chain management• Indian market is changing- shift from seller’s market to buyer’s market• changing customer• expanding business, global trade• competition, internal & external• concept of lean management
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Operating Objectives Of Logistics
1.Rapid response• F- Objective: Ability to respond rapidly to customer’s order• Role of Information Technology • Concept of SMED and Kanban2. Minimum variance• D-Objective as OTD• Any event that disturbs the supply chain is variance• Problems in information flow, traffic snarls, acts of god, wrong dispatches, transit damage• Traditional approach Vs costs
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Operating Objectives Of Logistics -continued
3. Minimum inventory
• Concept of Inventory Turns
• Increase these turns without
sacrificing customer satisfaction• Single piece flow as practiced by
JIT companies
4. Movement consolidation• Integrating interests of several
players in the supply chain. • Planning several small shipments
together [of different types of
shipments]
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Operating Objectives Of Logistics -continued
5. Quality
• Quality of logistics performance -
complete fulfillment of order
6. Life cycle support [cradle to
cradle logistical support]
• After sales service
• Reverse logistics
# Rigid quality standards
# transit damage
# product expiration dating
# law against unscientific disposal
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Operating Objectives Of Logistics -continued
# law making recycling mandatory
# erroneous order processing by
supplier
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Logistical Functions
LOGISTICSFUNCTIONS
WAREHOUSINGStorage,Handling,Packing &Distribution
INFORMATIONSYSTEMSInternal &ExternalInformation flow
INVENTORYWhen to order?How much toorder? Just InTime
TRANSPORTATIONWater, Road, Rail,Pipeline & Air
NETWORKDESIGN
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Logistical Functions
components of logistics or elements of logistics
• Information management* Role of technology, fast & accurate information* Real time logistics in competitive business * Notification to customer* Role of information in logistical forecasting & logistical operations, order processing and order management* Erroneous information will result into product recall and reshipment
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Logistical Functions - continued
* Inventory control* Neither stock-out nor stockpiling
* Inventory policies* Inventory models* Inventory systems• Transportation * the most visible of all elements* High contributor to costs logistics- Movement costs, Preservation costs, Cost of idle asset, Administration costs* Transportation is accomplished in three ways- Private carriage, contract carriage, common carriage
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Logistical Functions - continued* Expectations from carrier- minimum cost, speed of transport, consistency in speed
• Warehousing* Switching facility rather than a storage facility* Ownership can be private, public or third party contract.*Economic benefits - Consolidation, Break bulk, Cross Dock, processing postponement, stock piling[seasonal storage]* Service benefits - spot stocking, Assortment, mixing, production support, market presence
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Logistical Functions - continued
• Material handling * Receiving, moving, storing, dispatching activities* Impact on cost [capital as well as running], Quality and safety* One of the principles of material handling is minimum movement* Commonly used material handling equipment- forklifts, EOT Cranes, hoists, pulley blocks, trolleys, railroad cars, conveyers, ropes, slings, carousels, sortations, robotics• Packaging* Types of packaging- consumer packaging and industrial packaging
04/12/23 19
Logistical Functions - continued*Consumer packaging°Attracts attention° single most important factor in purchasing decisions made at point of sale* Industrial packaging - makes logistical activities of handling storage moving easy* Sales functions of packaging° Display - attraction, easy identification, communication of recipe, hazard, special care° Ease of opening° Convenience - flexi tubes, sprays° Dispensing - spouts, taps, spays, tubes
04/12/23 20
Logistical Functions - continued
* Functions of packaging # Protection - physical damage, bubble pack, corrugated sheet cartons, mangos in crates# Cube minimization - flattened cans, square shaped whisky bottles, soft drink concentrates, furniture in knocked down condition# Weight minimization - plastic bottles, plastic crates, milkbags# Facilitating handling & using - fruity packs, flexible tubes, aerosol pacs# Facilitating storage & reuse - corrugated boxes
04/12/23 21
Logistical Functions - continued# Grouping goods into convenient unit for distribution - mango boxes, cola bottles, cotton bales, wire rope coils# Pilfer proofing - bisleri caps, cola caps# Handling - pallets, straps
• Net work design [Location analysis] - to minimize overall system cost of delivering value to the customer # Number of facilities - production facilities, warehouses# What is to be performed in these facilities?
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Logistical Functions - continued
# Their location - to minimize overall system cost# Who operates these facilities? - outsourcing decisions # Communication between these facilities - are some of the salient features of net work design.
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Some important concepts# Logistics and supply chain management Logistics and Supply Chain Management by G.Raghuram, N.Rangaraj. Page #15, The Management of Business Logistics by Coyle, Bardi, Langlely Page # 31 ]
• Focus on costs and benefits in
physically moving the goods to
customers - post war1950s.
• Idea of total system cost
• Trade off situations between costs
of several activities
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Some important concepts - continued
• Selection of modes of transport
• 1960s - Emergence of Physical
distribution management
- integration of activities of outbound
logistics
- Electronic era, information as an
element of Physical distribution
management
• 1970 - some aspects of financial
subsystem integrated & focus on
activities of inbound logistics until
considered to be vendors’ concern
04/12/23 25
Some important concepts - continued
• 1980s - Concept of Logistics as a
management function, internally
integrating all activities of inbound
and out bound logistics - Focus on logistical operations, application of TQM, TPM & JIT
• 1990 - Gradually concept is
encompassing entire value chain as
Supply Chain Management
• Henry Ford’s [early 1990s] idea of
control on supply chain
• No firm can be self sufficient
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Some important concepts - continued
• Scope - Source of raw materials to
end user - all upstream &
downstream organizations & linkages
• How is this created in business? -
external integration
• Concept of supply chain as a pipe
line
• Main objective - Supply chain
profitability by value creation
• Focus - end user
04/12/23 27
Some important concepts - continued
• Origin - extension of scope of
logistics management
• Definition - Management of
upstream and down stream
relationships with suppliers and
customers to deliver superior
customer value at less cost to the
supply chain as a whole
• breaking the organizational barriers
to deliver value
04/12/23 28
Some important concepts - continued
* Sharing of sales information in
real time
- reduces inventories by
reducing uncertainties
- compresses value
chain by slashing lead-times thereby
quickening cash flow
04/12/23 29
vendors
Incoming materialsstores
Conversion process[WIP]
Warehouses
Customers
FG stores
M/M
O/M
Physicaldistrib.
Mgt[outboundlogistics]
Inboundlogistics
SupplyChainMagt
Logisticsmanagementnetwork
30 04/12/23
particulars Logisticsmanagement
Supply chainmanagement
Scope Inbound logistics,in processinventory,outbound logistics
All players in thesupply chain fromraw material sourceto finished productconsumer, vendors,their vendors,supplierorganization[shipper],Warehouses,service providers,customers, theircustomers
How this is createdin business?
By internalintegration oflogistics functionshandled by variousmanagementfunctions withinorganization
By externalintegration of rolesof various playersin the supply chain.
Main objective Logistics costreduction byintegratingresources acrossthe pipeline
Supply chainprofitability byvalue creation.
31 04/12/23
focus L/M tries to take theproduct to theconsumer atminimum logisticalcost. Hence it issupply driven.
SCM focuses onvalue creation in thesupply chain. Hencethis is customerfocused or demanddriven.
definition Logistics is theprocess ofstrategicallymanagingprocurement andstorage of material ,part and finishedinventory [andrelated informationflow] throughorganization and itsmarketingchannels in such away that currentand future profitsare maximizedthrough costeffective fulfillmentof order
Management ofupstream and downstream relationshipswith suppliers andcustomers to deliversuperior customervalue at less cost tothe supply chain asa whole.
Origin A very old conceptin military planning.
As a logicalextension of logisticsmanagement
04/12/23 32
Some important concepts - continued
*Business functions of logistics
management ……[physical distribution
management by K.K.Khanna – page # 13, The
Management of Business Logistics by Coyle,
Bardi, Langlely Page # 39]
• military origin, military functions &
post war march into business• procuring, moving and storing of
R/M and industrial F/G• making inputs available for value
addition to a conversion process• facilitation of relevant
manufacturing and marketing
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Some important concepts - continued
- making finished goods available to the customers in the market
• procuring, moving and storing of agricultural products
• Food Corporation of India
• importance of logistics function in commodities market
* Event logistics - The net work of activities, facilities and personnel required to organize, schedule and deploy the resources for an event to take place and to efficiently withdraw after the event
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Some important concepts - continued
* Service logistics - the acquisition,
scheduling and management of the
facilities/assets, personnel and
materials to support and sustain a
service operation
* Military logistics - design and
integration of all aspects of support
for the operational capability of the
military forces [deployed or in
garrison] and their equipment to
ensure readiness, reliability and
efficiency
04/12/23 35
Some important concepts - continued
*Logistical mission ………[Logistics &
SCM by Martin Christopher, Page # 13, L/M by
Bowersox Page #9]
• Achievement of business objectives
at minimum logistical cost
[delivering- QCD expectations of
customers at minimum logistical
costs, i.e. creating customer value at
minimum cost
• set of goals to be achieved at a
particular type of market responsive
to competition
04/12/23 36
Some important concepts - continued
• mission focus Vs individual
function
• Mission of logistics is providing a
means by which customer satisfaction
is achieved
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Some important concepts - continued
*Inbound logistics Procurement operations in procurement cycle
• potential avenues for reducing
systems costs
• value of inventory is low
• trade off between cost of
maintaining inventory in transit and
low cost transport exists
• Delivery time, size of shipment,
mode of transport are different from
O/B logistics
04/12/23 38
Inbound logistics - continued
SourcingOrderplacement& expediting
Supplier
TransportationReceiving
04/12/23 39
Some important concepts - continued
*Outbound Logistics
• Value added goods are to be made
available in the market distributed
through the network of warehouses
and retailers’ shops
• Value of the inventory is very high
as during conversion value is added
• Delivery time, size of shipment,
mode of transport are different from
I/B logistics
04/12/23 40
Outbound Logistics - continued
Customerorder
Ordertransmission
Orderprocessing
Orderselection
Ordertransportation
Customerdelivery
Activities in distribution performance cycle
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Some important concepts - continued
*Total cost analysisConventional approach• No information on the impact of cost of an individual function on the system• Apportionment of Logistics costs• Costs get submerged • Competitive edge is lost by the organization.• Incremental cost to the system - on account of changes to the system like introduction of a warehouse and the impact on the system • Impact of decisions at various levels on the system
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Some important concepts - continued
• Cost information is biased, cost elements tend to get hidden out of fear that they expose functional weakness• Costs in no man’s land are never owned - like tube lights on passages, cost of returned vehicle• Cost cutting is fragmented so doesn’t reduce system cost• Focus is on input function. Hence attempt is to reduce function cost in isolation • Customer dissatisfaction* Total cost approach• Modern approach to logistical costing
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Some important concepts - continued
• Focus on reduction of cost of output of the system• Provides competitive edge to the company• Several trade off points in the system, further areas of improvement
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Some important concepts - continued
*Mission based costing [or budgeting] in logistics• input focused costing• output focused costing• mission goals and costs are set • functional inputs are worked out to meet the system deliverables
290MissionA
MissionB
MissionC
Customer servicegoals [QCD]At market type A
Customer servicegoals [QCD]At market type B
Customer servicegoals [QCD]At market type C
Purchasing
Production
Sales
Marketing
Transportation
Etc
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Mission based costing - continued
Fig.8
15
45
10
5
35
10
MissionA
MissionB
MissionC
Customer servicegoals [QCD]At market type A
Customer servicegoals [QCD]At market type B
Customer servicegoals [QCD]At market type C
transportation
Ware housing
Functional Inputs to Logistical Management
5
20
10
C1=Rs. 25/-
C1=Rs. 100/-
C1=Rs. 30/-
Rs.155/-70 50 35
04/12/23 46
Interface with marketing
PRICE
PRODUCT
PROMOTION
PLACE
LOGISTICS
MARKETING
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Some important concepts - continued
*Interface with marketing
• a common wall,surface or area with another body, concept or function - area of common interest or concern
• Four Ps of marketing and logistical interface
• Price - marketing can re offer the price to beat the competition with superior logistical support
• Product & Packaging- size shape & weight/volume ratio of the product has major impact on logistical cost.# Gillette story of floor displays
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Some important concepts - continued, Interface with
marketing
Promotion - promotional strategies of marketing need to be decided by working closely with logistics# Push/Pull strategyPlace - whether to distribute through wholesalers or through retailers is a marketing decision with impact on logistics# wholesalers’ demand & retailers’ demandCustomer Service - another area of interface between marketing & logistics
04/12/23 49
Some important concepts - continued
Interface with operations
SHORT RUNS
SEASONAL DEMAND
SUPPLY SIDE INTERFACE
PACKAGING
LOGISTICS
OPERATIONS
04/12/23 50
Some important concepts - continued
Interface with operations * Short production runs• Very strong logistical support is needed to operate Just In Time• Short runs lead to inventory reduction* Seasonal demand• Inventory should be mutually accepted * Supply side interface• Prevent shortages* Packaging• Protective packaging• Third party alternatives
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Some important concepts - continued
Role of planning in logistics management• Role of planning is central to logistics management Mission of logistics is to achieve desired levels of service and quality at lowest possible cost. Logistics makes one plan, that replaces traditional concept of planning in pockets
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Some important concepts - continued
“C” customersLook for value[benefit] at lowestprice
“C” companyBy effectiveutilization of assets tries tocreate and offervalue to customers
“C” competitionBy effectiveutilization of assetstries to create andoffer value tocustomers
Value Value
Cost differentials
SERVICE LEADER
OK
SERVICE & COSTLEADER
HAPPY COMPANY
SAD
COST LEADER
OK
C O S T
SERVICE
Whomshall Ibuyfrom?
CUSTOMER
8. Importance of 3Cs
LOW
LOW
HIGH
HIGH
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Some important concepts - continued
*Integrated logistics•Attributes of Logistics Department# Scope is wide spread- functions of logistics are spread across various stages of value chain in the organization# Provides interface between marketing and customers, marketing and operations, operations and supplier# Provides competitive edge to business in the current environment# Handles flow of information, materials & recovery cycle# Tackles cost reduction
04/12/23 54
Some important concepts - continued
• Logistical competency• What is logistical competency?• Definition: Logistical Competency is the relative assessment of a firm’s capability to provide competitively superior customer service at the lowest possible total cost. • It is a strategy to provide a superior service at a total cost below industry average. • Its aim is to view how logistics can be exploited as a core competency so that fits into a firm’s overall strategic positioning
04/12/23 55
Some important concepts - continued
Inventory flow
Physicaldistribution
Manufacturingsupport Procurement
Information flow
Customer Suppliers
•How can this be achieved?• By integrated performance of logistical functions# jigsaw puzzle# What is the big picture?• What are the parameters needed to achieve this integrated performance?# Information flow, Inventory flow, organization, customers and suppliers
04/12/23 56
Some important concepts - continued
• Concept of Integration in Logistics Operation• Internal & External Integration• Internal Integration# First Stage of Internal Integration - Materials management & Physical distribution Management # Second Stage of Internal Integration - Logistics Management• [ External Integration - Supply Chain Management]# functions in coordinated fashion# One operational command - Performance in isolation loses sight of overall picture.
04/12/23 57
Some important concepts - continued
# Picture before you to solve the jigsaw puzzle# Links the enterprise with customers and suppliers# Information flowing into the enterprise is converted into schedules and plans & value added products reach the customers# Integrated logistics is interrelated efforts of managing information flow & inventory flow
04/12/23 58
Some important concepts - continued
• Value added role of Logistics# form utility, place and time utility and possession utility add value to a product• Form Utility is given by Production• How logistics also adds form utility - processing postponement, mixing, unpacking• Place and Time Utility is given by logistics functions• Possession Utility: Marketing creates Possession Utility by promoting the product• But logistics makes finally possession by customer happen
04/12/23 59
Some important concepts - continued
* Logistical Information System.
• Primary activities of LIS• data flow from external sources• processing and storage of information within the firm• communication to the decision maker in the form of reports• communication to customers and suppliers and their feedback