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Elements of Logistical

Management

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What is logistical Management?

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A Function Of Business Management

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Business & Business Management
What are business functions?
• What is function?
• What is activity?

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Logistical Management
• Ensuring availability of resources at
minimum cost for production
• Ensuring availability of finished
products at minimum cost to the
customer

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Definition of Logistics as a function of
management
Logistics is the process of strategically managing
procurement and storage of material , part and
finished inventory [and related information flow]
through organization and its marketing
channels in such a way that current and future
profits are maximized through cost effective
fulfillment of order

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Production and Logistics
What is the most accessible production
process known to you?

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How Logistics is visualized?

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V1 V2 V3

V4 Receiving stores

Procurement cycle
V5

Manufacturing Operation
Support cycle

Finished Goods Stores Distribution


cycle

W1 W2 W3

R1 R2 R3 R4 R5 R6

Market 11
What are logistical functions?

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Inventory Management
 Neither stock-out nor stockpiling
 Inventory policies, models, systems

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Information management
* Fast & accurate information in real time
in competitive business supported by
Information technology

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Transportation
* The most visible of all elements
* High contributor to costs of logistics-
Movement costs, Preservation costs, Cost of
idle asset, Administration costs

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Net work analysis
# Number of facilities, their location,
communication systems,
operational decisions

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Warehousing
* Switching facility rather than a storage
facility that provides economic & service
benefits

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forklift_1.jpg

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Material handling
* Receiving, moving, storing, dispatching
activities
* Impact on cost [capital as well as running]

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Packaging
* Types of packaging- consumer packaging and
industrial packaging

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Genesis of modern logistics
• Military planning
• OR techniques like VA, PERT, CPM etc.
• “Battles are won or lost even before they are
fought……….”Field Marshall Rommel
Some logistical feats in history:
• Indians in the Gulf countries – 1991
• 1776 American war of Independence [4th
July1776]

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BERLIN AIRLIFT- 1945
In total, 1,534 tons of provisions were
needed daily to keep the over 2 million
people alive. 28
OPERATION OVERLORD – NORMANDY BEACH

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II World War-1945
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.]
What Does Bad Logistics Cause?
• Costly products, shortages
• Deteriorating economy
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Importance of Logistics
Why should we learn logistics? Why is
logistics important for management
students?
2. Logistics is the bed rock of trade and business
3. Leads to customer satisfaction, D & F
expectations of customers
4. Integrates logistical activities
5. Competitive edge in a commodities market
6. Logistics wins or loses wars
7. Supports critical functions like operations and
marketing to be JUST IN TIME to the 31
customer
Importance of Logistics

1. Logistical costs are 5% to 35% of sales


depending on type of business, geographical
areas of operation etc.
2. Crucial to survival and prosperity in global
business
3. Logistics experts are moving up in Corporate
Ladder
4. Leads to the concept of supply chain
management
5. Indian market is changing- shift from seller’s
market to buyer’s market 32
12. Changing customer
13. Competition, internal & external

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Operating Objectives Of Logistics
1. Rapid response
Ability to respond rapidly to customer’s order
• Short lead-times
• High flexibility
• Real time information
• Concepts of SMED and Kanban

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2. Minimum variance
• Any event that disturbs flow of supplies to
customer is variance
• Interrupts product delivery
• Undermines OTD Objective
• Problems in information flow, traffic snarls, acts
of god, wrong dispatches, transit damage
• How to maintain smooth, undisturbed flow of
supplies to customer?
Traditional approach – Inventory
Modern approach – Minimum Variance
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3. Minimum inventory
• Low inventory volume by high inventory turns
• Kanban as an inventory control tool
• Single piece flow as practiced by JIT
companies

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4. Movement consolidation
Movement planning to reduce costs
• Bulk volume, same product or collection
• Long runs, eliminating broken short runs
• Integrating interests of several players in
business

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5. Quality
Quality of logistics performance - complete
fulfillment of order, product, place, time and
quantity

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6. Life cycle support [cradle to cradle logistical
support to product]
• After sales service
• Reverse logistics

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• Reverse logistics
 Rigid quality standards
 Transit damage
 Product expiration dating
Product recall
Law against unscientific disposal
 Law making recycling mandatory
 Erroneous order processing by supplier
 Reuse of packaging material
• What are the drivers of reverse logistics?
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