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Elements of Logistics Management

Er. H. Manjunath

Project Report:

Logistic Information System and Logistics Planning Process

Subject

Elements of Logistic Management Er. H. Manjunath Naqeeb S. (05), Mustafa Bootwala (31), Roma khot (32), Nida Shaikh (33), Adil Shaikh (34), Amir Reza (35). 10/10/2008

Presented to : Prepared by :

Date

Elements of Logistics Management

Er. H. Manjunath

Index:

Elements of Logistics Management

Er. H. Manjunath

LOGISTIC INFORMATION SYSTEM DEFINITION:


Sr No. Contents Chp-1 Logistics Information System 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Definition Importance of information Main functions of LIS Presentation of Information Characteristics of Information Technologies Involves Knowledge Management Logistics Information Flow Architecture Chp-2 Logistics Planning Process 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 Definition Factors Required For Planning Mission Statement The Mission Of Logistics Planning Methodology Planning Structure in the Organization Logistics Planning Influencing Factors on Strategy and Planning Planning, Budgeting and Controlling Action On Operational Level Logistics Plans In Coordination With Other Departments Page Nos.

Elements of Logistics Management

Er. H. Manjunath

LIS is an interacting structure of people, equipment, and procedures that together make relevant information available to the Logistic manager for the purpose of planning, implementation, and control. The information is the data processed to get meaningful picture of the situation and generate thoughts for further actions. Comprehensive relational database that contains the type of information required to make effective decisions. This has greatest use in all the parts of logistics management such as the transportation, inventory, and product areas with warehousing and customer areas showing less progress.

IMPORTANCE OF INFORMATION
In the new competitive world success is measure of more sales, increased profit or a growing customer base. More important is to get an edge over the competitor. For that purpose basic business demands to simply get better at what we do. In the field of logistics, there has always been an abundance of data. Shipping bills alone make a lot of information. Gathering the data is important; evaluating the information, setting benchmarks and measuring performance and progress is critical. The purity of the raw data is important. The small issues can have a major impact. Simple spelling errors or listing an

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address as a road can confuse during the evaluation process. Logistics has to develop some simple, yet powerful tools to quickly cleanse raw data from virtually any ad all sources. From the data available many reports are generated, which can pinpoint simple solutions that can generate cost savings and/or service improvements. These can have significant impact on profitability and customer satisfaction. Further the decisions have to be taken at every stage which impact throughout the entire organization, from operations to finance. changes. For some square meters of warehouse space and few lacks worth of inventory, the information is a critical factor in seeking continuous improvements. The information is power. The evolution of new profession depends on putting that high quality information into the hands of the professional. The logisticians can take decisions that can make a measured difference for companies. Example-In the small enterprises like hotel industries the practice of ordering has progressed from phone to fax. And now it is shifting from faxing to Internet mode. The critical factors are the quality of the information, the ability to recommend and implement the

Elements of Logistics Management

Er. H. Manjunath

MAIN FUNCTIONS OF LIS


The functions are as follows. Take proper decision at all levels in the organization. Provide Database at appropriate stage. Support Planning function. Provide Controls in the operations. Communication with concerned persons. Policy Level
Importance D A T A
I N F Contd.., O R M A T I O N

Functions Decision Level

Control Level Operating Level

D E C I S I O N S

The organization has different levels. Each level has different needs of the information. The lowest level is the operating level. Here the activities are at the level of workmen; charge hand, loading-unloading, warehouse material handling functions take place. Generally the data gets generated here. This data has to be transferred to

Elements of Logistics Management

Er. H. Manjunath

further levels of control level to take decision form of information. At control level the efforts are to be taken to improve efficiency of the operating level by analyzing the information. At the decision level the manager has to evaluate and analyze the information to see the operations and customer needs are equalized. At the top level the logistics management has to decide the policy on the basis of factors of warehouse, transportation system the future plans. The customer needs, satisfaction is given prime importance while making policy. At every level some data is generated and same is processed in to relevant information for every level in the organization. As the material keeps moving in the organization from supplier to the customer the data keeps on generating. Analyzing this data and taking the needful improves organizational efficiency to provide the right supply to the customer at right time at right place. The proper decisions can be taken by logistics management by having quality information at every point in the organization.
Functions Contd..,

decisions

and

implementing

these

decisions

Elements of Logistics Management

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PRESENTATION OF INFORMATION:
The style of presenting the information is important. It is to be seen by whom the information is to be used and the purpose. Generally the people are anxious about getting some or other information. As much as transparency is there in the organization the flow of information is fast and clear. In the absence of transparency the people are left without needful information. The presentation of information has to be eye catching as well as meaningful. Following are the different methods of presenting the information.

Written Form
The written information is called as proper communication. However in order to use it for the purpose it is intended efforts have to be taken to avoid essay type write up. There are situations where the matters have to be written in sentences. For example the remarks are to be written at the end of some charts or graphs. The reports on number of subjects by employees, visit reports, tour reports training reports, etc are the example of the information in the written form.

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Charts
In the similar way bar charts are useful to get comparative picture of different attributes. As shown in figure the comparison is given for two year performance of the company in view of different attributes, such as sales, profits, reserves, pending orders, etc. The attribute is displayed in the bar chart like shown in the figure. There are cases which are well presented by pie charts. Different constitutes are properly indicated on these pie charts. The figure shows the bar chart shows the data to compare the information. These types of charts are good for the top management to get them right comparison for attribute.

Graphs
The graphs are important method to present the information. It gives the data in a proportional manner, related to some other attribute.

For Example
The extent of rejection due to a typical problem on the production shop is shown on the Y axis and the X axis the dates are given. Such a graph gives information to the production manager.

Elements of Logistics Management

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The sales figure related to the date or month are indicated on the graph the management to get an idea of the growth of dispatches.

Columns sheets
The charts are useful to get the data in tabulated forms. Different attributes are given in the tabulated form. This method is good for the middle level management. They need different types of information in the tabulated form. Proper units like Tones, Millions of Rupees etc need to be given. Each column is given or mathematical functions derived are provided. So that no one needs to calculate further. Often it is observed that people concerned do not know the purpose of the statement has come to them and what action they need to take. So many computerized statements coming to a person, he is confused and may ignore some of the important data from them.
Presentation of Information contd

Black Board
Black Boards are provided in the departments, shop floor. On these boards the important information is mentioned. This information is usually the company matters related the working of that department. For example on shop floor it is

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indicated, as to what is the production planned and scheduled for that period. What is major problem and hurdle to achieve that scheduled quantity? Important data should be highlighted on these boards to make clear the needs to all concerned. Also the same should be explained to the proper persons.

Hoarding
Very important information is displayed on the hoardings, which are displayed at important place in the organization. Generally all are concerned with this information. This may be generally a one line statement. This may the statement indicating a receipt of the large order from important customer.ofOr it cancontd Presentation Information be the welcome visit of an esteemed customer.

Verbal/Telephonic
What ever the mechanism available, it can not eliminate the speaking of the people with each other. In the department matter people should continue telling information to each other and check the communication in complete and it is understood by the concerned persons. At long distance appropriate use of the telephone/mobiles has to be used to convey the problems and information. The heap of computer

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statements or the emails can not become the substitute for verbal transfer of information.

Other Methods
This is the system in Amada company in Tokyo, Japan. We were taking lunch in the staff canteen. It was a big size descent place. Staff and important clients were enjoying delicious food. Few sweet beautiful girls came in the gallery area in good music. They displayed big banner. It showed the Orders which were received by company yesterday. The value of those orders. The order completion is scheduled etc. This type of information is conveyed to the people as pride, esteem, to get ready to satisfy the requirements of the order, etc.

CHARACTERISTICS OF INFORMATION
The information is the major factor, which helps to create data to take actions, make perfect plans, as well as decision. Proper planning and utilization of space delivers improved warehouse inventory visibility. Enhanced visibility decrease buffer stock, increase
Presentation efficiency,of Information contd and reduces movement.

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Real Time Information


The information has to be available fresh at any time when taken by the needy person. It should be available to all the people who so ever logs in. Real time means the activity, which has taken place should be reported to all the points immediately, without any delay. The perfect time delivers near 100% accuracy, eliminating waste and redundancy Imp roved order fulfillment errors and improved fulfillment cycles. Perfect time can be maintained by having quick measurement devices, good scanning instruments. Manual data updating has limitations although many depend on that. The accuracy of the decision is possible on time information.

Accuracy
The information should be accurate. The facts and figures should match the real position, where the event takes place. As the event changes, the information also should be updated. Old information will lead to wrong decision. This increase labour efficiency through system directed picking. Pick rates are improved. No more lost or misplaced inventory. Accurate real-time data decrease or even eliminates cycle counts. The inventory reduction is possible due to accurate information.
Characteristics of Information

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Regular Availability
The information should be available on regular basis, constantly and any place. It should not be difficult to retrieve from the source. Rapid availability can only make right person to take right decision. The managers, client, supervisors should be in position to get information and any uncertainty of order, production should be understood immediately. Such a thing is only possible in the computer system. Management can respond the customer and take right decision for any change. Since the logistics area is highly basis. spread geographically it is required to have accessibility for the information at any place on continuous

Relevant to right person


The right information has to be given to the right person at time is the method of logistic management. Great amount of information of high variety is not at all useful to take proper decision and action. For example the report indicating the production completed and stores credited for last week is important to the production manager and ales manager. However it may not be useful to the purchase manager. Legal adviser needs the detailed report of the dispute o the shop floor, but it may not be of use to the sales manager.

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Production reports may be useful as information to the head of marketing, but it may not be relevant for the people who move in the market.

TECHNOLOGIES INVOLVES
With the advent of the improvement computer technology the information system in the organization is becoming easy job. It provides all the necessary needs of the perfect information system. The speed , the real time information ,
Characteristics of Information contd

customers and vendors data along with inventory are all satisfied by the application help of computer to technology. monitor pre Information systems managers

negotiated prices and rebates, and to better manage inventory tracking.

Internet Connectivity
Internet-enabled Information systems have great potential to improve the efficiency and effectiveness of supply chain activity. Direct link between the companies is possible, eliminating the middle points like retailers, distributors, agents, etc giving straight service to the customers. The warehouse of the company is placed at distant places.

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They need to have quick connections with each other as well as with the main office and the manufacturing plants. Now the plants are also placed at different palaces. The LAN system with the internet connectivity is the great boon to the information network. The people can do the job easily with this facility. Many firms view effective management of logistics and supply chain activities as prerequisites to overall cost efficiency, and keys to ensuring their ability to competitively price their products and services. The company meets the logistic needs of its customers. Management indicates that highest priorities are on customers, productivity, and performance. It is clear that Internet and E-commerce issues
Technologies Involves are both recognizable and critical..

E - Commerce:
This is the emergence of new system of selling, buying through the internet connectivity. The long chain between the real consumer and the manufacturer is eliminated by this method. Thus resulting is much cost reduction of logistic operations on both the sides. The consumer ticks on the list of articles that he

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needs and places the order to the manufacturer on the internet. The internet connectivity is now available to the common people at their home places. They find it convenient to use it and place the orders. As the confidence increases regarding the quantity and quality the system will definitely grow. Three key types of Information System (IS) personnel needed: Architect to design process System software. Data manager to build data warehouse. programmer to assemble hardware and

Bar - Coding / Scanning


This is most commonly used automatic identification technology. Consistency of this technology is the important factor in efficiency and effectiveness. Here optical scanner reads the bar codes on the container of the product accurately. The read information is in the digital contd Technologies Involves form. immediately. This gets fed to the computer immediately. This information is available to be used

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Electronic Data Interchange (EDI)


This helps B2B, computer exchange of business data in a structured, machine- process able format. This is the direct transfer of information from a company to other company without the human intervention. The speed and the accuracy is maintained at level.

Extensible Markup Language (Xml)


This is the method of packing information for movement on they Internet. This may replace EDI in the future.

Data Management and Imaging


This is the image processing method of documents like drawings, bill of material, etc. These are handheld input devices and optical scanning popular in data management. These documents can be stored and instantaneously transmitted to the customers for evaluation, quotation, etc, making the logistics operation quick. Both photographic and facsimile processes are being used to image documents.

RF Technology
This uses radio frequency to transmit computer outputs, possibly from an expert system to human operated devices,

Technologies Involves contd

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such as, a forklift. This optimizes quality, efficiency, and accuracy. This helps two way communications. On board computers and satellite tracking. This technology uses systems such as GPS to track and communicate with mobile and / or remote vehicles. This is used for broader, non-optimum solutions. It is Responsible for short-term, day-to-day functioning that help manage warehousing, transportation, international trade, and inventory. Many recent advances in technology and these advances will most likely continue to evolve and impact logistics management in this future.

Artificial intelligence
This is a system where the actual happening in future can be predicated by the equipment. In logistic management this is used to get idea of transportation time, type and cost involved, inventory levels in the warehouses, customer service response, and time required for delivery. These issues are generated as model by feeding the relevant data to the system.

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Export System
This is the computer program which gives solution to the problem by the computer. It offers to a common inexperienced man the solution which experts and highly experienced teams of the persons. This is used for the problems in logistics, designing the modes of transportation and monitoring the activity.

KNOWLEDGE MANAGEMENT
Technologies Involves contd To maximize the results of an environmental scan, the

logistics manager needs to consult: Logistics area employees Channel partners Internal audit or external consultant Other internal logistics initiatives It is increasingly popular to dedicate a website to hold information from the scan. Many logistics managers do not believe that reports communicate effectively. Firms must have a scientific and intuitive knowledge of customers and suppliers information requirements. Lack of co-ordination and integration are the key logistics and supply chain processes. See that logistics organization strategies move from a functional to a process orientation. Early implementation efforts may suffer due to

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poor data or the non-availability or none sharing of future data.

Adapting to new information technologies


The organization must have the financial resources needed to assure a smooth, full implementation and the people willing to accept and the people willing to accept and use new technologies. Firms must create opportunities for interaction and team efforts among logistics managers and those others most knowledge about information technologies.

LOGISTICS INFORMATION FLOW ARCHITECTURE:


The operations in the organization are planned in a particular strategic plan. These plans are made as per the
Knowledge Management

forecast by marketing department. On the basis of this forecast the logistic plans and further production plans are made. This chain of operations has to be converted in to information. The center point happens to be inventory management to help the development of the inventory. The information architecture has to be developing to organize these operations. Without the accurate information the regular activities are not possible. The figure on the next page indicates logistic information architecture.

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This includes the information from both the sides such as customer order on one side and purchase, production and inventory management on the other side. Data warehousing should provide information for planning and coordination of production and deploy inventory to satisfy customer orders. Co-ordination Flow
Strategic plan Capacity plan Logistics plan Production plan Procurement plan

Inventory Deployment Forecast Inventory Management

Order Management

Order processing

Distributio n

Transportation &

dispatch

Purchase Function

Operation Flow For accuracy requirements the hardware and software parts of the computer system become backbones of the total information system. These include computers, servers, and

Logistics Information Flow ARCHITECTURE:

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internet connectivity, input and output devices as hardware. The relevant logistic program becomes the software part. Replenishment orders on the production shops as well as vendors shops depend on the movement of finished goods to the customers. The logistics activities of transportation and warehousing depend on the strategy and the flow of the goods to the customers.

Logistics Information Flow

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LOGISTICS PLANNING PROCESS


DEFINITION:
Planning is the list of the activities to achieve a typical goal, which is fitting in the budgeted expenses and possible to achieve. The planning is the main function at each and every group in the company. At the top of company people have to device the mission for the company. They have to set a goal for the company. To achieve the goal of the company proper planning has to be done.

FACTORS REQUIRED FOR PLANNING


The function of planning has needs following important factors. Aim to be achieved. The description and definition of the project-activity has to be crystal clear. It should have sanction from right authority. Projects are failure if they are not clearly defined. Resources in terms of money, men, place. Success of the project needs these factors with sanction of senior management. Proposing number of projects and not providing the resources results in mess. We observe number of incomplete projects by government, roads

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and railways etc. The transportation and logistics is poor in India due to poor infrastructure. There are many good projects in India. Many of them are lying in incomplete stage. So money is spent but fruits are not there. The people continue suffering. Time period to achieve the aim is required. If the project setting up needs a period of say one year, it should be given one year. That period should be available. Mechanism to coordinate, control the activities. Use of software, Bar charts, PERT/CPM. Third party monitoring is useful. Timely review is important. Critical path method is the best known system of controlling and monitoring any project plan. These charts will indicate how the time period in the project and finance management can be done. Involvement of people. Any project will be found failure if right people who will be working on the matter in future. Appropriate involvement of the people will result in success even in the difficult projects.

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MISSION STATEMENT
For any organization, planning is essential for its survival and growth in its business. While planning, management should take into consideration the overall mission statement of the organization and develop specific action plans to enable the organization to move in the proper direction. For the rapidly changing business environment, managers need to anticipate changes and equip their organizations. Managers should be proactive rather than being reactive in a crisis mode and should be able to move forward in achieving theirs companys mission. A mission of any company is a statement indicating goals of the organization. As per TQM it is to be generated by all the employees of company. It indicates the aims and targets, dealing with customers, goals,contd & Missionit is not expected that to be just elusive Factor ethics etc. Statement statement. As per ISO requirements the company has to be explained and shown in documents, as to what actions are being taken for achieving the mission. In order to fulfill the needs of mission of the organization, the top level persons have to decide line of action. Strategies have to be selected for implementation in order to meet the objectives and goals that will suit the mission. Plan of the

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organization is to decide activities to achieve the corporate mission. The strategic or long-term plans for the firm are developed at the highest levels of management of the company.

THE MISSION OF LOGISTICS


An organization achieves competitive advantage over its competitors by fulfilling customers requirement, by means of value advantage or Effectiveness at the lowest cost of product by improvement in productivity Efficiency. Logistics aims to achieving a decided quality requirement of customer service through efficient operations. Thus, integrated logistical systems aim to fulfill the service at the level required by the customer by performing the necessary operations at the lowest possible total cost. For example the mission of leading Logistics Company in India, Shipping Corporation of India is as follows.

Mission Statement of Shipping Corporation of India


To serve Indias overseas and coastal seaborne trades as its primary flag carrier and be an important player in the field of global maritime transportation as also in diverse fields like Offshore and other marine transport infrastructure.
Mission Statement contd, Mission of log..

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PLANNING METHODOLOGY
The strategic plan is generally developed at the top level with the basis of long term needs. The strategy is based on the mission. On the basis of the yearly budgets made. These are passed on to the concerned departments to create their project plan, which are functional plans. Mission of the company gives rise to the strategic plan at top level. The plan for each department like marketing, production, design, logistics, etc., is derived from the companys strategic plans, which are developed at the top level. The planning vision for strategic planning may vary from 2 to 5 years. It is less detailed and its focus is on competition, resources and stake holders. It integrates the corporate and the supply chain. The strategic plan usually include projected revenues and expenses, lines or business anticipated relative share of the market, and sales and profits from existing business lines

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PLANNING STRUCTURE IN THE ORGANIZATION


MISSION STRAREGIC PLAN Planning Methodology FUNCTIONAL PLAN ORERATIVE PLAN

The functional plans are developed at each department level. Here the budgets are made under different heads to achieve the plans. These plans are in the line of strategic plans decided at the top level. Detailed operational plans are made at the operational levels of management in the respective department. Controlling activities during implementation is essential to meet the operational plans. This plan includes a combination of marketing and financial objectives and defines the markets, products, services, and activity levels relevant to logistical activities. The activity in the logistical function takes care of the activities from order receipt to procurement to customer delivery.

LOGISTICS PLANNING
The internal production capacity expansion plans and also suppliers expansion plans are concurrently decided on

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the basis of sales forecast. Outsourcing is given priority only after internal capacity is fully used. The money is already spent for internal capacity in from of plant machinery and persons the cost already gets added due to those expenses. So vendoring out should be considered only after the internal capacity is fully used up. The extent of future logistical activities is based on forecasts customer orders and promotions. The budget for the inventory has to be made plan for efficient logistical operations and the plans for Manufacturing and procuring the inventory items have to be synchronized this synchronizing should be preferably done by dedicated software dedicated Software is available in MRP and MRP1 packages The procurement of materials required for manufacturing and order fulfillment the logistics activity flows outline the sequence of logistics Operations from order receipt involves Inventory management activities in order to reconcile inventory availability based on prior planning and ordering for actual requirements. through order processing distribution And dispatching and transportation to customer delivery this

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INFLUENCING FACTORS ON STRATEGY AND PLANNING


Company strategy and further logistics plan depend on the number of factors. They are as follows.

Government and legal political factors. Technological innovations in the company. Outsourcing opportunities available Economic and social factor, and General competitive atmosphere in the

markets.

Government Regulatory Factors


The government rules and regulation make lot of differences on the decisions of strategic planning. Some governments give tax holiday for company for specific period. There is some regulations for pollution control. Some areas like Div, Daman, Goa, which are ruled by central government. They offer some concessions to carryout business in that area. Following are the matters to be considered. Regulatory issues Taxation Pollution control
logistic Planning contd.., Influencing

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Special interests

Outsourcing Opportunities
There are areas where the small industries have mushroomed very nicely. The companies find easy to do outsourcing. The places around Pune, Bangalore, etc. are the places where small industries have grown and private entrepreneurship has been increasing. These areas will reduce the cost of transportation. For example M/S the company can reduce inventory levels also, Tata by motors has number of suppliers in the vicinity of 5 KMs. Here implementing JIT type activities. Number of sources Availability of power.

Competitors in Market
The field in which the company is working are to be considered to get an edge over them. New entrants are more attacking and aggressive. Many small unorganized
Influencing contd.. sector companies can be challenge to the product sales.

Complete data of the following type is necessary while taking decisions of strategic plans. It may be essential to fight with the competitors product in the market on any issue accepting the price alone. However

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there are example that good companies have to make a collaborative deals with even competing companies. Such decisions have to be a part of strategic plans. Number of competitors Relative strengths Locations Degree of integration Partnerships

Economy and finance:


Banking system and economic situation has to be considered. Rate of change Availability Cost Interfaces These factors interact with each other. Based on the forecasted trends in factors and the projected inflation and economic growth rates, the corporate strategic planning is carried out.
Influencing contd..

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PLANNING, BUDGETING, CONTROLLING


For the function of logistics, the strategic plans are developed for the company at the top level. Further the functional plans are developed at department level. These have to be implemented. The activities are precisely defined and budgets are prepared. No plan can be implemented unless the budgets are made available by senior managements and the accounts department. The activities are monitored throughout the period and strict watch is kept on the expenses. The controls on the expenses are the important function of planning. Strategy by logistics managers will enable them to take decisions in the best interest of the organization. The logistics strategy will be based on the corporate strategy. Logistics managers would choose road transport over rail transport. Low cost is the primary objective of transportation. Hence a logistics plan must be develop so as to execute a logistics strategy and monitor progress. Functional planning is done at the middle management level and generally having a planning vision of one to three years. The resulting plan is a medium range plan. Functional plans have to be more specific than strategic plans in terms of product lines. This will be further split into detailed quarterly

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revenues and expenses at the middle level management. Their implementability has to be positive. Activities generally considered are such as follows. Some activities are regular type while some are one time activities. Regular types of activities are budgeted on the basis of historical figures. For example transportation, material handling, etc. As against that one time activities do need specific sanction by senior management. The historically planned matters are related with production forecast. If the forecasted figures of sales are more by 10%, these budgets can get sanctions to the extent of 10%. But in the case of regular type activities also management will expect some cutting down in expenses even when the sales and production increase. That will cut the logistics cost. Procurement budget-regular type Transportation budget-regular type Internal material handling budget- regular type Building new warehouses- one time type Purchasing material handling or transportation equipments and other major expenditure to support the logistic infrastructure one time type

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Waste,

rework,

rejection,

pilferage

budget-Cost

reduction drive projects For example, the objectives of cost reduction for a firm would lead to strategies to reduce total logistics costs. These strategic plans could take the form of, reducing the number of warehouses, transportation consolidation, or purchase of new software for and logistics running information number of management. Maintaining

warehouses is very costly. So it will be issue of planning to consider reviewing number of warehouses. Operational planning is carried out in more detail on yearly basis. That is further split to quarterly or monthly plans. The
Planning, Budgeting, Controlling operating plan which breaks down resulting plan is called contd

revenues expenses and associated cash flows and activity by month for a one year period. The detailed operating plan guides the activities at the junior management level and facilities monitoring of actual performance by comparing it with planned performance production scheduling and material purchases are based on the operating plan. A company can use its operating plan to anticipate its logistics needs from warehouse capacity to shipping. It permits logistics to anticipate its labour costs and to negotiate contracts with third party logistics providers.

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ACTION ON OPERATION LEVEL


The planning at the operational or control is about the basic work level. These activities like dispatching, raising invoices, responding to customer enquires etc. here the performance and efficiency and discipline of the persons working on the job is important. This is the control level of management. The level of performance of the work is also measured continuously at this level of performance of the work is also measured continuously at this level and reports prepared for the functional level of management. The performance measurement is in relation to costs, customer service, and productivity. At the strategic planning level, the reports from the tactical level help to refine logistical strategic plans like development of alliances and improving competencies in strategic areas.

LOGISTIC PLANS IN COORDINATION WITH OTHER DEPARTMENTS


Main intension of logistics strategic planning is an integrated
Action on planningOperation Level achieve competitive advantage through process, to

increased value and customer service. Or get superior customer satisfaction, by anticipating future demand for logistics services. Or it may be managing the resources of

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the entire supply chain. This is to achieve overall corporate goals and plan. Logistics strategy has to be properly formulated by understanding the corporate strategy. Also it has to be related to plans of other departments such as production, design, etc. however plans of production, or marketing or design departments are given importance. Production Plan Marketing Plan

Logistics Plan

Design Plan

Materials Plan

Logistics strategic planning and logistics planning is well spread in the different departments so it does not get highlighted.
Logistic Plan in Co-Ordination

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The activities concerning to logistic functions need to be consolidated and coordinated appropriately. Strategic logistics plan depends on a number of inputs from various functional areas. They are (I) marketing, (ii) production (iii) Design, and (iv) Materials. Marketing is closely related to logistics and hence provides the key inputs to logistics. Marketing provides information about product / service offerings, pricing, and promotion for each channel. This information includes: (i) Sales volume by month, (ii) type of customer, (iii) regional area, (iv) product introductions and deletions, (v) customer and (iv)geographical area. Logistics does contribute t6o and support an organizations strategic planning process in a number of ways. They are as follows. Reduction in inventory resulting reliability of delivery time. Achieving improvement in customer service. Undertaking number of time saving projects in the production department to improve shop through put. That not only saves cost but also improves delivery of products to customers.

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Reducing inventory levels through shorter cycle time in production shop. Improving marketing advantage from consistent, shorter order cycles. Uninterrupted supply of in-bound materials. Reduced total costs by incorporating logistics into the corporate planning process. Customer strategy. service Logistics policies must are critical to logistics the participate with

Logistic Plan in Co-Ordination contd organizations management in setting such policies to

ensure that they are feasible and economical. Customer service policies should include the following information by type of customer and region: (i) Order placement methods, (ii) order entry, (iii) target cycle, (IV) order cycle variability, (v) desired fill-rate or instock levels. Also, customer service policies should be related to product substitution, expediting, transshipment, and customer pickup. Production department provides some key information to logistics strategic plan. Locations of present and future production facilities, and Planned production volume and product mix for each location.

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When the same product is produced at multiple locations, logistics can decide how to serve each market most efficiently. Accounts department provides forecasts of costs related to inflation rates and growth assumption to project future costs. It provides the cost data required to perform cost trade-off analysis. Also it is responsible for capital budgeting which determines the availability of capital for improving logistics equipments and infrastructure. Logistics provide data and analysis related to the existing logistics network to the other functions, including current storage and distribution facilities owned and rented, both at manufacturing locations and in the field, equipment capacity and capabilities at each location. And current transportation arrangements between various channel members.
SEMESTER V Logistic Plan in Co-Ordination contd

UNIVERSITY QUESTION PAPER (November 2004)

SECTION I I) Answer the Following Question In Brief (1) Cross-docking. (2) Economic order Quantity. (3) Fill rate. (4) Bill of Materials.

II) Case study

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Mumbai flour mills provide high-quality bakery flours to commercial bakers as well as to the consumer market. The commercial have consistent demand and brand-loyalty, whereas consumers have minimal brand-loyalty but also generally prefer known names over store brands. Demand is seasonal for the flours with the annual break occurring just before Diwali and slacking off dramatically during January and February. To offset these both, Mumbai flour mills and sales promotions. The production planning department of the company located at Akola, Maharashtra, has the responsibility for controlling the inventory levels at the plant warehouse at Nagpur as well as three distribution centres located at Nasik in Maharashtra, Bhopal in Madhya Pradesh and Hyderabad in Andhra Pradesh. Planning has been routinely based on past experience and history. No formal forecasting is performed. Distribution centres get their requirements by rail from Nagpur. The lead time of replenishment from Nagpur to distribution centers is 7 days. The replenishment rate is 48 to 54 pallets per wagon depending upon the type of wagon used. In case of any emergency demand, eighteen pallets can be made available by truck with a 3 days transit time.
University Question Paper (November, 2004)

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Recently the company has experienced two major stocks out for its consumer-size 5Kg. sacks of refined quality white flour. One of these was due to problems in milling operations, the other occurred when marketing initiated a buy one, get one free coupon promotion. Since these events, the planning has become overly cautious and errs on the side having excess inventories at the distribution centers. Additionally, two other events have affected Distribution Centers throughput: (1) implementation of direct factory supply for replenishing the five largest super market chains, and (2) a price increase making Mumbai flour more expensive than its national brand competitors such a Pillsbury or TATA Media. Of 1500 pallets in the Hyderabad distribution centre the Mumbai flour M<Ills shows only 3-9-6 pallets for open orders. This has led the company to use outside overflow storage, where there are another 480 pallets. Flour is easily damaged; hence, Mumbai flour Mills prefers to minimize handling. Over stocking at Distribution centers alone cost Rs.1.85/per pallet for outside storage to which must be added Rs.4.25per pallet extra handling and Rs.225per truckload for transportation.

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Similar scenarios are being played out at the DCs as well. Mr. Mohan, the distribution manager is contemplating various approaches to solving the inventory problem. It is clear that the product must be in place at time a consumer is making a decision to buy the product, but the company cannot tolerate the overstocking situation and the stress that it is putting on facilities and cash flow Mr. Mohans first thought is a better information system which will provide timely and accurate information throughout the organization.
QUESTION: University Question Paper (November, 2004)

1) Evaluate

the

alternative

solution

that

could

be

considered by Mr. Mohan. 2) What additional solution do you propose? 3) Examine the transportation system and its drawbacks.
SECTION II

Explain

the

various

factors

deciding

the

number

of

warehouses. Also discuss the basic layout and design objectives of a warehouse. (5) (a) Explain the strategic role of Information Technology in Logistics Management. (b) Discuss the various factors of performance measures of logistics activities.

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(6) What is selective inventory control? What are various methods adopted in selective inventory control policy? Explain with examples. (7) Answer any two from the following: (1) Functions of packaging. (2) Third party logistic. (3) Unitization and containerization. (4) Lead time in inventory management. QUESTION PAPER SOLUTION

I]Answer the following questions in brief:


1) Cross Docking
University Question Paper (November, 2004)

Cross Docking is a relatively new logistics technique used in the retail and trucking industries to rapidly consolidate shipments from different sources and economically transporting to the customers. Cross docking eliminates the inventory holding function of the warehouse, allowing it to serve consolidation and dispatching functions. Incoming shipments directly transported without storing them in between. Dispatching takes place in less than 24 hours at the facility, sometimes less than an hour.

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It is taking of finished goods from the manufacturing plant and delivers it directly to the customer with little or no handling in between. Cross docking reduces handling and storage of inventory. Filling a warehouse with inventory before dispatching materials out is virtually eliminated. Cross docking means receiving goods at one door and shipping out through the other door almost immediately without putting them in storage. Cross docking shift the focus from supply chain to demand chain. For example- stock coming into cross docking centre has already been pre-allocated against replenishment order generated by a retailer in the supply chain. It helps retailers to streamline the supply chain from point of origin to point of sale. Objectives It helps in reducing operating cost. ItUniversity Q. inventory levels. reduces Paper Solution It increase throughput. It increases sales space.

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2) Economic Order Quantity


The order quantity depends upon the cost of the inventory items, the rate and nature of demand (whether constant or fluctuating), the replenishment time, and the inventory carrying costs and ordering costs for the inventory items. As the order quantity increases, the inventory carrying cost increases due to the increased average inventory held during a period. However, the ordering costs per period decrease since the number of orders to be placed during the period are fewer. Hence, if we assume that all the other variables that determine the order quantity remain constant, we can economize the total cost of inventory carrying plus ordering. This optimization results in the Economic Order Quantity or EOQ. The assumptions of the simple EOQ model are as follows: The price or cost of inventory is constant, and does not depend upon the order quantity or time (no discounts); Continuous, constant, and known demand rate; Satisfaction of all demand; that is, there are no inventory shortage; Replenishment time is known and constant, and each replenishment is in a single lot; No inventory in transit

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Infinite planning horizon


A single inventory item and no interaction with other inventory items; and No limit on capital availability.

3) Fill Rate:
When orders are received, you want to be able to confidently promise availability and meet those commitments in a timely order. Order fulfillment gives real time, constraint based facilities for accelerating order execution in environments spanning multiple groups, departments, plans, and companies. It is essential to accurately calculate product availability dates based on the actual status of supply chain. When a precise configuration wont meet a customers required date, flexible business rules let you define alternative ways to respond to the customer based on customer priority, order size, location, cost, time, or other factors. Whats more, customers can get update their orders in real time to change certain configurations. Cost of goods sold Days in inventory Days sales outstanding Fixed assets utilization

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Revenue growth Order fill rate Customer turnover Order to invoice lead time Manufacturing equipment utilization Fulfillment accuracy University Q. Paper Solution Use substitute components or products to meet customer orders Manage availability, stock-outs, partial shipments, and returns Stop using fixed quoted lead-times on sales orders Reduce or eliminate errors and inaccurate deliveries for configurated products Reduce time needed to prepare and process sales quotations. Reduce partial order shipments Reduce customer change orders

4)Bills of Materials
The bill of material is prepared from the product design documents. Each product is basically the assembly of the number of components. Before reaching to the final

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assembled product for convenience the engineering person has to make several sub assemblies depending upon the complexity and the size of the product. It is never true that all the components come to one assembly station and the full product gets assembled. Obviously the components are made from some raw material. The raw material is required to be planed I if the said components is made in factory.

Product A
University Q. Paper Solution SA 1

SA 2
C4 C5 C6 C7

SA 3
C8 C9

C1 R M

C2 R M

C3 R M

R M

R M

R M

R M

R M

R M

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This information is essentially indicated in the design and assembly process sheets. This is fed to the MRP software. On the basis of this, production requirements the BOM extrapolates the requirements for the components and raw materials are to arrive in the factory. According to the lead time requirements the requisites release documents are prepared. II) CASE STUDY Mumbai flour mills provide high-quality bakery flours to commercial bakers as well as to the consumer market. The commercial have consistent demand and brand-loyalty, whereas consumers have minimal brand-loyalty but also generally prefer known names over store brands. Demand is seasonal for the flours with the annual break occurring just before Diwali and slacking off dramatically during January and February. To offset these both, Mumbai flour mills and sales promotions. The production planning department of the company located
University Q. Paper Solution at Akola, Maharashtra, has the responsibility for controlling

the inventory levels at the plant warehouse at Nagpur as well as three distribution centres located at Nasik in Maharashtra, Bhopal in Madhya Pradesh and Hyderabad in

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Andhra Pradesh. Planning has been routinely based on past experience and history. No formal forecasting is performed. Distribution centres get their requirements by rail from Nagpur. The lead time of replenishment from Nagpur to distribution centers is 7 days. The replenishment rate is 48 to 54 pallets per wagon depending upon the type of wagon used. In case of any emergency demand, eighteen pallets can be made available by truck with a 3 days transit time. Recently the company has experienced two major stocks out for its consumer-size 5Kg. sacks of refined quality white flour. One of these was due to problems in milling operations, the other occurred when marketing initiated a buy one, get one free coupon promotion. Since these events, the planning has become overly cautious and errs on the side having excess inventories at the distribution centers. Additionally, two other events have affected Distribution Centers throughput: (1) implementation of direct factory supply for replenishing the five largest super market chains, and (2) a price increase making Mumbai flour more expensive than its national brand competitors such a Pillsbury or TATA Media. Of 1500 pallets in the Hyderabad distribution centre the Mumbai flour M<Ills shows only 3-9-6 pallets for open orders.

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This has led the company to use outside overflow storage, where there are another 480 pallets. Flour is easily damaged; hence, Mumbai flour Mills prefers to minimize handling. Over stocking at Distribution centers alone cost Rs.1.85/per pallet for outside storage to which must be added Rs.4.25per pallet extra handling and Rs.225per truckload for transportation. Similar scenarios are being played out at the DCs as well. Mr. Mohan, the distribution manager is contemplating various approaches to solving the inventory problem. It is clear that the product must be in place at time a consumer is making a decision to buy the product, but the company cannot tolerate the overstocking situation and the stress that it is putting on facilities and cash flow Mr. Mohans first thought is a better information system which will provide timely and accurate information throughout the organization.
QUESTION:

1) Evaluate the alternative solution that could be considered by Mr. Mohan.


Ans) The alternative solutions to be considered by Mr. Mohan are as follows

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LOGISTICS PLANNING
Logistic master planning is a systematic approach to logisticengineering based on logistics planning. The planning process decides following: Performance measures and goals, Processes, System requirements, and Organization requirements for customer service and ore... processing, Inventory planning and management, Supply, Transportation and distribution. Short-term and long-term recommendations are evaluated on regular basis and time-phased with the principles of incremental justification and implementation. The Logistic planning process requires the client;.: assemble a crossfunctional logistics planning and management team These include detailed, prioritized, and scheduled short and longterm action plans for performance measures and goals, processes, information systems, design; logistics and information training and organization system requirements; requirements. The
University Q. Paper Solution

detailed material and information flows; and detailed' organizational

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importance

of information flow has to be kept in mind.

In

some cases Logistics Resources International equips the clients with decision support tools for on-going computeraided logistics planning and management.

MRP
The computers can be great help to the material manager. Further with the help of specialized software experts MATERIIAL I REQUIREMENT PLANNING (MRP) is developed as computational f technique. This software converts the master schedule to the useful activities like requirements raw material, components, subassemblies and assemblies For meeting the master schedule requirement, MRP indicate the quantities and when precisely they are required to be brought in. It is the integrated approach to the inventory management, taking in to the account purchase and the in house production program. The deliveries of the products week by week are indicated.
University Q. Paper Solution

LIS (logistics information system) LIS is an interacting structure of people, equipment, and procedures that together make relevant information

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available to the Logistic manager for the purpose of planning, implementation, and control. The information is the data processed to get meaningful picture of the situation and generate thoughts for further actions. Comprehensive relational database that contains the type of information required to make effective decisions. This has greatest use in all the parts of logistics management such as the transportation, inventory, and product areas with warehousing and customer areas showing less progress.

Main Functions of LIS


The functions are as follows. Take proper decision at all levels in the organization. Provide Database at appropriate stage. Support Planning function. Provide Controls in the operations. Communication with concerned persons.

Policy Level
N University Q. Paper Solution Decision Level F O R M A T I O N I

D A T A

Control Level Operating Level

D E C I S I O N S

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2) What additional solution do you propose?


Mr. mohan should consider Cross Docking as a additional solution since, Cross Docking is a relatively new logistics technique used in the retail and trucking industries to rapidly consolidate shipments from different sources and economically transporting to the customers. Cross docking eliminates the inventory holding function of the warehouse, allowing it to serve consolidation and dispatching functions. Incoming shipments directly transported without storing them in between. Dispatching takes place in less than 24 hours at the facility, sometimes less than an hour. It is taking of finished goods from the manufacturing plant and delivers it directly to the customer with little or no handling in between. Cross docking reduces handling and storage of inventory. Filling a warehouse with inventory before dispatching materials out is virtually eliminated.

University Q. Paper Solution

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Cross docking means receiving goods at one door and shipping out through the other door almost immediately without putting them in storage. Cross docking shift the focus from supply chain to demand chain. For example- stock coming into cross docking centre has already been pre-allocated against replenishment order generated by a retailer in the supply chain. It helps retailers to streamline the supply chain from point of origin to point of sale. Objectives It helps in reducing operating cost. It reduces inventory levels. It increase throughput. It increases sales space.

Functioning Of Cross Docking:


In a traditional warehouse, goods are received from vendors and stored in devices like pallet racks or shelving. When a customer (e.g., the consumer or perhaps a retail outlet) requests an item, workers pick it from the shelves and send it to the destination. In a cross dock, goods arriving from the vendor already have a customer assigned, so workers need only move the shipment from the inbound trailer to an

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outbound Trailer bound for the appropriate destination. The already part should make you think of information system requirementsa chief obstacle to implementing crosses docking successfully. Pre-distribution is definitely more difficult to implement because the vendors of the cross dock must know which customers of the cross dock need what before they send the shipment. This involves quite a lot of information transfer, system integration, and coordination. The problem is big for a distributor with many vendors.

Q:3 )Examine the transportation system and its drawbacks.


the company madly needs to have their own transportation system. The product has to reach the customer quickly and directly to the customer. The seemed figures of the product have to reach production centre directly and the product supply ahs to be done to the customer directly. There has to be pull system for the product. The product should not be supplied thought the distribution centre. In choosing a transportation mode, the transportation managers consider the following criteria.

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Cost:
Cost per ton-mile is considered. Tariff charges, extra inventory, warehousing, buffer stock, broker fees customs are the contents of the cost. The air transport is costly. Still from the point of view of the product the right combination has to be derived.

Transit Time:
The time from the shipment of the order at the origin to the receipt of the order at the destination, with Security of the goods is considered. System stops may jeopardize goods; risks lessen when goods are in transit. Modal Characteristics and Selection is to be done. Hazards and regulations differ for each mode of transportation. The transporter's efficiency depends in observing the time when material in movement, as against it is lying stationary at his yard.
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Safety:
Concerns about safety at all levels from start to end of delivery. Proper storage and handling equipment, customer service goals, and all aspects of integrated logistics have to be considered. Selection of the mode of transport have to be careful so that any damage, theft must be avoided at any

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means. Also the proper packaging needs to be done to avoid damage by available quality of the people.

Reliability:
It is meeting schedules on time as per requirement of the customer. From the point of view of logistics this is important. Faster the mode the reliability increases. But it has to be weighed against the cost. However the systematic working improves reliability.

Claims record:
The damage of the goods is important problem. Damaged goods cannot be used by the client. Damage, pilferage and theft type of matters is the blunt on the name of transporter. The supplier has to fill up claim forms and get the money. The customer remains dissatisfied since he does not get the material. The insurance expenses increase in such type of cases.

Responsiveness:
The ability to handle various products is considered. The transporter has to respond the changing needs of the supplier. Services to be provided without following rigidity of the rules and regulations. However the material should be shifted with responsibility.
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Speed:
With this attribute the door to door delivery time is considered. Time starts from releasing the product from supplier. Although the mode of transportation is important, the methodological working at the transporter's place makes the difference. Those methods should display ability to deliver on time.

Capability
Here the number of geographic points served is import a: it. The transporter should be in position to deliver the goods at any remote place. Also the ability to move special, hazardous materials is considered.

Accessibility
The transporter has to be capable of door-to-door pick up as well as delivery. The Terminal Operations have to be known perfectly. Terminals serve to sort and consolidate shipments. Organize pickup and delivery systematically. Truck terminal operations, Railroad yard operations, knowledge of warehouses and distribution centers have to be known.

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SECTION II 3) Explain the various factors deciding the number of


University Q. Paper Solution warehouses. Also discuss the basic layout and design

objective of a warehouse. In order to take decisions regarding warehouses, a firm needs to consider the following: The ownership: whether owned or hired; The number of warehouses; The location of the warehouses; The size and type of warehouse and materials/ products stored; & The layout of the warehouse.

The Number of Warehouses:


The number of warehouses is another decision parameter impacting a number of cost variables and customer service. If customer service is taken in cost terms as cost of customer dissatisfaction, the number of warehouses will affect transportation, inventory, and warehousing and customer dissatisfaction costs.

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Transportation

costs

initially

decrease

with

increasing

number of warehouses. This is due to the transportation economies obtained by having large-volume long-range transportation from consolidation warehouses and shortrange small-volume However, transportation as the from of break-bulk warehouses warehouses. number

increases beyond a certain value/ the transportation cost starts increasing due to the large number of transportation trips in-between the larger number of warehouses. Inventory
University Q. Paper Solution costs continuously increase with the increasing number of

warehouses because the increased space available needs to be utilized and firms increase the commitment of inventory at these warehouses beyond those actually needed. Transit inventory costs continuously decrease with the increased number of warehouses due to the shorter transportation times between the larger numbers of warehouses. The warehousing costs increase with more warehouses due to the maintenance and facility costs associated with each warehouse. For the same space, a single warehouse incurs less warehousing cost than two warehouses. Increasing customer number service of warehouses levels, thus, leads to increasing decreasing customer

dissatisfaction costs.

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LAYOUT AND DESIGN OF WAREHOUSE


The efficient layout and design of warehouse is very important from point of view of its working, which is linked to the overall fuctionning of the company. A good layout must be as follows. To achieve minimum waste of space and flexibility of arrangement. Supplying right material to customer as and when required. Ensure easy movements of the material handling equipments. Minimize of material handling requirements. Minimize of material deterioration and pilferage.

To

assist the

marketing

to

meet

the

objectives,

following information should be generated from the records: Classification of store items by size, number, weight, frequency of handling
FSNFast moving. Slow moving. Non-moving, handling University Q. Paper Solution

arrangements, considering perish ability of material.

Consider the quantities to be withdrawn at a time. Maximum number of units to be stored at one time. Storage facility best suiting the item.

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List of available storage space for different kinds of storage facilities. Size and shape of the space available for laying out the warehouse. Prepare a diagram of the flow the warehouse, of materials through

REL Chart for the storage of different classes of materials can be prepared.

While planning the layout and design of the stores, following factors should be considered:

The

space

for

receipt and

inspection

should be

provided Adjacent to the main warehouse. Use of third dimension (height) must be made effectively different storage facilities should be situated in clearly defined lanes, so that items are quickly stored and located. Main lanes should usually be 1.5 to 3 meters wide. Depending upon the type of material and the amount of traffic involved. Clear markings should be made at storage space to The fast moving items should be stored near the facilitate location and identification. dispensing window; the slow moving should be away from the window.

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The layout should permit the use of modern material Stores layout should encourage the FIFO, i.e. the old

handling equipment. stock should be used earlier and the storekeeper should not
University Q. Paper Solution

be compelled to keep the new stock above the old one. Due space should be left for expansion purposes in each portion, A pleasing and hygienic environment must be provided within the warehouse. etc. Adequate and clear lighting arrangements should be Adequate safety provisions including fire-fighting provided. equipment, alarms, accident control and prevention methods should he inbuilt in the warehouse design. Special facilities, such as cold room, heating equipment, air- conditioning etc, if required, should be carefully planned in advance. This may be done by proper selection of the colors of walls, provisions of exhaust removal, provision of cleaning

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5) a) Explain the strategic role of

Information Technology in logistics Management?


LIS is an interacting structure of people, equipment, and procedures that together make relevant information available to the Logistic manager for the purpose of planning, implementation, and control. The information is the data processed to get meaningful picture of the situation and generate thoughts for further actions. Comprehensive relational database that contains the type of information required to make effective decisions. This has greatest use in all the parts of logistics management such as the transportation, inventory, and product areas with warehousing and customer areas showing less progress.

IMPORTANCE OF LIS:
In the new competitive world success is measure of more
University Q. Paper Solution

sales, increased profit or a growing customer base. More important is to get an edge over the competitor. For that purpose basic business demands to simply get better at what we do. In the field of logistics, there has always been an abundance of data. Shipping bills alone make a lot of information. Gathering the data is important; evaluating the

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information,

setting

benchmarks

and

measuring

performance and progress is critical. The purity of the raw data is important. The small issues can have a major impact. Simple spelling errors or listing an address as a road can confuse during the evaluation process. Logistics has to develop some simple, yet powerful tools to quickly cleanse raw data from virtually any ad all sources. From the data available many reports are generated, which can pinpoint simple solutions that can generate cost savings and/or service improvements. These can have significant impact on profitability and customer satisfaction. Further the decisions have to be taken at every stage which impact throughout the entire organization, from operations to finance. changes. For some square meters of warehouse space and few lacks worth of inventory, the information is a critical factor in seeking continuous improvements. The information is power. The evolution of new profession depends on putting that high quality information into the The critical factors are the quality of the information, the ability to recommend and implement the

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hands of the professional. The logisticians can take decisions that can make a measured difference for companies. Example-In the small enterprises like hotel industries the practice of ordering has progressed from phone to fax. And now it is shifting from faxing to Internet mode.

Main Functions of LIS


The functions are as follows. Take proper decision at all levels in the organization. Provide Database at appropriate stage. Support Planning function. Provide Controls in the operations. Communication with concerned persons.

Policy Level
I N F O R M A T I O N

Decision Level Control Level Operating Level

D A T A

D E C I S I O N S

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In the organization from supplier to the customer the data keeps on generating. Analyzing this data and taking the organization has different levels. Each level has different needs of the information. The lowest level is the operating level. HerePaper Solution University Q. the activities are at the level of workmen; charge hand, loading-unloading, warehouse material handling functions take place. Generally the data gets generated here. This data has to be transferred to further levels of control level to take decision form of information. At control level the efforts are to be taken to improve efficiency of the operating level by analyzing the information. At the decision level the manager has to evaluate and analyze the information to see the operations and customer needs are equalized. At the top level the logistics management has to decide the policy on the basis of factors of warehouse, transportation system the future plans. The customer needs, satisfaction is given prime importance while making policy. At every level some data is generated and same is processed in to relevant information for every level in the organization. As the material keeps moving needful decisions and implementing these decisions improves organizational efficiency to provide the right

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supply to the customer at right time at right place. The proper decisions can be taken by logistics management by having quality information at every point in the organization.

Logistics Information Flow Architecture:


The operations in the organization are planned in a particular strategic plan. These plans are made as per the forecast by marketing department. On the basis of this forecast the logistic plans and further production plans are made. This chain of operations has to be converted in to information. The center point happens to be inventory management to help the development of the inventory. The information architecture has to be developing to organize these operations. Without the accurate information the regular activities are not possible. The figure on the next page indicates logistic information architecture. This includes the information from both the sides such as customer order on one side and purchase, production and inventory management on the other side. Data warehousing should provide information for planning and coordination of production and deploy inventory to satisfy customer orders.
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Co-ordination Flow
Strategic plan Capacity plan Logistics plan Production plan Procurement plan

Inventory Deployment Forecast Inventory Management

Order Management

Order processing

Distributio n

Transportation &

dispatch

Purchase Function

Operation Flow

Performance Measurement:
Performance measurement is necessary to evaluate whether logistics activities are efficient and effective. Like the pilot of an aircraft obtains feedback regarding the performance of the aircraft from the measures displayed on the panel, logistics managers need performance measures for evaluating the logistical performance of the firm. The basic
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objectives for developing and implementing performance measurement systems include monitoring, controlling, and directing logistics operations. Performance measurement helps in ensuring the proper utilization of scarce resources and comparing performance in relation to plans internally, and enables benchmarking with the competition and customer perception evaluation external to the firm.
4) b) Discus the various s factors of performance measure of logistic activity

Performance measures can be classified as follows:

Output-related measures.

and

process-related

performance

Function-based or activity-based and process-based performance measures.

Internal and external performance The experience obtained by managers from quality measurement of manufactured products has resulted in the realization that improvements in quality can be achieved by measuring the process rather than the output. Logistics is basically a process resulting in customer satisfaction. In order to ensure that the output of customer satisfaction is ultimately achieved, it is necessary to monitor and control the process by measuring the logistics variables in the

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process

which

ultimately

affect

customer

satisfaction.

However, the output also needs to be measured to ensure that the process being measured is resulting in the desired output. Examples of output-related measures are order cycle time and product availability. Function-based measures are metrics that measure performance of the activities within functions. These are measures like warehouse space utilization, transportation costs, obsolete inventory, and documentation accuracy which are related to functional areas. Functionally oriented measures fail to consider the cross-functional nature of logistics management, and so, can lead to functional optimization and overall logistics sub optimization. For example, the perfect order process metric measures the percent of customer orders that are flawlessly fulfilled. This metric measures the effectiveness of the order fulfillment process, crossing the boundaries of functions. Internal performance measures are related to measurement of activities and processes internal to the firm by focusing on historical performance and goal performance comparisons. Thus, actual logistical costs and customer service during this period can be compared to the previous period's actual performance and the goals set for this period. External

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performance measures focus on metrics concerned with customer perceptions and benchmarking against the competition. This classification of logistical performance measures shall be utilized to understand the various performance measures which can be utilized in practice.

INTERNAL PERFORMANCE MEASURES:


These measures are concerned with the activities and processes that ultimately service customers. Due to the focus of these measures on comparison of present performance with past performance and performance goals, these facilitate performance appraisal and improvement. Internal performance measures can be classified into the following categories:
University Q. Paper Solution

Time:
Time is an important measure of logistics performance related to effectiveness. Some of the measures in this category are order fulfillment lead time and variability, response time, on-time product shipment/ delivery, and forecasting/planning cycle time.

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Cost:
Cost measures are the basic measures used traditionally for measuring performance by most firms. The most commonly utilized logistics cost measures are cost to serve, total delivered cost, order processing costs, warehouse cost, freight cost, and cost trend analysis.

Customer service:
These metrics measure the ability of firms to satisfy customers. Examples of customer service measures are fill rate, stock outs, on-time delivery, back-order duration, cycle time components and variability, customer feedback, and customer satisfaction survey results.

Quality:
Quality measures involve measurement of the output of a process or a series of activities. Logistics quality performance measures like processing accuracy, frequency and amount of damage, number of customer returns, forecast and planning accuracy, cost of returned goods, and schedule adherence are frequently utilized. One of the most comprehensive measures of quality in logistics is the perfect order measure. This conceptual performance measure concerns the overall logistics performance of the firm. The perfect order fulfillment means completeness of order, onUniversity Q. Paper Solution

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time delivery, complete and accurate documentation, and perfect condition on delivery or installation.

Asset:
Metrics related to assets like facilities, equipment, and inventory measure the extent of their utilization. Measures like inventory turns, inventory accuracy, inventory carrying costs, obsolete inventory, and inventory days of supply, cash-to-cash cycle time return on net assets, and return on investment are common.

Productivity:
Productivity of a system is the ratio of the output produced to the resource inputs utilized for producing that output. Logistics productivity related measures commonly utilized are units picked per employee, orders per sales employee, orders shipped per hour, container utilization and orders processed per employee.

EXTERNAL PERFORMANCE MEASURES:


Whereas internal performance measures evaluate the logistics performance of processes and functions within the control of a firm, external measures concern the effects of these operations on the customer and compare the
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operations and effects with those of competitors. The external performance measures in most common use are those related to customer perception and competitor benchmarking.

Customer Perception:
Customer perception measurement is achieved by conducting post-order customer feedbacks and general customer surveys sponsored by the firm or the industry. These obtain customer feedbacks regarding response to customer enquiries, availability, and lead time, response to order information requests, problem resolution, repeat purchases, and product support.

Competitor Benchmarking:
Competitive benchmarking might simply be defined as the continuous measurement of the company's products, services, processes, and practices against the standards of best competitors and other companies who are recognized as leaders. It is not sufficient to measure performance internal to the firm, but more so performance relative to the competition. The first step in benchmarking is the understanding of the Processes involved in logistics fulfillment. The performance of these processes is then compared against the

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competitors' performance in those processes. Further, these processes are compared with the processes and practices, concerning the benchmarking areas, utilized by the best firms in comparable related and non related industries. This is known as best-practice benchmarking. The benchmarking areas in logistics could involve cost, customer service, strategy, technology, order processing, or any other logistics area. The practices would relate to organizational structure and relationships, facilities and equipment, and information systems. Benchmarking information may be obtained either by sourcing published information, private benchmarking, or information sharing between firms.

6) What is selective inventory control? What are various methods adopted in selective inventory control policy? Explain with examples.
Ans: Selective inventory may be defined as usable but ideal

resource. If resource is some physical and tangible object such as materials then it is termed as stocks. Selective inventory control means to keep as much inventory is required by the firm and does not involve overstock of inventory.

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Various methods adopted in selective inventory control policy are as follows: JUST IN TIME (JIT)

Definition:
This is a technique from TQM process. Basically this is waste control method. It is not the inventory control technique, but the result is that. It is organized approach to introduce in manufacturing cycle. Timeliness, Quality, Productivity, University Q. Paper Solution Flexibility, Work simplification and Waste reduction.

Techniques used in JIT


Although it is very attractive and beneficial to have JIT, but it does not come easy way. The employees of the company, suppliers will have to exert very much. They have to adopt high level discipline, dedication, togetherness to resolve the problem. Basically number of improvements has to be done in the manufacturing set up. Low lot quantities will have to be manufactured in lesser expenses. The higher lot quantity is main need of production department. For this purpose "JIT"

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gave birth to many 'common sense' techniques in the organization such as: Pokayoke, Kanban, Push pull method, TPM, Jidoka (low cost automation), Single minute exchange of Dies (SMED), etc. These processes are implemented in the manufacturing set ups. However they were found extendable in the nonmanufacturing set ups also, to improve the productivity.

SQUARE ROOT LAW


The Square Root Law states that The Total Inventory in a System is proportional to the Square Root of the Number of Locations at which a product is stocked. The Square Root Law has been discussed as far back 15 1962 and was proven mathematically by D. H. Maister in his 1975, International Journal of Physical Distribution article entitled Centralization of Inventories and The Square Root Law". The significance of The Square Root Law is that a firm currently operating out of five warehouses which centralizes to one warehouse can theoretically reduce inventory carried in stock by 55 per cent. This will of course result in large
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inventory carrying cost savings, which will be slightly offset by more rapid transport to meet current delivery service levels. In the quest of reducing inventory and number of locations for keeping the finished products, the companies are looking for avenues. This has to be done be with out reducing service to customers. In general t he inventory is more as the number of locations increase. And the reverse is true.

The Law
The square root law determines the extent to which inventory reduces by reducing the number of locations. The assumption is that the total customer demand remains the same. The square root law states that total safety stock inventories in a future number of facilities approximates be multiplying the total amount of inventory at existing facilities by the square root of number of future facilities divided by number of facilities. L L LI = = = (LI) (-X/W2/W1) Where total Inventory in future Warehouses total inventory in existing Warehouses

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WL = W2 =

Number of existing warehouses Number of future Warehouses

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For Example In a company there are 40 warehouses. These are reduced to 10 numbers. We use the above mentioned Square Root Law formula. This gives us the reduction in the inventory by 50% as follows. Wl = 40 existing Warehouses W2 = 10 future Warehouses LI = total units in the existing 40 Warehouses L = Total units at future 10 warehouses = (2, 00,000) = (2, 00,000) (0.5) = 1, 00,000 There will be 1, 00,000 units stocks giving reduction of 50%. It will be seen that if the number of Warehouses increased, the Total Inventory will increase.

Assumptions
We find the assumptions are as follows. (1) done. (2) (3) (4) Lead time does not vary. Customer service level does not change from any Demand level is well distributed from all the Inventory transfer from one warehouse to other is not

Warehouse. Warehouses.
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CROSS DUCKING
Cross Docking is a relatively new logistics technique used in the retail and trucking industries to rapidly consolidate shipments from different sources and economically transporting to the customers. Cross docking eliminates the inventory holding function of the warehouse, allowing it to serve consolidation and dispatching functions. Incoming shipments directly transported without storing them in between. Dispatching takes place in less than 24 hours at the facility, sometimes less than an hour. It is taking of finished goods from the manufacturing plant and delivers it directly to the customer with little or no handling in between. Cross docking reduces handling and storage of inventory. Filling a warehouse with inventory before dispatching materials out is virtually eliminated. Cross docking means receiving goods at one door and shipping out through the other door almost immediately without putting them in storage. Cross docking shift the focus from supply chain to demand chain. For example- stock coming into cross docking centre has already been pre-allocated against replenishment order generated by a retailer in the supply

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chain. It helps retailers to streamline the supply chain from point of origin to point of sale. Objectives It helps in reducing operating cost. It reduces inventory levels. It increase throughput. It increases sales space.

Functioning Of Cross Docking


In a traditional warehouse, goods are received from vendors and stored in devices like pallet racks or shelving. When a customer (e.g., the consumer or perhaps a retail outlet)
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requests an item, workers pick it from the shelves and send it to the destination. In a cross dock, goods ,i raving from the vendor already have a customer assigned, so workers need only move the shipment from the inbound trailer to an outbound Irailer bound for the appropriate destination. The already part should make you think of information system requirementsa chief obstacle to implementing crosses docking successfully. Pre-distribution is definitely more difficult to implement because the i'cndors of the cross dock must know which customers of the cross dock need what before they send the shipment. This involves quite a lot of information transfer,

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system integration, and coordination. The problem is big for a distributor with many vendors.

Q: 7) Answer any two from the following:


1) FUNCTIONS OF PACKAGING: Packaging serves three functions in the context of the product it contains within itself:

Protection:
This

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involves

protection physical

from effects

damage, and

pilferage,

contamination,

environmental

conditions. It is generally not economical to provide absolute protection to the product from all possibility of damage and environmental conditions. Hence, packaging design and material utilized is a balancing of economic considerations and adequate protection. The higher the value of the product, the more the protection it deserves; and so, the more expensive the packaging. During the logistical

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process,

packaged

product

can

be

damaged

in

transportation, handling, and storage. The physical effects that cause damage are impact, vibration, piercing and crushing. The environmental conditions that can affect a packaged product are temperature, humidity, and contamination. Packaging can provide protection against physical effects. Protection from environmental conditions can only be achieved by maintaining the product in the right environment during the logistics process. For example, chocolates cannot be prevented from melting when exposed to high temperatures by any amount of packaging. Packaging is generally tested for the degree of protection provided.

Utility:
In this functionality, of packaging helps in improving procedures, efficiencies materials handling

"transportation, storage and order picking. Packaging the products in the form of master cartons, unit loads, and containers Paper Solution handling, transportation and storage University Q. promotes efficiencies by speeding up handling, enabling higher quantities to be transported, more quantity storage in the same space and faster retrieval from storage. Packaging

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facilitates securing and stacking during transportation, storage, and handling.

Communication:
Packaging enables product identification and tracking, and displays product care information. This is facilitated by labels on the packages. Product identification improves efficiency in receiving and order picking. Tracking of the product during the logistics process improves logistical efficiency. Improvements in technology enable the utilization of bar code scanners for improved efficiency in product identification and tracking and the resulting overall logistical efficiency improvement. Packaging also provides the facility of displaying handling instructions to ensure proper care of the product during handling, transportation, and storage. In case the product is hazardous, requiring special handling, this functionality becomes critical.

2) THIRD PARTY LOGISTIC:


Third party logistics providers enable companies to achieve reduction in operating costs and increased revenues in new and existing markets. Third party logistics companies provide companies an opportunity to enhance their market value by reducing ownership of assets, which translates to a

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higher return on remaining assets and greater return on stockholder investment. These companies also bring to the relationship. I heir specialized expertise in managing logistics with contemporary technology and systems. The decision to outsource company logistics operations to the third party logistics is often justified solely on the favorable difference between the more efficient price for the services and the company's higher costs of existing operations. The marketing manager views the enhanced services and distribution reach of third party, in existing and new markets as translating into increased sales and better long-term relationships with customers. The company removes property, plant, equipment, and even inventory from the balance sheet. This releases cash for more productive uses, instantaneously and "permanently" improving the company's returns on assets. It is easy to have access to the third party systems and technology resources, .1 voiding the cost and trauma of upgrading their own. The company employees can focus on their core competencies, doing more of what II icy are good at and less of what can be done better by the third party logistics provider. Main logistics manager realizes that ownership of resources is not necessary to achieve control over the results.

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(3) UNITIZATION AND CONTAINERIZATION:


Unitization -- The practice or technique of consolidating many small pieces of freight into a single unit for easier handling.

Benefits of Unitisation: The reasons given by the different countries for reforming their systems may be ordered differently or have different emphases, but the concerns behind these aims tended to have a lot in common. These commonalities have been distilled into the following list of aims, all of which are associated to some extent with Unitisation:

Rationalisation and simplification


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Access and progression Uptake Flexibility and responsiveness Quality of learning Quality assurance of qualifications

Containerization
Containerization ISO containers (or containerization) as shipping is a system of intermodal freight transport cargo transport using standard (known containers, ITUs (Intermodal Transport Units) or is obtainers) that can be

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loaded and sealed intact onto container ships, railroad cars, planes, and trucks.

(4) LEAD TIME IN INVENTORY MANAGEMENT


No business can operate without inventories. It needs inventory as a protection against uncertainty, for efficient processing of material, and to permit transit and handling. Inventory is a necessary evil. Because, it aims at absorbing the uncertainties of demand. So the companies carry inventory when the business uncertainty in lead times. The supplier is usually not in position to supply the goods as decided or as he promises. In the context of the vendors in India it is observed that there is rather rare supplier who supplies as per promises and of the quality essential. This situation leads to overstock the quantity. EOQ
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formulas

are

best

applied

when

there

is

little

uncertainty about delivery promises. When lea- time is long delivery is less certain, the order quantity should be adjusted to reflect the materials managers evaluation of the situation.

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BIBLIOGRAPHY

Books: Elements of Logistics Management S. D. Aphale Elements of Logistics Management Vijay Kumar Bhatia

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Websites: www.yahoo.com www. en.wikipedia.org www.google.com www.answers.com www.businessworld.com

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