What is Benchmarking?

It is a process of measuring organizations overall performance against the other organizations from the same industry or other industries. It identifies the gap in performance & assist companies to close that gap. Benchmarking process Get aware of the industrys best practices Establish realistic objectives Ma e strategy!structure!tactical action plan "ocus on relevant resources Improve service #uality $ontrol cost effectively Meet customer re#uirements %etermine true measure of productivity &ttain competitive position

'he objective of creating a competitive advantage involves outperforming rather than matching the efforts of competitors. (ince it may not be possible to obtain information on competitors internal operational systems and processes) the focus of benchmar ing e*pands to a wider) but selective focus on products of the top performing companies regardless of their industrial sector. Benefits of benchmarking It enables the company to creatively incorporate the best practices in the process of the benchmar ed function. It provides motivation to the professionals whose creativity is re#uired to perform and implement benchmar findings. It brea s down reluctance ! resistance of employees towards change.

Typical Benchmarking Measures +. ,. .. /. 1. 2. 3. 5. &sset management -perating cost $ustomer service level 0uality of products & services 'echnology -rder processing procedures 'ransportation 4 routes) modes) freight structures 6arehousing 4 storage) material handling) automation

7. 8ac aging +9. :everse logistics ++. Information flow & connectivity 'he benchmar ing may be done based on published data) alliances with the firms to be benchmar ed or by appointing consulting firm) depending on criticality of the results.

Outsourcing in Logistics Management

What is Outsourcing? (Definition) -utsourcing is defined as the contracting of one or more of companys business processes ! activities to outside service providers for increasing shareholders alue (profitability) by primarily reducing o erall operating cost and focusing on core competencies for ma!imum utili"ation of a ailable resources ;financial!manpower!technology etc.< with the company. Why do companies outsource? +. :eduction in operating costs. ,. "ocus on core competent functions. .. &c#uiring new s ills. /. &c#uiring better management. 1. &void labor problems. 2. "ocus more on business policies & strategies. 3. :educe major investments & avoid financial ris s. 5. =andle overflow ;emergency< situations. 7. Improve fle*ibility in functions. +9. Improve financial ratios. ++. Enhance mar et credibility. +,. Improve overall operating performance. #isks $n ol ed in Outsourcing +. -perational issues at outsiders end. ,. >on4alignment of companys goals! objectives with outsiders goals. .. -utsiders inability to cope with the re#uirements of new manufacturing! information technology. /. 'oo much dependence on very few suppliers involves business ris s. 1. ?usiness outloo of the outsiders may not match with the companys business philosophy & vision.

Third Party Logistics

In view to eep the costs of inbound ! outbound logistics activities under control by reducing the liabilities of fi*ed nature) an outside agency appointed to perform these logistics functions is called %Third &arty 'ogistics (ompany) (*&'). 'hird party logistics ;.8@< provider handles all or most of the supply management ;procurement!stores!inventory management< & demand management ;right from warehousing to reverse logistics< activities including management of related information.

Scope of Third Party Logistics

Fourth Party Logistics

"ourth party logistics ;/8@< provider is a supply chain integrator that manages the resources) capabilities & technologies of its own organization with those of complementary service provider to deliver a complete supply chain solution. It provides ma*imum overall benefits that cannot be achieved by any individual service provider. It is a complete outsourcing of manufacturing + logistics functions including selection of third party ser ice pro iders,

Scope of Fourth Party Logistics

Needs for Fourth Party Logistics

+. ,. .. /. Ever4increasing customers re#uirements. $ompetitive & comple* mar et scenario. :ising globalization with lifting of mar et barriers & import tariffs. Increased inclination of companies to enter higher margin and value4added business. 1. :ising accessibility of supply chain technology. 2. Emphasis to improve asset utilization & compliance of environmental standards.

Services Provided by 4PL Companies

+. 8rocurement of inputs. ,. (torage & inventory control of inputs. .. Manufacturing activities including inspection!testing.

/. >egotiations ! selection of third party logistics companies. 1. 'ransportation management ;routing!scheduling etc.< 2. 6arehousing decisions. 3. Information transfer!I' solutions. 5. $ollection of payments!cash4flow management. 7. :is management and insurance. +9. $ontinuous logistics improvement program.

Differences bet een !PL and 4PL

Generally) *&' owns and manages the assets ;li e manpower) warehouse) fleet etc.< so that it can ma*imize its utilization and hence return on investments. o 6hereas) -&' manages the supply chains and offers intellectual capital or adds value. *&' service providers core activities include truc load) parcel) ocean and air forwarding) whereas a -&' provider mainly concentrates on information e*change through technology integration. o -&' provider serves as the hub) which ties together different logistics services to fulfill clients needs.

"#ements of Customer Service

$ustomer service can be e*amined under three headings. 'hey are as followsA 8re4transaction elements 'he pre4transaction elements of customer service relate to corporate policies or programs) for e*ample written statements of service policy) ade#uacy of organisational structure and system fle*ibility.

6ritten statement of customer service policy $ustomers provided with organization can offer. a written statement stating what

(ystem fle*ibility in case of unforeseen events (ervices e*tended to help customers in determining their needs & offering solutions

Establishing organization structure to facilitate internal & e*ternal communication of policies) performance and corrective actions) if needed

'ransaction elements 'he transaction elements are those customer service variables that are directly involved in the physical distribution function) for e*ample product and delivery) reliability. 'he transaction elements of customer service often receive most attention as they are immediate + apparent. 8roduct availability $orrect order status information $onsistency in order cycle (pecial handling ! shipping arrangements in case of urgency $onvenience of placement of orders -ffering substitute products in case of non4availability of products.

8ost4transaction elements 'he post transaction elements of customer service are generally supportive of the product while in use. "or instance) product warranty) parts and repair service) procedures for customer complaints and product replacement.

Installation ! warrantee ! repairs ! service parts availability 8roduct tracing for withdrawal on its o.n in case of some #uality problems in supplied products &ttending customer complaints ! claims ! accepting returned goods from customer ;reverse logistics< 8roduct loaning during service! repairs to avoid inconvenience to customer.

It is essential to understand customer service in terms of the different re#uirements of different mar et segments and no universally appropriate list of elements e*ists. Each mar et that the company services) it will attach different importance to different service elements. $ustomer service plays a

significant role in developing and maintaining customer loyalty and satisfaction. It is customer service that really brings the customer bac . (atisfactory service encounter or favourable complaint resolution is one of the important ways that the organisation can really distinguish itself in the eyes of the customer. @ogistics can thus play a ey role in contributing to the organisations competitive advantage by providing e*cellent customer service.

MATERIALS HANDLING SYSTEM

Materials handling is the process of movement of raw materials) wor in process inventory and finished products within a facility most efficiently at the lowest possible cost. ?efore a product reaches the consumer) it passes through a series of handling processes.

$mportance of Materia#s %and#ing System

Materials handling system decides the speed of movement of goods & services within organization & between the organization & its customers ! suppliers. It determines the companys response level to internal & e*ternal customers re#uirements. +1 B ,9C of the manufacturing cost of a product is spent on material handling activities. If this system is not properly designed & implemented) it increases the cost of procurement) production & distribution.

Materia#s movement cyc#e

:eceipt of inputs storage of inputs moving to production moving of finished goods to warehouses to final customer +14,9C of the cost of the manufacturing of a product is spent on material handling activities. Material handling is an important and specialized function of industrial activity. Even though this activity does not add to the value of the product) its essential from the point of space and time utility ;when and where it is re#uired<.

Ob&ectives
+. 'o achieve efficiency in movement of products in & out of stores ! warehouse to improve customer service and control. ,. 'o ensure availability of products when ;time< & where ;place< they are re#uired for pic ing) pac ing & shipping activities. .. Effective utilization of available space) e#uipment & manpower of an organization.

/. Movement of goods in the right #uantity

Scope of Materia# %and#ing System

+. :eceipt & unloading of incoming inputs ! outputs from transport vehicles. ,. Moving the unloaded products to assigned storage ! warehouse space. .. 8ic ing & pac ing of the products for onward dispatch to production ! warehouse centers. /. @oading the products to designated transport vehicles to the customers.

Materia#s hand#ing system

Inputs are transported from supplier to the plant ;unloading ! inspecting< Dnloaded inputs are moved to storage spaces and stac ed ;loading) stac ing) storing) weighing) counting) sorting< (tored inputs are moved to manufacturing location ;loading ! unloading ! counting ! weighing<. (emi4finished products are moved from one location to another within the plant or from plant to another outside processing unit ;loading ! unloading ! moving ! inspecting<. "inished goods are moved to warehouses for pac ing ! stac ing ;loading ! unloading ! stac ing< "inished goods are dispatched to customers ;moving) loading and if re#uired) unloading<

Princip#es of Materia#s %and#ing

&lanning / &ll the materials handling should be as a result of a deliberate plan. 0tandardi"ation / Material handling methods) e#uipment) controls & software should be standardized without sacrificing needed fle*ibility and throughput. Work principle / &voiding unnecessary movement of the products. 1rgonomic principle / =uman capacities & limitations must be recognized for safe & effective operations. 2nit load principle / 'he load should be of uniform size to achieve smooth material flow. 0pace utili"ation / Efficient & effective use of available space.

0ystems / 'he material movement & storage activities should be fully integrated to form a coordinated and operational system ;material flow should eep pace with needs<. 3utomation / -perations should be mechanized ! automated where ever feasible to improve overall operational efficiency. 1n ironment / 'he environmental impact and energy consumption should be considered. 'ife cycle cost / Economic feasibility of material handling e#uipment & system over an entire life cycle. &re enti e + 0chedule Maintenance / It is absolutely necessary to regularly maintain all material handling e#uipment.

Systems of Materia#s %and#ing'

4, Manual 0ystem 6hen the olumes 5 .eights to be handled are lo. + distance to be tra eled is less6 than the manual system for movement & storage of the products is the best & cheapest option for material handling. 17uipment #e7uired / Manual 'rolleys ! :ac s) (helves) %rawers) @oc ers etc. 8, Mechanical 0ystem 6hen the olumes5.eights to be handled are hea y + distance to be tra eled is more6 than the movement of the products with the help of mechanical e#uipment is the safest option for Material =andling. 'he (ystem includes wide variety of =andling E#uipment. a, 9orklift Trucks: 'his e#uipment represents perhaps the greatest single innovation in material handling in post war era. It has largely responsible for introduction of pallets or unit load. It can move loads both horizontally & vertically. b, (ranes: 'hey are either floor mounted or overhead mounted drag devices. c, (on eyors: 'hey e*cel at straightforward transportation because they eliminate re4handling before & after each function. d, (arousels: the entire carousels rotate vertically and bring the desired item to the operator.

*, 3utomated 0ystem 6hen the olumes 5 .eights to be handled are ery hea y + distance to be tra eled is more as .ell as the .arehouse space a ailable is ery limited6 than

the movement of the products with the help of automated system is the best & efficient option for material handling. 3utomated ;uided <ehicle 0ystem: It does not re#uire an operator. It automatically rotates & positions itself at destination without operators guidance.

#obotics: It is a human li e machine that can be programmed by micro processor to perform one or series of activities

3utomated 0torage + #etrie al 0ystem (30#0): &mongst the most important storage & order pic ing e#uipment are automated storage & retrieval system) as it provides reduced labor cost & floor space) while increasing inventory accuracy.

(dvantages of (S)S
+. ,. .. /. :eduction in labor cost ! Material =andling cost. Increase in productivity ;-utput ! Input ratio<. $onsistency in services offered. Increases accuracy & speed of services.

1. Improvement in speed of service

Disadvantages of (S)S
+. ,. .. /. 1. =eavy initial $apital cost. %owntime of e#uipment may cause interruptions. @ac of fle*ibility to respond to changing needs. 8erpetual maintenance cost. Dsers training re#uired.

Cost of Materia#s %and#ing System

Direct (ost +. 'ransportation $ost. ,. Manpower $ost. .. E#uipment $ost ;$apital & Maintenance $ost<. $ndirect (ost (=idden (ost) +. ,. .. /. $ost of @ost (ales. @osses ! %amages to Inputs & "inished Goods. %elays in transportation. %eterioration in 0uality ! 0uantity of 8roducts.

1. 6aste of Man4=ours ! @oss of 8roduction 'ime.

Conc#usion
Material handling is underta en at every stage of logistics activities and hence it is an integral part of logistics function, 'he use of proper methods and designing of material handling system along with the selection of 8roper (ystem & Materials =andling E#uipment and their layout ! location will result inA +. Improvement in $ustomer (ervice @evel through #uic response in meeting the re#uirements. ,. :eduction in the overall $ost of -perations. .. Efficiency in 8rocurement ! 8roduction ! %istribution -perations. /. Increase in 8rofitability of an organization.

)everse Logistics a Competitive Too#

'o remain competitive and differentiated) the organizations across the world are showing speed and reliability in service offerings such as :eplacing defective goods. :epairing of used products. :efurbishing the returned products. $alling bac sub4standard or harmful goods. %isposing4off product waste. 'hese services add to the competitiveness of an organization operating in a regulatory environment & create customer value by providing a clean environment through reverse logistics services without any e*tra cost to the customer.

Definition
:everse logistics may be defined as a process of moving goods from their place of use) bac to their place of manufacture for re4processing) re4filling) repairs or recycling ! waste disposal. It is a planned process of movement of goods in reverse direction in an effective and cost efficient manner) through an organized networ . It is an integrated system in an organizations supply chain management.

:everse logistics refers to the s ills of logistics management to reduceE manage & dispose4off waste arising from products & inputs.

)easons for )everse Logistics

+. ,. .. /. 1. 2. 3. 5. :eturn of goods from customer for non performance (hort term rental returns :eturns sent to manufacturer for repairs ! re4filling :eusable containers ! pac ages :eturn of inputs not used by manufacturer ! goods not sold by distributors E*change of new product for the old ones Goods sent for up4 gradation ! modification :ecycling of product

Scope of )everse Logistics

:everse logistics) though considered as a drain on company profits) in todays competitive mar ets) more and more manufacturing firms are planning of incorporating the reverse logistics system in their supply chain process for following reasonsA Growing concern for environment pollution. Government regulations on product recycling and waste disposal. Growing consumerism. (tiff competition. 'he reverse logistics networ can be used for various purposes such as refilling) repairs) re4 furbishing) re4 manufacturing etc. %epending on the nature of the product) unit value) sales volume & distribution channels.

$nventory management under conditions of certainty

1conomic Order >uantity (1O>) 'he E-0 is a concept which determines economic or optimal order #uantity per order indented by the warehouse on the basis of annual order processing cost & annual inventory carrying cost. 6hen incremental order processing costs is e#ual to incremental inventory carrying cost) the economic order #uantity e*ists. &t this level of #uantity per order) &nnual -rder 8rocessing $ost ;&-8$< F &nnual Inventory $arrying $ost ;&I$$< are the minimum. $n other .ords6 3O&( ? 3$((

Total (ost Order &rocessing (ost

1O>

(osts

$(( @umber of orders placed per year 6here) &A -rder 8rocessing $ost per -rder ;:upees< DA &nnual %emand ;>umber of Dnits< (A &nnual Inventory $arrying $ost ;&nnual C< <A Galue of -ne Dnit of Inventory ;8roduct 8rice in :upees< 3ssumption (9or 1O>) +. (onstant6 continuous + kno.n rate of demand ,. (onstant + kno.n order processing cycle time .. (elling price remains constant + independent of order #uantity or order processing cycle time /. 'ransportation cost remains constant 1. 'he satisfaction of all demand (no pending orders) 2. @o in entory in transit 3. 'he item having independent demand 5. @o constraints on financial 5 capital a ailability 3, (omponents of order processing cost $ost of transmitting & processing of the inventory transfer $ost of handling the product ;if in stoc < ! cost of setting up production to produce it and the handling cost relating to it. 'ransportation cost for receiving at field location

$ost of documentation

B, (omponents of in entory carrying cost $apital cost on inventory investment ;opportunity costs< Inventory service cost comprised of ta*es & insurance paid as a result of holding inventory. (torage space costs ;plant warehouse ! public or private warehouse< Inventory ris costsA cost of obsolescence) cost of damage) cost of shrin age) costs involved in relocation of the non4moving stoc s.

S*uare )oot La

+S)L,'

>+A >,A H+A H,A &ssumptions + + + +

>umber of e*isting stoc points >umber of future stoc point 'otal inventory in e*isting stoc points 'otal inventory in future stoc points

Inventory transfer between stoc points is not a common practice @ead time for supply of goods is constant $ustomer service level is constant %emand for the products is also constant

Mission Costing
$ntroduction I'he mission of logistics management is to plan and co4ordinate all the logistics activities necessary to achieve desired level of service & #uality at lowest possible costsJ 'he basic purpose of logistics cost analysis is to provide decision ma er reliable information on cost & benefits of each & every logistical activity for better allocation of available resources. @ogistics management is ultimately concerned with meeting customer service re#uirements in the most cost effective manner and hence it is essential that the most accurate and meaningful cost data should be available.

What is mission costing? &n effective logistical costing system must see to determine the total system ;all the activities< cost of meeting desired logistics objectives or mission ;output of the system< & the cost of various inputs involved in meeting those outputs. Dnder mission costing) a functional budget is determined by the demands of the mission it serves.

M$00$O@ (O0T$@;

Basic &rinciples of Mission (osting 'he system should be capable of identifying the cost of each activity involved in providing the customer service at the mar et place. It should be capable of showing separate cost & revenue analysis by customer type!mar et segment or distribution channel.

To implement these principles it is necessary to %efine the desired outputs of logistics system in terms of revenues ! profitability ! tangible benefits. Identify the costs associated with those outputs. #e7uirements of mission costing approach

'he activity centers associated with the particular distribution mission is to be identified ;transported ! warehousing ! inventory<. 'he incremental cost incurred for each activity center as a result of underta ing that mission In determining the cost of the activity center attributable to the specific mission) it is necessary to find out what cost can be avoided if that customer ! segment is not serviced. 'he avoidable costs are the true incremental costs of servicing the customer ! segment ;mission< 'he mission costing approach becomes practicable when combined with customer revenue analysis because even a customer with low sales off ta e may still be profitable in incremental cost terms. Mission costing concept can be used for producing profitability analysis for customers ! mar ets ! segments or distribution channel. Mission costing see s to identify uni#ue costs that are generated as a result of specific customer service strategies aimed at target mar et segments. 9our 0tages of Mission (osting +. ,. %efining customer service segment ;identifying different service needs of different customers< Identifying the factors those produce variations in the cost of services i.e. determining service elements which will directly!indirectly ma e an impact upon the cost of service ;li e product mi* ! special pac ing ! after sales service ! drop size etc.< Identifying specific resources used for supporting customer segments. ;inventory support ! delivery fre#uency ! manpower re#uirement< &ttribute activity cost by customer type or segment. Dsing principle of avoid ability) the incremental costs incurred through the application of specific resource for meeting service needs are attributed to the customers.

.. /.

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