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LOGISTICS MANAGEMENT

Meaning of logistics
Logistics is a system of handling the physical movements of goods and services from the
place of origin to the destination as fast as possible at a low cost and with safety and security.
Logistics involves 3 broad interrelated areas as shown below:
Logistics = S + M + D
Where

S - Supply
M - Materials Management
D - Distribution

Definition of Logistics
Logistics is the science of planning, organizing and managing activities that provide
goods or services.
Logistics is the science of planning and implementing the acquisition and use of the
resources necessary to sustain the operation of a system.
The Council of Logistics Management defines logistics as the process of planning,
implementing and controlling the efficient, cost-effective flow and storage of raw materials, inprocess inventory, finished goods and related information from the point of origin to point of
consumption for the purpose of conforming to customer requirements.
Origin of Logistics
1810

1. Logistics in early literature

The firs early literature with respect to logistics was by William


Muller. He included a section titled Logistics in his book
The Art of War in 1838
1927

2. Mass Production

Mass production of cars was first introduced by Ford. Fords


Model A Car utilized mass production concept to achieve
economy of scale.
[Mass production or flow production is the production of large
amounts of standardized products, including and especially on

assembly lines.]
1952

3.

Barcoding

US Patent issued to Normal Woodland and Bernard Silver for


Bar-coding System.
[A bar code is a machine-readable code in the form of numbers
and a pattern of parallel lines of varying widths, printed on and
identifying a product]
1961
1

4. Forrester effect

Material
requirements
planning (MRP) is a
Jay Forrester explained demand amplification in his book production planning and
Industrial Dynamics.
inventory control system.
An MRP integrates data
Gene Thomas at IBM developed Bill of Materials or the
from production schedules
earliest version of Material Requirements Planning (MRP).
with that from inventory
and the bill of materials
(BOM)
to
calculate
purchasing and shipping
schedules for the parts or
components required to
build a product.

1963
Council of Logistics Management (CLM)
Council for Logistics Management was founded under the name
of National Council of Physical Distribution Management.

1971

Early Stage of Reverse Logistics

William Sigmund and William Stanton discussed early form of


reverse logistics.

1984

Theory of Constraints
Early form of Cost/Service trade off

1988

Establishment of term Lean

Manufacturing
John Krafcik introduced the term Lean Manufacturing in his
article Triumph of Lean Production System after studying
Toyota Production System.
Lean manufacturing or lean production, often simply "lean", is
a systematic method for the elimination of waste ("Muda") within
a manufacturing system. Lean also takes into account waste
created through overburden and waste created through
unevenness in work loads.

1993

RE-ENGINEERING

Reengineering refers to the


radical redesign and

re-

Michael Hammer and James Champy published a book


organization of an enterprise
Reengineering the Corporation : A Manifestation for
to lower costs and increase
Business Revolution.
quality of service with
information technology acting
as the key enabler for that
radical change.
ECR is a strategy to increase
level of services to customers
through cooperation among
retailers, wholesalers and
manfuacturers.
Efficient Consumer Response (ECR)
Andy Wood published the first Journal article on Efficient
Consumer Response.

1996

Supply Chain Council (SCC)

Pittiglio Robin Todd & McGrath, AMR Research and 69

SCC is a global nonprofit


organisation
whose
framework
imrpovdment
thodology,
training,

voluntary members companies established the SCC.

2000
00

certification
and
benchmarking tools help
member organisations make
dramatic
,
rapid
and
sustainable improvement in
SCM..
Supply Chain
Operations Reference is the
world standard for SCM, a
model that prvides a unique
framework for defining and
linking peforamnce metrics,
process best practices and
people
into
a
unified
structure.

Logistics as a Profession

US Department of Labour given classification to Logistics job


as Logisticians
Types of Logistics
1. Reverse Logistics
Reverse logistics is also known as Product Recall. It may be defined as a process of
moving goods from their place of use, back to their place of manufacture for re-processing,
refilling, repair, and recycling or waste disposal.
Reasons for Reverse Logistics
1. Rigid quality standards- it is critical in case of contaminated products, which can cause
environmental hazard.
2. Rigid laws prohibiting unscientific disposal of items
3. Rigid laws making recycling mandatory
4. Transit damage e.g. leaking containers containing hazardous material.
5. Product expiration.
6. Erroneous order processing by supplier
7. Exchange of new product for the old ones.
8. Return for repair or refill.
Success factors of Reverse Logistics
The success of reverse logistics depends upon the efficiency of following subsystems:
1. Product Location: For product recall it is necessary to identify the product location in the
physical distribution system of the firm. It is difficult in case of consumer goods but
easier in case of industrial goods.

2. Product Collection System: After the product location is identified, product collection is
to be done through companys field force or third party.
3. Recycling / Disposal Centers: This may be companys plant, warehouse or any other
location. Called back products must be inspected before recycling or disposal etc.
4. Documentation System: Proper documents should be maintained at each level, this would
help in tracing the product location.
2. Inbound Logistics

All the activities related to the material movement till the dispatch of the products out of
the factory gate are called as inbound logistics activities.
Creation of value in the products depends upon availability of inputs on time. Making
available these inputs on time at minimum cost is the essence of Inbound Logistics.
Activities of a procurement performance cycle come under the scope of Inbound
Logistics. They are transportation during procurement operation, storage, handling and
overall management of inventory of inputs.

3. Outbound Logistics

All the activities in which the value added goods are to be made available in the market
for customers are called as outbound logistics activities.
Success of the firm depends upon the supply of products to the customer on time.
Supplying the products of firm at marketplace at minimum cost is the essence of
Outbound Logistics.
Activities of distribution performance cycle come under the scope of Outbound Logistics.
They are order management, transportation, warehousing, packaging, handling etc.

4. Third-Party Logistics (3PL)


In order to keep the costs of inbound and outbound logistics activities under control, an
outside agency appointed to perform these logistics functions is called Third Party Logistics.
5. Forth-Party Logistics (4PL)
Forth Party Logistics is a complete outsourcing of manufacturing and logistics functions
including selection of Third Party service provider.
Need for 4PL:
1.
2.
3.
4.
5.

Ever-increasing customer requirements.


Competitive and complex market scenario
Rising globalisation, liberalization and privatisation.
Rising accessibility of supply chain technology.
Inclination of companies to enter into higher margin business.

Services provided by 4PL


1.
2.
3.
4.
5.
6.
7.

Procurement and storage of materials.


Manufacturing of products.
Selection of 3PL companies
Transportation and warehousing management
Collection of payment and cash flow management
Risk management and insurance.
Sharing of information, IT solution.

Logistics in Indian Business Environment (May 04)


Liberalization opens our door to competition.
Global business has long supply & distribution lines.
Changing Indian customer, aware, demanding and less brand loyal
Competition ensures that product differentiation in terms of quality is difficult.
Product life cycles are shrinking
Our markets are shifting from sellers to buyers
Many consumer products are moving into commodities market
In India, large distances separate production and consumption centers. Essential
commodities have to travel from Food Corporation Warehouses to consumers through
PDS.
Still Logistics performance in India has not been impressive Fruits and vegetables are
grown at various places but do not enjoy access to market.

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