SUBJECT: MATERIAL MANAGEMENT

CLASS: S.Y.BMS

SEMESTER - III

SUBMITTED BY –

NITU MISHRA
29
LAXMI NISHAD
35
BINU PATHAK
39
SUSHIL PATIL
46
SIDDHESH PAWAR
47
RAKSHA SHETTY
55
SUBMITTED TO – PROF. AVADHUT
SAMANT.
Firstly, we would like to thank to our professor. Mr.
Avadhut Samant. For giving us this opportunity to work
on this project. We also thank to our team members for
cooperation and hard work. Also our heartful thank to all
those people who are directly and indirectly related to this
project.
 INDEX

 INTRODUTION

 FUNCTIONS OF LOGISTICS

 THREE CATEGORIES OF LOGISTICS

 VALUE-ADDED ROLE OF LOGISTICS

 IMPORTANCE OF LOGISTIC
MANAGEMENT

 LOGISTIC PLANNING

 WHAT IS LIS & ITS OBJECTIVES

 LOGISTICS IN BUSINESS

 ADVANTAGE OF LOGISTICS

 CONCLUSION
 INTRODUCTION

What is Logistics?

“The service of providing the right resources at the right

time and right place for efficient and effective performance of a
goal-oriented activity, including consumption is called as
logistics.”

In simple words, “Logistics is the process of anticipating

customer needs and wants; acquiring the capital, materials,
people, technologies, and information necessary to meet those
needs and wants; optimizing the goods- or service-producing
network to fulfill customer requests; and utilizing the network to
fulfill customer requests in timely way.”

Logistics is the support element of the enterprise. It helps

in managing the movement and storage of:

 Material into the enterprise.

 Goods in the enterprise.

 Finished goods from the enterprise.

Its focus should be upon its inbound logistics system

(movement of material within the organization) and its outbound
logistics system (meeting the requirements of its customers). The
definition above accurately defines the logistics process but is too
restrictive under the modern concept of logistics. Logistics, as a
support element of the enterprise, incorporates activities beyond
those identified in the preceding definition. Consider an example,
the enterprise that introduces a new product or a significant
change in the existing product. Support of the new product or
feature may require training, the development of technical
publications and the acquisition of spare parts and special tools
or repair (test) equipment. These items also belong under the
umbrella of logistics; thus our definition must be revised to
include them.
This is the simplified definition of logistics, which states
logistics objective clearly:

“Getting the right item to the right customer, in the right

quantity, in the right condition, at the right place, at the right
time and at the right cost.”

The right item in the right quantity here prefers to the raw
material, finished goods, trained personnel, spare parts or service
created, required or procured by a firm based on ordered or
forecasted customer (whether internal or external) requirements.
This indicates the following role for logistics:

(1) Accurate interpretation of customer requirements or

orders or marketing strategy, as also providing manufacturing
operations support.

The right customer at the right time and the right place
refers to the requirement of:

(2) Precise execution of the process of reaching the product

from the point of origin to the point of requirement/consumption.
The right condition concerns:

(3) Suitable care of the product from the point of origin to

the point of requirement consumption in order to avoid damage
and/or deterioration.

At the right cost indicates:

(4) Efficiency to ensure the lowest cost during execution.

Hence, logistics is the process of accurately interpreting

customer requirements or orders or marketing strategy, as also
providing manufacturing operations support, with precise
execution of the process of reaching the product material from
the point of origin to the point of requirement consumption
ensuring suitable care of the product material throughout to
avoid damage deterioration, continuously ensuring the lowest
possible cost throughout the process.

Logistics is concerned with getting products and services

where they are needed when they are desired. The responsibility
of logistics is the temporal and spatial positioning of raw
materials, work in progress, and finished inventories when and
where required. Hence, one of the basic functions of logistics is
the provision of availability.
 FUNCTIONS OF LOGISTICS
 Facility of location & Network design:

Facility of location & network design refers to the design

of the geographical structure of logistics facilities from where
logistics operations are carried out. The number, size, location of
logistics facilities like manufacturing plants, warehouse, cross
dock operation, wholesaler & retail outlets affects to the aspects
of other logistical function. This activity is necessary location &
network structure.

 Information management:

It involves ensuring fast & accurate information for

efficient & effective performance of logistical activities.
Information also threads together all the activities in to an
integrated process. Information gives a link of many activities
such as order processing, Inventory management, forecasting,
production scheduling. Many firms developed growing interest in
logistics because of 1) Advancement in information technology 2)
Growing recognition of system approach3) Higher emphases on
customer service4) Total cost concept & etc

 Transportation management:

Transportation enables the means of transfer of inventory

given the location & network framework developed earlier. This
involves the selecting the modes of transportation like Air, Water,
Rail, Road & the decisions relating to outsourcing this activities
to other agencies.
Selection of the modes of transportation depends on the following
factors: A) Speed & reliability B) loss& damage C) Inventories D)
Freight rate E) Market competitiveness F) Company policy &
customer influence G) External market influences. The aspects of
transportation management is an essential factor 1) Facility
Location 2) Transportation cost3) consistency.

 Inventory management:

Inventory management concerns with the decision

regarding the amount of type & material stored at various facility
location. These decisions will be affected by the decision made
under the function of facility location & transportation e.g.: the
location of warehouse & retail outlets.& modes of transport
whether fast or slow will affect the quantity type of material to be
stored at facilities location.

 Warehousing management:

Warehousing provide the adequate space for the

inventory at the right location, unpack aging, sorting, &
consolidation of material & modification of material elements if
required .the role of warehouse provide the economic & service
benefit to the logistical system. Economic benefits: - movement
consolidation, break bulk, cross-dock, processing /postpone
movement & stock piling. Service benefits are spot stocking,
assortments, mixing & production supports.

 Material Handling system:

Material handling activities are required while unloading,

moving & loading material at facilities. These include the variety
of mechanical equipment like Conveyors, Forklift, Truck, and
Crane. One of the considerations of effective material handling is
the minimization of product damage during handling.

 Packaging:

It helps in achieving the objective of maintaining the material in

the right condition through the logistics process. Packaging
decision is impacted by requirement of other activities like
protection & facilitation during transportation, material handing
& storage as so ultimately customer requirements.
THREE CATEGORIES OF LOGISTICS
Integrated logistics support, when properly understood
and applied, can provide the means to identify and resolve many
logistic problems, frequently before they developed. Logistics, in
the broadest sense of the word, can be considered as scope of
activity comprised of three major areas or subsets.

(1) Subsistence logistics,

(2) Operation logistics, and
(3) System logistics.

Subsistence logistics is concerned with the basic necessities of

food, clothing, and shelter .At any given time, within any given
environment, subsistence logistics is relatively stable and
predictable. Men and women, as rational begings, know within
very narrow limits what is needed, how much is needed, where it
is needed, and when it is needed. Subsistence logistics is primary
activity of primitive societies and is an essential ingredient of an
industrial society. It provides foundation of operations logistics.

Operation logistics extends beyond the bare necessities by

incorporating systems that produce the luxuries or niceties of life.
By definition, operations logistics incorporates the raw material
required by the enterprise in the production. This category of
logistics is also relatively constant and predictable. All enterprise,
from the automobile manufacturer to the fast food chain store
can determine the quality of materials and the resources needed
for its production with high degree of accuracy. Operation
logistic can not, however, determine when a component of the
enterprise is going to break down ,what will be required to repair
it ,or the duration activity .Operation logistics, which is
concerned with the movement an storage of material in to
,through ,and out of enterprise ,provide the foundation for system
logistics .

System logistics incorporates the resources required in keeping a

system in operating condition. These resources, or logistics
elements, are spares and repair part, personnel and training,
technical publication, test and support equipment, and facilities.
A well designed integration of these logistics elements is critical
when, for eg; repair instructions describe one methods of repair
and tools are developed for another method . Thus repair may be
impossible
 VALUE-ADDED ROLE OF LOGISTICS
Four principal types of economic utility add value to a
product or service. Included are form, time, place, and
possession. Generally, we credit manufacturing activities with
providing form utility, logistics activities with time and place
utility, and marketing activities with possession utility. We
discuss each briefly.

 Form Utility: Form utility refers to the value added to

goods through a manufacturing, production, or assembly process.
For example, form utility results when raw materials are
combined in some predetermined manner to make a finished
product. This is the case, for example, when a bottling firm adds
together syrup, water, and carbonation to make a soft drink. This
simple process of adding the raw materials together to produce
the soft drink presents a change in production form that adds
value to the product.

 Place Utility: Logistics provides place utility by moving

goods from production surplus points to points where demand
exists. Logistics extends the physical boundaries of the market
area, thus adding economic value to the goods. This addition to
the economic value of goods or services is known as place utility.
Logistics creates place utility primarily through transportation.
For example, moving farm produce by rail or truck from farm
areas to markets where consumers need this produce creates
place utility. The same is also true when steel is moved to a plant
where the steel is used to make another product. The market
boundary extension added by place utility increases competition,
which usually leads to lower prices and increased product
availability.
 Time Utility: Not only must goods and services be
available where consumers need them, but they must also be at
that point when customers demand them. This is called time
utility, or the economic value added to a good or service by
having it at a demand point at a specific time. Logistics creates
time utility through proper inventory maintenance and the
strategic location of goods and services. For example, logistics
creates time utility by having heavily advertised products.

To some extent, transportation may create time utility

by moving something more quickly to a point of demand. Time
utility is much more important today because of the emphasis
upon reducing lead time and minimizing inventory levels through
logistics-related strategies such as JIT inventory control.

 Possession Utility. Possession utility is primarily

created through the basic marketing activities related to the
promotion of products or services. We may define promotion as
the effort, through direct and indirect contact with the customer,
to increase the desire to possess a good or to benefit from a
service. The role of logistics in the economy depends upon the
existence of possession utility, for time or place utility make sense
only if demand for the product or service exists. It is also true
that marketing depends upon logistics, since possession utility
cannot be acted upon unless time and place utility are provided.
Order fulfillment is the critical and often final step for meeting
customer requirements.
 IMPORTANCE OF LOGISTICS
MANAGEMENT
Logistics management from this total system is the means
whereby the needs of customers are satisfied through the
coordination of the materials and information flows that
extend from the marketplace through the firm and its
operations and beyond that to supplies.

Today’s organizations worldwide need logistics management

more than ever because of following:

1) Competitive pressure 2) information technology 3)

channel power and 4) profit leverage.

These are the discussed briefly in the following paragraphs.

1) Competitive pressure: during the 1970s. Logistics received

more attention as a major cost driver to offset the effects of
rising interest rates and increasing energy costs. In addition
the logistics cost became more critical for many
multinational companies because of globalization of their
business. these developments affected logistics primarily in
two ways :

I. The growth of world class competitors which has

pressurized organization to differentiate themselves and
 their product offerings. Logistics enable domestic firms to
provide more reliable and responsive services to customers
in the local markets than overseas competitors.

II. As firms increasingly buy and sell off-shore, the supply

chain between the manufacturing firm and its supplier and
customer firms become longer, costlier and more complex.
Hence in such situation, excellent logistics is necessary to
take advantage of global opportunities.

2) IINFORMATION TECHNOLOGY: with the explosion of

information technology, organization gained the ability to
better monitor transaction intensive activities such as
ordering, transportation and storage of goods and materials.
Computerized quantitative models along with technology
increased the ability to manage material flows and optimize
inventory levels and movements. For example, systems such
as material requirement planning (MRP 1), distribution
resources planning (DRP) and just-in-time (JIT) allowed
firms to link many activities such as order processing,
inventory management, forecasting and production
scheduling.

3) CHANNEL POWER: the channel power shifted

from manufacturers to wholesalers, distributors and
retailers. This has had a great impact on logistics. In major
consumer good industries, when competition increases,
 many suppliers and manufacturers are forced out of
competition and a few leading; competitors remain in the
market. Those who remain are highly competitive and are
able to offer very high quality products. In the views of
consumers, all of the leading brands are substitute for each
other and lower brand loyalty decreases the manufacturer’s
power. Ultimately sales of consumer products are
determined by what is in stock, and not by what particular
brand offered to the customers.

4) PROFIT LEVERAGE: Any amount of money saved in

logistics costs has greater impact on the organizations
profitability than a similar increase in sales revenue
considerably because profit earned through sales is only a
small percent of sales revenue. Hence, a rupee saved in
logistics is a rupee increase in the company’s profit.
Therefore, we can infer that logistics cost savings have
much more leverage than an increase in sales.
 LOGISTIC PLANNING

A corporate mission is a statement setting out long

range goals unique to each organization elucidating the business
the company wants to be in, who its customers are its basic
beliefs about business, and its goals of survival growth and
profitability. Objectives and goals sets the targets which are to
be achieved in the long term in order to fulfill the mission of the
firms in order to achieve the long term objectives and goals,
alternatives strategies or actions plans need to be evaluated in
the context of the environment faced by the firm from these
alternatives, specific strategies must be selected for
implementation in order to meet the objectives and goals that
will fulfill the mission of the firm hence business strategy is a
long range game plan of an organization and provides a road
map of how to achieve the corporate mission. The strategic or
long term plans for the firm and developed at the highest level of
management of the firm.

The strategic planning for each of the functions of the firm, such
as marketing, operations, logistics, etc.that are derived from the
firms strategic plans, are developed at the highest level of the
concerned function. The strategic plan within the function need
to be detailed in the form of tactical and operational plans at the
tactical and operational levels of management in the respective
function. The operational level og management of a function in
affirm plans the operational activities in order to meet the
tactical and strategic plans of the function and control the
activities during implementation on order to meet the
operational plans.

According to the planning level illustrates the logical flow of the

planning process across the organization. The activity flows in
the logistic function bring out the sequence of activities from
order receipt to procurement to customer delivery. Strategic
plans determine the capacity plans by defining the internal
capacity limitations in manufacturing, warehousing, and
transportation as well as human resources.

PLANNING AND OPERATIONS PROCESS

The strategic plans developed for the firm lead to the

development of strategic plans for the logistics functions. These
in turn generates the tactical and operational logistical plans.
For e.g. the objectives of cost reductions for a firm would less to
strategies to reduce total logistics cost reduction for a firm
would lead to strategies to reduce total strategies costs. these
strategic plans could take the form of, for e.g. reducing the
number of warehouses, transportation consolidation, or
purchase of new software for logistic information management
next ,the tactical plans are developed to implement the stetegic
plans .tactical plans out line the steps or procedure that are
required to execute strategic plans. for eg in order to reduce the
number of warehouses one can plan to centralize the ware
housing at a few locations by increasing the capacity of these
warehouses which are not economical.
At the operational level, operational plans are developed in
order to perform and control the activities to accomplish the
tactical plans thus operational plans need to be developed for
performing the logistics activities from the fewer warehouses as
decided in the tactical plans

A corporate mission is a statement setting out long range goals

unique to each organization elucidating the business the
company wants to be in, which its customers are its basic beliefs
about business, and its goals of survival growth and
profitability. Objectives and goals sets the targets which are to
be achieved in the long term in order to fulfill the mission of the
firm in order to achieve the long term objectives and goals,
alternatives strategies or actions plans need to be evaluated in
the context of the environment faced by the firm from these
alternatives specific strategies must be selected for
implementation in order to meet the objectives and goals that
will fulfill the mission of the firm hence business strategy is a
long range game plan of an organization and provides a road
map of how to achieve the corporate mission. The strategic or
long term plans for the firm and developed at the highest level of
management of the firm.
 WHAT IS LOGISTC INFORMATION SYSTEM
AND ITS OBJECTIVES

Logistic information system is nothing but to manage,

control and measure the logistical activities. These activities
occur within the organization or as well as overall across the
supply chain.
Logistics information systems are important for
achieving logistics efficiency and effectiveness. In an enterprise,
logistics information system seeks to achieve the following:

1) It ensures of logistics functional operations into a process

pursuing customer satisfaction at the lowest total cost.
2) Information system facilitates planning and control of the
logistical activities related to order fulfillment.
3) It makes the firm more competitive, by making better
tactical and strategic decision for the benefits of the firm
and its customer.
4) Helps provide customers information regarding product
availability, order status, and delivery schedules promoting
customers service.
5) It reduces the requirements of inventory and human
resources by enabling requirements planning.
6) It interfaces with marketing, financial, and manufacturing
information systems and provides information to top
management to help formulate strategic decisions for the
whole firm.
.
7) The use information technology in information systems has
enabled quick response to demand making forecasting
redundant. This has also helped in implementing “pull”
systems like just-in-time making the firm more
competitive.

8) It promotes systems that link the operations of the firm,

such as manufacturing and distributing, with the suppliers
operations on the one hand the customer on the other.
9) In the other cases, organizations are finding that through
information they can manage dispersed inventories as if
they were single inventory. The benefits of this can be
considerable. If inventory management is centralized and
decisions on replenishment and other quantities are taken
or the basis that is a single stock, then only one safety stock
instead of many required. The stock itself can be carried
anywhere in the system, either near the point of production
or the consumption. This is the concept of ‘virtual’
inventory management or electronic inventory
management.
 LOGISTICS IN BUSINESS

In the first half of the twentieth century, logistics existed as

a fragmented and elusive activity with little recognition beyond
the military services and those firms that were a part of the
military-industrial complex. This began to change in the latter
half of the twentieth century as business realized the potential
benefits of logistics. Logistics management is concerned with the
development and implementation of a methodology for ensuring
the efficient and cost-effective attainment of logistic objectives.
Logistics management is the most widely accepted term and
encompasses logistics not only in the private business sector but
also in the public/government and nonprofit sectors. In addition,
service companies including banks, hospitals, restaurants, hotels,
and so on have logistics challenges and issues, and logistics
management is an appropriate form for the service industry.
LOGISTICS FOR COMPETITIVE ADVANTAGE

Martin Christopher has presented an interesting ‘Three

C’s” model of competitive advantage:

The bases for success in the marketplace are numerous, but a

simple model is based around the triangular linkage of the
company, its customers and its competitors – the ‘Three C’s’.

The source of competitive advantage is found firstly in the ability

of the organization to differentiate itself, in the eyes of customer,
from its competition and secondly by operating at a lower cost
and hence at lower profit.

Seeking a sustainable and defensible competitive advantage has

become the concern of every manager who is alert to the realities
of the marketplace. It is no longer acceptable to assume that good
products are sold themselves, neither it is advisable to imagine
that success today will carry forward into tomorrow.

Let us consider the bases of success in any competitive context. At

its most elemental, commercial success derives either from a cost
advantage or a value advantage or ideally both. It is as simple as
that – most profitable competitor in any industry sector tends to
be lowest cost producer or the supplier providing a product with
the greatest perceived differentiated values.

Put very simple, successful companies either have a productivity

advantage or they have a ‘value’ advantage or they have a
combination of both. The productivity advantage gives a lower
cost profile and the value advantage gives the product or offering
a differential ‘plus’ over competitive offerings.
 Diagrammatic Representation of Three C’s Model

Customers

Needs seeking benefits at

acceptable prices

ue
e
al
u
al
V V

Assets and
Cost Differentials Assets and
Utilization
Utilization

Company Competitors

Those firms that develop superior logistical competency are

strategically positioned to enjoy hard-to-duplicate competitive
advantage in terms of cost and service performance.

It can be said that a firm achieves competitive advantage over its

competitors by fulfilling customer requirements (value advantage
or effectiveness) at the lowest cost (productivity advantage or
efficiency).
PRODUCTIVITY ADVANTAGE

In many industries there will be a competitor who will be a low

cost producer and will have greater sales volume in that sector.
This is partly due to economies of scale, which enable fixed costs
to spread over a greater volume but more particularly to the
impact of the experience curve.

It is possible to identify and predict improvements in the rate of

output of workers as they become more skilled in the processes
and tasks on which they work. Bruce Henderson extended this
concept by demonstrating that all costs, not just production
costs, would decline at a given rate as volume increased. This
cost decline applies only to value added, i.e. costs other than
bought in supplies. Traditionally it has been suggested that the
main route to cost reduction was by gaining greater sales
volume and there can be no doubt about the close linkage
between relative market share and relative costs. However it
must also be recognized that logistics management can provide a
multitude of ways to increase efficiency and productivity and
hence contribute significantly to reduced unit costs.
♦ VALUE ADVANTAGE

It is a observed that customers don’t buy products they buy

benefits. These benefits may be intangible i.e. they relate not to
specific product features but to such things as image and
reputation. Unless the product or service that we offer can be
distinguished in some way from its competitors there is a strong
likelihood that the marketplace will view it as a ‘commodity’
and so the sale will tend to go to the cheapest supplier. Value
differentiation can be gained in numerous ways. When a
company scrutinizes markets closely it frequently finds that
there are distinct value segments. In other words different
groups of customers attach different levels of importance to
different benefits. Adding value through differentiation is a
powerful means of achieving a defensible advantage in the
market. Equally powerful as a means of adding value is service.
Increasingly it is the case that markets are becoming more
service sensitive and this poses a challenge in management of
logistics. It is important to seek differentiation through means
other than technology. A number of companies have responded
to this by focusing upon service as a means of gaining a
competitive edge. Service in this context relates to the process of
developing relationships with customers through the provision
of an augmented offer. This augmentation can take many forms
including delivery service, after sales service, financial packages,
technical support and so on.
This matrix is a useful way of examining the options
available for value and productivity advantage:

SERVICE COST &

LEADER SERVICE
LEADER

COMMODITY COST
MARKET LEADER

In commodity market situations where a company’s products

are indistinguishable from their competitors’ offerings the only
strategy is to move towards being a cost leader or towards being
a service leader. Often the leadership route is not available. This
particularly will be the case in a mature market where
substantial market share gains are difficult to achieve.

Cost leadership strategies have been based upon the economies

of scale, gained through greater volume of sales. This is why
market share is considered to be so important in many
industries. This cost advantage can be used strategically to
assume a position of price leader and make it difficult for high
cost competitors to survive. This cost advantage can come
through effective logistics management. In many industries
logistics cost represents such a large part of total costs that that
it is possible to make major cost reductions through
fundamentally reengineering logistics processes.

The other way to come out of the commodity quadrant of the

matrix is to seek a strategy of differentiation through service
excellence. Customers in all industries are seeking greater
responsiveness and reliability from suppliers; they are looking
for reduced lead times, just-in-time delivery and value added
services that help them do a better job of serving their
customers.
 CONCLUSION

In this scheme of things, logistics is therefore essentially an

integrative concept that seeks to develop a system wide view of
the firm. It is fundamentally a planning concept that seeks to
create a framework through which the needs of the
manufacturing strategy and plan, which in turn links into a
strategy and plan for procurement

Logistics is an important operation that helps the organization to

manage his business in today’s competitive world.

While doing this project, we came to know that how much

important is the logistic to the organization.

It helps to deal with the problem and issue and provide

immediate and medium term solution and improves performance.
 BIBLIOGRAPHY

 WWW.GOOGLE.COM (THE FREE

ENCYCLOPEDIA)

 WWW.ANSWERS.COM

 WWW.BMSCAMPUS.COM (FREE
DOWNLOADING PROJECTS)

 TEXTBOOK- ELEMENTS OF LOGISTICS IN

BUSINESS (HIMALAYA PUBLICATION)

 MATERIAL MANAGEMENT (HIMALAYA

PUBLICATION)