Elements of Logistics and Supply Chain Management

What is Logistics? Science of movement What is Movement? Human body? Economy? Movement is life Stagnation is death!

Where does the movement take place? Infrastructure What moves? Materials and information

What are Elements? Building blocks Constituents Elements of Logistics and Supply Chain Management Participants Processes and Activities Tools and techniques

Processes Planning Procurement Warehousing Distribution Outsourcing Activities Communication Packaging, material handling, Transportation Storage

Tools and Techniques

Operations Research Models MRP, DRP, SAP RFID EDI KANBAN

Participants

3PL

3PL

VENDOR

SUPPLIER

CUSTOMER

What? Where? When? Who? How much? How?

4PL

What are the objectives of Logistical Management? What is Logistical Management? Customer service Achieving logistical objectives at minimum cost What is Supply Chain? Evolved from the concept of Logistical management Looking beyond the organization to satisfy the end user A conceptual pipe line connecting source of raw material to end user What is there in this pipe line? What flows in this pipeline? ? ? ? - Procuring resources for production from where they are available (who is the customer?) - Distributing finished products where they are required in the market (who is the customer?)

The Supply Chain

Vendors vendor

Vendor

Supplier

Customer

Customers customer

Source of raw materials

End users

Genesis of modern logistics Logistics is as old as business but modern logistics (Logistical Management) is new Dark continent of economics in 60s.. Logistics is military planning, a military concept OR techniques like PERT/CPM, VA etc. came from military Battles are won or lost even before they are fought. Field Marshall Rommel Logistical Management? Performing physical movement of materials efficiently and effectively Ensuring availability of resources at minimum cost for production Ensuring availability of finished products at minimum cost to the customer A Function Of Business Management

Definition of Logistics management Logistics is the process of strategically managing procurement, storage and distribution of raw materials, parts, finished inventory and related information flow through organization and its marketing channels in such a way that current and future profits are maximized through cost effective fulfillment of order ? Logistics is the process of planning implementing and controlling efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of confirming to customer requirements Council of Logistical Management What Causes Bad Logistics? Infrastructure : Bad roads, inefficient railways, poor communication lines, congested ports Government policies : Octroi Information : Inadequate information, bad communication Management decisions : Bad management decisions like carrier selection, out sourcing etc. Cost cutting in isolation What Does Bad Logistics Cause? Costly products - Poor logistics adds costs - Higher cost of capital (delayed deliveries) - Damaged products (bad roads, bad vehicles, bad packaging) - Excessive movement costs (wrong deliveries)

Shortages as product/service delivery fails - PDS and FCI stocks - Deteriorating economy - Law and order problems

Importance of Logistics Logistics is the bed rock of trade and business Leads to customer satisfaction, D & F expectations of customers Integrates logistical activities, which leads to cost reduction Competitive edge in a commodities market, where quality and costs are only qualifiers Supports critical functions like operations and marketing to be JUST IN TIME to the customer. Strong logistical support improves Lead time Product protection Logistical costs Logistical costs are 5% to 35% of sales depending on type of business, geographical areas of operation etc. Crucial to survival and prosperity in global business (longer supply lines, language, rules & regulations, taxes, holidays, beliefs!) Logistics experts are moving up in Corporate Ladder, great opportunities Leads to the concept of supply chain management Indian market is changing- shift from sellers market to buyers market Changing customer Competition, internal & external Logistics and Supply Chain Management, development of concepts. 1950s First post war decade - Decade of awareness Importance of physical movement of materials to customers Focus on costs of these activities & idea of total cost (Total cost and its components) Importance of mode of transport 1960s Integration of activities of outbound logistics and emergence of Physical Distribution Management Information as an important element of Physical Distribution Management Impact of electronics on information 1970s Integration of some aspects of financial subsystem recovery, cash flow Focus on activities of inbound logistics until considered to be vendors concern 1980s Concept of Logistics as a management function, internally integrating all activities of inbound and out bound logistics Focus on logistical operations Application of TQM, TPM & JIT philosophies

1990s Gradually concept is encompassing entire value chain as Supply Chain Management due to external integration Henry Fords [early 1890s] concept of mutual dependence of firms in a value chain Idea of control on entire supply chain for improving product delivery

LOGISTICAL FUNCTIONS :Inventory Management Neither stock-out nor stockpiling of inputs or outputs Minimum cost by minimum stock & high turns Just In Time to customer (internal and external) Inventory policies, models, systems Information management Importance in competitive business Response to customer Customer service The role Information Management function Accurate information Real time information Choice of Information technology phone, fax, internet, satellites, RFID (Radio Frequency Identification Device), EDI Transportation Physical movement of materials The most visible function of Logistics High contributor to costs of logistics Movement costs Preservation costs Cost of idle asset Administration costs Net work analysis Analysis of Logistical Network to retain or gain competitive edge Number of facilities and their locations Communication systems Operational decisions - What?Who?How much?Where? Warehousing Strategic storage storage as an activity in W/H Value Adding Activities in warehouses Switching facility rather than a storage facility Economic benefits (cost reduction) & service benefits (customer service) Material handling Receiving, moving, storing, dispatching activities Cost adding activity High capital cost as well as high running cost Packaging Product Protection Facilitation of transportation & material handling Types of packaging

Consumer packaging Logistical packaging

SUPPLY CHAIN MGT ;

Scope - Source of raw materials to end user - all upstream & downstream organizations & linkages Encompasses all logistical management activities involved Sourcing (procurement) Manufacturing support Distribution activities Includes coordination and collaboration with channel partners to finally deliver the product to end users Main objective - Supply chain profitability by value creation Focus - End User Origin - extension of scope of logistics management A set of several subsets Definition - Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole How SCM creates value? Breaking the organizational barriers Sharing of sales information in real time Inventory visibility Reduces inventories by reducing uncertainties Compresses value chain by slashing lead-times thereby quickening cash flow The channel partners Suppliers product owners Intermediaries experts in international shipping who offer consultancy service to suppliers Third-party service providers those who offer logistics service for a fee Customers the recipients of service Manufacturers parts manufacturers Transporters 3PL companies who offer transportation service Handlers 3PL companies who offer material handling service Wholesalers who stock inventory and offer in small quantities to retailers Dealers who book orders and instruct wholesalers to supply to retailers Retailers offer products to consumers

Logistical performance cycles :Cycles are sets of logistical activities in logistical value chain Types of Logistical Performance Cycles Procurement Manufacturing support Physical distribution

Important features Logistical performance cycles link all participating firms (facilities) and organizations in the value chain up and down by information and product movement Input sensitive (customer order) & dynamic Sensitiveness determines efficiency of operating system

Operating Objectives Of Logistics :Rapid response Ability to respond rapidly to customers order High flexibility Short lead-times SMED and Kanban Real time information IT supported systems Minimum variance Any event that disrupts flow of supplies to customer is variance Problems in information flow, traffic snarls, acts of god, wrong dispatches, transit damage Interrupts product delivery Undermines OTD Objective How to maintain smooth, undisturbed flow of supplies to customer? Traditional approach stock piling Modern approach Minimum Variance

Minimum inventory Low inventory volume by high inventory turns Kanban as an inventory control tool Single piece flow as practiced by JIT companies Movement consolidation Movement planning to reduce costs Bulk volume, same product or collection Long runs, eliminating broken short runs Integrating interests of several players in business Quality Quality of logistics performance - complete fulfillment of order, product, place, time and quantity Life cycle support [cradle to cradle logistical support to product] After sales service Product delivery (cradle) Fault free installation Training (how to use) Repairs and maintenance Product replacement (cradle)