LOGISTICS FRAMEWORK

By: Iqbal Ali Sanchit Sharma

DEFINITION BY COUNCIL OF LOGISTICS MANAGEMENT, USA LOGISTICS MANAGEMENT IS THE PROCESS OF PLANNING, IMPLEMENTING & CONTROLLING, THE FLOW & STORAGE OF GOODS, SERVICES & RELATED INFORMATION IN THE MOST EFFICIENT & EFFECTIVE WAY, FROM THE POINT OF ORIGIN TO THE POINT OF CONSUMPTION, AS PER THE CUSTOMERS REQUIREMENTS AT THE LOWEST POSSIBLE COST

OPERATING OBJECTIVES:
RAPID & COMPLETE RESPONSE TO CUSTOMERS REQUIREMENTS REDUCTION IN LOGISTICS OPERATIONS COSTS CONTINUOUS IMPROVEMENT IN QUALITY OF SERVICES OFFERED LIFE-CYCLE SUPPORT

NEED FOR LOGISTICS:

IT BRINGS ALL ITEMS FOR SALE TOGETHER AT ONE PLACE IT PROVIDES A WIDE MIX OF PRODUCTS

IT MAKES PRODUCTS AVAILABLE WHEN THEY ARE REQUIRED TODAY, SALES ARE DETERMINED BY WHAT IS IN STOCKS & NOT BY WHAT PRODUCTS ARE PRODUCED & OFFERED BY AN ORGNISATION.

Role of Transportation in Supply Chain Transportation

Movement of product from one location to another Involving movement from the beginning of supply chain to end customer. Play a key role in every supply chain because products are rarely produced & consumed in the same location Freight transport cost in Thailand in 2001 was 14.3% of GDP while such cost in USA in 2001 was 6% of GDP. Growth in E-Commerce & home delivery, transportation costs have become more significant in retailing.

The International Supply Chain

Suppliers Domestic/Import Sourcing Inbound Materials Order Processing Corporation Throughflow Outbound Materials Order Processing Transportation Physical Materials Distribution Management Management Customers Domestic/Export Distribution Order Placement Transportation

Order Processing

Supplier-Firm Interface Transportation Transportation

Costumer-Firm Interface Physical Customer Distribution Service Management Inventory Management Inventory Management

Storage

Storage

Inventory Management

Storage

Forward and Reverse Flow of Information, Products, and Funds

Modes of Transportation
Air
Package Carriers

Truck

Intermodal

Rail

Water

Pipeline

Warehousing Traditional concept of warehouse as store or godown Development of modern concept of warehouse as facility Traditionally, consumer maintained his own store Gradually, manufacturer visualized the need of a buffer between factory and market as productivity improved All activities were manual as warehouses did not receive any engineering attention

Post war thinking made inventory shrink and production became streamlined to demand and demand for variety in every product increased Marketing experienced the need of a warehouse to stock products and support marketing Production units started using the concept of warehouse as a facility to optimize production [minimize cost]

Decades of 1960 & 70 saw engineering focus on material handling, storage & information Concept of JIT production system needs dependable delivery system of which warehouses are by now an integral part As we have discussed earlier decade of 1980 was a decade of TQM

Warehousing Costs Handling

Holding
Order Processing Packaging Admin Maintenance

Functions of warehouse [warehousing operations] Receiving goods receive and accept responsibility Identifying goods place, label, color code Sorting goods- sort out the received goods for appropriate storage area Dispatching goods to storage- for temporary storage with easy accessibility Holding goods- security against pilferage and deterioration Selecting, retrieving, packing- items are retrieved and grouped according to customer order for dispatch

 Marshaling goods- check the items of a single order for completeness and order records are updated Dispatching goods- consolidated order is packaged and directed to right transport Preparing records and advices- of stocks and replenishment requirements

Site selection
Location considerations Cost of distribution to market area Transport requirement and facilities Transport cost Competition, presence of others Availability of utilities [power, water, gas, sewerage disposal and cost] Labour supply and cost I - R climate, labour productivity Customer expectation of D Company specific commitments Local taxation Community attitude Restrictions associated with warehouses

INVENTORY CONCEPTS :
INVENTORY IS A LARGE & COSTLY INVESTMENT. BETTER MANAGEMENT OF INVENTORIES IMPROVES ORGANISATIONS CASH FLOW & RETURN ON INVESTMENT. INVENTORY REPRESENTS LARGEST SINGLE INVESTMENT IN ASSETS ( 20% OF THE TOTAL ASSETS OF MANUFACTURER & MORE THAN 50% OF TOTAL ASSETS OF WHOLESALERS & RETAILERS.

OBJECTIVES OF INVENTORY MANAGEMENT:

1. MEETING DESIRED LEVEL OF CUSTOMER SERVICE 2. REDUCING TOTAL OPERATING COST OF LOGISTIC ACTIVITIES THROUGH IMPROVED INVENTORY CONTROL 3. TO INCREASE ORGANISATIONS PROFITABILITY

NEED FOR INVENTORY HOLDING :

1. ACHIEVE ECONOMIES OF SCALE IN PURCHASING, TRANSPORTATION & MANUFACTURING 2. ACHIEVE SPECIALISATION IN MANUFACTURING 3. STRIKE BALANCE BETWEEN SUPPLY & DEMAND 4. BUILDING SEASONAL INVENTORIES 5. PROVIDE PROTECTION FROM UNCERTAINTIES ARISING OUT OF FLUCTUATIONS IN DEMAND & ORDER PROCESSING CYCLE 6. ACT AS A BUFFER BETWEEN CRITICAL INTERFACES IN THE CHANNEL OF DISTRIBUTION 7. OFFER HIGHER CUSTOMER SERVICE LEVEL.

PACKAGING IS AN IMPORTANT ASPECT OF LOGISTICS. MANAGEMENT INTEGRATED PACKAGING & LOGISTICS ACTIVITIES HELP ORGANISATION TO OPTIMISE OPERATIONAL EFFICIENCY, IMPROVE CUSTOMER SATISFACTION, MINIMISE OPERATIONAL COST & REDUCE NATIONAL WASTE OF RESOURCES TWO BASIC FUNCTIONS 1. MARKETING INFORMATION ABOUT PRODUCT & PRODUCT PRESENTTION THROUGH THE USE OF COLOUR / DESIGN / SHAPE ETC. 2. LOGISTICS PROTECTION & PRESERVATION OF THE CONTENTS (QUALITY & QUANTITY) FROM OUTSIDE ENVIRONMENTS, TILL IT REACHES TO THE FINAL COSUMER.

PACKAGING OBJECTIVES :
1.TO INCREASE CUSTOMER SERVICE LEVEL

2.TO ACHIEVE REDUCTION IN OVERALL PRODUCT DISTRIBUTION COSTS

3. TO FACILITATE EFFICIENT HANDLING / STORING / TRANSPORTATION ACTIVITIES

MAJOR PACKAGING FUNCTIONS: 1. CONTAINMENT PRODUCTS MUST BE CONTAINED BEFORE THEY ARE MOVED FROM ONE PLACE TO ANOTHER 2. PROTECTION/ PRESERVATION FROM DAMAGES / LOSSES DURING HANDLING / STORING / TRANSPORTATION 3. APPORTIONMENT TO REDUCE THE OUTPUT FROM THE BULK TO SMALL SIZE REQUIRED BY THE CONSUMER

4. UNITISATION TO PERMIT PACKAGE TO BE CONSOLIDATED IN TO LARGER SECONDARY PACKAGE.

5. CONVENIENCE IT OFFERS CUSTOMER CONVENIENCE IN HANDLING / USING THE PRODUCT 6. COMMUNICATION IT PROVIDES EASY IDENTIFICATION & DIRECTION TO HANDLE / USE