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What is Logistics? Can you visualize the production function of a business process? What is the most accessible of all production functions you can visualize? Now what activities make production happen? * Procurement Sourcing Moving or Transportation Handling Storage
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Logistical Management Making inputs and outputs available when they are needed, where they are needed and in the quantities they are needed * Inputs from market [domestic or import] are needed for production * Out puts of production process [Industrial products, engineering, chemical & pharmaceutical products are needed in the market [domestic or export] * Battle fronts need troops * Troops need supplies *People need agricultural products * Agriculture needs fertilizers *11/27/2012 needs food grains PDS 3
Logistical Management - continued Without logistics no value adding process can run Logistics is a facilitator of trade & business Age old practice Modern logistics is scientific Logistics is a planning function Genesis of logistics is in military planning Origin of many OR techniques like Value analysis, PERT, CPM etc.. is the crucible of war
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Logistical History of India India was a maritime power since about 300 BC Goods Made in India, steel, textiles etc. Trade and prosperity Gradual degeneration Some logistical feats in history: Berlin Air Lift A study in logistics Indians in the Gulf countries - 1991 Operation Overlord, II World War1945 1962 war with China 1776 American war of Independence [4th July1776]
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What causes bad logistics? Infrastructure: bad roads, inefficient railways, poor communication lines, congestion in ports Taxation: e.g. Octroi Information: Inadequate information, bad communication Management: Bad management decisions [carrier selection, out sourcing etc.]
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V1
V2
V3
V5
Receiving stores
V4
Procurement
Outbound Logistics
Inbound Logistics
Operation
W1
W2
W3
R1
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R2
R3
R4
R5
R6
7
Market
Importance of Logistics
Why should we learn logistics? Why is logistics important for management students? Logistics is the bed rock of trade and business Leads to customer satisfaction, D&F expectations of customers Integrates logistical activities Competitive edge in a commodities market Logistics wins or loses wars Supports critical functions like operations and marketing to be JUST IN TIME by providing Interface with marketing
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Importance of Logistics - continued 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 logistics experts are moving up in corporate ladder leads to the concept of supply chain management Indian market is changing- shift from sellers market to buyers market changing customer expanding business, global trade competition, internal & external concept of lean management
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Operating Objectives Of Logistics 1.Rapid response F- Objective: Ability to respond rapidly to customers order Role of Information Technology Concept of SMED and Kanban 2. Minimum variance D-Objective as OTD Any event that disturbs the supply chain is variance Problems in information flow, traffic snarls, acts of god, wrong dispatches, transit damage Traditional approach Vs costs
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Operating Objectives Of Logistics -continued 3. Minimum inventory Concept of Inventory Turns Increase these turns without sacrificing customer satisfaction Single piece flow as practiced by JIT companies 4. Movement consolidation Integrating interests of several players in the supply chain. Planning several small shipments together [of different types of shipments]
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Operating Objectives Of Logistics -continued 5. Quality Quality of logistics performance complete fulfillment of order 6. Life cycle support [cradle to cradle logistical support] After sales service Reverse logistics # Rigid quality standards # transit damage # product expiration dating # law against unscientific disposal
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Operating Objectives Of Logistics -continued # law making recycling mandatory # erroneous order processing by
supplier
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Logistical Functions
NETWORK DESIGN
LOGISTICS FUNCTIONS
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Logistical Functions
components of logistics or elements of logistics Information management * Role of technology, fast & accurate information * Real time logistics in competitive business * Notification to customer * Role of information in logistical forecasting & logistical operations, order processing and order management * Erroneous information will result into product recall and reshipment
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Logistical Functions - continued * Expectations from carrierminimum cost, speed of transport, consistency in speed Warehousing * Switching facility rather than a storage facility * Ownership can be private, public or third party contract. *Economic benefits - Consolidation, Break bulk, Cross Dock, processing postponement, stock piling[seasonal storage] * Service benefits - spot stocking, Assortment, mixing, production support, market presence
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Logistical Functions - continued Material handling * Receiving, moving, storing, dispatching activities * Impact on cost [capital as well as running], Quality and safety * One of the principles of material handling is minimum movement * Commonly used material handling equipment- forklifts, EOT Cranes, hoists, pulley blocks, trolleys, railroad cars, conveyers, ropes, slings, carousels, sortations, robotics Packaging * Types of packaging- consumer packaging and industrial packaging
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Logistical Functions - continued *Consumer packaging Attracts attention single most important factor in purchasing decisions made at point of sale * Industrial packaging - makes logistical activities of handling storage moving easy * Sales functions of packaging Display - attraction, easy identification, communication of recipe, hazard, special care Ease of opening Convenience - flexi tubes, sprays Dispensing - spouts, taps, spays, tubes 11/27/2012 19
Logistical Functions - continued * Functions of packaging # Protection - physical damage, bubble pack, corrugated sheet cartons, mangos in crates # Cube minimization - flattened cans, square shaped whisky bottles, soft drink concentrates, furniture in knocked down condition # Weight minimization - plastic bottles, plastic crates, milkbags # Facilitating handling & using fruity packs, flexible tubes, aerosol pacs # Facilitating storage & reuse corrugated boxes
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Logistical Functions - continued # Grouping goods into convenient unit for distribution - mango boxes, cola bottles, cotton bales, wire rope coils # Pilfer proofing - bisleri caps, cola caps # Handling - pallets, straps Net work design [Location analysis] - to minimize overall system cost of delivering value to the customer # Number of facilities - production facilities, warehouses # What is to be performed in these facilities?
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Logistical Functions - continued # Their location - to minimize overall system cost # Who operates these facilities? outsourcing decisions # Communication between these facilities - are some of the salient features of net work design.
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Some important concepts # Logistics and supply chain management Logistics and Supply Chain
Management by G.Raghuram, N.Rangaraj. Page #15, The Management of Business Logistics by Coyle, Bardi, Langlely Page # 31 ]
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Some important concepts continued Scope - Source of raw materials to end user - all upstream & downstream organizations & linkages How is this created in business? external integration Concept of supply chain as a pipe line Main objective - Supply chain profitability by value creation Focus - end user
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Origin -
extension of scope of
logistics management
Definition - Management of
upstream and down stream relationships with suppliers and
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vendors
M/M
Inbound logistics
O/M
FG stores
Warehouses
Customers
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particulars
Logistics management
Scope
All players in the supply chain from raw material source to finished product consumer, vendors, their vendors, supplier organization [shipper], Warehouses, service providers, customers, their customers How this is created By internal By external in business? integration of integration of roles logistics functions of various players handled by various in the supply chain. management functions within organization Main objective Logistics cost Supply chain reduction by profitability by integrating value creation. resources across the pipeline
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focus
L/M tries to take the product to the consumer at minimum logistical cost. Hence it is supply driven. Logistics is the process of strategically managing procurement and storage of material , part and 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
SCM focuses on value creation in the supply chain. Hence this is customer focused or demand driven. 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.
definition
Origin
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Some important concepts continued Business functions of logistics management [physical distribution
management by K.K.Khanna page # 13, The Management of Business Logistics by Coyle, Bardi, Langlely Page # 39]
military origin, military functions & post war march into business procuring, moving and storing of R/M and industrial F/G making inputs available for value addition to a conversion process facilitation of relevant manufacturing and marketing
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Some important concepts continued - making finished goods available to the customers in the market procuring, moving and storing of agricultural products Food Corporation of India importance of logistics function in commodities market * Event logistics - The net work of activities, facilities and personnel required to organize, schedule and deploy the resources for an event to take place and to efficiently withdraw after the event
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Some important concepts continued * Service logistics - the acquisition, scheduling and management of the facilities/assets, personnel and materials to support and sustain a service operation * Military logistics - design and integration of all aspects of support for the operational capability of the military forces [deployed or in garrison] and their equipment to ensure readiness, reliability and efficiency
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Some important concepts continued mission focus Vs individual function Mission of logistics is providing a means by which customer satisfaction is achieved
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*Inbound logistics
Procurement operations in procurement cycle potential avenues for reducing systems costs value of inventory is low
Sourcing
Supplier
Receiving
Transportation
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I/B logistics
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Order selection
Order transportation
Customer delivery
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Some important concepts continued *Total cost analysis Conventional approach No information on the impact of cost of an individual function on the system Apportionment of Logistics costs Costs get submerged Competitive edge is lost by the organization. Incremental cost to the system on account of changes to the system like introduction of a warehouse and the impact on the system Impact of decisions at various levels on the system
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Some important concepts continued Cost information is biased, cost elements tend to get hidden out of fear that they expose functional weakness Costs in no mans land are never owned - like tube lights on passages, cost of returned vehicle Cost cutting is fragmented so doesnt reduce system cost Focus is on input function. Hence attempt is to reduce function cost in isolation Customer dissatisfaction * Total cost approach Modern approach to logistical costing
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Some important concepts continued Focus on reduction of cost of output of the system Provides competitive edge to the company Several trade off points in the system, further areas of improvement
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budgeting] in logistics input focused costing output focused costing mission goals and costs are set functional inputs are worked out to meet the system deliverables
Purchasing Sales Production Mission A Mission B Mission C Transportation Marketing Etc Customer service goals [QCD] At market type A Customer service goals [QCD] At market type B Customer service goals [QCD] At market type C
290
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Customer service goals [QCD] At market type A Customer service goals [QCD] At market type B Customer service goals [QCD] At market type C
45
35
20
C1 =Rs. 30/10 10 10
70
50
35
Rs.155/-
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PRICE
LOGISTICS
PRODUCT
MARKETING
PROMOTION
PLACE
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Some important concepts continued *Interface with marketing a common wall,surface or area with another body, concept or function area of common interest or concern Four Ps of marketing and logistical interface Price - marketing can re offer the price to beat the competition with superior logistical support Product & Packaging- size shape & weight/volume ratio of the product has major impact on logistical cost. # Gillette story of floor displays
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Some important concepts continued, Interface with marketing Promotion - promotional strategies of marketing need to be decided by working closely with logistics # Push/Pull strategy Place - whether to distribute through wholesalers or through retailers is a marketing decision with impact on logistics # wholesalers demand & retailers demand Customer Service - another area of interface between marketing & logistics
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SHORT RUNS
LOGISTICS
SEASONAL DEMAND
OPERATIONS
SUPPLY SIDE INTERFACE
PACKAGING
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Some important concepts continued Interface with operations * Short production runs Very strong logistical support is needed to operate Just In Time Short runs lead to inventory reduction * Seasonal demand Inventory should be mutually accepted * Supply side interface Prevent shortages * Packaging Protective packaging Third party alternatives
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Some important concepts continued Role of planning in logistics management Role of planning is central to logistics management Mission of logistics is to achieve desired levels of service and quality at lowest possible cost. Logistics makes one plan, that replaces traditional concept of planning in pockets
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Value
Value
C company By effective utilization of assets tries to create and offer value to customers
Cost differentials
C competition By effective utilization of assets tries to create and offer value to customers
HIGH
SERVICE LEADER
CUSTOMER
LOW
SAD
OK
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HIGH
COST
LOW
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# Scope is wide spread- functions of logistics are spread across various stages of value chain in the organization # Provides interface between marketing and customers, marketing and operations, operations and supplier # Provides competitive edge to business in the current environment # Handles flow of information, materials & recovery cycle # Tackles cost reduction
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the relative assessment of a firms capability to provide competitively superior customer service at the lowest possible total cost. It is a strategy to provide a superior service at a total cost below industry average. Its aim is to view how logistics can be exploited as a core competency so that fits into a firms overall strategic positioning
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Customer
Information flow
By integrated performance of logistical functions # jigsaw puzzle # What is the big picture? What are the parameters needed to achieve this integrated performance? # Information flow, Inventory flow, organization, customers and suppliers
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Internal Integration # First Stage of Internal Integration Materials management & Physical distribution Management # Second Stage of Internal Integration - Logistics Management [ External Integration - Supply Chain Management] # functions in coordinated fashion # One operational command Performance in isolation loses sight of overall picture.
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Some important concepts continued # Picture before you to solve the jigsaw puzzle # Links the enterprise with customers and suppliers # Information flowing into the enterprise is converted into schedules and plans & value added products reach the customers # Integrated logistics is interrelated efforts of managing information flow & inventory flow
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Some important concepts continued Value added role of Logistics # form utility, place and time utility and possession utility add value to a product Form Utility is given by Production How logistics also adds form utility processing postponement, mixing, unpacking Place and Time Utility is given by logistics functions Possession Utility: Marketing creates Possession Utility by promoting the product But logistics makes finally possession by customer happen 11/27/2012 58
Some important concepts continued * Logistical Information System. Primary activities of LIS data flow from external sources processing and storage of information within the firm communication to the decision maker in the form of reports communication to customers and suppliers and their feedback
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