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LOGISTICS MANAGEMENT Facilitator Dr Pramod Shetty 1
LOGISTICS
MANAGEMENT
Facilitator
Dr Pramod Shetty
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Logistics Management • The Process of strategically managing the movement and storage of material, parts and
Logistics Management
The Process of strategically managing the movement and
storage of material, parts and finished goods from
suppliers,through the firm to the customers.
.....
Council
of Logistics Management
A planning, implementing and controlling the physical flows
of materials and finished goods from point of origin to point
of use to meet the customers need at profit
.....
Philip
Kotler
Logistics involves the integration of information,
transportation, inventory, warehousing, materials
handling and packaging
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Forces Shaping Perspective of LOGISTICS

Forces Shaping Perspective of LOGISTICS • • Concept of supply chain Cost pressure Speed to market

Concept of supply chain Cost pressure Speed to market Customer delight Movement toward globalization Time –space utility ‘Hollowing out’ of industry Outsourcing

Pervasiveness of Logistics

24 Hours ATM •Dabbawalas of Mumbai •Laundry Service in a Five Star Hotel •Indian Postal Service
24 Hours ATM
•Dabbawalas of Mumbai
•Laundry Service in a Five Star Hotel
•Indian Postal Service
•Gulf war in 1991
•Public Distribution System (FCI)
• Molded plastic water tanks – product design • Cement industry – packaging • Two wheelers
• Molded plastic water tanks – product design
• Cement industry – packaging
• Two wheelers – network design
• Sponge iron – mode of transport
• Pharmaceutical – production planning,
transportation

Source of Competitive Advantage

Source of Competitive Advantage • Competitive advantage is the ability of an organization to differentiate itself

• Competitive advantage is the ability of an organization to differentiate itself in the eyes of the customer, from its competition, and to operate at a lower cost and hence greater profit.

• Competitive advantage helps organizations to achieve commercial success which mainly depends upon two factors – cost advantage and value advantage.

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Commercial success Cost advantage Value advantage
Commercial success
Cost advantage
Value advantage
Commercial success Cost advantage Value advantage 7
Commercial success Cost advantage Value advantage 7

Cost advantage or Productivity advantage

- Characterized by low cost of production due to greater sales volume, economies of scale enabling
-
Characterized by low cost of production due to
greater sales volume, economies of scale enabling
fixed costs to be spread over a greater volume and
the impact of the ‘experience curve’.
Value advantage is in terms of product offering a
differential ‘plus’ over competitive offerings.
-
Based on marketing concept that customers that
‘customers don't buy products, they buy benefits’.
-
Benefits may be intangibles and may not relate to
specific product features.
-
It can be an image or reputation or even some

functional aspects.

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• Adding value through differentiation is extremely powerful is extremely powerful means of achieving competitive edge
• Adding value through differentiation is
extremely powerful is extremely powerful
means of achieving competitive edge in the
market.
One
of
the
significant
method
of adding
value is service.
• Service helps in developing relationship with
the customers through provision of an
augmented offer.
• Augmentation
takes many
forms
such as
delivery services, after-sales services,
financial packages, technical support etc.
Productivity and Value Matrix V Service Leader a Cost and Service Leader (3) l (4) u
Productivity and Value Matrix
V
Service Leader
a
Cost and Service
Leader
(3)
l
(4)
u
e
Commodity Market
Cost Leader
(1)
(2)
A
d
v
Productivity Advantage
• For companies in quadrant (1), the market is uncomfortable place as their products cannot be
For
companies
in
quadrant
(1),
the
market
is
uncomfortable
place
as
their
products
cannot
be
differentiated from their competitors’ offerings as
they
do
not
have any
cost advantage. These are
commodity markets.
Companies in quadrant (2), adopt cost leadership
strategies. Traditionally, these are based on
economies of scale gained through volume.
• Another route to achieving cost advantage is through
logistics management. As logistics constitutes a major
proportion of total costs, reengineering logistics
processes results into substantial cost reduction.
• Companies in quadrant (3), seek differentiation through service excellence since markets are becoming more and
• Companies
in
quadrant
(3),
seek
differentiation
through service excellence since markets are
becoming more and more service sensitive.
• Customers expect greater responsiveness and
reliability from the
suppliers, reduced lead times,
just-in-time delivery, and various other value added
services.
• Services
strategies
can
be
developed
through
enhanced logistics management.
• Companies in quadrant (4) are distinctive in value
they deliver and are also cost competitive.
• Competitors find it hard to attack these companies
which try to excel in all the value chain activities.
Value Chain Activities Value Chain Activities Primary Activities Secondary Activities •Inbound Logistics •Operations •Outbound Logistics •Marketing
Value Chain Activities
Value Chain Activities
Primary Activities
Secondary Activities
•Inbound Logistics
•Operations
•Outbound Logistics
•Marketing & Sales
•Service
Value Chain Activities Value Chain Activities Primary Activities Secondary Activities •Inbound Logistics •Operations •Outbound Logistics •Marketing

•Infrastructure •Human Resource Management •Technology Development •Procurement

• Primary activities represent the functional areas like arranging inputs for transforming them into output, and
• Primary activities represent the functional
areas like arranging inputs for transforming
them into output, and managing distribution,
marketing, sales, and services.
The
secondary
activities
facilitate
the
integration
of
all
the
functions
across
the
entire organization.

Factors affecting value and productivity advantage

A. Productivity advantage - Capacity utilization - Asset utilization - Inventory reduction - Integration with the
A.
Productivity advantage
-
Capacity utilization
-
Asset utilization
-
Inventory reduction
-
Integration with the suppliers.
B. Value advantage
-
Customized services
  • - Reliability

Underlying Philosophy Behind Logistics Concept Materials Flow Suppliers Procurement Operation Distribution Customers Information Flow
Underlying Philosophy Behind
Logistics Concept
Materials Flow
Suppliers
Procurement
Operation
Distribution
Customers
Information Flow

How do we define supply chain?

• A network of organizations that are having linkages, both upstream and downstream in different processes
• A network of organizations that are having
linkages, both upstream and downstream in
different processes and activities that produce
and deliver value in the form of products and
services in the hands of ultimate consumer.
Weavers
Yarn/Fibre
Customers
Retailers
Shirt Manufacturer
of Fabrics
mfrers
Downstream
How do we define supply chain? • A network of organizations that are having linkages, both
Upstream
Upstream

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• A shirt manufacturer is a part of supply chain that extends upstream through the weavers of fabrics to the spinners and the manufacturers of fibres, and downstream though distributors and retailers to the final consumers.

• A shirt manufacturer is a part of supply chain that extends upstream through the weavers

• Though each of these organizations are dependent on each other yet traditionally do not closely cooperate with one another.

Is Supply chain management same as vertical integration?

Is Supply chain management same as vertical integration? • SCM is not the same as vertical

• SCM is not the same as vertical integration. • Vertical integration implies ownership of upstream suppliers and downstream customers.

• Earlier, vertical integration used to be the desirable strategy but increasingly the companies are focusing on their core business i.e. the activities that they do really well and where they have a differential advantage.

• Everything else is outsourced.

Implementation of SCM through Logistics Management

Implementation of SCM through Logistics Management • Transferring costs upstream or downstream leads to logistics myopia

• Transferring costs upstream or downstream leads to logistics myopia as all costs ultimately will make way to the final market place to be reflected in the price paid by the end user.

• The prime objective of SCM is to reduce or eliminate the buffers of inventory that exists between the organizations in a chain through sharing of information on demand and current stock levels.

How does Logistics differ from SCM? • Logistics management is primarily concerned with optimizing flows within
How does Logistics differ from
SCM?
• Logistics management is primarily concerned with
optimizing flows within the organization.
• Supply chain management deals with integration of
all partners in the value chain.
• Logistics is essentially a framework that creates a
single plan for flow of products and information
through a business.
• Supply chain builds upon this framework and seeks
to
achieve
linkage
and
coordination
between
processes
of
other
entities
in
the
pipeline
i.e.

suppliers and customers, and organization itself.

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Objectives of Logistics Management

• Inventory reduction • Reliable and consistent delivery performance • Freight economy • Minimum product damages
• Inventory reduction
• Reliable and consistent delivery
performance
• Freight economy
• Minimum product damages
• Quick response

Logistics - Macro Level Growth Variables

• Country's economic growth • Government policies for trade development • Regulatory environment • Transportation Infrastructure
• Country's economic growth
• Government policies for trade development
• Regulatory environment
• Transportation Infrastructure
• Warehousing and cold chain network
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