Logistics

 Objectives:
 In correct quantity
 At desired location
 At right time
 In usable condition
 In the most cost efficient manner
 Objectives are interrelated and can be
achieved by an integrated logistics
management system
 Logistics
 Material flow
 Timely availability
 At correct place
 Ensure quality of goods & service (usability)
 Material storage:
 Balance the supply and demand/need
 To provide for risk factor of non-availability (service
level of availability)
 Points of storage in the supply chain
 Information flow
Logistics
 Physical Distribution:
 Transportation
 Warehousing
 Inventory levels
 Packaging & unitisation
 Information & communication
Logistics - Transportation
 Air: preferred for high-value goods
 Speedier & faster
 Perishable goods
 Light packing
 Simpler documentation
 Low inventory & storage cost
 Reliability of service
 Air transport cost to justify total overall cost
 Limited capacity of air carriers
 Vulnerable to disruption due to weather
Logistics - Transportation
 Ocean: Types of cargo:
 Bulk – minerals, commodities, fertilizers, crude etc
 Break bulk – packaged cargo handled piece by
piece or containerized
 Neo bulks – special goods sent without packing
like automobiles
 Containerized:
 FCL / LCL
 20 ft / 40ft / 40ft open top (8ft wide & 8ft high)
 Logistics - Transportation
 Ocean: Types of vessels:
 Tankers
 Bulk carriers for general cargo
 Neo-Bulk carriers for specific types of cargo
 General cargo vessels
 Containerships
 RO/RO – Roll On and Roll Off – cargo can be driven aboard
the vessel
 LASH – Light aboard ship – carry barges
 Barges – unmanned to be towed by a tugboat
 Combination carriers
 Logistics in Exports & Imports
 Ocean: Terms used:
 FOB – free on board
 FAS – free alongside ship
 DEQ – delivered exquay – for chartered vessels
where, unloading is seller’s responsibility
 DES – delivered exship – for chartered vessels
where, unloading is not seller’s responsibility
Logistics - Transportation
 Transportation: Road:
 Pakistan: Attari (India: Wagah)
 Bangladesh: Benapole (India: Petrapole)
 Myanmar: Moreh in Manipur
 Transportation: Rail:
 Pakistan: Attari (India: Wagah)
 Bangladesh: Benapole (India: Petrapole)
 NAFTA/CIS/EU trade extensively through rail
& road
Logistics Warehousing
 Warehousing: to bridge the gap
between production & customer
demand
 Storage of goods
 Consolidation
 Breaking bulk
 Custom bonded warehouses
Logistics - Warehousing
 Warehousing: Choice of warehouse
 Inventory level to be maintained
 Location of warehouse
 Level of customer service provided
 Warehousing costs
Logistics - Inventory
 Maintaining inventory is an integral part of
logistics
 Order Cycle Time
 Transit Time
 Inventory Carrying Cost
 Service Levels
 Replacements
 Currency Fluctuation
 International Storage
Logistics - Packaging
 Packaging & unitisation
 For air transport
 pallets & sling loads
 Not to exceed stipulated size
 Light weight
 For sea transport
 Containerisation
 Facilitate stuffing the container
 Chemical treatment of packing cases
 International Logistics
 Managing Logistics:
 In-house
 Out-source
 Special Trade Zones:
 Rotterdam
 Dubai
 Singapore
 Honk Kong
 Chennai
Logistics Management
 Ugar Sugar Works, Belgaum:
 5000 tons of barley per annum procured from North India
for malt production
 Transportation cost
 Quality issues (feed & malt grade)
 Solution: Contract farming
 Ugar supplied genetically pure seed on credit without interest
recovered at the time of barley supplies
 Free technical assistance
 Free transportation from the farmer’s place to Ugar factory (40
Km)
 Fluctuation in prices is absorbed by Ugar to keep the farmers
motivated to keep farming barley
 Ugar is planning to take up contract farming of casuarina
and eucalyptus to fuel their power plant
Logistics Management
 Appachi Cotton Company:
 Ginning & Trading House from Pollachi
 An example of forward and backward integration
between ‘grower’ (farmer) and ‘buyer’ (textile
mills) – Integrated Cotton Cultivation Model
 Integrated 600 farmers and arranged need based
loans through SHGs
 Other highlights:
 900 farmers
 Synchronised sowing
 Cotton crop insurance
 Assured buy-back from farmers
Logistics Management
 ITC’s e-Choupal:
 ‘choupal’ : gathering place in Hindi
 Serves as both a gathering place for exchange of
information and an e-commerce hub
 First crop to be covered: Soya in MP
 Benefits:
 Alleviate rural isolation
 Create more transparency for farmers
 Improve their productivity and incomes
e-Choupal Business Model
 e-Choupal Business Model
 ITC owns the IT network connected through phone lines
or VSAT
 One center for 10 surrounding villages covers 600 farmers
 System costs nothing for farmers
 Host farmer called “sanchalak” incurs some operating cost
and is obligated by public oath that to serve the entire
community. (Sanchalak gets prestige)
 Farmers access (either themselves or with the help of
sanchalak)
 Daily closing prices – domestic and international
 New farming technique
 Place orders for farm inputs and other items
 e-Choupal Business Model
 At harvest time ITC agrees to buy the crop directly from
farmers at the previous day’s closing price
 The farmer then transports the crop to ITC processing
center where crop is weighed and paid for including
transportation cost
 Above norm quality crops will entail “bonus points” which
can be exchanged for ITC products
 e-Choupal process bypasses Government mandated
trading ‘Mandi’s
 Farmers benefit from more accurate weighing, faster
processing time and prompt payment
 e-Choupal Transaction Costs
Rs per tonne

Description Mandi chain Choupal chain

Farmer Trolley freight to Mandi 120 (to ITC hub)120
incurs Labour 50 0
Kacchha Adat 150 0
Handling loss 50 0
Sub total 370 120
Commission to agent 100 (to sanchalak)50
Cost of gunny bags 75 75
Freight to factory 120 0
Handling at Mandi 40 (handling at hub)40
Cash disbursement cost 0 50
Sub total 335 215
Toatal cost per tonne 705 335
e-Choupal scale
 Present:
 6500 choupals, 9 states, 40000 villages and
4 million farmers
 Plans:
 20000 chouplas, 15 states, 100000 villages
and 10 million farmers