Learning Objectives

Principles of materials management, logistics and supply chain management Logistics interface with other functions Inventory management principles and systems Warehousing management fundamentals Transportation management practices How IT enables the logistics function Understand about the performance measurement of the logistics function

Materials Management
Materials forms the largest single cost item in most manufacturing companies needs to be carefully managed Materials management function includes planning and control, purchasing and stores and inventory control Materials management is the precursor to logistics and supply chain management

Logistics Defined
Logistics means having the right thing, at the right place, at the right time The procurement, maintenance, distribution and replacement of personnel and materials Websters Dictionary The science of planning, organizing and managing activities that provide goods or services Logistics World, 1997

Logistics
Functions: planning, procurement, transportation, supply and maintenance Processes: requirements determination, acquisition, distribution and conservation Business: science of planning, design and support of business operations of procurement, purchasing, inventory, warehousing, distribution, transportation, customer support, financial and human resources

Scope of Logistics
Choice of markets Procurement Plant location and layout Inventory management Location and management of warehouses Choices of carriers, mode of transport Packaging decisions Relevant to all enterprises: manufacturing, Government, Institutions, service organisations

Components of LOG Management

Input
Natural Resources (land, facilities Equipment) HR Finance Informati on

Logistics Activities
Customer service Demand forecasting Distribution Communications Inventory control Materials handling Order processing Parts and service support Plants and warehouse selection Procurement Packaging Return goods handling Salvage and scrap disposal Traffic and transportation Warehouse and storage

Output
Marketing Orientation (competitive Advantage) Time and Place utility Efficient move to customer

Links and Flows

General material flow/ service flow Information flow

Information flow
Customer s customer
Customer Lead Firm Supplier Suppliers supplier

General cash flow Outbound / Downstream logistics Inbound / Upstream logistics

Source: ICFAI

Logistics and Marketing

Interface on:
o o o o o o

Product design and pricing Customer service policies Sales forecasts and order processing Inventory policies and location of warehouses Channels of distribution and despatch planning Transportation to reach products to customers

Production wants larger production runs to minimise time spent on set up changes on the machines. Marketing wants smaller runs of a variety of products.

SDM Ch 15

Tata McGraw Hill Publishing

Source: Michael Porter

The Value Chain

S U P P P O R T
Company Infrastructure Organisation, people, methods Systems & technology

margin

Procurement

Inbound logistics Operations

Outbound Marketing logistics & sales

Service

margin

SDM Ch 15

Tata McGraw Primary activities Hill Publishing

Logistics Plan Outline

Internal analysis (current position)
o o o o o o o o o o o

Organisation Human resources Transportation Relations with internal customers Quality of product Quality of Service Competitor logistics performance Trends External environment / economy Public, private and contract warehouse Public, private and contract carriage
Tata McGraw Hill Publishing

External / situation analysis

SDM Ch 15

Principles of Logistics Excellence

Strategic Link logistics to corporate strategy Organise comprehensively Use the power of information Emphasise human resources Form strategic alliances

Operational Focus on financial performance Target optimum service levels Manage the details Leveraging logistics volumes Measure and react to performance

SDM Ch 15

Tata McGraw Hill Publishing

Alling & Tyndall

Logistics Focus Areas

Customer service related
Packaging Order processing Spare parts and service support After sales Customer service support Demand forecasting Distribution communications Return goods handling

Operations related
Plant and warehouse site location Procurement Inventory control Materials handling Salvage and scrap disposal Traffic and transportation Warehousing and storage

Logistics may be confined to the company whereas SCM extends beyond

Supply Chain Management

Business context:
o o o o

Globalization of the market place Advances in technology Increasingly demanding, informed customer base Purchase decisions on dimensions of quality, price and time To meet customer driven challenges To reduce costs Improve service levels Enhance speed to market

Innovative supply chain:

o o o o

Supply Chain Integration

Optimising the supply chain requires supplier and customer involvement to integrate processes, policies, systems, database and strategies between diverse trading partners

Supply Chain Integration

Order Fulfillment

Customer Analysis
Purchasing/Supplier Partnering

Storage & Transportatio n

Integrated Supply Chain Management

Inventory Management and control

Manufacturing/ Remanufacturing/ Assembly

Demand & Lead Time Management

Materials Management

Functions
Warehouses

Material handling

Customer service

Information transfer

Storage function

Receive goods Identify goods Sort goods Despatch to storage Hold inventory Recall, select goods Marshal the shipment Despatch the shipment Prepare records and advices

Temporar y

Permanen t

Purpose of Warehousing
To provide desired level of customer service at the lowest possible total cost It is that part of the firms logistics system that stores products (RM, Packing Materials, WIP, FG) at and between point of origin and point of consumption and provides info to management on the status, condition and disposition of items being stored Distribution warehousing relates mainly to FG

Reasons for Warehousing

Service related
Maintain source of supply Support customer service policies Meet changing market conditions Overcome time and space differentials Support JIT programs of suppliers and customers Provide customers with the right mix of products at all times Temporary storage of materials to be disposed or re-cycled

Cost related
Achieve production economies Achieve transportation economies Take advantage of Quantity Purchase discounts and forward buys Least Logistics cost for a desired level of customer service

Warehouses
Support manufacturing Mix products from multiple facilities for shipment to a single customer Break-bulk Aggregate Used more as a flow-thru point than as a hoarding point

Reverse Logistics
Movement of goods from the market or customer back to the company The need:
o o o o o

Increased awareness of the environment Stringent legislation For some it is part of the business Profitability of dealing with scrap, surplus Over optimistic sales forecasts, change in product specs, errors in estimating material usage, losses in processing or overbuying based on incentives

Surplus, obsolescence can result due to:

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