Logistic Management An Supply Chain Imperative

LOGISTICS

Defined
Planning implementing and controlling the physical flow of material and finished goods from point of origin to point of use to meet customer`s need at a profit By Philip Kotler It is essentially a planning process and an information activity So A integrative process that optimizes the flow of material and supplies through the organization and its operations to the customer

The word logistic has originated from Greek word Logistikos and the Latin word Logisticus which means science of computing & calculating In ancient times it was used more in connection with moving armies, the supplies of food & armaments to the war front. During World War II logistics gained importance in army operations covering the movement of supplies , men & equipment across the border Today It has acquired the wider meaning and is used in the business for the movement of material from suppliers to the manufacturer and finally the finished goods to the consumers

Scope of Logistic It is of critical importance to the organization how it delivers products & services to the customer , whether the product is tangible or intangible. Effective & efficient Physical movement of the tangible product will speak of intangible services associated with the product and the organization which is delivering it. In Case of intangible product , the delivery of tangibles at the right place & right time will speak about its quality. On the macro level infrastructure such as Various modes of transport , transportation equip., storage facilities, connectivity & information processing are contributing to a larg3e extent in the physical movement of goods produced in manufacturing , mining & agriculture Sectors.

Scope of logistics
This speed & reliability in distribution of products & services contribute to a great extent in the growth of a country`s domestic & international trade . Logistic cost as a percentage of GDP across the world is shown in the following table Country Logistic cost as a percentage of GDP
Korea China Japan India France UK USA 16 15 14 13 12 11 10

Scope of logistics
India spent nearly $ 50 billion to move material from one use to another.
So the Public distribution system in the country needs logistical support for delivering goods at right place on time and the lowest cost. At Micro Level logistic plays a critical role in the value delivery system of business organization to provide superior customer service i.e. to achieve a desired level of delivered services and quality at the lowest possible cost. In a nutshell any productivity improvement that could be achieved in any part of logistic system,at the micro or macro level would help in cost reduction and proper deployment of scare national resources to the productive purposes.

Fact
In a manufacturing org. the business process starts with the flow of material from the suppliers, progress to the plant, then to the customer through the distribution channel the department may excel in their respective function but org. as a whole their performance may be dismal. Reason Lack of Co ordination in their activities They have different goal to cherish There is no single agency that coordinates their functions and homogenizes them. How to overcome ? Use of Logistic as a system

Logistic A system approach

Logistic recognizes that all the activities of material movement across the business process are interdependent and needs close coordination and these are to be maintained as a system and not the functional Silos. System is shown as logistic Mix including following functional Areas Order Processing Information Flow Warehousing Inventory control Packaging Transportation

Order Processing Involve following activities Order checking for any deviation in agreed on negotiated term Technical details;price;delivery period;payment terms;taxes etc Checking the availability of material in stock (material requisition) Production & material scheduling for shortage Acknowledging the order, indicating deviation if any It is routine operation but require great deal of planning training of people involved and investment to bring about efficiency & accuracy In a large organization a system capable of handling thousands of voluminous orders with minimum human involvement or without human involvement is a must involving shortened order fulfillment cycle to have edge over rivals

Information Flow It is basically information based activity of inventory movement across the supply chain. Hence role of information system plays a vital role in delivering superior customer service This function is required to facilitate the following information needs Order Registration Order checking & editing Order processing Coordination means to integrate the total supply chain of the company with informational needs as to time ,quantity, value e.g Lead time, rate of consumption , delivery schedule & price of the material , Transportation time & cost etc.

Warehousing
A storage place wherein finished goods are stored till they are sold.Effectiveness of an organization`s marketing strategy depends on making the right decision regarding warehouse.

Nowadays Warehouse are treated as switching facilities rather than storage place.It is a major cost center, many customer problem are the direct result of improper warehousing management. Major decision of ware house are as follows:Location ,Size & Number of warehousing facilities Warehouse layout Design of building Ownership of the warehouse

Inventory management
Point order problem That is How much to order When to order For this we require Dependable IMS Independent IMS Purchase Control Stores control
ABC Analysis VED Analysis
EOQ & EBQ Analysis

Issue management
Level Management MRP System

Perpetual inventory system

JIT System

Packaging It is also a critical element in physical distribution of the product , which influences the efficiency of the logistic system this is done with the view of following : Foe handling and damage prevention For communications For inter modal transportation Storage space economy Thus to reduce packaging cost

Transportation
Foe the movement of goods from supplier to buyer , transportation is the most fundamental and important component of logistic. E.g. for low unit value products the transportation cost component is 20% of the product cost. In logistic cost its share varies up to 65-70% in case of mass consumed very low unit price products. Mode of transportation ( Cost & time factor) Own fleet or Outsourcing Route Planning Vehicle scheduling Are the few decision which are involved in transportation

Three Forces
Which have change the perspective of logistics

Globalization

Focus on Supply chain Management Outsourcing of Non Core Competency Functional Area

Globalization
The entire world has become a global village for marketers because of the liberalization of economics of most countries and the emergence of WTO which is forcing business organizations to supply products beyond the national boundaries wherever there is a market opportunity. In such conditions the role of

LOGISTICS
Will be to provide time and place time and place utility of the product to the customer

Focus on Supply Chain Management

Business the world over are striving for competitiveness. In their struggle for survival their focus has shifted to the supply chain I.e. Integrating the process of Procurement , processing & distributing to deliver value for money to the customer Two key roles logistics planning & support are Value delivery process success of supply chain management

Outsourcing of Non Core Competency functional Area

Outsourcing is a acceptable trend in business. Corporation have realized that doing everything by themselves does not result in effective & efficient use of scare resources available to them. It is better to outsource functional area to experts who can do job at the lowest cost and that to efficiently & Effectively. LOGISTICS Is one such area where most of business org. do not have enough expertise thus needs to be outsourced Thus Logistics have shaped into different service industry offering complete & customized logistics solutions

Value Chain
It is understood now that an organization`s competitive Success could only come through either cost leadership or offering differentiated product and services

LOGISTIC MANAGEMENT
Can provide both the benefits simultaneously Through its value chain activities Which can be categorized into different types Inbound logistics operations Out bound logistics Support activates e.g HR, Accounts & finace, IT & MIS

Infrastructure

O A&F p e r operations a S&M t i Out bond In bound o Logistics logistics n s

Technology

Services

Customer Value

M&M

HR

Supply Chain

Stores

Operations

Stores

Procurement

Warehouse

Vendor

Customer

Inbound Logistics

Out Bound Logistics

Supply Chain
Material flow
Material flow

Stores RM

Purchase

Vendor

P r o c u r e m e n t

OPERATIONS

Information flow

D Stores is FG tr i b u Warehousing ti o n Customer Out bound logistics

Inbound Logistics

Logistics for Business Excellence

For Business Excellence logistics operation need to be integrated on the following two fronts integration of logistic into business
Integration

of components of logistics To achieve the objective of making available right product at the right place and at a right time at low cost , every business is required to integrate logistics into the business process. For logistic operation to run smoothly, proper integration amongst the component of logistic process is a must.

Logistic
HR
A/Cs FinanceUtilities Marketing PPC

QC

Mat. Mng.

IT

Others

Organizational Functions
In process Log.

Suppliers

Procurement
In Bound Log.

Processing

Distribution
Out Bound Logistic

Customer

Logistic System Component

Transportation Material Handling & Storage Logistical Packaging

Warehousing

Information
Inventory Mang.

LOGISTIC FUNCTION
Order Processing

Objectives of Logistic management

Inventory Reduction Reliable and consistent delivery performance Freight economy Minimum product damage quick Response

NOTE:
Amongst most of the Indian companies logistics outsourcing Has now become an accepted trend for the following reasons: Cost Saving Focus on core Business Paucity of funds Reduction in liabilities Wider Geographical coverage Cross pollination of better available practice

Warehousing Nowadays warehousing is used as a switching facility rather than as a long term storage house. Attention is paid to
1

Higher lower shorter inventory turnover operating cost cycle time And in light of these warehouse`s performance is judged by its productivity and cost performance while trying to achieve 2 polemic goals.
1 2

Customer`s satisfaction

lower cost of operation

We have to decide on 2 factors Whether to have Centralized decentralized warehouse warehouse

It ensures tight control On inventories and can Operate on EOS

multiple distribution centers location of sites

Objective Main better customer service low operating cost Ancillary objective
Maximum utilization of storage space Higher labour productivity Maximum Asset utilization Reduction in material handling Increase in inventory turnover Reduce order filing time

Warehousing Function 3 Functions Material Storage Function

Material Handling Function Information Handling Function

Material Storage function Due to non synchronization of Manufacturing cycle with that of the consumption cycle of the material , storage of the material remains a big hurdle So material storage is required to accommodate the following functions: Holding Consolidation Postponement Break Bulk packing Cross Docking Mixing

Material Handling function

This involves three function

1.

Loading & unloading Material Movement

3.

2.

Order filing

Information handling function For this following information is required Goods inward Inspection & auditing Goods outward Excess Stock Invoicing Warehouse expenses Transit damage & Breakage Consignment tracking This all information facilitate quick decision