Supply Chain Management

1. Logistics Management
Prepared by:
Narendra Singh
Chaudhary

3. "Logistics means having the right thing,
at the right place, at the right time."

4.  Word, ’Logistics’ is derived from French word ‘loger’,
which means art of war pertaining to movement and
supply of armies.
 “Logistics means the art of managing the flow of raw
materials and finished goods from the source to the
user”
 To get goods from where they arise to the right place
in the right form, at the right time, at the right cost,
“Logistics or physical distribution or distribution
logistics is an integral part of Marketing Process”.

5. Definitions
 Application of management principles to
logistics operations for efficient and
cost effective movement of goods and
personnel.
 Management of the activity of transporting
goods to customers or to places where they
are bought or sold

6. Definition Of LM
 According to Council of logistics
management: “Logistics is the process of
planning, implementing and controlling the
efficient, effective flow and storage of goods,
services and related information from point of
origin to point of consumption for the purpose
of conforming the customer requirement”.

7.  Logistical management includes the design
and administration of systems to controls the
flow of material, work- in – process, and
finished inventory to support business unit
strategy.
 Logistics is the designing and managing of a
system in order to control the flow of material
throughout a corporation.

8.  Logistics of an company includes movement
of raw materials, coordinating flows into and
out of different countries, choices of
transportation, and cost of the transportation,
packaging the product for shipment, storing
the product, and managing the entire
process.

10.  Fragmentation 1960-This era was known as
fragmentation because every thing that done was
disintegrated
 Evolving Integration-At this stage of time new
concepts of Logistical management were evolving
 Total integration-In the present scenario because of
technological advances logistics has evolved as part
of management

11.  There are two main phases that are important in the movement
of materials: material management and physical distribution.
 Materials management is the timely movement of raw
materials, parts, and supplies.
 The physical distribution is the movement of the firm's finished
products to the customers. Both phases involve every stage of
the process including storage.
 The ultimate goal of logistics is: "To coordinate all efforts of the
company to maintain a cost effective flow of goods."

12.  Inbound logistics covers the movement of materials received
from suppliers.
 Material management describes the movements of material &
components within a firm.
 Physical distribution refers to movement of goods outward from
the end of the assembly line to the costumer.
 Supply- chain management is somewhat larger than logistics
and it links logistics more directly within the user’s total
communication network & with the firm engineering staff. It
includes manufacturer and suppliers but also transporters,
warehouses, retailers and customers themselves.

13. Importance of logistics
 Transportation cost rose rapidly due to the
rise in fuel prices
 Production efficiency was reaching a peak
 Fundamental change in inventory philosophy
 Product line proliferated
 Computer technology
 Increased use or computers

14.  Increased public concern of products Growth of
several new, large retail chains or mass
merchandise with large demands & very
sophisticated logistics services, by pass traditional
channel & distribution
 Reduction in economic regulation
 Growing power of retailers
 Globalization
 The interrelation of different logistics element and
their costs should be based on total cost rather than
individual costs.

15. The objectives of Logistics
 Rapid Response-Rapid response is concerned with
a firm's ability to satisfy customer service
requirements in a timely manner.
 Minimum Variance-Variance is any unexpected
event that disrupts system performance. Variance
may result from any aspect of logistical operations.
Delays in expected time of customer order receipt,
an unexpected disruption in manufacturing, goods
arriving damaged at a customer's location, or
delivery to an incorrect location-all result in a time
disruption in operations that must be resolved.

16.  Minimum Inventory-The objective of minimum
variance involves asses commitment and relative
turn velocity. Total commitment is the financial value
of inventory deployed throughout the logistical
system. Turn velocity involves the rate of inventory
usage over time. High turn rates, coupled with
inventory availability, means that assets devoted to
inventory are being effectively utilized. The objective
is to reduce inventory deployment to the lowest level
consistent with customer service goals to achieve
the lowest overall total logistics cost.

17.  Movement consolidation-One of the most
significant logistical costs is transportation.
Transportation cost is directly related to the
type of product, size of shipment, and
distance. Many Logistical systems that
feature premium service depend on high-
speed, small-shipment transportation.

18.  Quality improvement-A fifth logistical objective is to
seek continuous quality improvement. Total quality
management (TQM) has become a major
commitment throughout all facets of industry.
 Life-Cycle support-The final logistical design
objective is life-cycle support. Few items are sold
without some guarantee that the product will perform
as advertised over a specified period. In some
situations. The normal value-added inventory flow
toward customers must be reversed.

20. Essence of logistics in marketing
 Marketing Process is successfully completed when
 Products are produced and priced to satisfy the identified
needs of the segment of buyers
 Arrangements are made to supply these goods through
selected distribution channels
 An awareness is created among the buyers about the
availability of the goods through information facilitation &
 Goods are physically supplied to the buyers at the place & time
selected by them.
 Besides satisfying the customers need, the marketing process
must be profitable to the seller.

21. Basic logistical service is measured in
terms of
 Availability-Availability means having inventory to consistently
meet customer material or product requirements.
 Operational performance-Operational performance deals with
the elapsed time from order receipt to delivery. Operational
performance involves delivery speed and consistency. A firm's
operational performance can be viewed in terms of how flexible
it is in accommodating unusual and unexpected customer
requests.
 Service reliability-Service reliability involves the quality
attributes of logistics. For logistics performance to continuously
meet customer expectations, it is essential that management
be committed to continuous improvement

22. There are four logistics concepts
 The systems concept-The systems concept
is based on all functions of a organization
working together in order to maximize
benefits. This concept sometimes requires
certain components of the organization to
operate sub optimally in order to achieve
maximum goals of the system.

23.  The total cost concept-The total cost concept is based on the
systems concept; however goal achievement is measured in
terms of cost.
 After-tax concept-A variation of the total cost concept is the
after-tax concept. This goal of this concept is after-tax profit.
This concept is becoming very popular because of the many
different national tax policies.
 The trade-off concept links the system together in a way that is
very efficient, but can have trade-offs that might be inefficient.
The advantages of such high efficiency must be weighed
against the risk.

24. Logistics sub-systems
 Physical Supply or Management of flow of raw
materials, spare parts, consumable stores and
machinery & tools from suppliers.
 Physical distribution or management of finished
goods from the factory to the buyers &
 Logistical Controls for managing the logistics system,
it helps an efficient co-ordination of physical supply &
distribution sub-systems.

25. Primary Activities
 Inbound logistics: materials handling, warehousing,
inventory control, transportation;
 Operations: machine operating, assembly,
packaging, testing and maintenance;
 Outbound logistics: order processing, warehousing,
transportation and distribution;
 Marketing and sales: advertising, promotion, selling,
pricing, channel management;
 Service: installation, servicing, spare part
management

26. Support activities:
 Firm infrastructure: general management, planning,
finance, legal, investor relations;
 Human resource management: recruitment,
education, promotion, reward systems;
 Technology development: research & development,
IT, product and process development;
 Procurement: purchasing raw materials, lease
properties, supplier contract negotiations.

27. Importance of Inbound and Outbound
logistics
 Inbound and Outbound Logistics covers and
supports the following processes and options:
 All of the processes in the warehouse from goods
receipt through goods issue.
 Option to use RFID to support goods Issue and
goods receipt processes
 Complete stock transparency, to allow companies to
know what is in the warehouse.
 Trace and track the history of the warehouse
processes in Detail for each individual article

28.  Improve the accuracy of deliveries, thus increasing
customer satisfaction.
 Option to use mobile data entry and work in a paper-
free environment.
 Build optimal loads with the routing and scheduling
allowing a close collaboration between shipper and
carrier via optimized carrier selection and tendering
 Operational shipping, manifesting, freight costing,
freight settlement, and foreign trade are always
transparent to company

29. Objective of an ideal logistic system is to ensure flow of supply to the
buyer
 In Correct Quantity
 At Desired location
 At Required time
 At useable condition
 At the lowest total cost
 Thus the objectives encompass efforts to coordinate
physical distribution and material management in
order to save money or improve service.

30. Elements of logistics system
 Transportation
 Warehousing
 Inventory Management
 Packing & Utilization &
 Information & Communication

31. Forms of logistics management.
 Centralized logistics management-Centralized logistics
management provides that managers that also head other
divisions of the company head the logistics operations. This
type of management helps avoid internal problems by having a
central manager that ultimately decides how logistics and
operations are coordinated.
 Decentralized logistics management-Decentralized logistics
management is based on the fact that a company needs to
have a division that helps control the local-adaptation needs.
Dealing with different cultures requires input from the local
branch. The managers that deal with the cultural differences on
a daily basis normally know what works and what don’t.

32. Outsourcing-Outsourcing is the final option for
logistics management. When this happens,
transportation firms concentrate on logistics,
and the company can concentrate on it's
production. There are many cost savings
using this type of program, however that lack
of control can negatively effect many
companies.

33. Logistical competency is achieved by
coordinating
 Network design
 Information
 Transportation
 Inventory
 Warehousing
 Material handling
 Packaging
 Work

35. Logistics Cost

36. Logistics Cost
 As companies continue to manufacture and source
materials from overseas, controlling costs remains a
top priority for those involved in international trade.
 One key factor that should be monitored more
closely is logistics management, which covers all
activities relating to the procurement, transport,
transshipment and storage of goods. Depending on
the industry sector, supply chain logistics costs
account from 5% to 50% of a product’s total landed
cost.

37.  Some issues effecting logistics costs: Fuel
prices remain high and ports continue to
experience delays, resulting in higher
transportation fees. Increasingly complex
international trade laws and security
measurements threaten to lengthen delivery
times and increase warehousing costs.

38. 10 tips on to reduce supply-chain costs
 Understand the true costs of sourcing
overseas- Calculate freight, duty,
brokerage, and inventory-carrying costs to
support these lengthened supply chains.
Factor in such items as the costs of flying
engineers overseas. Once you understand
the true total landed cost and total impact to
the business, buying domestically may look a
lot better.

39.  Focus on eliminating the variability from transit
times-The more variable the transit times are, the
more likely it is that the receiving party is using more
premium freight, building buffers of inventory or
ordering more often and more quantity than
necessary to compensate for the uncertainty.
Understanding these dynamics can lead to the
conclusion that paying higher freight costs to ensure
higher variability actually saves your company in
total costs.

40.  Tariff engineering-Strategically source and
manufacture products to take advantage of
classification duty rates and eligibility for special
trade programs such as the North American Free
Trade Agreement.
 Consolidate-If you have multiple suppliers in one
country, consolidate their goods into one shipment.
In addition, if you always have less-than-
containerload shipments out of one country, try to
find another Less than Container Load(LCL) importer
of goods from that country. You may be able to
partner and consolidate to a more cost-effective full-
containerload shipment.

41.  Informed decision-making-Provide to the decision-
makers/customers of your logistics network the cost of freight
for each service level, the reliability of each lane for each
service level, and the true cost of carrying inventory so they can
make informed decisions
 Sometimes insurance doesn’t pay-When a company has a
shipment of premium goods, they often tend to use the carrier’s
insurance, which is very expensive. If the company is self-
insured, as most companies are, it should check its insurance
policy to see if it covers shipment of goods. If it does, the
company does not need to add the extra cost of carrier’s
insurance.

42.  Automate compliance processes-
Companies that implement software solutions to
automate trade compliance are able to speed the
cycle times associated with tasks being performed
manually, such as document preparation, and
eliminate the associated errors. Automated
compliance procedures also bring fewer delays at
border crossings, resulting in on-time delivery,
adequate inventory levels, increased customer
satisfaction, and the avoidance of fines.

43.  Control your express shipping costs-When a
company runs into a supply-chain issue, it typically
will have an entire shipment sent on an
express/expedited (highest-cost) service basis.
Panicking often results in higher costs. A little bit of
calculating can help the company determine the
amount of goods needed immediately. It can then
have that amount sent using express/expedited
services, while the balance of the shipment can be
sent using a standard (lower-cost) service.

44.  Planes, trains and automobiles-Which is
cheapest? In general, rail is more cost-effective than
trucking or air. Water is cheaper than air shipment.
No matter the mode of delivery, always try to get
three quotes for movements.
 Be aware of non-tariff trade barriers -Companies
need to be more aware of the increasing level of
non-tariff trade barriers that are in force to reduce
sweatshop labor and support human rights and
animal welfare issues. These restrictions can bring
importers increased liability and compliance costs.

46. Distribution & Warehousing Mgmt
 A warehouse management system, or
WMS, is a key part of the supply chain and
primarily aims to control the movement and
storage of materials within a warehouse and
process the associated transactions,
including shipping, receiving, put away and
picking. The systems also direct and
optimize stock put away based on real-time
information about the status of bin utilization.

47.  Warehousing, material handling, and packaging are
an integral part of other logistics areas. For example,
merchandise typically needs to be warehoused at
selected times during the logistics process.
Transportation vehicles require material handling for
efficient loading and unloading. Finally, the individual
products are most efficiently handled when
packaged together into shipping cartons or other
types of containers.

48.  When warehouses are required in a logistical system, a firm
can choose between obtaining the services of a specialist or
operating its own facility. The decision is broader than simply
selecting a facility to store inventory, since many activities
essential to the overall logistical process are typically
performed while products are warehoused. Examples of such
activities are sorting, sequencing, order selection,
transportation consolidation and, in some cases, product
modification and assembly.
 Within the warehouse, material handling is an important
activity. Products must be received, moved, sorted, and
assembled to meet customer order requirements.

49. Physical Distribution
 The area of physical distribution concerns movement of
a finished product to customers. In physical distribution,
the customer is the final destination of a marketing
channel. The availability of the product is a vital part of
each channel participant's marketing effort. Even a
manufacturer's agent, which typically does not own
inventory, must depend on inventory availability to
perform expected marketing responsibilities. Unless a
proper assortment of products is efficiently delivered
when and where needed, a great deal of the overall
marketing effort can be jeopardized.

50.  It is through the physical distribution process that the time and
space of customer service become an integral part of
marketing. Thus physical distribution links a marketing channel
with its customers.
 To support the wide variety of marketing systems that exist in a
highly commercialized nation, many different physical
distribution systems are utilized. All physical distribution
systems have one common feature: they link manufacturers,
wholesalers, and retailers into marketing channels that provide
product availability as an integral aspect of the overall
marketing process.