introduction to role of logistics in SCM. functions of warehouse

1. LOGISTICS MANAGEMENT
 Recommended Book
 Strategic Logistics Management
 By James R. Stock & Douglas Lambert

2. COURSE OBJECTIVES
1. To identify how logistics affects the
performance of organizations
2. To understand how logistics contribute to value
creation
3. To understand the concept of systems
approach as it relates to logistics &
marketing, the total cost concept &
profitability
4. To show how to implement the integrated
logistics management concept using total
cost analysis
5. To show how to recognize areas in which
logistics performance can be improved

3. LOGISTICS – ROLE IN THE ORGANIZATION

4.  Business logistics
 Channel Management & Distribution
 Industrial Logistics
 Materials Management
 Quick-response Systems
 Logistic Management

5. Logistics Management is that part of the
supply chain management that plans,
implements & controls the effective flow of
the goods, services and related information
from the “point of origin” to the “point of
consumption” in order to meet customers’
requirements
DEFINITION OF LOGISTICS MANAGEMENT

6. Natural
Resources
Human
Resources
Financial
Resources
Informational
resources
Inputs into Logistics
Management Actions
Planning Implementation Control
Competitive
advantage
Time & Place
Utility
Efficient
Movement to
customer
Propriety
Asset
Outputs of Logistics
Logistics Activities
•Customer service
•Demand Forecasting
•Inventory Management
•Logistics Communication
•Material Handling
•Packaging
•Order processing
•Parts and service support
•Procurement
•Plant and warehouse site
selection
•Reverse Logistics
•Traffic and transportation
•Warehousing and storage
Logistics
Management
Suppliers Customers
RM WIP FG

7. SYSTEMS APPROACH/INTEGRATION
All functions or activities need to be understood in
terms of how they affect and are affected by other
elements and activities with which they interact
The sum or outcome of series of activities are greater
than the individual parts

8. LOGISTICS’ ROLE IN THE ORGANIZATION
 Key element in improving both the
“profitability” and the “competitive
performance” of the firms

9. Customer Satisfaction
•Suppliers
•Intermediate customers
•Final Customers
Integrated effort
• Product
•Price
•Promotion
•Place (distribution)
Company Profit
•Maximize long-term
profitability
•Lowest total costs given
an acceptable level of
customer service
1. Logistics leads to competitive advantage

10. 2. Logistics adds Time & Place Utility
 Place utility is the value created or added to a product by
making it available for purchase or consumption in the right
place
 Time utility is the value created by making something
available at the right time

11. 3. Logistics allows efficient movement to
the customer
 Five rights of a logistics system
 Supplying the right product at the right time at
the right place in the right condition for the right
cost to the customers consuming the product

12.  Logistics competency cannot be readily duplicated
 Can gain market share by providing products at low cost at
the right place
 Should be shown as an intangible asset
4. Logistics is a proprietary asset

13. KEY LOGISTICS ACTIVITIES

14. 1. Customer Service
Customer oriented philosophy that integrates and manages
all elements of the customer interface within a
predetermined optimum cost-service mix
It involves successful implementation of the
“integrated logistics management” concept in order
to provide the necessary level of customer
satisfaction at the lowest possible total cost

15. 2. Demand Forecasting
Involves determining the amount of product and accompanying
service that customers will require at some point in the
future

16. 3. Inventory Management
Involves trading off the level of inventory held to achieve high
customer service levels, with the cost of holding inventory,
including capital tied up in inventory, warehouse costs and
obsolescence

17. 4. Logistics Communication
Effective communication is necessary
1. The organization, it’s suppliers and its customers
2. The major functions within the organization
3. The various aspects of each logistics activity such as
coordinating warehousing Raw Material, Work In Process
and Finished Goods

18. 5. Material Handling
• Eliminate handling wherever possible
• Minimize travel distance
• Minimize work-in-progress
• Provide uniform free flow of bottle necks
• Minimize losses from waste, breakage, spoilage and theft
• Note: Cost is incurred every time an item is handled.

19. 6. Order Processing
1. Operational Elements such as order entry/editing,
scheduling, order shipping, set preparation and invoicing
2. Communication Elements such as order modification, order
status inquiries, tracing and expediting, error correction and
product information requests
3. Credit & Collection Elements including credit checking and
accounts receivable processing/collecting

20. 7. Packaging
Two basic functions:
a. Marketing:
 Form of promotion & advertisement. Size, weight, color and printed
information attracts customers and convey relevant information
b. Logistics
 Protects the product from damage
 Makes it easy to store and move thereby reducing material
handling costs

21. 8. Parts & Service Support
Concerned with activities involved in the repair and servicing
of the products e.g. providing replacement parts when
product breaks down or malfunction.

22. 9. Plant & Warehouse Site Selection
Assist firms in improving customer service levels
Allow lower volume-related transportation rates
Site should :
 Be near target market
 Have abundant labor force
 Have proper infrastructure, transport system and utilities
available
 Have minimum legal concerns
 Have low land costs

23. 10. Procurement
Process of acquiring materials and services to ensure
operating effectiveness of the firms’ manufacturing and
logistics processes
This function includes:
 Selection of supply source locations
 Determination of the form in which material is to be acquired
 Timing of the purchases

24. 11. Reverse Logistics
An important part of logistics concerned with
 Handling of return goods
 Salvage & scrap disposal
 Removal and disposal of waste materials from the
production, distribution and packaging processes
 Effectively and efficiently handle the by-product

25. 12. Traffic and Transportation
Involves managing the movement of products
Includes
 selecting the method of shipment (road, rail or air)
 Choosing the specific path (routing)
 Complying with various local, state and federal
transportation regulations
 Being aware of both domestic and international shipping
requirements

26. 13. Warehousing & Storage
Involves the management of the space needed to hold or
maintain inventories
Includes:
 Deciding whether the storage facility should be owned,
leased or rented
 Layout and design of the storage facility
 Product mix considerations
 Safety and maintenance procedures
 Personnel training
 Productivity measurement

27. WHY SHOULD LOGISTICS ACTIVITIES BE
INTEGRATED?
Supplier
Supplier
Supplier
Manufacturin
g Site
Distribution
Centre
Distribution
Centre
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Carrie
r
Carrie
r
Carrie
r
Carrie
r
Carrie
r
Carrie
r

28.  Benefits of Integration:
1. Improves the flow of inventory
2. Improves transport and warehouse assets
utilization
3. Eliminates the duplication of efforts
4. Achieve economies of scale working with high
volumes
5. Forces cost trade offs to be made between and
among logistic activities

29. TOTAL COST CONCEPT
 Aim should be to reduce overall costs of logistics
activities

30. Order processing &
Information Costs
• Order processing
•Logistics communication
•Demand Forecasting/planning
Inventory Carrying Costs
• Inventory Management
•Packaging
•Inventory of retuned goods
Lot Quantity costs
• Materials handling
•Procurement
•Production setup costs
Place/customer service levels
•Cost of lost sale/ future sales
•Parts & service support
•Return goods handling
Transportation costs
• Mode
•Inbound/Outbound
•Weight, Dimension etc
Warehousing costs
• Warehousing & Storage
•Plant and warehouse site
selection

31. RELATIONSHIP OF LOGISTICS ACTIVITIES TO
LOGISTICS COSTS
1. Customer Service Levels
 Key trade-off associated with varying levels of
customer service is the “cost of lost sales”.
 Customer service costs include:
 Order fulfillment costs
 Costs of parts and support services
 Cost associated with return goods handling
 Cost of lost sale includes not only the lost
contribution of current sales but also future
potential sales due to negative word of mouth

32. 2. Transportation Cost
Costs can be categorized by customer, product line, by
type of
channel, by carrier, by direction and so on.
Costs vary with volume, weight, points of origin &
destination
and mode of transportation chosen
3. Warehousing Cost
These are created from warehousing & storage activities
and by the plant & warehouse site selection

33. 4. Order Processing/Information System
Costs
These costs are related to
 Processing customer orders
 Distribution communication
 Demand forecasting

34. 5. Lot Quantity Costs
These are production- or purchase- related costs that vary
with changes in production lot size or order size or
frequency. They include:
 Production setup costs
 Capacity lost due to downtime during changeover of line or
changeover to a new supplier
 Materials handling, scheduling and expediting
 Price differentials due to buying in different quantities

35. 6. Inventory Carrying Costs
 Capital cost
 Inventory service cost
 Storage space cost
 Inventory risk cost

36. FUTURE CHALLENGES & AREAS FOR LOGISTICS
PERFORMANCE IMPROVEMENT
 Significant challenges will occur in the following
areas:
 Strategic Planning
 Total Quality Management
 Just In Time
 Quick Response
 Efficient Consumer Response
 Increasing skill requirements
 Outsourcing
 Reverse logistics

37.  Quick Response (QR)
This is a retail sector strategy that combines a number of
tactics to improve inventory management and efficiency while
speeding inventory flows.
QR applies JIT principles through out entire supply chain.
The concept works by combining electronic data interchange
with bar coding technology
Cross-docking: A process that involves unloading inbound
product, sorting products for individual stores and reloading
shipments onto trucks destined for a particular store

38. SCHEDULING

39. WHY SCHEDULING?
 Scheduling determines what would be
shipped next where and when.
 Specifies the time each job starts and is
completed on each machine, as well as on
any additional resources needed for the
production.
 Optimize the best utilization of resources
of organization

40. WHY SCHEDULING IS IMPORTANT??
 “ The two basic goals schedules are :
 Meeting customers delivery on time
 Meeting first objective with minimum
required resources

41. SCHEDULING & INTEGRATED LOGISTICS
 As we know that integrated logistics interface with
all department for getting maximum efficiency and
minimizing cost.
 Before production, during production and after
production the role of integrated logistic is most
important;
 Coming Material form Vendors / Supplier
 Movement of material between production facility to
warehouses
 Movement of finish products form production to
warehouses, distribution centre etc
“Integrated logistics needs to work with operation to
produce goods”

42. WAREHOUSE MANAGEMENT

43. WAREHOUSE
“The warehouse is where the supply
chain holds or
stores the goods.”
‘A bounded wall area where receiving,
storage and shipping takes place.”

44. WAREHOUSES VS DISTRIBUTION CENTERS
The purpose of warehouse is to store products until customers require
them. Mostly used for Raw, Packing, work in process materials and
finished products. Storage life of product may be as long as required
by company.
The purpose of distribution center is product through-put, storage.
Bulk shipments come into a distribution center, are broken down into
smaller shipments, and then are transported further in the supply
chain.

45. IMPORTANCE OF WAREHOUSE MANAGEMENT
Better Inventory Control
 Better utilization of Space
 Reduce loss sales and Damages
 Improved Customer Service
 Great Visibility into supply Chain
 Improve safe working Environment

46. THE ROLE OF WAREHOUSE
 Serve as a transportation consolidation facility.
 Plays vital role in backup seasonal product
availability.
 Smooth production depends on warehouses
space.
 Customer service, faster order fulfillment, timely
receiving and dispatching.
 Value Added activities and products support and
safety

47. BUSINESS PRESSURE AND WAREHOUSE
ROLE
 How can I improve the speed of
warehouse operation?
 How do I integrate operation to
reduce order processing time?
 How can I improve order
promise accuracy?
 How do I create a global
view of inventory.
Work Quality
Improvement
Check and
Control
Improvement
Just in time Delivery Guaranteed Availability
Inbound
Internal
Processing
Outbound
One Size Fits One Lowest Total Cost
 Where can I reduce
inventory while maintaining
high fill rates?
 How do I improve labor efficiency
 How can I manage SKU ?
 How do I ensure labeling
compliance?

48. KEY FUNCTION
 The basic function of a warehouse include movement,
storage, and information transfer. It takes place in four
distinct areas:
1. Receiving inbound goods from the transportation carriers and
performing quality and quantity checks.
2. Transferring goods from the receiving docks and moving them
to specific storage, locations throughout the warehouse.
3. Order selecting the products for filling customer orders
including checking, packing, and transporting to the outbound
dock.
4. Shipping the goods outbound to customers.

49. TYPES AND NUMBERS OF WAREHOUSE IS A
STRATEGIC DECISION ??
 The type & number of warehouses is a strategic
decision for the management considering the following
points:
 Location and Coverage
 Cost & Volumes
 Safety and Quality
 Check and Controls
 Current & Required Customer Service Level
 No of Customers, their location, and buying habits

50. TYPES OF WAREHOUSE
 Private Warehousing
 Public Warehousing
 Contract Warehousing

51. WAREHOUSE DESIGN / LAYOUT
 The five interrelated variables should be considered;
 Land and Building
 Management and Staff
 Storage and handling requirement
 Computers and Software
 Operating methods and procedures

52. WAREHOUSE PRODUCTIVITY
 The warehouse effects profit of the organization and approximately
7 to 10 percent of sales value amount. The efficiency and
performance need to measure with certain KPI.
 Productivity
 Safety
 Cost
“The KPI always best to determine and find the actual result vs
targeted. Improving KPI mean positive contribution in
maximization of Profit.”

53. PRIME IMPORTANCE FOR EFFICIENCY
 Improving forecasting accuracy.
 Reducing or eliminating labor bottlenecks.
 Smoothing out the variance in product flow in the warehouse.
 Decreasing the distances traveled in the warehouse.
 Increasing the size of the units handled.

54. MATERIAL HANDLING & PACKAGING

55. MATERIAL HANDLING
 The art & science of material movement with in plant and finished
goods with in facility and out side.
 A properly installed material handling system can reduce costs
and labor, increase safety, increase productivity, reduce waste,
increase capacity, and improve service.
Materials handling refers to the total management of all materials
and processes involved in the entire manufacturing procedure.
This includes sourcing, delivery, movement, protection and
storage of product. Significant savings in time, labor and
materials result from effective materials handling achieved
through a series of well-coordinated and inter-related procedures

56. MATERIAL HANDLING
“Material is the most valuable assets in the integrated logistics
management. Logistics takes the ownership for safe, efficient and
timely movement during Inbound, Conversion and Outbound. Value
Chain increase the value of material as it move through the supply
chain”.
“Materials Handling procedures, systems and equipments are not fixed
and same for all. It vary from industry to industry and depends on
product Type, Size, and Shape not only physical but also consider
chemical properties of products.”

57. OBJECTIVE OF MATERIAL HANDLING
“A good logistics system seeks to create a
mechanism to move equipment and
supplies in a time-bound manner, as and
when needed, to the place where needed,
at an economic cost. Since this movement
is not always from Point A to Point B but
often involves storage as inventory at one
or more intermediate points along the way,
the efficiency of management comes into
play.”

58. OBJECTIVE CONTINUE …
 The main objectives of material handling
are as follows:
 It should be able to determine appropriate distance to be
covered.
 Facilitate the reduction in material damage as to improve quality.
 Reducing overall manufacturing time by designing efficient
material movement
 Improve material flow control and tracking, status etc …
 Creation and encouragement of safe and hazard-free work
condition
 Improve productivity and efficiency
 Better utilization of time and equipment

59. METHODOLOGY OF MATERIAL
HANDLING
 In the current competitive and globalized environment, it is important to
control cost and reduce time in material handling. An efficient material
handling process promotes:
 Design of proper facility layout.
 Promotes development of method which improves and simplifies the
work process.
 It improves overall production activity.

60. TYPES OF MATERIAL HANDLING &
EQUIPMENT
 Three Types of Material Handling
 Manual
 Mechanized
 Automated
 Selection of Equipment depends :
What + Where +When = Equipment Specification
What refer to the type of material being
handled, Characteristics, size and shape etc.

61. TYPES OF MATERIAL HANDLING &
EQUIPMENT
 Where refer to the everything involved in the routing the
material throughout the facility. This component includes:
 Type of Movement –
 Length of movement –
 Limitation of movement –
 Building limitation –
 Transfer Requirement
 The Associated in-transit operation
 When means the material must be in the right place at the
right time

62. TYPES OF MATERIAL HANDLING &
EQUIPMENT
 Manual Material Handling systems tend to be labor –intensive.
Typical type of equipment would be hand dollies, drawers, low racks
and
pallet jack
Manual material handling system yield low output because of a lack of
handling speed. Also, they use cubic space poorly.
 Mechanized Material is the most common type. Its replace
some manual handling with mechanical movement. The forklift is the
backbone of the mechanized materials handling system. Others
equipment includes in this system includes Pallets, cranes, storage
rack systems and wheel conveyors etc ..

63. TYPES OF MATERIAL HANDLING &
EQUIPMENT
 Automated Material Handling System is the most
sophisticated. Its uses automatic storage and retrieval system
(A system typically consists of high-rise shelving, multi-level conveyors
etc.), item picking equipment, optical scanners and robots.
 It can fully utilize the available cubic space in the facility, fast /
speedy, high productivity, accurate and easy to control.
But at the same time
 Its seems superior but costly.
 May require special types and sizes of facilities
 May be high risky when the system fail
 In case of low production very high fixed cost etc

64. PRINCIPLES OF MATERIAL HANDLING
Material handling principles are as follows:
 Orientation Principle: It encourages study of all
available system relationships before moving towards
preliminary planning. The study includes looking at
existing methods, problems, etc.
 Planning Principle: It establishes a plan which
includes basic requirements, desirable alternates and
planning for contingency.
 Space Utilization Principle: Encourage effective
utilization of all the space available

65. PRINCIPLES OF MATERIAL HANDLING
 Energy Principle: It considers consumption
of energy during material handling.
 Ecology Principle: It encourages minimum
impact upon the environment during material
handling.
 Mechanization Principle: It encourages
mechanization of handling process wherever
possible as to encourage efficiency.
 Flexibility Principle: Encourages of
methods and equipment which are possible
to utilize in all types of condition.

66. PRINCIPLES OF MATERIAL HANDLING
 Standardization Principle: It encourages
standardization of handling methods and
equipment.
 Safety Principle: Encourages provision for
safe handling equipment according to safety
rules and regulation
 Computerization Principle: Encourages of
computerization of material handling and
storage systems

67. PRINCIPLES OF MATERIAL HANDLING
 System Flow Principle: Encourages
integration of data flow with physical
material flow
 Cost Principle: Encourages cost benefit
analysis of all solutions available

68. THANK YOU