LOGISTICS MANAGEMENT

MBA 031-SUPPLY CHAIN MANAGEMENT

MBA 3rd SEMESTER FACULTY DILIP KUMAR GUPTA ASSISTANT PROFESSOR (SRGC-IC)

SHRI RAM COLLEGE OF MANAGEMENT

MUZAFFARNAGAR

LOGISTICS MANAGEMENT

ORIGIN OF LOGISTICS
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

Logistics - Science of managing (controlling) the movement and storage of goods (or people) from acquisition to consumption. Goods: Raw Materials Final products, and everything in between. Logistics for services & people similar to goods logistics. Ex. Police, fire, ambulance, passenger airlines, taxi cabs, etc. Movement Storage
Suppliers

= Transportation (between locations). = Inventory, Warehousing (at locations).

Manufacturers Warehouses & Distribution Centers Customers

Material Costs

Transportation Costs

Manufacturing Costs

Transportation Costs

Inventory Costs

Transportation Costs

LOGISTICS
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 Satisfying customer requirements.
Suppliers Manufacturers Warehouses & Distribution Centers Customers

Material Costs

Transportation Costs Manufacturing Costs

Transportation Costs Inventory Costs

Transportation Costs

Logistics
Logistics is an effort to deliver:
the right product in the right quantity in the right condition to the right place at the right time for the right customer at the right cost

OBJECTIVES OF LOGISTICS MANAGEMENT

1. INVENTORY REDUCTION:- Traditionally firms used excess inventory , the funds thus invested are blocked and cannot be used for any other productive purpose. Hence the prime objective of logistics is to maintain the inventory at the minimum level. 2. RELIABLE AND CONSISTENT DELIVERY PERFORMANCE:-The other objective of logistics should be consistency in delivery performance, this will help in building customer confidence and contribute to long term relationships.

3. FREIGHT ECONOMY :- Freight is the major

cost element in logistical cost .This can be reduced by adopting measures like right transport mode selection , route planning etc. 4. MINIMUM PRODUCT DAMAGES :-Product damages add to logistical cost. Reasons for product damages are :Improper logistics packaging , frequent consistent handling , absence of load unitizing etc.

5.Quick response :- This aspect is related with the capability of the firm to provide better service to the customer in the shortest time frame. For this :1.Latest technology can be used in information processing and communication. 2.Which will enhance the decision making capability in terms of accuracy and time. 3. Enabling the enterprise to be flexible enough to fulfill the customer requirements in terms of volume and varieties in the shortest time frame.

OPERATIONS OF LOGISTICS
1) Material Management. 2) Physical Distribution Management.

Logistics Material Management

Manufacturing and supply services

Physical distribution management

Customer service

Suppliers
Ram materials Sub assemblies Manufactured parts Packaging material

Inbound

WIP

produc tions

FGs

Outbound finished goods

Materials flow

Inventory in the field

Transit depot

intermediary

Customer Other equipment manufacturers End users Government Operations of Logistics

ROLE OF LOGISTICS IN SUPPLY CHAIN MANAGEMENT

1) Connects the source of supply with the demand :-

logistics basically connects the source of supply with source of demand. To do this all the components of a logistics system like warehousing network , transportation network ,,inventory control system, come into operation with the objective of providing the right product at the right time at least cost

2) Fills the gap between supply and demand:Logistics makes it possible to deliver the product to the customer anywhere , irrespective of its manufacturing location. It facilitates either to deliver a full truckload of shipment once a week/month or part of load daily. for e.g. Laptops demanded in market in August 10,000 units. Supply of 10,000 laptops may be once in a week/month or part of load daily.

Supply Chain
SUPPLIER FACTORY DC RDC RETAILE R

Raw Materials
Finished Goods

Office

BULLWHIP EFFECT
It refers to the increase in variance in the demand as one moves up in the supply chain from retailers to distributors to manufacturers/suppliers.

Multi-tier Suppliers

Manufacturer

Wholesale Distributo rs

Retailers

Consumers

Sales

Sales

Time

Sales

Time

Time

Sales

Time

Bullwhip Effect

15

Case study of HP
HP experienced the bullwhip effect in the pattern of sales of its printers. Orders placed by retailer exhibited wider swings than the actual retail sales to customers. Orders placed by the printer division to the companys integrated circuit division had even wider swings.

Case study of P&G

P&G observed bullwhip effect in the pattern of sales for pampers disposable diapers. P&G were surprised to see that the orders placed by distributors had much more variation than sales at the retail stores. Further , order of materials to suppliers had even greater variation as compared to variation at distributors , retailers and at the sales counters.

INBOUND AND OUT BOUND LOGISTICS

INBOUND LOGISTICS OUTBOUND LOGISTICS

SUPPLIERS TO MANUFACTURERS

MANUFACTURERS TO CONSUMERS

Supply Chain

Stores

Operations

Stores

Procurement

Warehouse

Vendor

Customer

Inbound Logistics

Out Bound Logistics

Supply Chain
Material flow
Material flow

P r o c u r Purchase e m e n Supplier t

Stores RM

OPERATIONS (Manufacturing process)

Information flow

D Stores is FG tr i b Warehousing/ u Distribution channel ti o n Customer

Inbound Logistics

Out bound logistics

Suppliers

Manufacturers

Warehouses & Distribution Centers

Customers

Material Costs

Transportation Costs

Manufacturing Costs

Transportation Costs

Inventory Costs

Transportation Costs

INBOUND LOGISTICS
SUPPLIER TO MANUFACTURERS

OUTBOUND LOGISTICS
MANUFACTURERS TO CUSTOMERS

REVERSE LOGISTICS

Inbound Logistics, Supplier to Company

Outbound Logistics Company to customers

SUPPLIERS

Company

Resellers

Customers

REVERSE LOGISTICS e.g. return of goods

LOGISTICS COSTS
CASH EXPENSES

FIXED COST

SUNK COST DIRECT COST

VARIABLE COST
MARGINAL COST

SEMI- VARIABLE COST

INDIRECT COST

NON CASH EXPENSES

LOGISTICS SUB SYSTEMS

PROCUREMENNT /PURCHASING SUB SYSTEM

INVENTORY MANAGEMENT SUB SYSTEM

ORDER PROCESSING SUB SYSTEM

WAREHOUSING SUB-SYSTEM

RECYCLING , RETURNS AND WASTE DISPOSAL SUB-SYSTEM

ORDER SIZE SUB-SYSTEM

TRANSPORTATION SUB - SYSTEM

MATERIAL HANDLING SUB SYSTEM

FACTORS AFFECTING LOGISTICS

1) Globalization:-Now a days business organizations are supplying products beyond the national boundaries whenever there is a market opportunity. In such a situation , the role of logistics will be to provide time and place utility of the products to the customers. 2) Focus on supply chain management:-Business organizations all over the world in order to survive in this competitive environment has shifted their focus on supply chain management i.e., integrating the process of procurement, processing and distribution to deliver value for money to customer.

3) Outsourcing of Non-Core-competency Functional Areas:-Business

organizations are outsourcing the functional areas to experts who can do the job at the lower cost and can ,thus make operations more effective and efficient. Logistics is an area wherein most business organizations do not have necessary expertise, and which needs to be outsourced for operating effectiveness and efficiency.

MODELS IN LOGISTICS MANAGEMENT

3) MATHEMATICAL PROGRAMMING MODELS

i) LOCATION MODELS

5) ROUTING MODELS

ii) ALLOCATION MODELS

iii) DISTRIBUTION NETWORK MODELS

6) SCHEDULING MODELS

1) FORCASTING MODELS 4) ALTERNATIVE ANALYSIS

2) INVENTORY MODELS