1- Logistics Management,

LOGISTICS MANAGEMENT

INTRODUCTION

LOGISTICS INTRODUCTION

• THE TERM “LOGISTICS” IS DERIVED FROM MILTARY ORGANISATION AND IT WAS IN USE IN THE DAYS OF LOUIS XIV OF FRANCE.

• IT WAS EVEN FELT THEN THAT THE EFFECTIVENESS OF MILTARY ORGANISATION DID NOT MERELY DEPEND ON THE WEAPONS, FIGHTING SKILLS AND THE FIGHTING SPIRIT OF THE SOLDIERS.

• IT WAS ALSO EFFECTED BY THE EFFICIENCY OF TRANSPOTATION AND SUPPLY OF AMMUNITION AND FOOD.

• LOGISTICS WAS THE TERM TO MEAN FOR THIS MILTARY SUPPORT (I,E, TRANSPORTATION AND SUPPLY OF FOOD MATERIAL AND AMMUNITION)

• MILTARY SUCCESSES OF THAT TIME WERE ATTRIBUTED TO LOGISTICS.

LOGISTICS INTRODUCTION

• LOGISTICS MANAGEMENT WHEN CONSIDERED IN THE CONTEXT OF INDUSTRIAL ACTIVITY, REFLECT SIMILAR KIND OF APPROACH TO IMPROVE FLOW OF PRODUCT FROM SOURCE OF ORIGIN THROUGH DIFFERENT STAGES AND FINALLY TO CUSTOMER.

• IN INDIA THE CONCEPT IS GAINING GROUND.

• CURRENT MARKET FORCES - INCREASED COMPETION, HIGH COSTS OF ACQUISITION AND DISTRIBUTION OF PRODUCTS INCLUDING RAW MATERIALS INCREASED SERVICE LEVELS DEMANDED BY THE CUSTOMERS AND SHRINKING PROFITS – HAVE FORCED THE MANAGEMENT TO REALIZE THE NEED AND IMPORTANCE OF EFFICIENT MANAGEMENT OF PHYSICAL FLOW OF RAW MATERIAL, COMPONENTS/ PARTS, SPARES, WORK – IN – PROCESS AND FINISHED GOODS FROM SUPPLIERS, THROUGH THE ORGANISATION AND FINALLY TO THE CUSTOMER.

LOGISTICS INTRODUCTION• EVERY ORGANISATION, BE IT IN THE MANUFACTURING

OR NON – MANUFACTURING SECTOR, REQUIRES A TOOL/SYSTEM FOR THE INTEGRATION AND CO-ORDINATION OF DIFFERENT FUNCTIONAL ACTIVITIES TO SMOOTHEN THE FLOW AT MINIMUM COST.

• LOGISTICS MANAGEMENT HAS BEEN EVOLVED TO ACHIEVE SUCH AN INTEGRATION.

• LOGISTICS MANAGEMENT HAS ALSO BEEN KNOWN BY VARIOUS OTHER NAMES SUCH AS TOTAL PHYSICAL DISTRIBUTION, COMPLETE FLOW MANAGEMENT, AND SUPPLY MANAGEMENT.

• ANOTHER TERM WHICH IS BEING WIDELY USED IN USA AND IS GAINING GROUND IN OTHER COUNTRIES IS INTEGRATED LOGISTICS MANAGEMENT.

DEFINITION OF THE LOGISTICS IN THE INDUSTRY

LOGISTICS MANAGEMENT ENCOMPASSES ALL MATERIALS FLOWS MANAGEMENT,

FROM THE FLOW OF PURCHASED MATERIALS INTO WORKS

MATERIALS PLANNING OF RAW MATERIALS, COMPONENTS AND OTHER PRODUCTS,

TRANSPORT OF MATERIALS FROM SUPPLIERS TO WORKS

RECEIVING AND INSPECTION

STORAGE OF MATERIALS.

MATERIAL FLOW THROUGH MANUFACTURING PROCESSES I, E, MATERIAL ISSUES AND MATERIAL HANDLING.

MATERIAL FLOW TO CUSTOMERS I,E, PHYSICAL DISTRIBUTION

FACTORS AFFECTING LOGISTICS FUNCTIONS

FOLLOWING FACTORS AFFECTS LOGISTICS FUNCTION –

1. LACK OF STANDARDIZATION. IF NEW COMPONENTS ARE SPECIFIED FOR EACH NEW PRODUCT, THE TIME FOR THEIR PLANNING AND PROCUREMENT WILL INCREASE.

2. TOO CLOSE TOLERANCES AND HIGH FINISHES, TEND TO RESTRICT PROCUREMENT FROM A FEW SUPPLIERS AND THEREBY RETARD THE EFFICIENCY OF THE LOGISTICS MANAGEMENT.

3. EFFICIENCY OF PRODUCTION FUNCTION AFFECTS LOGISTICS FUNCTION TO A LARGE EXTENT.

4. EFFECTIVENESS OF PRODUCTION, PLANNING AND CONTROL AFFECTS MATERIALS FLOW.

RELATIONSHIPS BETWEEN LOGISTICS AND OTHERS

SUPPLIER INBOUND LOGISTICS

PRODUCTION OUTBOUND LOGISTICS

CUSTOMER

MATERIALSMANAGEMENT

PHYSICAL DISTRIBUTION

LOGISTICSMANAGEMENT


• SCHMIDT (1986) DESCRIBES LOGISTICS MANAGEMENT AS : “THE MANAGEMENT I.E. THE PLANNING, EXECUTION AND CONTROL, OF

ALL FACTORS THAT AFFECT THE MATERIALS FLOW AND THE INFORMATION ABOUT IT, SEEN FROM THE PERSPECTIVE OF CUSTOMER REQUIREMENTS FOR THE PURPOSE OF ACHIEVING A HIGH DELIVERY, A HIGH RELIABILITY, A HIGH DEGREE OF COMPLETENESS AND A SHORT DELIVERY TIME.”

• INSTITUTE OF PURCHASE AND SUPPLY LOOKS AT LOGISTICS AS UNDER :

“ LOGISTICS IS THE CONCEPT WHICH SEEKS TO PROVIDE FOR THE MANAGEMENT AND CO-ORDINATION OF THE ACTIVITIES WITHIN THE SUPPLY CHAIN FROM SOURCING AND ACQUISITION, THROUGH PRODUCTION, WHERE APPROPRIATE, AND ON THROUGH DISTRIBUTION CHANNELS TO THE CUSTOMER.

THE GOAL OF LOGISTICS IS THE CREATION OF COMPETITIVE ADVANTAGES THROUGH THE SIMULTANEOUS ACHIEVEMENT OF HIGH CUSTOMER SERVICE LEVELS, OPTIMUM INVESTMENT AND VALUE FOR MONEY.”


• ACCORDING TO BOWERSOX AND CLOSS:

“ LOGISTICS MANAGEMENT INCLUDES THE DESIGN AND ADMINISTRATION OF SYSTEMS TO CONTROL THE FLOW OF MATERIALS, WORK IN PROGRESS AND FINISHED INVENTORY TO SUPPORT BUSINESS UNIT STRATEGY.”

LOGISTICS MANAGEMENTFROM THE ABOVE DEFINITIONS, WE CAN CONCLUDE –

1. LOGISTICS MANAGEMENT IS THE FUNCTION OF MANAGING THE TOTAL FLOW OF MATERIALS WHICH INCLUDES MOVEMENT OF RAW MATERIALS FROM SUPPLIERS, IN PROCESS WITHIN THE FIRM, AND MOVEMENT OF FINISHED GOODS TO THE CUSTOMER.

2. LOGISTICS MANAGEMENT COVERS BOTH PHYSICAL FLOW OF PRODUCTS AS WELL AS INFORMATION FLOWS COVERING REPORTS AND DOCUMENTATION RELATING TO GOODS MOVEMENT.

3. LOGISTICS MANAGEMENT EVOLVES PROCEDURES THAT MEET CUSTOMER SERVICE AT THE MINIMUM COST.

4. LOGISTICS MANAGEMENT ACHIEVES COST REDUCTION BY SPEEDING THE FLOWS OF MATERIALS, WORK – IN – PROGRESS AND FINISHED PRODUCTS.

OBJECTIVES OF LOGISTICS MANAGEMENT

BASIC OBJECTIVES OF A GOOD LOGISTICS SYSTEM IS TO GET –

• RIGHT GOODS OR SERVICES.• TO THE RIGHT PLACE.• AT THE RIGHT TIME.• IN THE RIGHT CONDITION.• AT THE RIGHT COST.

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OBJECTIVES OF LOGISTICS MANAGEMENT

THE OBJECTIVES OF LOGISTICS MANAGEMENT INCLUDE TO :

1. ENSURE THE HIGHEST LEVEL OF CUSTOMER SERVICE AND SATISFACTION BY ACHIEVING THE RIGHT COMBINATION OF PRODUCT AVAILABILITY AND DEPENDABILITY.

2. MINIMISE THE OPERATING COSTS OF PHYSICAL MATERIALS SYSTEM.3. REDUCE TIME SPENT AT EVERY STAGE OF LOGISTICS PIPELINE.4. ADD VALUE AT EVERY STAGE OF LOGISTICS PIPELINE.5. CONTROL AND REDUCE WHEREVER POSSIBLE, INVENTORY OF RAW

MATERIALS, WORK – IN – PROGRESS AND FINISHED GOODS.6. TO RAISE COMPANY’S IMAGE AND IMPROVE ITS COMPETITIVE

POSITION IN THE MARKET.7. IMPROVE COMPANY’S COMMUNICATION BOTH INTERNALLY AND

EXTERNALLY.8. IMPLEMENT THE PRINCIPLES OF JUST – IN – TIME.9. PROMOTE CO-OPERATION AND CO-ORDINATION AMONG SUB-

SYSTEMS BY MAKING THEM REALISE THAT THEIR ACTIVITIES ARE INTER-RELATED AND INTER-DEPENDENT.

ACTIVITIES OF LOGISTICS FUNCTIONS

LOGISTICS FUNCTION CONSISTS OF FOLLOWING SETS OF ACTIVITIES:

1. ORDER PROCESSING. THOUGH THIS ACTIVITY DOES NOT CONTRIBUTE MUCH TO

TOTAL COSTS, YET IT IS TREATED IMPORTANT BECAUSE OF ITS CONTRIBUTION TO LEAD TIME.

2. TRANSPORTATION MANAGEMENT. IT INVOLVES – • FIRM’S OWN TRANSPORT ( IF GOODS ARE TO BE

COLLECTED)• HIRING OF THE TRANSPORT ( IF THE SERVICES OF

EXTERNAL FIRM ARE TO BE USED) • ROUTING AND LOAD PLANNING.• SELECTION OF MOST SUITABLE MODE OF TRANSPORT I.E.

RAIL, ROAD, SEA OR AIR.• PACKAGING NEEDED I.E. LOOSE, PALLETS OR SPECIAL.• DOCUMENTAION REQUIRED ( ESPECIALLY IF GOODS ARE

ARRIVING FROM OVERSEAS)


3. INVENTORY MANAGEMEN INVENTORIES REQUIRE TO BE MAINTAINED TO TAKE CARE

OF NEEDS BETWEEN THE TIME OF DEMAND AND TIME OF SUPPLY.

INVENTORY MANAGEMENT INVOLVES DECISIONS CONCERNING -

• BUFFER STOCKS• LEAD TIME• REPLENISHMENT OF STOCKS4. WAREHOUSING THIS IS CONCERNED WITH MANAGEMENT OF SPACE TO

HOLD INVENTORIES AND INVOLVES SUCH PROBLEMS AS :• SITE SELECTION• SPACE DETERMINATION• LAYOUT AND DESIGN• RECEIPTS AND ISSUES AND STORAGE.• PRESERVATION.


5. MATERIAL HANDLING THIS IS CONCERNED WITH MOVEMENT OF PRODUCT AT THE

STOCKING POINT AND IT INVOLVES SUCH DECISIONS AS :• SMOOTHENING OF MATERIALS FLOW.• SELECTION OF MATERIALS HANDLING EQUIPMENT.• MAINTENANCE OF MATERIALS HANDLING EQUIPMENT6. PACKAGING THIS IS CONCERNED WITH DESIGN OF PACKAGING OF THE

PRODUCT THAT ENSURES DAMAGE FREE MOVEMENT OF THE PRODUCT AND IS CODUCIVE TO EFFICIENT HANDLING AND STORAGE.

7. ACQUISITION THIS IS CONCERNED WITH SOURCING, PLANNING AND

ORDERING OF THE PRODUCT IN ORDER TO ENSURE ITS AVAILABILITY IN THE RIGHT QUANTITY, AT THE RIGHT TIME, AT THE RIGHT PLACE AND AT THE RIGHT COST.

ACQUISITION, HOWEVER, DOES NOT INCLUDE OTHER PURCHASING ACTIVITIES SUCH AS PRICE NEGOTIATION, VENDOR RATING ETC.


8. PRODUCT SCHEDULING THIS IS CONCERNED WITH PREPRARATION OF

SCHEDULES OF AGGRIGATE QUANTITIES TO BE PRODUCED IN ACCORDANCE WITH DEMANDS, ACTUAL AS WELL AS PROJECTED.

PRODUCT SCHEDULING, HOWEVER, DOES NOT INCLUDE DAY – TO – DAY DETAILED SCHEDULING CARRIED OUT BY PRODUCTION PLANNER.

9. INFORMATION SYSTEM THIS IS A MUST FOR THE SUCCESSFUL

IMPLEMENTATION OF LOGISTICS FUNCTION. DATABASE ON CUSTOMER LOCATION, SALES VOLUME, INVENTORY LEVELS, LEAD TIMES ETC. MUST BE MAINTAINED.

IMPROVING EFFECTIVENESS OF


• FIVE PILLARS TO THE EFFECTIVE LOGISTICS ARE :

1. LOGISTICAL NETWORK

THIS INCLUDE FACILITIES AS MANUFACTURING, WAREHOUSES, DEALERS AND RETAIL STORES. THE LARGER THE GEOGRAPHICAL SPREAD, THE MORE COMPLEX WILL BE THE FIRM’S LOGICAL NETWORK.

SUPERIOR LOGICAL NETWORK, BASED ON SYSTEMATIC ANALYSIS AND DETERMINATION OF NUMBER OF EACH TYPE OF FACILITIES, THEIR GEOGRAPHICAL LOCATIONS, SPECIFIC WORK ALLOCATIONS ETC. CAN BE VERY BIG COMPETITIVE TOOL.



2. INFORMATION

ACCURATE FORECASTING AND GOOD ORDER MANAGEMENT ARE ESSENTIAL FOR SYSTEMATIC INVENTORY MANAGEMENT.

JIT AND CONTINGENCY REPLINISHMENT (CR) AND QUICK RESPONSE (QR) TO THE CUSTOMER.

TIMELY INFORMATION THUS IS THE KEY TO THE LOGISTICAL PERFORMANCE.

MODERN INFORMATION TECHNOLOGY, IN THE FORM OF BOTH HARDWARE ( TELEPHONES, FAXES, MOBILE PHONES, E- MAILS ) AND SOFTWARE ( ENTERPRISE RESOURCE PLANNING ) HAVE REMOVED THE DEFICIENCIES IN INFORMATION.



3. TRANSPORT COST, SPEED, AND RELIABILITY ARE KEY

DETERMINANTS OF THE EFFECTIVENESS, BE IT WAR OR BUSINESS.

SINCE THE TIME IS ESSENCE, QUALITY OF TRANSPORT PERFORMANCE BECOMES THE CRITICAL FACTOR.

FURTHER, AS SPEED AND THE COST OF TRANSPORT ARE INTER-RELATED, CAREFUL SELECTION OF THE TRANSPORT BECOMES ESSENTIAL FOR OPTIMUM COST.

FOR EXAMPLE, FASTER TRANSPORT COSTS MORE MONEY BUT REDUCE INVENTORIES AND IMPROVE CUSTOMER SERVICE.



4. SOUND INVENTORY MANAGEMENT GOOD INVENTORY MANAGEMENT SYSTEM

MUST BE PUT INTO PLACE TO ACHIEVE DESIRED CUSTOMER SERVICE WITH MINIMUM INVENTORY INVESTMENT.

INVENTORY POLICIES MUST BE CAREFULLY DEVISED.

EXCESSIVE INVENTORIES HIDE DEFICIENCIES (E.G. DEFICIENCIES OF LOGISTIC NETWORK, POOR QUALITY OF SUPPLIERS, INTERIOR PURCHASE ORDER MANAGEMENT ETC.)

WHILE TOO LOW INVENTORIES CAUSE DELAY IN ORDER EXECUTION, SLOW RESPONSE AND DEFICIENT CUSTOMER SERVICE.


LOGISTICS MANAGEMENT• SELECTIVE TREATMENT BASED ON FOLLOWING PRINCIPLES

GENERALLY LEAD TO EFFECTIVE INVENTORY MANAGEMENT :• ENOUGH QUANTITY OF HIGH PROFIT HIGH VOLUME PRODUCTS,

DEMANDED BY THE CORE CUSTOMERS, MAY BE CARRIED IN STOCK WHILE SMALL OR NEGLIGIBLE INVENTORY MAY BE KEPT OF LOW PROFIT, LOW VOLUME PRODUCTS PURCHASED BY A FRINGE OF CUSTOMERS.

• CORE CUSTOMERS MAY BE SERVICED BY FAST RELIABLE AIR SERVICE WHILE ORDERS OF OTHER CUSTOMERS MAY BE DESPATCHED BY SURFACE TRANSPORT.

• COMMITMENT TO DELIVER PRODUCT RAPIDLY AND TIMELY MUST BE BASED ON COMPANY’S CAPABILITY. IMPROVED CUSTOMER SERVICE COMMITMENTS MUST BE PRECEDED BY ENHANCED CAPABILITIES OF LOGISTIC NETWORK.

• COMMITMENT OF RAPID AND CONSISTENT DELIVER SHOULD BE INTENDED TO GAIN CUSTOMER SERVICE ADVANTAGE AND TO NEUTRALISE THE STRENGTH THAT COMPETITOR MIGHT BE ENJOYING.



5. WAREHOUSING, MATERIALS HANDLING AND PACKAGING :

THE CHOICE AND LOCATION OF THE WAREHOUSE SHOULD BE WITH A VIEW TO GET CLOSER TO THE CORE CUSTOMERS.

MATERIALS HANDLING WITHIN THE WAREHOUSE SHOULD BE PLANNED TO ENSURE SAFE AND SPEEDY RECEIPT, MOVEMENT, STORAGE AND PACKAGING OF CUSTOMERS REQUIREMENTS.

TRADITIONAL ORGANIZATION

CHIEFEXECUTIVE

PRODUCTIONCONTROL

PURCHASING STORE TRANSPORTMARKETINGFINANCE

ORGANIZATION CHART WITH LOGISTICS MANAGEMENT SYSTEM

CHIEF EXECUTIVE

PRODUCTION MARKETING FINANCE LOGISTICS

MATERIALSMANAGEMENT

PHYSICALDISTRIBUTIONMANAGEMENT

PURCHASINGPRODUCTION

CONTROLTRANSPORT DESPATCHDISTRIBUTION

STOREMANAGEMENT

1- Logistics Management,

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