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DEFINITION OF LOGISTICS MANAGEMENT DEFINITION OF LOGISTICS MANAGEMENT CONCEPT OF LOGISTICS MANAGEMENT CONCEPT OF LOGISTICS MANAGEMENT ROLE OF LOGISTICS MANAGEMENT IN AN ORGANIZATION ROLE OF LOGISTICS MANAGEMENT IN AN ORGANIZATION ROLE OF LOGISTICS IN SCM & INTEGRATION OF ROLE OF LOGISTICS IN SCM & INTEGRATION OF LOGISTICS OPERATIONS LOGISTICS OPERATIONS THE FIVE ARMS OF LOGISTICS MANAGEMENT THE FIVE ARMS OF LOGISTICS MANAGEMENT TRANSPORTATION, TRANSPORTATION, WAREHOUSING, WAREHOUSING, MATERIALS HANDLING, MATERIALS HANDLING, INFORMATION & INFORMATION & PACKAGING. PACKAGING. PHYSICAL DISTRIBUTION MANAGEMENT PHYSICAL DISTRIBUTION MANAGEMENT BULLWHIP EFFECT BULLWHIP EFFECT
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Page 1: Logistics Management

DEFINITION OF LOGISTICS MANAGEMENTDEFINITION OF LOGISTICS MANAGEMENT CONCEPT OF LOGISTICS MANAGEMENTCONCEPT OF LOGISTICS MANAGEMENT ROLE OF LOGISTICS MANAGEMENT IN AN ROLE OF LOGISTICS MANAGEMENT IN AN

ORGANIZATIONORGANIZATION ROLE OF LOGISTICS IN SCM & INTEGRATION OF ROLE OF LOGISTICS IN SCM & INTEGRATION OF

LOGISTICS OPERATIONSLOGISTICS OPERATIONS THE FIVE ARMS OF LOGISTICS MANAGEMENT THE FIVE ARMS OF LOGISTICS MANAGEMENT

TRANSPORTATION,TRANSPORTATION,

WAREHOUSING,WAREHOUSING,

MATERIALS HANDLING, MATERIALS HANDLING,

INFORMATION &INFORMATION &

PACKAGING.PACKAGING. PHYSICAL DISTRIBUTION MANAGEMENTPHYSICAL DISTRIBUTION MANAGEMENT BULLWHIP EFFECTBULLWHIP EFFECT

Page 2: Logistics Management

DEFINITIONDEFINITION Logical extension of transportation and related areas to Logical extension of transportation and related areas to

achieve an efficient and effective goods distribution systemachieve an efficient and effective goods distribution system Design and operation of the physical, managerial, and Design and operation of the physical, managerial, and

informational systems needed to allow goods to overcome informational systems needed to allow goods to overcome time and space (from the producer to customer).time and space (from the producer to customer).

Logistics is the process of strategically managing the Logistics is the process of strategically managing the procurement, movement and storage of materials, parts procurement, movement and storage of materials, parts and finished inventory( and the related information flows) and finished inventory( and the related information flows) through the organization and its marketing channels in through the organization and its marketing channels in such a way that current and future profitability are such a way that current and future profitability are maximized through the cost-effective fulfillment of ordersmaximized through the cost-effective fulfillment of orders

Logistics management can provide a multitude of ways to Logistics management can provide a multitude of ways to increase efficiency and productivity and hence contribute increase efficiency and productivity and hence contribute significantly to reduced unit costssignificantly to reduced unit costs

Page 3: Logistics Management

Integrated LogisticsIntegrated Logistics

The process of anticipating customer The process of anticipating customer needs and wants; acquiring the capital, needs and wants; acquiring the capital, materials, people, technologies, and materials, people, technologies, and information necessary to meet those information necessary to meet those needs and wants; optimizing the goods needs and wants; optimizing the goods or service –producing network to fulfill or service –producing network to fulfill customer requests; and utilizing the customer requests; and utilizing the network to fulfill customer requests in network to fulfill customer requests in a timely way.a timely way.

Inbound logisticsInbound logistics Conversion operationsConversion operations Outbound logisticsOutbound logistics

Page 4: Logistics Management

Formal Definition of Formal Definition of logistics managementlogistics management

Design and operation of the Design and operation of the physical, managerial, and physical, managerial, and informational systems needed to informational systems needed to allow goods to overcome time and allow goods to overcome time and space (from the producer to space (from the producer to consumer)consumer)

Integrated view of a number of Integrated view of a number of activities/functions may be required.activities/functions may be required.

Page 5: Logistics Management

Decisions in logistics Decisions in logistics managementmanagement

1.1. Product Design (moulded plastic water tanks)Product Design (moulded plastic water tanks)2.2. Plant LocationPlant Location3.3. Choice of Markets/SourcesChoice of Markets/Sources4.4. Production Structure (cement manufactures)Production Structure (cement manufactures)5.5. Distribution/Dealer Network Design (two Distribution/Dealer Network Design (two

wheeler)wheeler)6.6. Location of Warehouses (two wheeler)Location of Warehouses (two wheeler)7.7. Plant Layout Plant Layout 8.8. Allocation DecisionAllocation Decision9.9. Production PlanningProduction Planning10.10. Inventory Management – Stocking LevelsInventory Management – Stocking Levels

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11. Transportation – mode Choice, 11. Transportation – mode Choice,

Shipment Size and Routing Decision, Shipment Size and Routing Decision, and Transport Contractingand Transport Contracting

12. Packaging12. Packaging

13. Materials Handling13. Materials Handling

14. Warehouse Operations14. Warehouse Operations

Page 7: Logistics Management

Key Actors in effective Key Actors in effective logistics systemlogistics system

Shippers Shippers SuppliersSuppliers

- Carriers (rail, road, air,water, - Carriers (rail, road, air,water, pipeline)pipeline)

- Ware house providers- Ware house providers

- Freight Forwarders- Freight Forwarders

- Terminal Operators (Ports etc.)- Terminal Operators (Ports etc.)

Government (regulator of logistics)Government (regulator of logistics)

Page 8: Logistics Management

Role of governmentRole of government(legislations that affect (legislations that affect

logistics)logistics) Central Sales Tax and Local Sales TaxCentral Sales Tax and Local Sales Tax Consignment TaxConsignment Tax Excise DutiesExcise Duties Octroi and Entry TaxOctroi and Entry Tax Use of Packaging MaterialUse of Packaging Material MODVAT (modified value added tax)MODVAT (modified value added tax) Motor Vehicles Act and similar acts for Motor Vehicles Act and similar acts for

other modelsother models Distribution PoliciesDistribution Policies

Page 9: Logistics Management

Classification of logistics Classification of logistics applicationsapplications

Decision – wiseDecision – wise Actor – wiseActor – wise Inbound logistics and outbound Inbound logistics and outbound

logisticslogistics Private vs public sectorPrivate vs public sector Single vs multiple plantsSingle vs multiple plants Nature of the productNature of the product Made to stock vs made to orderMade to stock vs made to order

Page 10: Logistics Management

Total Logistics CostTotal Logistics Cost Product inventory at sourceProduct inventory at source Pipeline inventoryPipeline inventory Product inventory at warehouses and Product inventory at warehouses and

dealersdealers Transit losses/insuranceTransit losses/insurance Storage losses/insuranceStorage losses/insurance Handling and warehouse operationsHandling and warehouse operations PackagingPackaging TransportationTransportation Customer’s shoppingCustomer’s shopping

Page 11: Logistics Management

DAY 2DAY 2

Explain the integrated logistics modelExplain the integrated logistics model Discuss the major activities associated with Discuss the major activities associated with

integrated logisticsintegrated logistics Discuss the service response logistics conceptDiscuss the service response logistics concept Discuss the value added concept in the Discuss the value added concept in the

context of integrated logisticscontext of integrated logistics Explain the financial impact of logistics on the Explain the financial impact of logistics on the

firmfirm Identify and discuss the major interfaces with Identify and discuss the major interfaces with

logisticslogistics

Page 12: Logistics Management

THE INTEGRATED LOGISTICS THE INTEGRATED LOGISTICS MODELMODEL

The process of anticipating customer needs The process of anticipating customer needs and wants; acquiring the capital, materials, and wants; acquiring the capital, materials, people, technologies, and information people, technologies, and information necessary to meet those needs and wants; necessary to meet those needs and wants; optimizing the goods – or service – optimizing the goods – or service – producing a network to fulfill customer producing a network to fulfill customer requests; and utilizing the network to requests; and utilizing the network to fulfill customer requests in a timely way.fulfill customer requests in a timely way.

Creates a sustainable, competitive, Creates a sustainable, competitive, strategic advantagestrategic advantage

Page 13: Logistics Management

Logistics management of Logistics management of servicesservices

Process of coordinating Process of coordinating nonmaterial activities necessary to nonmaterial activities necessary to the fulfillment of the service in a the fulfillment of the service in a cost – and customer service – cost – and customer service – effective mannereffective manner

Service response logistics activitiesService response logistics activities

waiting timewaiting time

capacitycapacity

deliverydelivery

Page 14: Logistics Management

Models in logistics Models in logistics managementmanagement

Forecasting modelsForecasting models Mathematicals programming modelsMathematicals programming models

location modelslocation models allocation modelsallocation models distribution network design modelsdistribution network design models Inventory ModelsInventory Models Routing ModelsRouting Models Scheduling ModelsScheduling Models

Page 15: Logistics Management

Financial impact of Financial impact of integrated logistics on the integrated logistics on the

firmfirm Macro level impactMacro level impact Micro level impactMicro level impact

Page 16: Logistics Management

Superior integrated logistics Superior integrated logistics accounting systemaccounting system

1.1. How do integrated logistics costs affect contribution by How do integrated logistics costs affect contribution by product, by territory, by customer, and by salesperson?product, by territory, by customer, and by salesperson?

2.2. What are the costs of additional customer service? What are the costs of additional customer service? What trade-offs are necessary and what are the What trade-offs are necessary and what are the incremental benefits or losses?incremental benefits or losses?

3.3. What is the optimal amount of inventory? How sensitive What is the optimal amount of inventory? How sensitive is the inventory level to changes in warehousing is the inventory level to changes in warehousing patterns or to changes in customer service levels? How patterns or to changes in customer service levels? How much does it cost to hold inventory?much does it cost to hold inventory?

4.4. What mix of transport modes/carriers should be used?What mix of transport modes/carriers should be used?5.5. How many field warehouses should be used and where How many field warehouses should be used and where

should they be located?should they be located?6.6. How many production setups are required? Which How many production setups are required? Which

plants will be used to produce each product? What are plants will be used to produce each product? What are the optimum manufacturing plant capacities based on the optimum manufacturing plant capacities based on alternative product mixes and volumes?alternative product mixes and volumes?

7.7. What product packaging alternatives should be used?What product packaging alternatives should be used?8.8. To what extent should the order processing system be To what extent should the order processing system be

automated?automated?9.9. What distribution channels should be used?What distribution channels should be used?

Page 17: Logistics Management

Supply chain (logistics Supply chain (logistics network)network)

Supply chain is defined as the Supply chain is defined as the sequence of business processes and sequence of business processes and information that provides a product information that provides a product or service from suppliers through or service from suppliers through manufacturing and distribution to manufacturing and distribution to the ultimate customer.the ultimate customer.

(marketing, logistics, production)(marketing, logistics, production) Buy-make-move-store-sellBuy-make-move-store-sell

Page 18: Logistics Management

Characteristics of supply Characteristics of supply chainchain

Decision in each part of the supply chain Decision in each part of the supply chain affect the other partsaffect the other parts

Accelerator or Bullwhip effectAccelerator or Bullwhip effectDemand changes by the end user create an Demand changes by the end user create an

accelerator effect in the supply chain accelerator effect in the supply chain which magnifies the size of demand which magnifies the size of demand changes on upstream supply chain changes on upstream supply chain elements (wholesalers,elements (wholesalers,

Warehouses, factories)Warehouses, factories) Reduce total replenishment timeReduce total replenishment time(the sc to react rapidly to real demand (the sc to react rapidly to real demand

changes and reduces the inventory needs)changes and reduces the inventory needs)

Page 19: Logistics Management

Supply chain management Supply chain management vs logistics managementvs logistics management

CLM CLM

The process of planning, implementing and The process of planning, implementing and controlling the efficient, cost effective flow controlling the efficient, cost effective flow and storage of raw materials, in-process and storage of raw materials, in-process inventory, finished goods, and related inventory, finished goods, and related information from point of origin to point of information from point of origin to point of consumption for the purpose of conforming consumption for the purpose of conforming to customer requirementsto customer requirements

SCM seems to be replacing more of the SCM seems to be replacing more of the traditional terms of management of material traditional terms of management of material and service flows.and service flows.

Page 20: Logistics Management

SUPPLY CHAIN SUPPLY CHAIN STRATEGYSTRATEGY

DELL VS CAMPBELL SOUPDELL VS CAMPBELL SOUP SUPPLY CHAIN SHOULD BE STRUCTURED SUPPLY CHAIN SHOULD BE STRUCTURED

TO MEET THE NEEDS OF DIFFERENT TO MEET THE NEEDS OF DIFFERENT PRODUCTS AND CUSTOMER GROUPSPRODUCTS AND CUSTOMER GROUPS

The efficiency of the supply chain can be The efficiency of the supply chain can be measured based on the size of the inventory measured based on the size of the inventory investment in the supply chaininvestment in the supply chain

Inventory turnover & weeks-of-supplyInventory turnover & weeks-of-supply Inventory turnover = cost of goods sold/ Inventory turnover = cost of goods sold/

average average aggregate aggregate

inventory valueinventory value

Page 21: Logistics Management

The The cost of goodscost of goods sold is the annual sold is the annual

cost for a company to produce the goods cost for a company to produce the goods or services provided to customersor services provided to customers

The The average aggregate inventory average aggregate inventory valuevalue is the total value of all items held is the total value of all items held in inventory for the firm valued at cost. in inventory for the firm valued at cost. (includes the raw material, work-in-(includes the raw material, work-in-process, finished goods, and distribution process, finished goods, and distribution inventory owned by the company)inventory owned by the company)

Weeks of supplyWeeks of supply is a measure of how is a measure of how many weeks worth of inventory is in the many weeks worth of inventory is in the system at a particular point in time.system at a particular point in time.

Page 22: Logistics Management

4 types of supply chain 4 types of supply chain strategiesstrategies

Efficient supply chainsEfficient supply chains

Risk-hedging supply chainsRisk-hedging supply chains

Responsive supply chainsResponsive supply chains

Agile supply chainsAgile supply chains

Page 23: Logistics Management

Efficient supply chainEfficient supply chain Highest cost efficiencyHighest cost efficiency Non value added activities should be eliminatedNon value added activities should be eliminated Scale economies should be pursuedScale economies should be pursued Optimization techniques should be deployed to Optimization techniques should be deployed to

get the best capacity utilization in production get the best capacity utilization in production and distributionand distribution

Information linkages should be established to Information linkages should be established to ensure the most efficient, accurate, cost-effective ensure the most efficient, accurate, cost-effective transmission of information across the supply transmission of information across the supply chainchain

(grocery, basic apparel, food, oil and gas)(grocery, basic apparel, food, oil and gas)

Page 24: Logistics Management

Risk-hedging supply Risk-hedging supply chainschains

Pooling and sharing resources in a Pooling and sharing resources in a supply chain so that the risks in supply chain so that the risks in supply disruption can be shared.supply disruption can be shared.

Alternative supply sources reduce the Alternative supply sources reduce the risk of disruptionrisk of disruption

Sharing the safety stock with other Sharing the safety stock with other companiescompanies

IT is important for the successIT is important for the success

(Hydro electric power, food produce)(Hydro electric power, food produce)

Page 25: Logistics Management

Responsive supply chainsResponsive supply chains

Responsive and flexible to the Responsive and flexible to the changing and diverse needs of the changing and diverse needs of the customercustomer

Companies use build to order and Companies use build to order and mass customization processes as a mass customization processes as a means to meet the specific means to meet the specific requirements of customersrequirements of customers

(Fashion apparel, computers, popular (Fashion apparel, computers, popular music)music)

Page 26: Logistics Management

Agile supply chainAgile supply chain

Supply chains that utilize strategies aimed at Supply chains that utilize strategies aimed at being responsive and flexible to customer being responsive and flexible to customer needs, while the risks of supply shortages or needs, while the risks of supply shortages or disruptions are hedged by pooling inventory disruptions are hedged by pooling inventory and other capacity resources.and other capacity resources.

Ability to be responsive to the changing, Ability to be responsive to the changing, diverse, and unpredictable demands of diverse, and unpredictable demands of customers on the front end, while minimizing customers on the front end, while minimizing the back-end risks of supply disruptionsthe back-end risks of supply disruptions

(Telecom, high – end computers, (Telecom, high – end computers, semiconductor)semiconductor)

Page 27: Logistics Management