Logistics Management LOGISTICS …………IS “THE PROCESS OF PLANNING IMPLEMENTING AND CONTROLLING THE EFFECTIVE AND EFFICIENT FLOW AND STORAGE OF GOODS, SERVICES AND RELATED INFORMATION FROM THE POINT OF ORIGIN TO THE POINT OF CONSUMPTION FOR THE PURPOSE OF CONFORMING TO CUSTOMER REQUIREMENTS.” ( COUNCIL OF LOGISTICS MANAGEMENT/USA) ITS ORIGINS BELONG TO MILITARY OPERATIONS RELATING TO THE COMPLETE SYSTEM OF MOVING, SUPPLYING AND QUATERING TROOPS AND ALL THE RESOURCES THEY NEED. IN TODAY’S HIGHLY COMPETITIVE INDUSTRIAL SCENARIO OF GLOBAL COMPETITIVENESS, LOGISTICS HAS TRULY BECOME A STRATEGIC WEAPON AND MOST IMPORTANT FACTOR IN THE SUPPLY CHAIN
Contd…… “Getting the right product to the right place in the right quantity at the right time, in the best condition and at an acceptable cost. “ (The Chartered Institute of Logistics & Transport) Logistics involves ‘8 Rs’- Logistics involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost.
Global : Logistics Industry Scenario The logistics industry is valued at US$ 3.5 trillion. The U.S., which contributes to over 25% of the global industry value, spends close to 9% of its GDP on logistic services. The sector currently employs over 40 million people in the world Countries Logistics Cost / GDP
India : Logistics Industry Scenario
Total GDP US$ 3 Trillion.
India spends 13% of its GDP on logistics compared to an average of 10% in other developing countries.
India logistics market to double by 2012.
The industry would need 4,20,000 skilled people in the ‘Senior Resource Category’ in warehouse management it self, by 2015.
Currently, India logistics industry has only 14,000 Warehouse Managers but required are approx. 35,000 .
Technological change in the logistics industry demands a trained workforce in all areas of the sector.
Indian logistics industry is at an inflection point and will reach a market size of over $125 billion in year 2010.
The organized logistics, which is about 6% of the total logistics market, is growing @ 15-20% a year.
Logistics Mix Logistics covers the following functional areas, and are termed as Logistics Mix by Martin Cristopher. Information flow- Order registration, order checking & editing, order processing, coordination Warehousing- Material storage, material handling, site selection & network planning, despatch documentation Packaging- Handling & damage prevention Transportation- Route planning, mode selection & vehicle scheduling
Logistics Functions The major logistics functions are: Order processing Inventory management Warehousing Transportation Material handling & storage system Logistical Packaging Information
Objectives of Logistics Management The objective of Logistics management are: Inventory reduction Reliable and consistent delivery performance Freight economy Minimum product damages Quick response
What is Supply chain? Consists of all parties involved, directly or indirectly, in fulfilling a customer request, include not only manufacturers & suppliers, but also transporters, warehouses, retailers & even customers. Supplier Manufacturer Distributor Retailer Customer
Suppliers Production Distribution Sales Channel Value-Added Services End User Distribution After Sales Logistics Distribution Logistics Manufacturing Logistics Inbound Logistics Supply Logistics Manufacture & Raw Materials Export & Import Activities Primary Movement Distribution Centres Secondary Movement B2B & B2C Distribution After-Sales Services Reverse Logistics Basic Supply Chain Process
Definition Of Supply Chain American Production & Inventory Control Society(APICS) defines Supply Chain as: “The processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies” “The functions within and outside a company that enable the value chain to make products & provide services to the customer”
SUPPLY CHAIN MANAGEMENT(SCM) Supply chain management involves planning, design,& control of flow of material, information and finance along the supply chain to deliver superior value to the end customer in an effective & efficient manner
Evolution of Supply Chain Management Statement made by the chief executive of an automobile industry: “Our aim is always to arrange the material & machinery and to simplify the operations so that practically no orders are necessary. Our Finished inventory is in transit. So is most of our raw material inventory. Our production cycle is about eighty-one hours from the mine to the finished machine(automobile) in the freight car.”
Contd………………. The First Revolution(1910-1920): The Ford Supply Chain The Second Revolution(1960-1970): The Toyota Supply Chain The Third Revolution(1995-2000): The Dell Supply Chain
Objective of Supply Chain Objective of every supply chain should be to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customer’s request Reduced inventory, reduced lead times, reduced warehouse costs, helps in forecast accuracy.
Contd….. Objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost.
Major Drivers of Supply Chain The major supply chain drivers are: Production Inventory Location Transportation Information
Importance of the Supply Chain Major trends that have emerged to make supply chain management a critical success factor in most industries: Proliferation in product line Shorter product life cycles Higher level of outsourcing Shift in power structure in the chain Globalization of manufacturing
Decision Phases in a Supply Chain Successful supply chain management requires many decisions relating to the flow of information, product & funds. The decision falls in three categories: Supply chain strategy or design: Supply chain planning Supply chain operation
Process views of a Supply Chain There are two ways: 1.Cycle view: Customer order cycle, replenishment cycle, manufacturing cycle, procurement cycle 2. Push/pull view: Pull are initiated by customer order & push by anticipation of customer orders
Process View Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier
Push vs Pull process Push process ,execution is initiated in anticipation of customer orders whereas pull is initiated in response to a customer order Pull process customer demand is known with certainty whereas in push, demand is not known and must be forecast Pull process is referred to as reactive & push as speculative process.
Logistics Versus Supply Chain Management Four unique perspectives on the relationship between logistics and SCM. Four perspectives: traditionalist , relabeling ,unionist , inter-sectionist The result of an international survey of logistics / SCM experts are reported. For logistics educators, researchers and practitioners
SCM versus Logistics: Four Perspective Traditionalist Re-Labeling Unionist Intersectionist Logistics=SCM Logistics SCM Logistics SCM SCM Logistics
TRADITIONALIST Traditionalist position SCM within logistics SCM is one small part of logistics. SCM as “Logistics outside the firm” & this reduces SCM to a special type of Logistics, external or inter-organisational logistics LOGISTICS SCM
Re-labeling The relabeling perspective simply renames logistics; what was logistics is now SCM. “Logistics Manager” = “Supply Chain Manager” Supply Chain = Logistics Network Re-labeling narrows the scope of SCM, since SCM equals logistics LOGISTICS= SCM
Unionist This perspective treats logistics as a part of SCM; SCM completely subsumes logistics. SCM= purchasing+ logistics+ operations+ marketing+….. SCM Logistics
Mentzer et al. (2001) “all the traditional business functions should be included” 1. Marketing & Sales 2. Research & development 3. Forecasting 4. Production 5. Purchasing 6. Logistics 7. Information systems 8. Finance 9. Customer service
According to Council of Logistics management SCM “encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities.” “Importantly, is also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.”
Intersectionist The intersection concept suggests SCM is not the union of logistics, marketing, operations management purchasing and other functional areas. SCM Logistics
SCM is not the union of logistics, marketing, operations management, purchasing and other functional areas. Rather it includes strategic, integrative elements from all of these disciplines. For example purchasing area, and in logistics area hiring a third party logistics
At the intersection, SCM co-ordinates cross-functional
efforts across multiple firms. SCM is strategic, not tactical
Method of survey Researchers created lists of topic/technique items. Combining these lists yielded over 120 items. This list was trimmed to 88 survey items,. Rated from 0 (no importance) to 5 (very high importance) for both Logistics & SCM The 88 Survey Items: Strategic management, Supplier development, Supply chain management (SCM),Information technology.. Total sample = 208(logistics educators) were sent via fax All members of the CLM(Council of Logistics Management). Total of 98 usable surveys was received, response rate R = 98/208 = 4.47% Survey recipients were from North America, Europe, South America and Asia
Results 34 survey items, significantly more important for SCM compared to logistics. (SCM>Logistics) 16 items, significantly more important for logistics compared to SCM. (Logistics>SCM) 38 survey items, there were no significant differences in importance between logistics and SCM. the top 10 lists, share seven common items: Customer service, Logistics management, Inventory management, Information technology Cycle time reduction, e-commerce, Supply chain management
Conclusion Logistics typically refers to activities that occur within the boundaries of a single organization and supply chain refers to networks of companies that work together and coordinate their actions to deliver a product to market. Logistics focuses its attention on activities such as procurement, distribution, maintenance & inventory management. Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance and customer services. Supply chain management views supply chain and the organizations in it as a single entity. It brings a system approach to understanding and managing different activities needed to coordinate the flow of products and services to best serve the ultimate customer.