An Supply Chain Imperative
1. Planning implementing and controlling the physical flow of material and finished goods
from point of origin to point of use to meet customer`s need at a profit
By “Philip Kotler”
It is essentially a planning process and an information activity
So A integrative process that optimizes the flow of material and supplies through the
organization and its operations to the customer
2) 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
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
Scope of Logistic
It is of critical importance to the organization how it delivers products & services to the customer ,
whether the product is tangible or intangible.
Effective & efficient Physical movement of the tangible product will speak of intangible
services associated with the product and the organization which is delivering it.
In Case of intangible product , the delivery of tangibles at the right place & right time will
speak about its quality.
On the macro level infrastructure such as Various modes of transport , transportation equip.,
storage facilities, connectivity & information processing are contributing to a larg3e extent in
the physical movement of goods produced in manufacturing , mining & agriculture Sectors.
Scope of logistics
This speed & reliability in distribution of products & services contribute to a great extent in the
growth of a country`s domestic & international trade . Logistic cost as a percentage of GDP across the
world is shown in the following table
Country Logistic cost as a percentage of GDP
Scope of logistics
India spent nearly $ 50 billion to move material from one use to another.
So the “ Public distribution system in the country needs logistical support for delivering goods at right
place on time and the lowest cost.
At Micro Level logistic plays a critical role in the value delivery system of business organization to
provide superior customer service i.e. to achieve a desired level of delivered services and quality at
the lowest possible cost.
In a nutshell any productivity improvement that could be achieved in any part of logistic system,at the
micro or macro level would help in cost reduction and proper deployment of scare national resources
to the productive purposes.
In a manufacturing org. the business process starts with the flow of material from the suppliers,
progress to the plant, then to the customer through the distribution channel the department may
excel in their respective function but org. as a whole their performance may be dismal.
Lack of Co ordination in their activities
They have different goal to cherish
There is no single agency that coordinates their functions and homogenizes them.
How to overcome ?
Use of Logistic as a system
Logistic –A system approach
Logistic recognizes that all the activities of material movement across the business process are
interdependent and needs close coordination and these are to be maintained as a system and not the
System is shown as logistic Mix including following functional Areas
Involve following activities
Order checking for any deviation in agreed on negotiated term
Technical details;price;delivery period;payment terms;taxes etc
Checking the availability of material in stock (material requisition)
Production & material scheduling for shortage
Acknowledging the order, indicating deviation if any
It is routine operation but require great deal of planning training of people involved and investment
to bring about efficiency & accuracy
In a large organization a system capable of handling thousands of voluminous orders with minimum
human involvement or without human involvement is a must involving shortened order fulfillment
cycle to have edge over rivals
It is basically information based activity of inventory movement across the supply chain. Hence role
of information system plays a vital role in delivering superior customer service
This function is required to facilitate the following information needs
Order checking & editing
Coordination means to integrate the total supply chain of the company with informational
needs as to time ,quantity, value e.g Lead time, rate of consumption , delivery schedule &
price of the material , Transportation time & cost etc.
A storage place wherein finished goods are stored till they are sold.Effectiveness of an organization`s
marketing strategy depends on making the right decision regarding warehouse.
Warehouse are treated as switching facilities rather than storage place.It is a major cost center, many
customer problem are the direct result of improper warehousing management.
Major decision of ware house are as follows:-
Location ,Size & Number of warehousing facilities
Design of building
Ownership of the warehouse
Point order problem
How much to order When to order
For this we require
Dependable IMS Independent IMS
Purchase Control Stores control Issue
VED Analysis Level Management
EOQ & EBQ Analysis MRP System
Perpetual inventory system JIT System
It is also a critical element in physical distribution of the product , which influences the efficiency of
the logistic system this is done with the view of following :-
Foe handling and damage prevention
For inter modal transportation
Storage space economy
Thus to reduce packaging cost
Foe the movement of goods from supplier to buyer , transportation is the most fundamental and
important component of logistic.
E.g. for low unit value products the transportation cost component is 20% of the product cost.
In logistic cost its share varies up to 65-70% in case of mass consumed very low unit price products.
Mode of transportation ( Cost & time factor)
Own fleet or Outsourcing
Are the few decision which are involved in transportation
Which have change the perspective of logistics
Focus on Supply chain Management
Outsourcing of Non Core Competency Functional Area
The entire world has become a global village for marketers because of the liberalization of
economics of most countries and the emergence of WTO which is forcing business
organizations to supply products beyond the national boundaries wherever there is a
In such conditions the role of
Will be to provide time and place time and place utility of the product to the customer
Focus on Supply Chain Management
Business the world over are striving for competitiveness. In their struggle for survival their
focus has shifted to the supply chain
Integrating the process of Procurement , processing & distributing to deliver value for
money to the customer
Two key roles logistics planning & support
Value delivery process success of supply chain
Outsourcing of Non Core Competency functional Area
Outsourcing is a acceptable trend in business.
Corporation have realized that doing everything by themselves does not result in effective & efficient
use of scare resources available to them.
It is better to outsource functional area to experts who can do job at the lowest cost and that to
efficiently & Effectively.
Is one such area where most of business org. do not have enough expertise thus needs to be
Thus Logistics have shaped into different service industry offering complete & customized logistics
It is understood now that an organization`s competitive Success could only come through either cost
leadership or offering differentiated product and services
Can provide both the benefits simultaneously
Through its value chain activities
Which can be categorized into different types
Out bound logistics
Support activates e.g HR, Accounts & finace, IT & MIS etc.
Logistics for Business Excellence
For Business Excellence logistics operation need to be integrated on the following two fronts
integration of logistic into business
Integration of components of logistics
To achieve the objective of making available right product at the right place and at a right time at low
cost , every business is required to integrate logistics into the business process.
For logistic operation to run smoothly, proper integration amongst the component of logistic process
is a must.
Objectives of Logistic management
Reliable and consistent delivery performance
Minimum product damage
Amongst most of the Indian companies logistics outsourcing
Has now become an accepted trend for the following reasons:
Focus on core Business
Paucity of funds
Reduction in liabilities
Wider Geographical coverage
Cross pollination of better available practice
Nowadays warehousing is used as a switching facility rather than as a long term storage house.
Attention is paid to
Higher lower shorter
inventory turnover operating cost cycle time
And in light of these warehouse`s performance is judged by its productivity and cost performance while
trying to achieve 2 polemic goals.
Customer`s satisfaction lower cost of operation
We have to decide on 2 factors
Whether to have
Centralized decentralized warehouse
It ensures tight control multiple distribution
On inventories and can centers
Operate on EOS
location of sites
better customer service low operating cost
Maximum utilization of storage space
Higher labour productivity
Maximum Asset utilization
Reduction in material handling
Increase in inventory turnover
Reduce order filing time
Material Handling function
This involves three function
1. Loading & unloading
2. Material Movement
3. Order filing
Information handling function
For this following information is required
Inspection & auditing
Transit damage & Breakage
This all information facilitate quick decision
India: Foreign Trade Policy
India: Foreign Trade Policy
Although India has steadily opened up its economy, its tariffs continue to be high when compared with
other countries, and its investment norms are still restrictive. This leads some to see India as a ‘rapid
globalizer’ while others still see it as a ‘highly protectionist’ economy.
Till the early 1990s, India was a closed economy: average tariffs exceeded 200 percent, quantitative
restrictions on imports were extensive, and there were stringent restrictions on foreign investment. The
country began to cautiously reform in the 1990s, liberalizing only under conditions of extreme necessity.
Since that time, trade reforms have produced remarkable results. India’s trade to GDP ratio has
increased from 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now
among the fastest growing in the world.
Average non-agricultural tariffs have fallen below 15 percent, quantitative restrictions on imports have
been eliminated, and foreign investments norms have been relaxed for a number of sectors.
India however retains its right to protect when need arises. Agricultural tariffs average between 30-40
percent, anti-dumping measures have been liberally used to protect trade, and the country is among the
few in the world that continue to ban foreign investment in retail trade. Although this policy has been
somewhat relaxed recently, it remains considerably restrictive.
Nonetheless, in recent years, the government’s stand on trade and investment policy has displayed a
marked shift from protecting ‘producers’ to benefiting ‘consumers’. This is reflected in its Foreign Trade
Policy for 2004/09 which states that, "For India to become a major player in world trade ...we have also to
facilitate those imports which are required to stimulate our economy."
India is now aggressively pushing for a more liberal global trade regime, especially in services. It has
assumed a leadership role among developing nations in global trade negotiations, and played a critical
part in the Doha negotiations.
Regional and Bilateral Trade Agreements
India has recently signed trade agreements with its neighbors and is seeking new ones with the East
Asian countries and the United States. Its regional and bilateral trade agreements - or variants of them -
are at different stages of development:
India-Sri Lanka Free Trade Agreement,
Trade Agreements with Bangladesh, Bhutan, Sri Lanka, Maldives, China, and South Korea.
India-Nepal Trade Treaty,
Comprehensive Economic Cooperation Agreement (CECA) with Singapore.
Framework Agreements with the Association of Southeast Asian Nations (ASEAN), Thailand and
Preferential Trade Agreements with Afghanista, Chile, and Mercosur (the latter is a trading zone between
Brazil, Argentina, Uruguay, and Paraguay).
World Bank Involvement
As a number of research institutions in the country provide the Government with good, just-in-time, and
low-cost analytical advice on trade-related issues, the World Bank has focused on providing analysis on
specialized subjects at the Government’s request.
In the last three years, the Bank has been working with the Ministry of Commerce in a participatory
manner to help the country develop an informed strategy for domestic reform and international
Given the sensitivity of trade policy and negotiation issues, the Bank’s role has been confined to providing
better information and analysis than was previously available to India’s policymakers.
World Bank Reports
Over the last two years, the World Bank has completed two reports:
Sustaining India’s Services Revolution: Access to Foreign Markets, Domestic Reforms and International
Negotiation: The study concludes that to sustain the dynamism of India’s services sector, the country
must address two critical challenges: externally, the problem of actual and potential protectionism; and
domestically, the persistence of restrictions on trade and investment, as well as weaknesses in the
From Competition at Home to Competing Abroad: The Case of Horticulture in India: This study finds that
the competitiveness of India’s horticulture sector depends critically on efficient logistics, domestic
competition, and the ability to comply with international health, safety and quality standards. The study is
based on primary surveys across fifteen Indian States.
A third study, dealing with barriers to the movement of professionals is under preparation.
The Bank has also held a number of workshops and conferences with a view to providing different
stakeholders with a forum to express their views on trade-related issues.