LOGISTICS PLANNING AND STRATEGY

1. Logistics Planning and Strategy

2. INTRODUCTION TO LOGISTICS PLANNING & STRATEGY
• Business Organizations and Economic Value creation.
• Basic activity sets in Operations Management, Materials Management and Physical Distribution.
• Evolution of integration and, Logistics Management and Supply Chain Management.
• Various perspectives of Logistics & Supply Chain Management
UNIT-1

3. Meaning of Business
• Business is an Economic activity which involves regular production and or exchange of goods and
services with the main purpose of earning profits.
• According to Urwick and Hunt, “Business is any enterprise which makes, distributes, or provides any
article or service, which other members of the community need and are able and willing to pay for
profit.
• Business comprises all profit seeking activities and enterprises that provide goods and services
necessary to an economic system.

4. Dealing in goods and services.
Profit motive
Regularity of transaction
Element of risk
Consumer satisfaction
Social activity.
CHARACTERISTICS OF BUSINESS

5. Business Organization:
• According to Stephenson, “Business Organization generally refers to operation and control of trade or
any similar business.
• According to William H. Hevoman, “Business organization means leadership, control and directing
the joint efforts of some people made to achieve a common objective.”

6. • Group of People
• Pre-determined Aims and objective
• Co-ordination and co-operation in the working of various persons
• Arrangement of various resources
• Direction, operation and control of business activities
• Delegating authority according to responsibility
Characteristics of Business Organization:

7. • To achieve pre-determined aims
• To increase the efficiency of business
• To establish the co-ordination among various department
• To receive benefit of specialization
• To establish harmonious relation between labor and capital
• To use country resources for the benefit of the country
• To fulfill social obligation
• To get maximum production at minimum expenses
Aims and objectives of business Organization:

8. • Functions related to Production
• Functions related to Marketing and Distribution
• Functions related to Management of Finance
• Functions related to Human Resource Management
Functions of business Organization

9. The Significance of business may be classified into the following categories namely :
• Significance to National Economy
• Significance to Business itself
• Significance to Community
Importance of Business Organization

10. • Optimum and profitable use of resources.
• Balanced industrial growth.
• Source of national income.
• Faster economic growth in the country
• Contributes of national prosperity.
• Better utilization of human resources.
• Increase in the standard of living of the people.
• Source for meeting import requirements.
• To meet the obligations of development planning.
• Larger creation of employment. Eradication of poverty.
• Capital formation.
• Development of labor and capital markets.
Significance to National Economy :

11. • Large scale production and efficient distribution.
• Creation of healthy competition.
• Fulfillment of social responsibility.
• Decrease in the cost of production.
• Helps to develop managerial skill.
• Greater utilization of production capacities.
• Development of the undertaking.
• Profitable sales volume.
• Specialization in production
Significance to Business itself

12. • Uplifts the standard and quality of life.
• Development of labor markets
• Human prosperity.
• Creation of employment.
• Creates habits of saving.
• Provides goods and services at reasonable prices.
• Advantage of form, place, time and possession utilities.
Significance to Community

13. • Sole Proprietor
• Partnership Firm
• Joint Hindu Undivided Family
• Joint Stock Company
• Co-Operative Society
Forms of Business Organization

14. • A Sole Proprietorship consists of one individual doing business.
• He invests money in the business and manages the operations, bears the risks involved and
enjoy the profit and loss of the business.
• He has the sole authority to take decision regarding the business.
• J.L. Hanson: “A type of business unit where one person is solely responsible for providing the
capital and bearing the risk of the enterprise, and for the management of the business.”
SOLE PROPRIETORSHIP

15. • Sole Possession
• Full Control
• Bearing whole Profit/Loss
• Infinite Liability
• Less Regulation
• No Separate Entity
• Limited resources
CHARACTERISTICS

16. • Easy to Form and Dissolve
• Directly Motivated
• Complete Control
• Maintenance of Secrecy
• Quick Decision-Making
• Individual Dealings
• Fewer Regulations
• Low start-up costs
• No corporate taxes
ADVANTAGES

17. • Faulty decisions
• Limited resources
• Unlimited liability
• Limited life
• Limited managerial skills
• Unsuitable for big businesses
DISADVANTAGES

18. Examples
• General store
• Beauty Parlor
• Sweet shop
• Local cloth stores
• IT Consultant

19. • Partnership‟ is an association of two or more persons who pool their financial and managerial
resources and agree to carry on a business and share its profit.
• Section 4 of the Indian Partnership Act, 1932 defines partnership as “the relation between
persons who have agreed to share the profits of a business carried on by all or any of them acting
for all.”
PARTNERSHIP

20. • Least Two Persons to form partnership
• Contractual Relationship
• Involvement in Profits and Business
• Legitimate Business
• Principal Agent Relationship
• Unlimited Liability
• Registration is not compulsory
• Quick decision
CHARACTERISTICS

21. TYPES OF PARTNERS
• Active Partners
• Sleeping Partners
• Nominal Partners (brand promotion by celebrities)
• General Partners
• Limited Partners
• Partners by Estoppel (who works in collaboration without legal partnership i,.e not a real
partner)
• Partners by Holding Out (Similar to estoppel where unreal partner get liable to third party that
is creditor to the company)

22. ADVANTAGES
• Better resources
• Quick and prompt decisions
• Better managerial ability
• Secrecy is maintained
• Risk is minimized
• Easy to form
• Easy to dissolve

23. DISADVANTAGE
• Indefinite liability
• Clash among partners
• Delay in decisions
• Interest can not be transferred
• Each partner is „jointly and severally‟ liable for the partnership's debts
• Inappropriate for big concerns

24. PARTNERSHIP DEED
Before starting a partnership business, all the partners have to draw up a legal document called a
Partnership Deed of Agreement. It usually contains the following information:
• Names and addresses of partners
• Commencement of partnership
• Duration of partnership
• Business to be done
• Name and address of firm
• Initial investments
• Division of profits and losses
• Ending of the business
• This document will be signed by members of the partnership.

25. Example
• Uber and Spotify
• Amazon and American express
• Apple and Mastercard
• Apple and Nike

26. JOINT HINDU FAMILY
• The Joint Hindu Family (JHF) business is a form of business organization run by Hindu Undivided
Family (HUF), where the family members of three successive generations own the business jointly.
• The head of the family known as Karta manages the business. The other members are called co-
parceners and all of them have equal ownership right over the properties of the business.
• The membership of the JHF is acquired by virtue of birth in the same family.
• The share of each member's interest in the family property and business keeps on fluctuating. The
member's interest increases by death of any existing coparcener and decreases by birth of a new co-
parcener.

27. ADVANTAGES
• Guaranteed Shares in Profits
• Swift Decision
• Cooperation
• Narrow Accountability of co-parceners
• Boundless responsibility of the Karta
• Persistent life
• Tax profit
• Contribution of understanding and Experience regarding business

28. DISADVANTAGES
• Instability
• Misuse of power
• Lack of motivation
• Scarce resources
Example: Reliance industry

29. CO-OPERATIVE SOCIETIES
• It is a voluntary association of persons who work together to promote their economic interest. It
works on the principle of self-help and mutual help.
• The primary objective is to provide support to the members. People come forward as a group, pool
their individual resources, utilize them in the best possible manner and derive some common
benefits out of it.
• The Section 4 of the Indian Cooperative Societies Act 1912 defines Cooperative Society as “a society,
which has its objectives for the promotion of economic interests of its members in accordance with
cooperative principles.”

30. FEATURES:
Intentional Union
Open Membership
Number of Members (minimum 10)
Registration of the Society
Capital of the society
Welfare Motive
Allocation of Surplus

31. TYPES OF COOPERATIVE SOCIETIES
Consumers‟ Cooperative Societies
Producer's Cooperative Societies
Marketing Cooperative Societies
Housing Cooperative Societies
Farming Cooperative Societies
Credit Cooperative Societies

32. ADVANTAGES
• Democratic management
• Open membership
• Created for welfare
• State aids
• Limited liability
• Easy to form

33. DISADVANTAGES
Corruption
Lack of motivation
Limited capital
Lack of secrecy
Clashes among members
Limited resources
No expert services in management

34. STOCK EXCHANGES
• Stock Exchange is an organized market for the purchase and sale of industrial and financial security.
It is convenient place where trading in securities is conducted in systematic manner i.e. as per certain
rules and regulations.
• According to Husband and Dockerary, "Stock exchanges are privately organized markets which are
used to facilitate trading in securities."
• The Indian Securities Contracts (Regulation) Act of 1956, defines Stock Exchange as, "An association,
organization or body of individuals, whether incorporated or not, established for the purpose of
assisting, regulating and controlling business in buying, selling and dealing in securities.“
• London stock exchange (LSE) is the oldest stock exchange in the world. While Bombay stock exchange
(BSE) is the oldest in India.

35. CHARACTERISTICS:
• Marketplace for securities
• Deals in second hand securities
• Regulates trade in securities
• Allows dealings in listed securities
• Transactions are done through members
• Association of persons
• Acknowledgment from Central Government
• Particular spot
• Financial Barometers

36. FUNCTIONS:
• Mobilization of Savings
• Appraisal of Securities
• Capital Formation
• Proper Channelization of Funds
• Providing a ready market
• Providing a quoting market prices
• Safeguarding activities for investors
• Creating the discipline
• Maintenance of liquidity
• Promotion of the habit of saving

37. Value
• Value = Function or Performance or Quality/ Cost
• Value is mainly classified into 4 types as:
1. Cost value: Cost of manufacturing a product that is sum of raw material, labor, tool and other
overhead cost.
2. Use value: amount of cost included into the product to perform its particular function.
3. Esteem value: amount of cost included into the product to make attractive and appealing to the
customer.
4. Exchange value: All the properties and features of a product which makes it possible to trade or
exchange a product from any other product.

39. Before being able to measure, track and communicate on value creation, it is important to understand
value creation and enable a value creating business model.
This can be achieved through a management process of defining, creating, delivering and sustaining
value. Value is ultimately
• Defined by customers, investors and other stakeholders
• Created through the organization’s purpose, strategy, and business model taking into account all
resources, capitals, and relationships in an integrated way
• Delivered to ever-more demanding and sophisticated stakeholders through responsible products and
services, and through new channels, at an appropriate price
• Sustained by retaining and protecting value internally, and by appropriate reinvestment and
distribution to shareholders and wider society

40. Advantages:
• Reduction in number of useless part
• Reduction in amount of scrap
• Overall cost reduction
• Better customer satisfaction

41. The business function responsible for planning, coordinating, and controlling the resources needed to
produce products and services for a company
What is Operations Management?
What is Role of OM?
OM Transforms inputs to outputs
• Inputs are resources such as
• People, Material, and Money
• Outputs are goods and services

42. OM’s Transformation Process

43. INTRODUCTION TO OPERATIONS MANAGEMENT
• Operation Management is a way or means through which the listed objectives of an operating
system is achieved. There is always a confusion between the word OM & PM (Production
Management).
• It is accepted norm that OM includes techniques which are enabling the achievement of
operational objectives in an operation system.
• The operation system includes both manufacturing sector as well as service sector, but the word
PM refers to the manufacturing sector but not the service sector.
• Suppose, you are designing a layout for the hospital you should say that you are applying
Operations Management Technique not the Production Management Technique.
• When you design a layout for a manufacturing sector you can say that you are applying Production
Technique or Operation Technique or vice versa.
• Therefore, production management is a subset of Operations Management.

44. • Operation managers are concerned with planning, organizing, and controlling the activities which
affect human behavior through models.
• Planning Activities that establishes a course of action and guide future decision-making is planning.
• The operations manager defines the objectives for the operations subsystem of the organization, And
the policies, and procedures for achieving the objectives.
• This stage includes clarifying the Role and focus of operations in the organization’s overall strategy.
• It also involves product Planning, facility designing and using the conversion process.
• Organizing Activities that establishes a structure of tasks and authority.
• Operation managers establish a Structure of roles and the flow of information within the operations
subsystem.
• The activities required to achieve the goals and assign authority and responsibility for carrying
Them out.

45. • Controlling Activities that assure the actual performance in accordance with planned performance.
• To Ensure that the plans for the operations subsystems are accomplished, the operations manager
Must exercise control by measuring actual outputs and comparing them to planned operations
Management. Controlling costs, quality, and schedules are the important functions here.
• Behavior Operation managers are concerned with how their efforts to plan, organize, and control
affect Human behavior.
• They also want to know how the behavior of subordinates can affect Management’s planning,
organizing, and controlling actions. Their interest lies in decision

46. OBJECTIVES OF OPERATIONS MANAGEMENT
Objectives of operations management can be categorized into customer service and resource Utilization.
1. Customer service : The first objective of operating systems is the customer service to the satisfaction
of customer Wants. The operating System must provide something to a specification which can
satisfy the customer in terms of cost And timing. Thus, primary objective can be satisfied by
providing the ‘right thing at a right price At the right time’.
2. Resource utilization: Customer service must be provided with the achievement of Effective
operations through efficient use of resources. Inefficient use of resources or inadequate Customer
service leads to commercial failure of an operating system.
Operations management is concerned essentially with the utilization of resources, i.e., obtaining
Maximum effect from resources or minimizing their loss, underutilization or waste.
The extent Of the utilization of the resources’ potential might be expressed in terms of the proportion of
Available time used or occupied, space utilization, levels of activity, etc.

47. Responsibilities of Operations Management
Planning
– Capacity, utilization
– Location
– Choosing products or services
– Make or buy
– Layout
– Projects
– Scheduling
– Market share
– Plan for risk reduction, plan B?
– Forecasting

48. Controlling
– Inventory
– Quality
– Costs
Organization
– Degree of standardization
– Subcontracting
– Process selection
Staffing
– Hiring/lay off
– Use of overtime
– Incentive plans
– Job assignments

49. ROLE OF OPERATION MANAGEMENT
Operations Management concern with the conversion of inputs into outputs, using physical
resources, so as to provide the desired utilities to the customer while meeting the other
organizational objectives of effectiveness, efficiency and adoptability.
It distinguishes itself from other functions such as personnel, marketing, finance, etc. by its
primary concern for ‘conversion by using physical resources’.

50. Scope of Operations Management
Operations Management includes:
– Forecasting
– Capacity planning
– Scheduling
– Managing inventories
– Assuring quality
– Deciding where to locate facilities

51. Operations management functions:
1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

52. 1. Location of facilities: Location of facilities for operations is a long-term capacity decision which involves
a long term Commitment about the geographically static factors that affect a business organization. It
is an Important strategic level decision-making for an organization. It deals with the questions such as
‘Where our main operations should be based?’ The selection of location is a key-decision as large
investment is made in building plant and Machinery. An improper location of plant may lead to waste
of all the investments made in plant And machinery equipment’s. Hence, location of plant should be
based on the company’s expansion.
2. Plant layout and material handling Plant layout refers to the physical arrangement of facilities. It is
the configuration of departments, Work centers and equipment in the conversion process. The overall
objective of the plant layout Is to design a physical arrangement that meets the required output quality
and quantity most Economically.

53. 3. Product design: Product design deals with conversion of ideas into reality. Every business
organization have to Design, develop and introduce new products as a survival and growth strategy.
Developing the New products and launching them in the market is the biggest challenge faced by the
organizations. The entire process of need identification to physical manufactures of product involves
three Functions: marketing, product development, manufacturing. Product development translates the
Needs of customers given by marketing into technical specifications and designing the various Features
into the product to these specifications. Manufacturing has the responsibility of selecting the processes
by which the product can be manufactured. Product design and development provides link between
marketing, customer needs and expectations and the activities required to manufacture the product.
4. Process design: Process design is a macroscopic decision-making of an overall process route for
converting the Raw material into finished goods. These decisions encompass the selection of a process,
choice Of technology, process flow analysis and layout of the facilities. Hence, the important decisions In
process design are to analyze the workflow for converting raw material into finished product And to
select the workstation for each included in the workflow.

54. 5. PRODUCTION PLANNING AND CONTROL
• Production planning and control can be defined as the process of planning the production in advance,
setting the exact route of each item, fixing the starting and finishing dates for each item, to give
production orders to shops and to follow up the progress of products according to orders.
• The principle of production planning and control lies in the statement ‘First Plan Your Work And then
Work on Your Plan’.
• Main functions of production planning and control includes Planning, routing, scheduling, dispatching
and follow-up.
• Planning is deciding in advance what to do, how to do it, when to do it and who is to do It.
• Planning bridges the gap from where we are, to where we want to go. It makes it possible For things to
occur which would not otherwise happen.

55. • Routing may be defined as the selection of path which each part of the product will follow, Which being
transformed from raw material to finished products.
• Routing determines the most Advantageous path to be followed from department to department and
machine to machine till Raw material gets its final shape.
• Scheduling determines the programmed for the operations.
• Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines
the sequence of operations to be followed.
• Dispatching is concerned with the starting the processes. It gives necessary authority so As to start a
particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.
• Therefore, dispatching is ‘release of orders and instruction for the starting of production for any Item in
acceptance with the route sheet and schedule charts’.
• The function of follow-up is to report daily the progress of work in each shop in a prescribed Preform
and to investigate the causes of deviations from the planned performance.

56. 6. QUALITY CONTROL
• Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of Quality
in a product or service’.
• It is a systematic control of various factors that affect the quality Of the product. Quality control
aims at prevention of defects at the source, relies on effective Feedback system and corrective action
procedure.
• Quality control can also be defined as ‘that industrial management technique by means of which
Product of uniform acceptable quality is manufactured’.
• It is the entire collection of activities which ensures that the operation will produce the optimum
quality products at minimum cost.

57. The main objectives of quality control are:
• To improve the companies income by making the production more acceptable to the Customers i.e., by
providing long life, greater usefulness, maintainability, etc.
• To reduce companies cost through reduction of losses due to defects.
• To achieve interchangeability of manufacture in large scale production.
• To produce optimal quality at reduced price.
• To ensure satisfaction of customers with productions or services or high quality level,
• To Build customer goodwill, confidence and reputation of manufacturer.
• To make inspection prompt to ensure quality control.
• To check the variation during manufacturing.

58. 7. MATERIALS MANAGEMENT
Management is that aspect of management function which is primarily concerned with The
acquisition, control and use of materials needed and flow of goods and services connected With the
production process having some predetermined objectives in view. The main objectives of materials
management are:
• To minimize material cost.
• To purchase, receive, transport and store materials efficiently and to reduce the related cost.
• To cut down costs through simplification, standardization, value analysis, import substitution, etc.
• To trace new sources of supply and to develop cordial relations with them in order to
• Ensure continuous supply at reasonable rates.
• To reduce investment tied in the inventories for use in other productive purposes and to
• Develop high inventory turnover ratios.

59. 8. MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total productive
Effort.
Therefore, their idleness or downtime becomes are very expensive. Hence, it is very Important that
the plant machinery should be properly maintained.
The main objectives of maintenance management are:
1. To achieve minimum breakdown and to keep the plant in good working condition at the Lowest
possible cost.
2. To keep the machines and other facilities in such a condition that permits them to be used at
their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services required by other sections Of
the factory for the performance of their functions at optimal return on investment.

60. Material management
It is concerned with planning, organizing and controlling the flow of materials from their initial
purchase through internal operations to the service point through distribution.
OR
Material management is a scientific technique, concerned with Planning, Organizing &Control of
flow of materials, from their initial purchase to destination.

61. AIM OF MATERIAL MANAGEMENT
To get
1. The Right quality
2. Right quantity of supplies
3. At the Right time
4. At the Right place
5. For the Right cost

62. PURPOSE OF MATERIAL MANAGEMENT
•To gain economy in purchasing
•To satisfy the demand during period of replenishment
•To carry reserve stock to avoid stock out
•To stabilize fluctuations in consumption
•To provide reasonable level of client services

63. Objective of material management
Primary
•Right price
•High turnover
•Low procurement & storage cost
•Continuity of supply
•Consistency in quality
•Good supplier relations
•Development of personnel
•Good information system
Secondary
•Forecasting
•Inter-departmental harmony
•Product improvement
•Standardization
•Make or buy decision
•New materials & products
•Favorable reciprocal relationships

64. Four basic needs of Material management
1.To have adequate materials on hand when needed
2.To pay the lowest possible prices, consistent with quality and value requirement for purchases
materials
3.To minimize the inventory investment
4.To operate efficiently

65. Assignment 1
Operations and material management in Sectors like (Use real example):
1. Hospitals
2. Automobile manufacturing
3. Telecommunication
4. Fruits and vegetables
5. Cloth industry