Logistic management


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Logistic management

  1. 1. Logistic Management An Supply Chain Imperative LOGISTICS Defined 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 Today 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 consumers 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.
  2. 2. 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 Korea 16 China 15 Japan 14 India 13 France 12 UK 11 USA 10 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.
  3. 3. Fact 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. Reason  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 functional Silos. System is shown as logistic Mix including following functional Areas  Order Processing  Information Flow  Warehousing  Inventory control  Packaging  Transportation
  4. 4. Order Processing 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 Information Flow 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 Registration  Order checking & editing  Order processing  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.
  5. 5. Warehousing 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. Nowadays 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  Warehouse layout  Design of building  Ownership of the warehouse Inventory management Point order problem That is How much to order When to order For this we require Dependable IMS Independent IMS Purchase Control Stores control Issue management ABC Analysis VED Analysis Level Management EOQ & EBQ Analysis MRP System Perpetual inventory system JIT System
  6. 6. Packaging 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 communications  For inter modal transportation  Storage space economy Thus to reduce packaging cost Transportation 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  Route Planning  Vehicle scheduling Are the few decision which are involved in transportation
  7. 7. Three Forces Which have change the perspective of logistics Globalization Focus on Supply chain Management Outsourcing of Non Core Competency Functional Area Globalization 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 market opportunity. In such conditions the role of LOGISTICS 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 I.e. Integrating the process of Procurement , processing & distributing to deliver value for money to the customer Two key roles logistics planning & support are
  8. 8. Value delivery process success of supply chain management 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. LOGISTICS Is one such area where most of business org. do not have enough expertise thus needs to be outsourced Thus Logistics have shaped into different service industry offering complete & customized logistics solutions Value Chain It is understood now that an organization`s competitive Success could only come through either cost leadership or offering differentiated product and services LOGISTIC MANAGEMENT Can provide both the benefits simultaneously Through its value chain activities Which can be categorized into different types  Inbound logistics  operations
  9. 9.  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   Inventory Reduction  Reliable and consistent delivery performance  Freight economy  Minimum product damage  quick Response NOTE: Amongst most of the Indian companies logistics outsourcing
  10. 10. Has now become an accepted trend for the following reasons: Cost Saving Focus on core Business Paucity of funds Reduction in liabilities Wider Geographical coverage Cross pollination of better available practice Warehousing 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 warehouse It ensures tight control multiple distribution On inventories and can centers
  11. 11. Operate on EOS location of sites Objective Main better customer service low operating cost Ancillary objective 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
  12. 12. Information handling function For this following information is required  Goods inward  Inspection & auditing  Goods outward  Excess Stock  Invoicing  Warehouse expenses  Transit damage & Breakage  Consignment tracking This all information facilitate quick decision
  13. 13. 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 Chile. Preferential Trade Agreements with Afghanista, Chile, and Mercosur (the latter is a trading zone between Brazil, Argentina, Uruguay, and Paraguay). World Bank Involvement
  14. 14. 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 negotiations. 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 regulatory environment. 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.