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  1. 1. Logistics Management in BLR INDIA 1 INTRODUCTION Logistics is concerned with getting the products and services where they are needed when they are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible. The formal definition of the word ‗logistics‘ is: - it is the process of planning, implementing and controlling the efficient, effective 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.
  2. 2. Logistics Management in BLR INDIA 2 FUNCTIONS 1) Information management Management is appreciating importance of information as an element of logistics of late, now. The role of information is vital in order processing. Quality of information is critical as error in composition of information requirement creates potential disturbance in the supply chain. Incorrect order processing due to erroneous information will result into product recall and reshipment if the sales opportunity still exists. Faster and Qualitative information flow from customer to processor, results into cost effective logistics. Forecasting and order management are two areas of logistical work dependent on information. Leading firms typically have information systems capable of monitoring logistical performance on a real time basis giving them the capability to identify potential operational breakdowns and take corrective actions prior to customer service failure. In situations where timely corrective action is not possible, customers can be notified in advance and thereby taking the surprise out of forthcoming service failures 2) Inventory control Keeping the stock levels in such a position, so that neither stock out nor stock piling takes place is Inventory control. While formulating inventory policies find out 20% of the products marketed that account for 80% of the profit. 3) Transportation Transportation is the most visible of all elements of logistics and high contributor to logistics expenditure. Costs of transportation are mainly as follows :
  3. 3. Logistics Management in BLR INDIA 3 a) Movement costs : Money paid for moving material across geographical terrain b) Preservation costs : money spent on preserving the material during transit c) Cost of idle asset : inventory is unavailable for conversion during transit. This results into costs for organization d) Administration costs : money spent on administration Transportation is accomplished in three ways a) One‘s own fleet – private carriage b) Contract with specialists on long term basis – contract carriage c) Contract on individual shipment basis – common carriage Expectations from transportation service are a) Minimum Cost : transportation costs are explained earlier b) Speed : speed of transport means the speed with which goods reach the destination. c) Consistency : consistency in speed is achieving the same speed over a long period of time. Consistency reflects on the reliability of carrier. Any unexpected variance can play havoc with logistics. Modern information technology has made continuous tracking of consignments possible. This takes the element of surprise out. IT has helped logistics managers to seek out ways and means to improve speed and consistency. What is becoming important is a combination of speed and consistency. Requirement of speed depends on type of industry. In some situations speed may not be important, the transportation service offering high speed increases cost. So logistics managers, have to strike a balance between service and cost. Three important aspects of transportation are facility location, transportation cost and consistency. Design of logistics system should consider total costs rather than elemental cost of transportation.
  4. 4. Logistics Management in BLR INDIA 4 4) Warehousing Warehousing is holding material before dispatch after it is produced. Although warehousing is conventionally considered to be a storage facility, it plays a much higher role from logistics viewpoint. It is perceived to be a switching facility rather than a storage facility. Warehouse ownership can be private, public or third party contract. Warehouse provides economic benefits such as Movement Consolidation, Break-bulk, Cross-dock, Processing/Postponement & Stock Piling and Service benefits like Spot Stocking, Assortment, Mixing & Production support to the logistical system. 5) Material handling Material handling covers receiving, moving, storing, dispatching activities. It has an impact on cost [capital as well as running], quality and safety. One of the principles of material handling is minimum movement. Commonly used material handling equipment are forklifts, EOT Cranes, hoists, pulley blocks, trolleys, railroad cars, conveyers, ropes and slings etc. 6) Packaging Packaging is done to make handling and transporting cost effective. It protects the product in transit and handling. Packing is expected to facilitate lifting and moving by providing easy access to forks or hooks. Packing is also expected to display universal symbols and other instructions for handling. For Eg. Pallets and containers, wooden boxes, wrapping etc.
  5. 5. Logistics Management in BLR INDIA 5 Functions of packaging [how packaging helps reducing overall costs & value addition] 1) Protection : Protection from environment, pilferage, shocks of handling and moving. Fried chips in tennis ball boxes. 2) Cube minimization : The truck is cubed out, that means the truck is full space wise, but not fully utilized weight wise. E.g. Round containers, round bottles. Cube minimization is reducing the space occupied by the product to cut the freight charge. Square shaped bottles and oval shaped containers. 3) Weight minimization : The truck is full, weight wise, but not fully utilized space wise. Liquids in glass bottles. Weight minimization is reducing the weight of the consignment to fully utilize the capacity of the truck. Liquids are packed in plastic bottles reducing the weight. 4) Facilitating handling & using : fruit juices in tetra packs, handling and consumption by users. 5) Facilitating storage & reuse : ink cartridges for printers, floppies, CDs, reusable corrugated boxes, bottles and refill packs. 6) Grouping goods into convenient unit for distribution: mangos in boxes, milk bags in crates, cola bottles in crates. 7) Reducing pilfering opportunities : pilfer proof caps, pilfer proof seals 8) Communication : a) Content identification : what does this contain? Product, manufacturer, universal code etc. with high visibility b) Tracking : bar codes and scanners
  6. 6. Logistics Management in BLR INDIA 6 c) Handling instructions : fragile, which side up? Temperature restrictions, environment concerns, potential dangers etc Palletization and Unitization Unitization, unit loads: Unitization is a concept where size shape, weight, volume of the items is considered and a collection of such items is decided in terms of these factors. And always in this unit inventory is moved whenever required. 1. This leads to standardization of handling equipment, methods and training 2. Now, the standardization reduces the time for handling and cost of handling 3. Inbound shipment checking is simplified 4. When transport vehicles are standardized to unit loads, product protection is improved Examples: bottles in crates, steel sheets in coils, steel ropes in coils etc. container also is an example of unit load. Palletisation Unit load is secured on a pallet to facilitate handling and protect the product which is unitized. One can say container is a self contained, ie., unitized and palletized, shipping unit. Pallet facilitates use of standardized handling equipment like a forklift or a crane. Without the use of pallet it would almost impractical to use this equipment. 1. Palletized unit loads bring down time of handling and cost of handling 2. Safe handling 3. Product is well protected
  7. 7. Logistics Management in BLR INDIA 7 Types of pallets : 1. Wooden pallets very commonly used, but break and disintegrate, wood is a rare natural resource 2. Plastic pallets, light, recyclable - being researched 3. Pressed wood fiber pallet 4. Solid molded plastic pallets 5. Corrugated fiber board pallet 6. Corrugated fiberboard slip-sheet to provide cushion effect to the unit load 7. Refrigerated pallets : self-contained shipping units for refrigerated materials 8. Pallet pools : central pools to collect pallets and issue pallets to global business
  8. 8. Logistics Management in BLR INDIA 8 THE MISSION OF LOGISTICS MANAGEMENT The mission is to plan and coordinate all those activities necessary to achieve desired levels of delivered service and quality at lowest possible cost. Logistics must therefore be seen as the link between the marketplace and the operating activity of the business. The scope of the logistics spans the organization, from the management of raw materials through to the delivery of the final product. Materials flow Requirements information flow Suppliers Procurements Operations Distribution Customers
  9. 9. Logistics Management in BLR INDIA 9 LOGISTICAL INTEGRATION Inventory Flow Information Flow INTEGRATED LOGISTICS Logistics is viewed as the competency that links an enterprise with its customers and suppliers. Information from and about customers flows through the enterprise in the form of sales activity, forecasts and orders. As products and materials are procured, a value added inventory flow is initiated that ultimately results in ownership transfer of finished products to customers. Thus the process is viewed in terms of two inter-related efforts, inventory flow and information flow. 1) Inventory Flow The management of logistics is concerned with the movement and storage of materials and finished products. Logistical operations start with the initial shipment of a material or component part from a supplier and are finalized when a manufactured or processed product is delivered to a customer. Manufacturing support Physical distribution ProcurementSuppliers Customers
  10. 10. Logistics Management in BLR INDIA 10 From the initial purchase of a material or component, the logistical process adds value By moving inventory when and where needed. Thus the material gains value at each step. For a large manufacturer, logistical operations may consist of thousands of movements, which ultimately culminate in the delivery of the product to an industrial user, wholesaler, dealer or customer. Similarly for a retailer, logistical operations may commence with the procurement of products for resale and may terminate with consumer pickup or delivery. The significant point is that regardless of the size or type of the enterprise, logistics is useful and requires continuous management attention. In order to understand logistics it is useful to divide it into three areas.  Physical distribution  Manufacturing support  Procurement Physical distribution The area of physical distribution concerns movement of a finished product to the customers. In physical distribution the customer is the final destination of the marketing channel. Unless the products are delivered where and when needed, a great deal of marketing effort can be wasted. All physical distribution systems have one feature in common: they link manufacturers, wholesalers and retailers and ensure that the product is available. Manufacturing support The area of manufacturing support concentrates on managing W.I.P inventory as it flows between the stages of manufacturing. A Master Production Schedule is prepared and arrangements are made for timely availability of materials, components, parts etc.
  11. 11. Logistics Management in BLR INDIA 11 Manufacturing support has one significant difference when compared with physical distribution. Physical distribution attempts to satisfy the needs of the customers while manufacturing support involves movement requirements that are under the control of the manufacturing enterprise. Procurement Procurement is concerned with purchasing and arranging in-bound movement of materials, parts and /or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Procurement is also known as purchasing and buying and in some cases inbound logistics. Procurement s concerned with availability of the desired material assortments where and when needed. Within a typical enterprise, the three areas of logistics overlap. The prime concern of an integrated logistical process is to coordinate overall value- added inventory movement. The three areas combine to provide integrated management of materials. 2) Information flow Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. The primary objective of developing and specifying requirements is to plan and execute integrated logistical operations. Within individual logistics areas, different movement requirements exist with respect to size of order, availability of inventory, and urgency of movement. The primary objective of information sharing is to reconcile these differences. Logistical information involves two major types of flows: a) Coordination flows b) Operation flows
  12. 12. Logistics Management in BLR INDIA 12 a) Coordination flows Coordination is the backbone of the overall information system. Coordination results in plans specifying :  Strategic objectives : Strategic objectives detail the nature and location of customers, which are matched to the required products and services to be performed.  Capacity constraints : Capacity constraints coordinate internal and external manufacturing requirements. Capacity constraints identify limitations, barriers, within basic manufacturing capabilities and determine appropriate outsource requirements.  Logistical requirements : Logistics requirements specify the work that distribution facilities, equipment and labour must perform to implement the capacity plan.  Inventory deployments : Inventory deployments are the interfaces between planning/coordination and operations that detail the timing and composition of where inventory will be positioned.  Manufacturing requirements : Manufacturing plans are derived from logistical requirements and typically result in inventory deployment.  Procurements requirements : Procurements requirements schedule material and components for inbound shipment to support manufacturing requirements. In retailing and wholesaling situations, procurements involve manufacturing requirements.
  13. 13. Logistics Management in BLR INDIA 13  Forecasting : Forecasting utilizes historical data, current activity levels, and planning assumptions to predict future activity levels. Logistical forecasting is generally concerned with relatively short –term predictions. The overall purpose of information planning/coordination flow is to integrate specific activities within a firm and to facilitate overall integrated performance. b) Operational flows The second aspect of information requirements is concerned with directing operations to receive, process, and ship inventory as required supporting customer and purchasing orders. Operational requirements deal with  Order management  Order processing  Distribution operations  Inventory management  Transportation and shipping  Procurement
  14. 14. Logistics Management in BLR INDIA 14 SUPPLY CHAIN & LOGISTICS MANAGEMENT Traditional Perspective Traditionally most organizations have viewed themselves as entities that exist independently from others and indeed need to compete with them in order to survive. However such a philosophy can be self-defeating idf it leads to unwillingness to corporate in order to compete. Behind this seemingly paradoxical concept is the idea of supply chain integration. Definition “ Supply chain management is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.” Explanation The supply chain is the network of organizations that are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of ultimate consumer. Thus for example a shirt manufacturer is a part of a supply chain that extends upstream through the weavers of fabrics to the manufacturers of fibres, and downstream through distributors and retailers to the final consumer. Each of these organizations in the chain are dependent upon each other by definition and yet and yet paradoxically by tradition do not co-orporate with each other. Clearly this trend has many implications for logistics management, not the least being the challenge of integrating and coordinating the flow of materials from a multitude of suppliers, often offshore, and similarly managing the distribution of the finished product by way of multiple intermediaries.
  15. 15. Logistics Management in BLR INDIA 15 Differences between Supply chain management and Logistics management 1. Supply chain management is a broader concept whereas Logistics management is a narrower concept. 2. The concept of Supply chain management is relatively new whereas the concept of Logistics management is relatively old. 3. Supply chain management is an extension of Logistics management. 4. Logistics management is primarily concerned with optimizing flows within the organization whilst supply chain management recognizes that internal integration by itself is not sufficient. 5. Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of product and information through a business. Supply chain management builds upon this framework and seeks to achieve linkage and co-ordination between processes of the other entities in the pipeline, i.e. suppliers and customers, and the organization itself. 6. The focus of Supply chain management is upon the management of relationships in order to achieve a more profitable outcome for all parties in the chain where as the focus of Logistics management is upon the management of resources within the organization.
  16. 16. Logistics Management in BLR INDIA 16 LOGISTICS PLANNING PROCESS To match the changing environment in the logistics due to the changes in the markets, competitors, suppliers and technology, there is a need for a systematic planning and design methodology to formally include the relevant consideration and effectively evaluate the alternatives. Methodology The logistics relational and operating environment is constantly changing. Even for the established industries, a firm's markets, demands, costs and service requirements change rapidly in response to the customer and competitive behavior. Just as no ideal logistical system is suitable for all enterprises the method for identifying and evaluating alternative logistics strategies can vary extensively. However there is a general process applicable to most logistics design and analysis situations. The process can be segmented into three phases: problem definition and planning, data collection and analysis, and recommendations and implementation. The following discussion describes each phase and illustrates the types of issues encountered. PHASE I : PROBLEM DEFNITION AND PLANNING Phase 1 of logistics system design and planning provides the foundation for the entire project. A thorough and well-documented problem definition and plan are essential to all that follows. 1. Feasibility Assessment The process of evaluating the need and desirability for change is referred to as feasibility assessment and it includes the activities of situational analysis, supporting logic development, and cost benefit estimation. The objective of doing so is to understand the
  17. 17. Logistics Management in BLR INDIA 17 environment, process, and performance characteristics of the current system and to determine future estimation. a) Situational analysis : The purpose of the situational analysis id to provide senior management with the best possible understanding of the strengths and weaknesses of the existing logistics capabilities for both current and future environment. The situational analysis is the performance of measures and characteristics that describe the current logistics environment through :  Internal review: Internal review is necessary to develop a clear understanding of existing logistics by covering the overall logistics process as well as each logistics function with respect to its stated objectives and its capabilities to meet those objectives. It profiles historical performance, data availability, strategies, operation and tactical policies and practices. All major resources such as workforce, equipment, facilities, relationships and information are examined. The comprehensive review attempts to identify the opportunities that might motivate or justify logistics system redesign or refinement. Assessment must consider the process (physical and information flows through the value – added chain), decisions (logic and criteria currently used for value chain management), and key measures for each major logistics activity. These measurements focus on the key performance indicators and the firm‘s ability to measure them.  Market assessment & competitive evaluation: the objective is to document and formalize customer perceptions and desires with regard to the changes in the firm‘s logistical capabilities. It‘s the review of the trends and service demands required by customers by the use of interviews with the selected customers or through customer5 surveys. The assessment focuses on the external relationships with the suppliers, customers (wholesalers and retailers) and consumers (final consumer). The assessment not only considers trends in requirements and processes but also the enterprise and the competitor‘s capabilities.
  18. 18. Logistics Management in BLR INDIA 18  Technology Assessment: it focuses on the application and capabilities of the key logistics technologies, including transportation, storage, material handling, packaging, and information processing. The assessment considers the firm‘s capabilities in terms of current technologies and the potential for applying new technologies. The objective of the assessment is to identify advancements that can provide effective trade – offs with other logistics resources such as transportation and inventory. b) Supporting logic development : The second feasibility assessment task is development of a supporting logic to integrate the findings of the internal review, external assessment and technology study. Supporting logic development builds on this comprehensive review in three ways.  First - supporting logic development forces a critical review of the potential opportunities for logistics improvements and a determination of whether additional investigation is justified, using logistics principles such as tapering principle, principle of inventory aggregation. The resulting benefits or costs should be clearly identified.  Second - it critically evaluates current procedures and practices using comprehensive, factual analysis and evaluation that isn‘t influenced by opinion and thus help in identifying areas with improvement potential which in turn provides a foundation to determine the need for strategic adjustment. The deliverables of this evaluation process include classification of planning and evaluation issues prioritized into primary and secondary categories across short and long range planning horizons.  Third - the process of developing supporting logic should include clear statements of potential redesign alternatives such as  Definition of current procedures and systems
  19. 19. Logistics Management in BLR INDIA 19  Identification of the most likely system design alternatives based on leading industry and competitive practices  Suggestion of innovative approaches based on new theory and technologies The alternatives along with being practical should also challenge the existing practices. Flow diagrams and /or outline illustrating the basic concepts associated with each alternative are constructed, which frame opportunities for flexible logistics practices, clearly outline value added and information flow requirements and provide a comprehensive overview of the options. A recommended procedure requires the manager responsible for evaluating the logistical strategy to develop a logical strategy to develop a logical statement and justification of potential benefits. Using customer service concept and logistics integration logic and methodology, the manager should commit to paper the most attractive strategy alternatives. c) Cost benefit estimate : The final feasibility assessment is a preplanning estimate of the potential benefits of performing a logistics analysis and implementing the recommendation. Benefits should be categorized in terms of:  Service improvements - It includes results that enhance availability, quality or capability. Improved sciences increase loyalty of existing customers and may also attract business.  Cost reduction - Cost reduction benefits may be observed in two forms: First, they may occur as a result of a one time reduction in financial or managerial resources required to operate the existing system for e.g. Reduction in capital deployed for inventory and other distribution related assets Second, cost reductions may be found in the form of out - of - pocket or variable expenses. For e.g. new technologies for material handling and information processing often reduce variable cost by allowing more efficient procedures and operations.
  20. 20. Logistics Management in BLR INDIA 20  Cost prevention - Cost prevention reduces involvement in programs and operations experiencing cost increases. Any cost prevention justification is based on an estimate of future conditions and therefore is vulnerable to some error for e.g. many material – handling and information technology upgrades are at least partially justified through financial analysis of the implications of future labor availability and wage levels. In the final analysis, the decision to undertake in – depth planning will depend on how convincing the supporting logic is, how believable estimated benefits are, and whether estimated benefits offer sufficient return on investment to justify organizational and operational change. These potential benefits must be balances against the out 0- of pocket cost required to complete the process. 2. Project Planning : Logistics system complexity requires that any effort to identify and evaluate strategic or tactical alternatives must be planned thoroughly to provide a sound basis for change. Project planning involves five specific items: a) Statement of objectives : The statement of objectives documents the cost and service expectations for the logistics systems revisions. It‘s essential that they be stated specifically and in terms of measurable factors. The objective fine market or industry segments, the time frame for revisions, and specific service levels. For e.g., desired delivery of 98 percent of all orders within 48 hours after the order is placed, minimal customer shipments from secondary distribution centers, back – orders held for a maximum of five days, etc. specific definitions of these objectives direct system design efforts to ache9ice explicit performance levels. Total system cost can then be determined. b) Statement of constraints : The second project planning consideration concerns design constraints. On the basis of the situational analysis, it‘s expected that senior management will place restrictions on the scope of permissible system modifications depending on the specific circumstances of individual firms. But constraints can affect the overall
  21. 21. Logistics Management in BLR INDIA 21 planning process for e.g. one restriction common to distribution system design concerns the network of manufacturing facilities and their product mix assortment which the management often holds constant for logistical system redesign as there are large financial investments in existing production facilities. The purpose of developing a statement of constraints is to have a well-defined starting point and overall perspective for the planning effort. The statement of constraints defines specific organizational elements, buildings, systems, procedures, and/or practices to be retained from the existing logistical system. c) Measurement standards : Such standards direct the project by identifying the cost structures and performance penalties and by providing a means to ass‘s success. Management must stipulate guidelines for each category as a prerequisite to formulation of a plan. It is important that the standards adequately reflect total system performance rather than a limited, sub optimal focus on logistics functions. Once formulated, such standards must be held constant throughout system development. An important measurement requirement is to quantify a list of assumptions that underlie or provide the logic supporting the standards. Measurement standards should include definitions of how cost components such as transportation are calculated and also relevant customer service measures and method of calculation must also be included. d) Analysis procedures : Analysis techniques range from simple manual methods to elaborate computerized decision support tools. For e.g., models incorporating optimization ort simulation algorithms for evaluating and comparing alternative logistics warehouse networks. Once the project objectives and constraints are defined, planning must identify alternative solution techniques and select the best approach. Selection an analysis technique must consider the information necessary to evaluate the project issues and options e) Project work plan : On the basis of feasibility assessment, objectives, constraints and analysis technique, a project work plan must be determined and the resources and time required for completion identified. The alternatives and opportunities specified during the feasibility assessment provide the basis for determining the scope of the study. In turn the scope
  22. 22. Logistics Management in BLR INDIA 22 determines the completion time. One of the most common errors in strategic planning is to undere4stimate the time required to complete a specific assignment. Overruns require financial expenditures and reduce project credibility. There are a number of PC – based software packages available to structure projects, guide resource allocation, and measure progress. PHASE II: DATA COLLECTION AND ANALYSIS Once the feasibility assessment and project plan are completed, phase 2 focuses on data collection and analysis. This includes activities to (1) define assumptions and collect data, and (2) analyze alternatives 1) ASSUMPTIONS AND DATA COLLECTION : This activity builds on the feasibility assessment and project plan to develop detailed planning assumptions and identify data collection requirements. Specific tasks are as follows a) Define analysis approach and techniques : The most common techniques are analytical, simulation and optimization The analytical approach uses standard numerical methods, such as those available through spreadsheets, to evaluate each logistics alternative. For e.g., spreadsheet availability have increases the use of analytical tools for distribution applications A simulation approach can be likened to a ―wind tunnel‖ for testing logistics alternatives. Simulation is widely used, particularly when significant uncertainty is involved. The testing environment can be physical (a model material handling system that physically illustrates product flow in a scaled down environment) or numerical (such as a computer model of a material handling environment that illustrates product flow on a computer screen) current software makes simulation one of the most cost effective approaches foe dynamically evaluating logistics alternatives
  23. 23. Logistics Management in BLR INDIA 23 Optimization uses linear or mathematical programming to evaluate alternatives and select the best one. Because of its powerful capabilities, optimization is used extensively for evaluating logistics network alternatives such as the number and location of the distribution centers. b) Define and review assumptions : Assumptions definition and review build on the situation analysis, project objectives, constraints and measurements standards. For planning purposes, the assumption defines the key operating characteristics, variables and economies of current and alternative systems. Assumptions generally fall into three classes: Business assumptions - They define the characteristics of the general environment including relevant market, consumer, and product trends and competitive actions, within which an alternative logistics plan must operate. They are generally outside the ability of the firm to change. Management assumptions define the physical and economic characteristics of the current or alternative logistics environment and are generally within the firm‘s ability to change or refine. Typical assumptions include a definition of alternative distribution facilities, transport modes, logistics processes and fixed and variable costs. Analysis assumption defines the constraints and limitations that must be included to fit the problem to the analysis technique. These assumptions frequently concern problem size, degree of analysis detail and solution methodology. c) Identify data resources : The process of data collection begins with a feasibility assessment. A fairly detailed specification of data is required to formulate or fit the analytical technique. For situations when data are extremely difficult to collect or when the necessary level of accuracy is unknown, sensitivity analysis can be used to identify data collection requirements.
  24. 24. Logistics Management in BLR INDIA 24 For e.g. an initial analysis may be completed using transportation costs estimated with distance – based regressions. The types of data required in a logistical design n study can be divided into three classes: business assumptions, management assumptions and analysis assumptions. The majority of data required in a logistical study can be obtained from internal records. Although considerable searching may be needed, most information is generally available. The first major data category is sales and customer orders. The annual sales forecast and percentage of sales by month, as well as seasonality patterns are necessary for determining logistics volume and activity levels. Historical samples of customer order invoices are also needed to determine shipping patterns by market and shipment size. The combination of aggregate measures of demand and detailed order profiles of projects the requirements that the logistics system must be capable of satisfying. Specific customer data are also required to consider the cost and time associated with moving the products across distance. Customers and markets ate often aggregated by location, type, size, order frequency, growth rate, and special logistical services to reduce analysis complexity. For integrated channel analysis, its necessary to identify and track the costs associated with manufacturing and purchasing. It‘s often necessary to consider the number and location of plants, product mix, production schedules and seasonality. Identification of policies and costs associated with inventory transfer, reordering, and warehouse processing, inventory control rules and product allocation procedures. For each of the current and the potential warehouse, the operating costs, capacities, product mix, storage levels and service capabilities should be established. Transportation data requirements include the number and type of modes utilized, modal selection criteria, rates and transit times, and shipping rules and policies. For most logistics analysis applications, a select amount of future market data is useful for evaluating future scenarios. Although the management may be able to prepare a
  25. 25. Logistics Management in BLR INDIA 25 consolidated sales forecast it is difficult to prepare a market-by-market projection of sales. There can be two solutions to this problem. 1. Usage of demographic projections that correlate highly with sales can help the company to estimate future demand levels and hence determine future logistics requirements. Secondary data published by various government agencies can also provide a data bank of environmental information 2. Keeping a watch on the competitors strategies and capabilities by documenting competitive logistical system designs and flows can be helpful in providing competitive benchmarks that compare customer service capabilities, distribution networks and operating capabilities. d) Collect Data : Once the data sources have been identified the company can start assembly of required data and conversion of that data to an appropriate format for the analysis tool. To avoid errors like overlooking data that does not reflect major components of logistical activity or collection of data from a misrepresentative time period, the data collection process should be properly documented. e) Collect Validation Data : The objective of validation is to increase management credibility regarding the analysis process and to ensure that the results of the analysis accurately reflect reality. It is important to ensure that a through investigation is conducted into analytical results based on data that might not accurately reflect the past. 2) ANALYSIS The analyst uses the technique and data from the previous activity to evaluate logistics strategic and tactical alternatives. The process of analysis includes
  26. 26. Logistics Management in BLR INDIA 26 a) Define analysis questions This involves defining specific analysis questions concerning alternatives and the range of acceptable uncertainty. The questions build on research objectives and constraints by identifying specific operating policies and parameters. For e.g.: In the case of inventory analysis questions might focus on alternative service and uncertainty levels. b) Complete and validate baseline analysis The second task completes the baseline analysis of the current logistics environment using the appropriate method or tools. Results are compared with validation data collected previously to determine the degree of fit between historical and analytical findings. The comparison should focus on identifying significant differences, determining sources of possible errors and identifying and correcting them. c) Complete alternative analysis An evaluation of systems alternatives should be accomplished either manually or electronically to determine the relevant performance characteristics of each alternative. d) Complete sensitivity analysis In this phase uncontrollable factors like demand, factor cost or competitive actions are varied to assess the ability of potential alternatives to operate under a variety of conditions. Sensitivity analysis in conjunction with an assessment of potential scenario probabilities is then used in a decision tree to select the best alternative. PHASE III - RECOMMENDATIONS & IMPLEMENTATIONS Phase III operationalize planning and design efforts by making specific management recommendations and developing implementation plans.
  27. 27. Logistics Management in BLR INDIA 27 a) Recommendations Alternative and sensitivity analysis results are reviewed to determine recommendations to management. There are four steps in this part of the phase namely: - 1. Identify the Best Alternative Performance characteristics and conditions for each alternative must be compared to identify the two or three best options. The decision tree analysis should identify the best alternative i.e.: The one that meets the desired service objectives at the minimum total cost. 2. Evaluate Costs and Benefits A Cost Benefit analysis compares the alternatives for a base period and then projects comparative operations across a particular planning horizon. Potential benefits such as cost reduction; service improvement and cost prevention are identified and quantified. In other words when evaluating the potential of a particular logistical strategy an analysis comparing present cost and service capabilities with projected conditions must be completed for each alternative. 3. Develop a Risk Appraisal Risk Appraisal considers the probability that the planning environment will match the assumptions. It also considers the potential hazards related to system changeover. Risk related to adoption of a selected alternative can be quantified using sensitivity analysis. For e.g.: Assumptions can be varied and the resulting influence on system performance for each alternative can be determined. The end result of a risk appraisal provides a financial evaluation of the downside risk if the planning assumptions fail to materialize. Risks related to system changeover such as unanticipated delays, a series of contingency plans etc can also be quantified and a series of contingency plans could be tested to determine their possible impact.
  28. 28. Logistics Management in BLR INDIA 28 4. Develop Presentation The final step in this procedure is a presentation to the management / submission of a report that identifies specific operating and strategic changes, provides qualitative reasons for suggesting these changes and then quantitatively justifies the changes in terms of service, expenses, asset utilization or productivity improvements. b) Implementation The actual plan or design implementation is the final process activity. An adequate implementation procedure is the only means to obtain a tangible return from the planning process. This broadly includes four phases. 1. Define Implementation Plan The implementation plan has to be defined in terms of the individual events, their sequence and their dependencies. The planning process may initially develop at a macro level. But it must ultimately be refined to provide individual assignment responsibility and accountability. Plan dependencies identify the interrelationships between events and thus define the completion sequence. 2. Schedule Implementation The implementation plan is scheduled based on the assignments identified in the previous stage. The schedule must allow adequate time for acquiring facilities and equipment, negotiating agreements, developing procedures and training. 3. Define Acceptance Criteria The criteria for evaluating the success of the plan are then developed. The Acceptance Criteria should focus on service improvements, cost reduction, improved asset utilization and enhanced quality. Although the acceptance criteria may focus on the area / function which was the main focus for the Plan, it should also take a broad perspective that focuses on total logistics system performance rather than the performance of an individual function.
  29. 29. Logistics Management in BLR INDIA 29 4. Implement The final task is actual implementation of the plan or design. Implementation must include adequate controls to ensure that performance occurs on schedule and that acceptance criteria are carefully monitored.
  30. 30. Logistics Management in BLR INDIA 30 TRANSPORTATION Transport Functionality Transportation is one of the most visible elements of logistics operations. Transportation provides 2 major functions :  Product movement  Product storage. Product Movement Whether the product is in the form of materials, components, assemblies, work-in- process, or finished goods, transportation is necessary to move it to the next stage of the manufacturing process or physically closer to the ultimate consumer. A primary transportation function of product movement is moving up and down the value chain. Since transportation utilizes temporal, financial, and environmental resources, it is important that items be moved only when it truly enhances the product value. Transportation involves the use of temporal resources because product is inaccessible during the transportation process. Such product, commonly referred to as in-transit inventory, is becoming a significant consideration as a variety of supply chain strategies such as just – in – time and quick response practices reduce manufacturing and distribution center inventories.Transportation uses financial resources because internal expenditures are necessary for private fleets or external expenditures are required for commercial or public transportation. Product Storage A less common transportation function is temporary storage. Vehicles make rather expensive storage facilities. However, if the in-transit product requires storage but will be
  31. 31. Logistics Management in BLR INDIA 31 moved again shortly (e.g. in a few days), the cost of unloading and reloading the product in a warehouse may exceed the per-daily charge of storage in the transportation vehicle. In circumstances where warehouse space is limited, utilizing transportation vehicles may be a viable option. One method involves loading on the vehicle and then having it take an indirect route to its destination. This is desirable when the origin or destination warehouse has limited storage capacity. A second method to achieve temporary product storage is diversion. This occurs when an original shipment destination is changed while the delivery is in transit. E.g. suppose a product is initially scheduled to be shipped from Chicago to Los Angeles. However, if during the delivery process, it is determined that San Francisco is in greater need of the product or has available storage capacity; the product could be delivered to the alternative destination of San Francisco. In short, although product storage in transportation vehicles can be costly, it may be justified from a total cost or performance perspective when loading or unloading costs, capacity constraints, or the ability to extend lead times are considered. Principles There are two fundamental principles guiding transportation management and operations. They are economy of scale and economy of distance. Economy of scale refers to the characteristic that transportation cost per unit of weight decreases when the size of the shipment increases. E.g. truckload shipments cost less per pound than less-than-truckload shipments. It is also generally true that larger capacity transportation vehicles such as rail or water are less
  32. 32. Logistics Management in BLR INDIA 32 expensive per unit of weight than smaller capacity vehicles like motor or air. Transportation economies of scale exist because fixed expenses associated with moving a load can be spread over the load‘s weight. The fixed expenses include administrative costs of taking the order; time to position the vehicle for loading or unloading, invoicing and equipment cost. These costs are fixed because they do not vary with shipment volume. E.g. suppose the cost to administer a shipment is $ 10.00. Then the 1-pound shipment has a per unit of weight cost of $10.00, while the 1,000 pound shipment has a per unit of weight cost of $0.01. Thus, it can be said that an economy of scale exists for the 1000-pound shipment. Economy of distance refers to the characteristic that transportation cost per unit of distance decreases as distance increases. E.g. a shipment of 800 miles will cost less than two shipments (of the same combined weight) of 400 miles. Transportation economy of distance is also referred to a se tapering principle since rates or charges taper with distance. The rationale of distance economies is similar to that for economies of scale. Longer distances allow the fixed expenses to be spread over more miles, resulting in lower overall per mile charge. These principles are important considerations when evaluating alternative transportation strategies or operating practices. The objective is to maximize the size of the load and the distance that is shipped while still meeting customer service expectations. Transport Infrastructure Transportation infrastructure consists of the rights-of-ways, vehicles, and carrier organizations that offer transportation services on a for-hire or internal basis. The nature of the infrastructure also determines a variety of legal and economic characteristics for each mode or multimodal system. A mode identifies the basic transportation method or form.
  33. 33. Logistics Management in BLR INDIA 33 Transportation Cost Elements Following are the essential elements of transportation to be taken into account: 1. Transport Mode – The most critical decision is the selection of appropriate mode of transport. This fixes two basic elements of distribution function: a) Transit time or time lapse between production and sale; b) Level of transportation costs. There is an inverse relationship between transit time and transport cost – the lower the transit time, the higher the transport cost. However, a decision that takes into account only one cost factor cannot be justified. An evaluation of the effect of transit time on other costs must also be considered. Unsold production represents a high cost, and the longer the transit time, the higher the level of unsold production. 2. Inventory Costs – A first class service to clients often requires immediate delivery and, hence a higher level of inventory at the market centre. Economy, on the other hand, calls for minimum inventory. The level of output held in stock is dictated by - a) Transit time: If the time lapse between production and sale is longer, the level of inventory becomes higher. b) Sales pattern: If the pattern of sales is erratic, higher inventory levels are caused. c) Production pattern: If the production pattern is erratic, higher inventory levels have to be maintained to prevent stock –outs. Assuming that the sales and production patterns are largely fixed, the important variable, which can influence stock, levels in transit time. As transit time is reduced, the level of static stock can be reduced with accompanying stock reduction.
  34. 34. Logistics Management in BLR INDIA 34 3. Transit Capital – Capital can be released by changing the proportion of the total output in transit. This can be done by adjusting the transit time. As transit time is reduced, the quantity of goods in transit can be decreased with an associated reduction in transit inventory costs. By realizing the capital cost of transit inventory and goods in transit, capital commitments can be reduced, and more capital can be available for other purposes. 4. Obsolescence - When a slow or erratic mode of transport is employed, a higher level of inventory is necessary to ensure continuous, prompt delivery to the customer. However, when designs change rapidly, obsolescence reduces the market value of the products in store. Rapid advances in technology bring about swifter technical obsolescence. Any goods in the pipeline realize a lower figure when new models are introduced by a company or it‘s competitors. Air distribution can overcome this problem, and the effect of such obsolescence can be minimized. 5. Packaging – The nature of packaging of a product is often determined by the mode of it‘s transport. E.g. Because of the dry conditions of carriage, short transit times and minimum handling, air cargo generally requires much less packaging than other forms of long distance transport. Goods dispatched by air may require only a dust cover or even no cover at all. In some cases, savings on the packaging of sophisticated products may more than pay for the actual transport charges. Less packaging may lead to other advantages too. These include lower unpacking costs and lower chargeable weight for freight. 6. Insurance – Insurance risks are based on transit time as well as the possibility of damages en route. With faster transit times, skillful handling, substantial reduction in damage and greater security in transit, insurance premiums tend to fall substantially. 7. Breakages – Cost of breakages is an important factor in any cost benefit analysis. Because breakages may be indemnified by insurance companies, the true cost of damage to cargos can easily be overlooked. In the first place, the vulnerability of various products sent by different modes is reflected in the insurance premium. To high premiums must be added the clerical work involved in establishing claims, making replacements and the loss of customer‘s
  35. 35. Logistics Management in BLR INDIA 35 goodwill. The replacements themselves will be subject to the same hazards and premiums will require further documentation. Therefore, only that mode of transport must be selected which substantially reduces real damage in transit. This calls for a selection of the routes which are more direct and which avoid transshipment. Handling equipment must also be more sophisticated. Containers can be used by shippers for door-to-door transportation, thereby avoiding all handling of goods by the carrier. 8. Pilferage – Many expensive administrative problems associated with breakages also apply to pilferage. This problem is reduced for example, when door-to-door containers are used, a fact which is again reflected in lower insurance rates. 9. Deterioration – In many surface cargos, deterioration may be avoided only by complicated and expensive packing to counteract mechanical shock, exposure to weather or unfavorable temperature etc. Some cannot be stored at all, except at great expense, and others deteriorate slowly. Deterioration can be costly in terms of packing, stock losses and expensive conditioning in store. It can only shut the door on many distant markets. A high speed of transport and the frequency of services can overcome many of these problems. 10. Transport Costs – Transport can be divided into 3 phases: (i) Delivery to docks, airport or railway station. (ii) Transport from one terminal to another. (iii) Delivery from the terminal to the consignee‘s place. In the cost-benefit analysis of the turnaround time of a company‘s delivery and collection vehicles, their man hour costs can be significant. Some customers may find this item to be more costly than the cost of the major journey.
  36. 36. Logistics Management in BLR INDIA 36 Transportation Hidden Costs The physical distribution component of a major project, including transportation of raw materials, project materials, machinery and equipment and such infrastructure facilities as roads, vehicles etc., usually accounts for 20 to 30% of the total capital cost. The general scarcity of various goods, unpredictable nature of the economy and economic behavior on the part of the business community and the bureaucracy in India make it all the more necessary for one to plan well ahead. In fact, planning of transportation and infrastructure must be done well ahead of general planning, so that resources spent on other parts of the project do not result in in - fructuous expenditure. In developed countries, these facilities are already available in abundance or are provided for well in advance. In developing countries, action is generally initiated only after the project has been partially put through or when it becomes totally inescapable to do so. On the other hand, because of lack of these facilities, such problems are faced even during construction. Eg. Trucks get stuck in muddy roads, work sites remain unapproachable, andserious vehicular accidents are caused near the project areas. In developing countries, for the supervision of construction of a building, usually no qualified individual is appointed for the co ordination and planning of transportation infrastructure, which forms a major fraction of the total cost of a project running into crores. For a major project, the average total cost to the economy of a project costing Rs. 100 crores which is delayed by one year from the date of targeted completion is 39% more than the original budgeted cost on account of the following: 1. The rate of interest on capital may be taken at nearly 12%. 2. The profit on income per year about 12% 3. The cost of depreciation on account of obsolescence or rusting without running of the plant at 5%. 4. The cost of escalation of the project cost at 10%.
  37. 37. Logistics Management in BLR INDIA 37 The cost of delay in the completion of the project would therefore be roughly about Rs.11 lakhs per day or Rs. 3.25 crores per month. It would be worthwhile to educate senior executives to recognize these facts, for this aspect of the project is usually ignored by project authorities. Project authorities do not hold themselves responsible for the transportation bottlenecks and resulting delays. These delays are due to non-receipt of equipment, machinery, raw materials etc. and these delays generally run into months. Due to such delays, the project suffers heavy losses, which occur because of congestion in the ports, traffic jams, railway restrictions etc. Therefore, it is financially more practical to obtain critical equipment, machinery and raw materials, critical not from the point of view of availability in the market but critical form the standpoint of transportation bottlenecks- so that the likely delays are avoided. A proper transportation planning of materials, therefore, may well save a project as well as the economy form the ill effects of wasteful expenditure. At the same time it would help speed up production. Transportation Network Design Options Classical economists neglected the importance of facility, location and overall network design Economists, when originally discussed supply – demand relationships, facility, location and transportation cost differentials were assumed to be non existent or equal among competitors. The number, size, geographical relationships of the facilities are used to perform logistics operation directly affect customer service capabilities and cost. Network design – primary responsibility of logistics. Typical logistics facilities are manufacturing plants, warehouses, gross dock operations and retail stores. Determining (i) How many of each facility are required (ii) Their geographic location (iii) The work to be performed at each is a significant part of network design.
  38. 38. Logistics Management in BLR INDIA 38 In specific situations facility operations may be outsourced to service specialists. No matter who does the actual work, all facilities must be managed as an integral part of a firm‘s logistical network. You have a network for internal customers, external customers as well as suppliers. Suppliers should be made to understand what their commitment is and follow it. You have to co-exist with your suppliers and share information with them. Network design must take into account geographical location because a great deal of variation exists between different geographical markets. If you set up your base in a place where your demand is high then after a while the demand shifts and come from another location, then again you are in a dilemma. In a dynamic, competitive environment • Product assortment • Customer supplies • Manufacturing requirements All of the above are constantly changing. However re-location of all logistics facilities at one time is inconceivable. Relocation or redesign of specific facilities is possible. Over a period of time, all facilities should be evaluated, to determine if their location is desirable. Selection of a superior location network can provide the first step. Your network of facilities forms a structure from which logistical operations are performed. Your network should incorporate transportation and information. Specific work tasks related to network design are processing customer orders, management of inventory, material handling. Freight Rate Structure Freight rates of any mode of transport are based on the following principles: 1. Freight should the actual cost of transport operation. The actual cost of operation depends on the following factors:
  39. 39. Logistics Management in BLR INDIA 39 a) Fixed costs - Freight should cover interest on capital, depreciation, registration and insurance expenses of a vehicle, if applicable, general upkeep of the vehicle, administration overheads, and expenditure on other fixed facilities, etc. b) Semi-fixed costs - Freight should cover the salary of the driver, cleaner, conductor and miscellaneous maintenance expenses, which vary partially with the running of the vehicle. c) Vehicle Utilization - A transporter is interested in getting maximum mileage out of his vehicle by moving it at top speed to cover the distance in as short a time as possible. i. If the consignments loaded or the route covered is not conducive, the transporter would quote a higher freight rates. ii. Higher freight rates are also quoted when vehicles are detained at terminals either for certain formalities, terminal congestion in busy ports or at factory gates, or while waiting for loading or unloading operations. Terminal detentions are invariably accounted for in the freight rates themselves, but they are normally not noticed at all. iii. Freight rates are quoted higher if there an expectation of obtaining a return trip with a load or if considerable empty movement of vehicles is involved after unloading. iv. Vehicle Utilization is affected by the nature of goods. Hazardous goods that are likely to cause damage to the other consignments or the vehicle itself attract higher freight rates. v. Consignments, which can be loaded less by weight in a vehicle, attract higher unit freight rate since they yield poor utilization of the vehicle. 2. Traffic Bearing Capacity: An age-old consideration for the freight rates is the doctrine of ―what traffic can bear.‖ Transportation adds place utility to goods, for it makes them marketable at another place. However, after the addition of the cost of transport, the price of goods should be still attractive to the buyer.
  40. 40. Logistics Management in BLR INDIA 40 3. Public Use: Freight rates all over the world are governed on human grounds that items of public use should be made available to the common man at the cheapest rate. For example, foodgrains and salt are carried at rock-bottom prices, sometimes even at those, which do not cover the actual cost of operation. 4. Government Policies : Freight rates are often framed on the basis of government objectives, which aim at serving certain points – such as promotion of certain type of trade, development of certain industries, etc. In such cases, freight rates are either depressed to promote the particular traffic or hiked to discourage particular traffic. 5. Reasonable Profit : The transporter must provide for a reasonable profit after covering the cost of operations and capital investment. This margin must give not only return of investment but also compensate him for the entrepreneurial time and effort he puts in, but also provide sufficient funds for future development of his enterprise. Modal Characteristics ROAD TRANSPORT Road transport forms an essential part of any transport activity, whether rail, sea or air. It is essential as a supplementary and complementary mode of transport to complete movement by other modes of transport. Eg. From one terminal i.e. the railway station the goods have to be carried to the destination like an area by road.
  41. 41. Logistics Management in BLR INDIA 41 RAIL NETWORK Since olden times, railroads have handled the largest number of ton-miles. As a result of the early establishment of a comprehensive rail network connecting almost all the cities and towns, railways dominated the intercity freight tonnage till World War II and in some cases of Europe, Asia and Africa they even connected the countries. This early superiority enabled railways to transport large shipments very economically. Railroads have come a long way, as we can see by just the US figures that 54.0% of intercity transport in 1947 was by Railways, 39.2% in 1958, 36.4 % in 1980 and almost 37% in 1992. The period from 1950-1970 saw a tremendous decline in use of railways. The capability to efficiently transport large tonnage over long distances is the main reason railroads continue to handle significant intercity tonnage and revenue. Railroad operations incur high fixed costs because of expensive equipment, right-of-way (railroads must maintain their own track), switching yards, and terminals. However, rail experiences relatively low operating costs. The replacement of steam by diesel power reduced the railroads‘ variable cost per ton-mile, and electrification offers potential for more reductions. WATER TRANSPORT It is the oldest mode of transportation. First it was the sailing vessels, which was replaced by steamboats in early 1800‘s and by diesel power in the 1920‘s. Domestic water transportation – involves the Great Lakes, canals, and navigable rivers. In every country, fewer system miles exist for inland water than any other transportation mode. The main advantage of water transportation is the capacity to move extremely large shipments. Water transport employs 2 types of vessels. Deep-water vessels, which are generally designed for Ocean and Great Lakes use, & are restricted to deep-water ports for access. In contrast, diesel-towed barges, which generally operate on rivers and canals, have considerably more flexibility. Water transport ranks between rail and motor carrier in the fixed cost aspect.
  42. 42. Logistics Management in BLR INDIA 42 Although water carriers must develop and operate their own terminals, the right of way is developed and maintained by the government and results in moderate fixed costs as compared to railways and highways. PIPELINES Surprisingly, Pipelines are also one of the major form of transportation medium throughout the world. In 1989, in USA over 53% of all crude and petroleum tonmile movements were through Pipelines. In addition to Petroleum, other important product transported by pipeline is the natural gas. Pipelines are owned and operated privately in most of the countries and many gas companies act as both gas distributors and contract transportation providers. Pipelines are also utilized for transport of manufacturing chemicals, pulverized dry bulk materials such as cement, flour via hydraulic suspension, and sewage and water within cities and municipalities. Pipelines are very unique in nature compared to other types of transport, such as; they operate on 24-hour basis, seven days a week, and are limited by commodity changeover and maintenance. Unlike other modes, there is no empty ―Container‖ or ―vehicle‖ that must be returned. AIR TRANSPORT Air transport is the newest and the least utilized mode of transport. Its major advantage is its speed, which is accompanied by high costs. A coast-to-coast shipment via air requires only a few hours contrast to days taken by other mean of transportation. The high cost of transport can be traded off for high speed, which allows other elements of logistical design, such as warehousing, inventory to be reduced or eliminated. But still air transport remains more of a potential opportunity than a reality because it is very much under utilized. The high cost of jet aircraft, coupled with erratic nature of freight demand, has limited the assignment of dedicated planes to all-freight operations. However premium carriers provide planes dedicated for freight operations.
  43. 43. Logistics Management in BLR INDIA 43 WAREHOUSING Warehousing was a customer‘s function conventionally anywhere in the world. Customer to protect himself from shortages at the time of inclement weather always used to store provisions and other utilities in his house. Consumer‘s own stores were underground cellars, smoke houses to store variety of items. Poor communication infrastructure was mainly the cause for this storage by customer. Producers and tradesmen conveniently shrugged off their responsibility for storage and passed it on to the customer who was left with no option. Traditional concept of warehouse as store or godown has undergone major change now. Warehouse is considered a value adding facility now, playing a remarkable role as a function of logistical management. As the times changed, manufacturer started applying modern scientific management techniques to improve productivity in his factories. Manufacturer visualized the need of a buffer between factory and market, now the warehouse became storehouse to stock production. This role of the warehouse supported production. Functions of warehouse [warehousing operations] Receiving goods – receive and accept responsibility 1. Identifying goods – place, label, color code 2. Sorting goods- sort out the received goods for appropriate storage area 3. Dispatching goods to storage- for temporary storage with easy accessibility 4. Holding goods- security against pilferage and deterioration 5. Selecting, retrieving, packing- items are retrieved and grouped according to customer order for dispatch 6. Marshaling goods- check the items of a single order for completeness and order records are updated 7. Dispatching goods- consolidated order is packaged and directed to right transport 8. Preparing records and advices- of stocks and replenishment requirements
  44. 44. Logistics Management in BLR INDIA 44 Principles of Warehouse design  Design criteria: following are the factors to be kept in mind while designing the warehouses. Product flow: warehouse should be designed round material handling flow. Movement of material should be kept minimum No of stories: one is ideal as against limitations of space. Cost of land prohibits having only one story as this would need large area. Height utilization: principle of cubic space, principle of ‗go vertical‘, e.g.-car parking in Japan. Limitation on this concept is posed by limitation of handling equipment, fire safety rules, insurance regulations and rules and regulations imposed by the state.  Handling Technology Movement continuity and movement scale economics : movement continuity is ensuring less number of long movements rather than large number of short movements. Movement scale economies depend on movement in large bulk. Moving material in cases strapped on pallets or containers yields large benefits in handling. Handling becomes standardized and simplified. Moving material in small packages is expensive and complex. Handling technology should address these issues Storage Plan : storage plan depends on characteristics of product. Some of the examples are - open air storage for bulky products - heavy items closer to floor - light items on higher rungs of the shelf or rack - fast moving items in large bulk closer to aisles - hazardous items stored at safe distances to limit damage in dangerous situations.
  45. 45. Logistics Management in BLR INDIA 45 Warehousing alternatives  Private Warehouses Owned or leased by the product owner. Ownership is not the criterion. Control is fully with the product owner. Product owner exercises overall control on management. Changes can be made to integrate the warehouse with rest of the logistical system. It provides market presence to the product owner. It is considered to be cheaper as there is no profit to be added to the cost.  Public Warehouses It is available to companies on hire. Overheads get distributed over a large customer base. This makes the usage cheaper. As warehousing is their core business public warehouses offer expertise in management. Flexibility of location : if the product owner needs to change the location of warehouse, it is easier if the current warehouse is public. It is only a question of terminating the contract and starting a new one. But if the warehouse is owned, one has to dispose off the current facility and procure a new one. Significant scale economies, several users and resultant volume, benefits in transportation costs can be gained by utilizing these facilities.  Contract warehouses Contract warehouse operators take over logistics responsibility from manufacturing company. Warehouse owner offers long term relationship and customized service. Product owner gets the benefit of management expertise of the warehouse owner. As the warehouse owner centrally controls several warehouses, product owners get the benefit of shared resources with several clients. This brings down the cost. General classification of Public warehouses 1. General merchandise 2. Refrigerated 3. Special commodity
  46. 46. Logistics Management in BLR INDIA 46 4. Bonded 5. Household goods & furniture Warehousing strategy Strategy in this context is finding answers some fundamental questions about warehouses keeping long term business in mind. These questions are product owner should have how many warehouses in the logistical network? Where these warehouses must be located? And what type of warehouses is suitable for the business we are in? How many? Total logistical cost must be calculated keeping various number of warehouses in the logistical warehouses. If a graph is plotted with total logistical cost on Y axis and number of warehouses on X axis, shape of the curve would indicate number of warehouses required for minimum total logistical cost. Where? Location considerations: While deciding the location following factors are to be considered keeping potential locations in mind. 1. Cost of distribution to market area. 2. Transport requirement and facilities. 3. Cost of transportation. 4. Presence of Competition. 5. Availability and cost of utilities [power, water, gas, sewerage disposal] and cost 6. Availability and cost of labour supply. 7. I - R climate, labour productivity. Whether conditions are conducive to operations. 8. Customer‘s expectation of ‗D‘ for our product. 9. Any specific commitments made by the company to any ‗A‘ category customer. 10. Local taxation levied by the local authority in the area. 11. Community attitude towards business from outside.
  47. 47. Logistics Management in BLR INDIA 47 12. Restrictions associated with warehouses. In some areas some type of products are not permitted to be stored. 13. Future expansion. Whether the location is able to accommodate organizations plan to expand in future as per their strategy. 14. Cost of land. 15. Topography and soil condition: if the warehouse needs special and heavy equipment for material handling and if the incoming loads are heavy then firm soil and flat topography are ideal. If these conditions are not available, substantial amount of money is required to be invested. 16. Possibility of title change to the land: Are the title change formalities straight forward? In some situations this is complex, like title to MIDC land. Ideal warehouse location 1. Protects of stock against moisture, insects, dust, fumes, pests, thieves, fire etc. 2. Provides facilities for ware housing activities like plenty of water for drinking and fire fighting. 3. Facilitates economics of operation. 4. Away from sources of detrimental conditions. 5. Easy access from highway, railhead and waterfront. No geographic barriers. There are no natural barriers like river or steep hills 6. Proximity to ‗A‘ category customers. Warehousing strategy Of what type? Private? Contract or Public? Private Contract Public Presence synergy Industry synergy
  48. 48. Logistics Management in BLR INDIA 48 Operating flexibility Location flexibility Scale economies Presence synergy : a private warehouse provides strong market presence to a company. This has a psychological impact on the customers and also provides physical presence close to the customers for prompt response to customers. Industry synergy : if several firms serving the same industry collocate themselves benefits in transportation cost result. These firms can share several facilities specially products handled are same. Operating flexibility : management control is full in a private warehouse. Location flexibility : change in location and increase or decrease in number of warehouses is very simple if public warehouses are used. This is important for seasonal demands. Scale economies : high volume handling results into benefits due to economies of scale. This can happen when highly capital intensive handling equipment is used. Public warehouses can invest in technology as they serve a large client base.
  49. 49. Logistics Management in BLR INDIA 49 A Case Study On
  50. 50. Logistics Management in BLR INDIA 50 BLR INDIA The Company Set up as a small trucking business in 1968, by a visionary Mr. LC Goel, BLR has shifted gears to become one of the largest & most reliable Transportation & Logistics companies in India. From a one man in one office in 1968, the company grew steadily to a sizeable business of about INR 2 crores and three offices by 1989. 1990s saw the spurt of growth in BLR as the company grew from an INR 2 crores in revenues from three offices to 120 crores (INR 1.2 billion or USD 27 million) out of a network of more than 50 offices all over India at present. The Company has moved up the ladder through innovation & consolidation and today with a 450-people strong family, BLR has become one of the most sought after Transportation & Logistics companies in India. The inspiring fact is that it is well endorsed by the customers nationally. With a fleet of more than 250 vehicles including trucks, trailers & LCVs and with a network of warehouses in major cities in India, BLR offers a truly integrated Logistics Services to its customer. Custom Bonded-warehousing, bonded-trucking and excise bonded warehousing are additional unique features of BLR's offerings to complete the bouquet of total Logistics Services. BLR is committed to service the customers by offering complete logistics & supply chain solutions. In order to facilitate this, BLR has promoted BLR Logistics to cater to the Logistics / Supply Chain requirements of the customers. BLR Logistics is being led by professionals with varied corporate backgrounds and rich industrial experience.
  51. 51. Logistics Management in BLR INDIA 51 A Brief History Mr. L.C. Goel (affectionately called LCG), a self-made man, a great visionary of strong values, started a small trucking business in the 1968. His short-term goal was to establish a road transport business between his native place and the commercial capital of India. The company was very aptly named Bombay Ludhiana Roadways, catering to the transportation needs of the customers in these stations and the stations en route. With his able leadership and great vision, LCG nurtured the nascent organization into an India wide Transport Company catering to the very need of the customers nationally. Quality, Integrity and Social responsibility are the values that he practiced, preached and imbibed in the culture of BLR. In line with his mission, he had grown the business steadily to about INR 2 crores by 1989. By that time, the 2nd generation had already been groomed to take the reigns of the business. Mr. Ashok Goel, a Commerce Graduate from Mumbai University, joined the Family business in 1985 started by his father Mr. L C GOEL. Through his able leadership, he has transformed BLR into an INR 120 crores company with a network of more than 50 offices spread across the length & breadth of the country. Ashok is an active member of various developmental industry bodies & associations like Indian Road Transportation Development Association (IRTDA), All India Transport Welfare association (AITWA) & Bombay Goods Transport Association (BGTA)
  52. 52. Logistics Management in BLR INDIA 52 He is actively involved in industry regulations necessary for the development of the transport infrastructure in the country. Company Profile and Key Strengths As one of India's leading logistics companies BLR offers customized solutions to all industrial sectors with a focus on saving costs and providing world class services. BLR Logistiks (I) Ltd stands for globally competitive solutions within a trusting and service oriented environment. BLR offers truly integrated Logistics Services to its customers through its privately owned fleet of more than 500 vehicles and over 24 general and custom bonded warehouses in all major cities across India. With its 100 offices in India BLR can offer you an extensive network and overall coverage. Having grown 58% annually, and Reliance Capital Ltd taking on an equity stake of 31%, BLR Logistiks (I) Ltd has developed from a small trucking company to a 250 crore rupees (equal to 50 million US Dollars) turnover logistics provider. Mission, Vision and Values Our mission is to create competitive edge and superior financial results for our customers by optimizing their supply chains through innovation & total commitment. We will be recognized globally as the number one provider of logistic services offering door-to-door solutions from, to and within India.
  53. 53. Logistics Management in BLR INDIA 53 INTEGRITY EQUALITY AMBITION HONESTY RESPONSIBILITY TRUSTWORTHINESS At BLR Logistiks Ltd integrity and trustworthiness are the basis of our commitment to our customers and employees. BLR allocates tasks and responsibilities to its staff based on their capacities regardless of other factors such as sex or religion. BLR values a strong culture of loyalty towards its
  54. 54. Logistics Management in BLR INDIA 54 employees and from its employees. These values form the backbone of BLR and will continue to provide the framework to realize BLR‘s potential and ambition in the future. The Infrastructure The Infrastructure of BLR consists of the following : 1) Office Network 2) Fleet BLR Office Network BLR has a network of more than 50 offices around the country. The offices are well networked through latest IT capability. The network of offices covers all the major business districts of India.
  55. 55. Logistics Management in BLR INDIA 55 BLR Fleet With a fleet of more than 250 vehicles including Trucks, Trailers and LCVs, BLR has the capability to carry all types of goods for transport within India. The profile of BLR customers varies from Global MNCs, Indian MNCs, Indian Corporate house, Start Trading house, Trading houses and Importers & Exporters. The industries and the products that BLR caters to currently include pharmaceuticals, Chemicals, Lubricants, Engineering, Automotive, Electronics, News Print, Papers, Fibers, Polymers, Steel, Project machinery, Plant & Equipments, odd dimensional cargo and Import & Export containers. With thorough knowledge of Indian Transport regulations, customers trust BLR and entrust with responsibilities to deliver goods in time, every time.
  56. 56. Logistics Management in BLR INDIA 56 BLR Supply Chain Solutions BLR provides the following services in its supply chain : 1) Transportation Services 2) Warehousing 3) Distribution 4) International Freight Management Transportation Services BLR has the capability to provide Transportation to all kind of material within India. The broad line segmentation of Transportation Services is as below: Domestics Transportation Bonded Trucking Project Transport Scheduled Transport Multi Modal Transport
  57. 57. Logistics Management in BLR INDIA 57 Customised Transport (Milk run, Hub & Spoke etc.) Domestics Transportation Transportation is the movement of people and goods from one place to another. Domestic transportation refers to the movement within the country. Transportation is the most visible of all functions of logistics and high contributor to logistics cost. We can see trucks, containers and wagonloads of material being moved from place to place as an activity directly associated with trade and business. We should also appreciate that this is an activity that adds highest amount of cost to the activity of making inputs and outputs available to consumers. Transportation function moves the products to meet customer expectations at minimum cost. Bonded Trucking Bonded Transportation provides same-day or next-day delivery of anything from an envelope to a truckload. BLR has been approved by CONCOR (Container Corp of India), a PSU of Govt. of India, to operate bonded-trucking services within India and is one of the few transportation companies in the panel of Concor to offer this service. BLR has been given this approval by CONCOR after a due diligence on the capability, security and quality parameters. Multi-Modal Transport The BLR Group believes in the concept of a `Multimodal Transport System' and hence with the help of the various units namely BLR Logistics, a variety of audiences demanding any / all of these modes of transportation are been addressed.
  58. 58. Logistics Management in BLR INDIA 58 The Cargo Industry is still an expanding market. The need for a comprehensive logistics systems in transportation, communications and information sector, continues to grow. Freight forwarding services alone are no longer sufficient, special deals are to be initiated on regular intervals to lure the customers to maintain them on permanent status, especially to cater to the increasing needs of seasonal vendors. This is with the object to provide most economical, smooth, reliable and speedy carriage of shipments to various destinations on selected mode of transport which must not only ensure hassle-free service but should render sizable savings in the freight expenses. This vital information of costing must arrive to the shipper well in advance to make proper planning in co-ordination with logistic company. This is essential in order to ascertain reliable and timely transportation scheduling and delivery throughout the logistic-chain, from the shipper to the consignee. Therefore, the cargo market demands a global solution and network linking all four modes of transportation i.e. (a) Air (b) Road (c) Rail & (d) Sea. The combination of these modes is defined as ‗Multimodal transport system‘. BLR Warehousing & Distribution The range of warehousing services currently offered to the customers are following; Bonded Warehousing (Custom Bonded & Excise Bonded) General Warehousing (for all industry types)
  59. 59. Logistics Management in BLR INDIA 59 Export Stuffing Warehousing Export Vendor Consolidation BLR Bonded Warehouses BLR is Govt. approved Custom-bonded warehouse operator within India and is operating Custom-bonded and Excise Bonded warehouses around the country. BLR is also adding 50,000 sq ft state-of-art bonded warehouse space in New Delhi to the existing network. An Excise-bonded warehouse of 20,000 sq ft is also being planned for export container stuffing at Mumbai and Ludhiana by Q1, 2006. BLR General Warehouses BLR offers warehousing and distribution services to its customers. With a warehouse space of more than 100,000 sq ft and with a strong transport network around the country, BLR has the capability to provide integrated logistics & supply chain services to its customers in India. BLR International Freight Management BLR through its logistics services entity does the complete program administration for the International Freight Management. In the recent past, the customer's demand gave rise to the development of a forwarding system in which the designated forwarder provided, arranged and assumed responsibility for the whole transportation process from storage, consolidation, packaging, transportation, insurance and custom clearance. Air Export & Import Freight Management Ocean Export & Import Freight Management
  60. 60. Logistics Management in BLR INDIA 60 Project Transportation Services Offered by BLR BLR can meet in-bound and out-bound logistical needs to enhance business efficiency. In-bound logistics 1. Material movement from suppliers to warehouse 2. Palletising, if required 3. Sub assemblies & kitting - if required 4. JIT supply 5. Return of defectives 6. Packing, Unpacking 7. Stock reporting 8. Payment Collection Outbound Logistics 1. Storage of finished gods 2. Movement till it reaches customers 3. Invoicing 4. Payment collection
  61. 61. Logistics Management in BLR INDIA 61 Functions of BLR INDIA 1) Freight forwarding At BLR, Freight Forwarding is a well defined, planned and executed service function. Offering a very strong local network and a comprehensive global reach, it brings to each client the assurance and the satisfaction of dealing with a professional logistics management group. Responsible for this service at BLR is a close knit team of experts who are well informed and well versed with the intricacies of managing and delivering a complete range of logistics solutions across multiple surfaces. The team has also initiated and carried forward many mutually beneficial movement management partnerships nationally and internationally, which has translated into quick, wider and cost effective access to all markets.Today, the service has evolved to cover a variety of shipments, offering a wide choice of destinations and provides the perfect match between cost and time schedules.
  62. 62. Logistics Management in BLR INDIA 62 2) Project handling At BLR, project handling is a core function and one of the main service strengths of its comprehensive portfolio. This service has evolved from its startup status in the year 1948, to become a real powerhouse solution provider to a variety of industries today. BLR since inception has focused on really building up this facet of its service. It has over the years given due emphasis to every minute detail to add edge to this service and deliver more value to all its clients. Attention to detail, accurate and quick paperwork, close and continuous co- ordination with government officials, constant monitoring of movement, trained staff at ports, a complete understanding of national and international processes, full range of handling equipment, all these are the hallmarks of this service. Topping this, is the fact that given the scope and the number of projects that BLR handles, it can really offer visible cost benefits to its valued clientele plus a delivery quality that guarantees minimum delays, total safety and adheres to time bound schedules. Today, with the support of trained personnel, a range of fully functional movement equipment like cranes, trucks etc and a rich and varied experience BLR has to its credit the successful management and delivery of prestigious projects for leading Sugar mills, Textile mills, Fertilizer plants, Cement plants, Power plants and White Goods projects India. No wonder, the company's reputation as a dependable and reliable project movement partner is growing by the day. 3) Logistics management Today, BLR is totally geared up to deliver to all its clients a very strong and complete service back up in terms of comprehensive logistics solutions. It has created a value- driven portfolio and this has been further bolstered by building a support team of professionals, a national and international network and also a pro-active response and technology system. Today, it competently handles and enables the speedy clearing and forwarding of a variety of industrial
  63. 63. Logistics Management in BLR INDIA 63 and customer import and export consignments. From loading at ports, unloading, dispatch, warehousing etc it can handle and deliver consignments of every shape and size across national and international borders. 4) Customs clearance Since the inception of the company in 1968, BLR Transport has been into Custom Clearance. With the vast knowledge of custom procedure, we have been handling customs procedure to post-clearance jobs for various clients. We also have cleared goods within one working day. The knowledgeable workforce that we have is one of the best one can find. As always, the customers have been their priority and this will always hold. 5) Trucking This facet forms a very specialized aspect of the BLR service portfolio. Being focused on the logistics management business it was with foresight that it steadily invested in and built up a fleet of vehicles. Today, BLR owns a fleet of trucks which it deploys to move and manage consignments speedily across national borders. These trucks are well maintained and driven by knowledgeable and well informed drivers who are instructed to drive carefully to ensure ―zero damage‖ to consignments during transit. These trucks are serviced from time to time and checked regularly so as to ensure that they stay in prime working condition and no breakdowns happen during delivery. BLR uses this fleet to transport and deliver its own consignment and it also at times gives these trucks on hire to the industry. 6) Door to door
  64. 64. Logistics Management in BLR INDIA 64 BLR has created a very clearly focused and value driven door-to-door service. This service encompasses the entire national network and places a strong emphasis on timely delivery, in good condition and with true value for money service. The service today is available across India and has steadily built up a reputation for being very reliable. It is used by a variety of clients from various businesses both big and small and with the strong infrastructure of vehicles, warehouses and offices that BLR has created, the service has evolved to set new standards in terms of cost and delivery parameters. 7) Warehousing BLR warehouse service supports inbound logistics, distribution and aftermarket services in a way that improves inventory management, reduces total operating costs and improves cycle times. Their facilities offer the customers warehousing that is fully integrated into the wider supply chain and meets demanding service levels. This encompasses the design implementation and operation for both dedicated and multi-user sites. The benefits include improvements in :  Customer service levels  Stock accuracy  Lead times  Redundant stock costs  Productivity responsiveness to a company's strategic needs Warehousing & 3rd Party Logistics
  65. 65. Logistics Management in BLR INDIA 65 Being in the logistics industry it was only logical for BLR that investing in warehousing formed a very vital part of growing the business and expanding the service portfolio. To this end BLR has made very prudent and strategic investments in creating a chain of warehouses, set up close to vital transport hubs and outside octroi limits. These warehouses are well maintained, well staffed and are secured by vigilant round the clock staff. Huge in size, well ventilated and clean they are used for the storage of both consumer and industrial consignments. These warehouses have helped to add a competitive edge to the BLR portfolio as they have served to give the BLR customer that sense of security during transit and also reduced the chances of damage during storage. This service has served to push BLR up the value chain considerably. Warehouse Management Systems The Warehouse Management System (WMS) records all events and actions in the receipt, handling and storage of products and orders in a warehouse environment. The WMS also accurately records the location of inventory whilst stored in the warehouse. BLC Prologs that WMS manages all critical processes in the warehouse, and is also an important support for varied transport and distribution concepts (planning, time controlling, booking of transport capacity, communication with customs and other authorities). Cross Docking Cross-dock operations are facilities where shipments are received from one mode of transport and transferred to another mode, or where shipments complete one leg of a journey prior to commencement of another journey. Shipments are consolidated or deconsolidated. Product received into the facility is not taken into inventory.
  66. 66. Logistics Management in BLR INDIA 66 Through effective inventory management, inefficiencies can be driven out of the supply chain, overall costs reduced and high service levels achieved. BLR optimises inventory at a line-item level at every stage of the supply chain. They focus on driving results in:  Supplier management  Expediting  Order replenishment  Demand forecasting  Safety stock setting  Order pipeline monitoring  Excess stock management Inventory optimisation is supported by inventory management software that calculates 'line item risk profiles' that measure the variability of demand and supply for each line item within a customer's inventory. They can offer:  Average of 20% inventory reduction and 8% improvement in product availability  Reduced inventory and overhead costs  Improved sales, profitability and return on investment  High service standards  Better matching of supply with demand  More streamlined and responsive supply chain Bonded Warehousing
  67. 67. Logistics Management in BLR INDIA 67 Bonded warehouses provide secure environments in which customers' products can be held without immediate payment of local duties and taxes. BLR takes over and manages the warehouse activities, either in dedicated or multi-user sites.
  68. 68. Logistics Management in BLR INDIA 68 Case Study Ocean Import/Export Freight Management BLR can handle all your international shipments. We negotiate best rates for you and provide the documentation necessary for the shipment. We compare all shipping lines and deliver your shipment all over the world. Air Import/Export Freight Management BLR ships your cargo to all major airports in the world. Our contacts with the Airlines and expertise within the company makes sure that your cargo gets delivered in a fast and timely manner. Custom Clearance Services Customs procedures require specific countrywise expertise. BLR offers this expertise and provides you with all the proper documentation for clearing of your cargo in India, both import and export. Our agents, located globally, have a thorough knowledge of the procedures in their respective countries and will assist in clearing the cargo all over the world. Cosmetics Company in Pune Previous situation : The customer was using conventional 9MT and 16MT trucks, in which respectively 7MT and 10MT of cargo was loaded. The truck was covered with Tarpaulin and lashed with ropes. Main destinations were in Eastern India and the customer was using a transit time of 6-7 days. By the time the cargo arrived at Kolkata from Pune the top layer of the cargo was totally damaged due to the ropes used for lashing. This resulted in loss of cargo and therefore loss of sales.
  69. 69. Logistics Management in BLR INDIA 69 Solution provided by BLR : To reduce the damage to the cargo, BLR designed and built a 32ft container vehicle with 15MT carrying capacity and GPS tracking facility. The customer was able to load 15MT and therefore used full capacity of the trucks and thus reducing the amount of vehicles previously required. The transit time of the cargo also got reduced from 6-7days to 4 days and the customer no longer lost cargo due to damages. BLR‘s solution increased efficiency and reduced the customers cost. Hydraulic axels Semi - Low Bed trailers LCV‘s MCV‘s 32ft containerized vehicles (6 and ten wheels) 28ft containerized vehicles 12 wheel trucks, open and full body Full Body Truck (18-20-22-24 ft) Open Body / 24ft Container Half Body, Open, 20ft Container Carrier 20ft Container Carrier (only frame) High Bed Trailer with frame (20 and 40 ft) High Bed Trailer with platform (20 and 40 ft) 44ft Low Bed Trailer 20ft HQ Container 44ft Low Bed Trailer 20ft Double Axle Trailer 40ft Triple Axle Trailer