Logistics Management
Prepared by:NarendraSingh Chaudhary
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SUPPLY CHAIN MANAGEMENT - MAIN
COMPONENTS
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LOGISTICS PHILOSOPHY
"Logistics means having the
right thing,
at the right place, at the right
time."
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Logistic means
• Word, ’Logistics’ is derived from French word ‘loger’,
which means art of war pertaining to movement
and supply of armies.
• “Logistics means the art of managing the flow of
raw materials and finished goods from the source to
the user”
• To get goods from where they arise to the right
place in the right form, at the right time, at the right
cost.
• “Logistics or physical distribution or distribution
• logistics is an integral part of Marketing Process”.
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DEFINITION
• Application of management principles to
logistics operations for efficient and cost
effective movement of goods and
personnel.
• Management of the activity of transporting
goods to customers or to places where they
are bought or sold
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DEFINITION (CONT.)
• According to Council of logistics management:
“Logistics is the process of planning, implementing
and controlling the efficient, effective flow and
storage of goods, services and related information
from point of origin to point of consumption for the
purpose of conforming the customer requirement”.
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• Logistical management includes the design and
administration of systems to controls the flow of
material, work- in – process, and finished inventory
to support business unit strategy.
• Logistics is the designing and managing of a system
in order to control the flow of material throughout a
corporation.
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• Logistics of an company includes movement of raw
materials, coordinating flows into and out of
different countries, choices of transportation, and
cost of the transportation, packaging the product
for shipment, storing the product, and managing
the entire process.
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History of Logistic
• Fragmentation 1960-This era was known as
fragmentation because every thing that done was
disintegrated
• Evolving Integration-At this stage of time new
concepts of Logistical management were evolving
• Total integration-In the present scenario because of
technological advances logistics has evolved as
part of management
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• There are two main phases that are important in the
movement of materials: material management and
physical distribution.
• Materials management is the timely movement of
raw materials, parts, and supplies.
• The physical distribution is the movement of the
firm's finished products to the customers. Both
phases involve every stage of the process including
storage.
• The ultimate goal of logistics is: "To coordinate all
efforts of the company to maintain a cost effective
flow of goods."
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• Inbound logistics covers the movement of materials
received from suppliers.
• Material management describes the movements of
material & components within a firm.
• Physical distribution refers to movement of goods
outward from the end of the assembly line to the
costumer.
• Supply- chain management is somewhat larger than
logistics and it links logistics more directly within the user’s
total communication network & with the firm
engineering staff. It includes manufacturer and suppliers
but also transporters, warehouses, retailers and
customers themselves.
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Importance of Logistic
• Transportation cost rose rapidly due to the rise in
fuel prices.
• Production efficiency was reaching a peak
• Fundamental change in inventory philosophy
• Product line proliferated
• Computer technology
• Increased use of computers
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• Increased public concern of products Growth of
several new, large retail chains or mass
merchandise with large demands & very
sophisticated logistics services, by pass traditional
channel & distribution.
• Reduction in economic regulation
• Growing power of retailers
• Globalization
• The interrelation of different logistics element and
their costs should be based on total cost rather than
individual costs.
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The objectives of Logistics
• Rapid Response-Rapid response is concerned
with a firm's ability to satisfy customer service
requirements in a timely manner.
• Minimum Variance-Variance is any unexpected
event that disrupts system performance. Variance
may result from any aspect of logistical operations.
• Delays in expected time of customer order receipt,
an unexpected disruption in manufacturing, goods
arriving damaged at a customer's location, or
delivery to an incorrect location-all result in a time
disruption in operations that must be resolved.
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Objectives (cont.)
• Minimum Inventory-The objective of minimum
variance involves asses commitment and relative
turn velocity. Total commitment is the financial
value of inventory deployed throughout the
logistical system. Turn velocity involves the rate of
inventory usage over time. High turn rates, coupled
with inventory availability, means that assets
devoted to inventory are being effectively utilized.
The objective is to reduce inventory deployment to
the lowest level consistent with customer service
goals to achieve the lowest overall total logistics
cost.
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Objectives (cont.)
• Movement consolidation-One of the most
significant logistical costs is transportation.
Transportation cost is directly related to the type of
product, size of shipment, and distance. Many
Logistical systems that feature premium service
depend on high speed, small-shipment
transportation.
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Objectives (cont.)
• Quality improvement-A fifth logistical objective is
to seek continuous quality improvement. Total
quality management (TQM) has become a major
commitment throughout all facets of industry.
• Life-Cycle support-The final logistical design
objective is life-cycle support. Few items are sold
without some guarantee that the product will
perform as advertised over a specified period. In
some situations. The normal value-added inventory
flow toward customers must be reversed.
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Essence of logistics in marketing
• Marketing Process is successfully completed when
Products are produced and priced to satisfy the
identified needs of the segment of buyers;
• Arrangements are made to supply these goods
through selected distribution channels
• An awareness is created among the buyers
about the availability of the goods through
information facilitation &
• Goods are physically supplied to the buyers at
the place & time selected by them.
• Besides satisfying the customers need, the
marketing process must be profitable to the seller.
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Basic logistical service is measured in
terms of:
• Availability-Availability means having inventory to
consistently meet customer material or product
requirements.
• Operational performance-Operational performance
deals with the elapsed time from order receipt to
delivery. Operational performance involves delivery
speed and consistency. A firm's operational
performance can be viewed in terms of how flexible it is
in accommodating unusual and unexpected customer
requests.
• Service reliability-Service reliability involves the quality
attributes of logistics. For logistics performance to
continuously meet customer expectations, it is essential
that management be committed to continuous
improvement
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There are four logistics concepts
• The systems concept-The systems concept is based on all
functions of a organization working together in order to
maximize benefits. This concept sometimes requires certain
components of the organization to operate sub optimally in
order to achieve maximum goals of the system.
• The total cost concept-The total cost concept is based on the
systems concept; however goal achievement is measured in
terms of cost.
• After-tax concept- A variation of the total cost concept is the
after-tax concept. This goal of this concept is after-tax profit.
This concept is becoming very popular because of the many
different national tax policies.
• The trade-off concept links the system together in a way that is
very efficient, but can have trade-offs that might be
inefficient.
• The advantages of such high efficiency must be weighed
against the risk.
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Logistics sub-systems
• Physical Supply or Management of flow of raw
materials, spare parts, consumable stores and
machinery & tools from suppliers.
• Physical distribution or management of finished
• goods from the factory to the buyers &
• Logistical Controls for managing the logistics
system, it helps an efficient co-ordination of physical
supply & distribution sub-systems.
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1. Flow Systems
i. Material Management system
ii. Material Flow System
iii. Physical distribution system
1. Flow Systems
Figure 3.1:Logistics system
Material Management System
1. The production control and purchasing functions.
2. The vendors.
3. The transportation and material handling
equipment required to move the material, part,
and supplies.
4. The receiving, storage, and accounting functions.
Material Management System
Figure 3.2: Material Management System
Material Flow System
A process involving flow of material, parts, and
supplies within a manufacturing facility. Subject of a
flow is the product.
Resources of material flow system:
i. Production control, quality control dept.
ii. The manufacturing, assembly, storage dept.
iii. Material handling equipment.
iv. Factory warehouse.
Material Flow System
Figure 3.3: Material Flow System
Physical Distribution
The flow process is referred to physical distribution
system. The subject for physical distribution systems
are the finish goods.
Resources of physical distribution:
i. Customer
ii. Sales, accounting and warehouse
iii. Material handling and transportation eqpt
iv. Distribution of finished goods.
Physical Distribution
Figure 3.4: Physical distribution system
Primary Activities
• Inbound logistics: materials handling,
warehousing, inventory control, transportation;
• Operations: machine operating, assembly,
packaging, testing and maintenance;
• Outbound logistics: order processing,
warehousing, transportation and distribution;
• Marketing and sales: advertising, promotion,
selling, pricing, channel management;
• Service: installation, servicing, spare part
management.
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Support activities:
• Firm infrastructure: general management,
planning,
• finance, legal, investor relations;
• Human resource management: recruitment,
• education, promotion, reward systems;
• Technology development: research &
development,
• IT, product and process development;
• Procurement: purchasing raw materials, lease
• properties, supplier contract negotiations.
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Importance of Inbound and Outbound
logistics
• Inbound and Outbound Logistics covers and
• supports the following processes and options:
• All of the processes in the warehouse from goods
• receipt through goods issue.
• Option to use RFID to support goods Issue and
goods receipt processes
• Complete stock transparency, to allow
companies to know what is in the warehouse.
• Trace and track the history of the warehouse
processes in Detail for each individual article
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• Improve the accuracy of deliveries, thus
increasing customer satisfaction.
• Option to use mobile data entry and work in a
paper free environment.
• Build optimal loads with the routing and
scheduling allowing a close collaboration between
shipper and carrier via optimized carrier selection
and tendering.
• Operational shipping, manifesting, freight costing,
freight settlement, and foreign trade are always
transparent to company.
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Objective of an ideal logistic system is to ensure
flow of supply to the buyer:
• In Correct Quantity
• At Desired location
• At Required time
• At useable condition
• At the lowest total cost
• Thus the objectives encompass efforts to
coordinate physical distribution and material
management in order to save money or improve
service.
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Elements of logistics system
• Transportation
• Warehousing
• Inventory Management
• Packing & Utilization &
• Information & Communication
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Forms of logistics management.
• Centralized logistics management-Centralized logistics
management provides that managers that also head
other divisions of the company head the logistics
operations.
• This type of management helps avoid internal problems
by having a central manager that ultimately decides
how logistics and operations are coordinated.
• Decentralized logistics management-Decentralized
logistics management is based on the fact that a
company needs to have a division that helps control the
local-adaptation needs.
• Dealing with different cultures requires input from the
local branch. The managers that deal with the cultural
differences on a daily basis normally know what works
and what don’t.
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• Outsourcing-Outsourcing is the final option for
• logistics management. When this happens,
• transportation firms concentrate on logistics,
• and the company can concentrate on it's
• production. There are many cost savings
• using this type of program, however that lack
• of control can negatively effect many
• companies.
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Logistical competency is achieved by
coordinating
• Network design
• Information
• Transportation
• Inventory
• Warehousing
• Material handling
• Packaging
• Work
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Logistics scheme
INVENTORY FLOW
PHYSICAL MANUFACT PROCURE
CUSTO DISTRIBUTI URING MENT SUPPLIER
MER ON SUPPORT
INFORMATION
FLOW
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Logistics Cost
• As companies continue to manufacture and
source materials from overseas, controlling costs
remains a top priority for those involved in
international trade.
• One key factor that should be monitored more
closely is logistics management, which covers all
activities relating to the procurement, transport,
transshipment and storage of goods. Depending on
the industry sector, supply chain logistics costs
account from 5% to 50% of a product’s total landed
cost.
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• Some issues effecting logistics costs: Fuel
• prices remain high and ports continue to
• experience delays, resulting in higher
• transportation fees. Increasingly complex
• international trade laws and security
• measurements threaten to lengthen delivery
• times and increase warehousing costs.
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10 tips on to reduce supply-chain costs
• Understand the true costs of sourcing overseas- Calculate
freight, duty, brokerage, and inventory-carrying costs to
support these lengthened supply chains. Factor in such items
as the costs of flying engineers overseas. Once you
understand the true total landed cost and total impact to the
business, buying domestically may look a lot better.
• Focus on eliminating the variability from transit times-The more
variable the transit times are, the more likely it is that the
receiving party is using more premium freight, building buffers
of inventory or ordering more often and more quantity than
• necessary to compensate for the uncertainty. Understanding
these dynamics can lead to the conclusion that paying higher
freight costs to ensure higher variability actually saves your
company in total costs.
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• Tariff engineering-Strategically source and
manufacture products to take advantage of
classification duty rates and eligibility for special
trade programs such as the North American Free
Trade Agreement.
• Consolidate-If you have multiple suppliers in one
country, consolidate their goods into one shipment.
• In addition, if you always have less-than container
load shipments out of one country, try to find
another Less than Container Load(LCL) importer of
goods from that country. You may be able to
partner and consolidate to a more cost-effective
full container load (fcl) shipment.
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• Informed decision-making-Provide to the decision
makers/ customers of your logistics network the cost of
freight for each service level, the reliability of each lane
for each service level, and the true cost of carrying
inventory so they can make informed decisions.
• Sometimes insurance doesn’t pay-When a company
has a shipment of premium goods, they often tend to
use the carrier’s insurance, which is very expensive. If the
company is self-insured, as most companies are, it should
check its insurance policy to see if it covers shipment of
goods. If it does, the company does not need to add
the extra cost of carrier’s insurance.
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• Automate compliance processes-
• Companies that implement software solutions to
• automate trade compliance are able to speed the
• cycle times associated with tasks being performed
• manually, such as document preparation, and
• eliminate the associated errors. Automated
• compliance procedures also bring fewer delays at
• border crossings, resulting in on-time delivery,
• adequate inventory levels, increased customer
• satisfaction, and the avoidance of fines.
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• Control your express shipping costs-When a
• company runs into a supply-chain issue, it typically
• will have an entire shipment sent on an
• express/expedited (highest-cost) service basis.
• Panicking often results in higher costs. A little bit of
• calculating can help the company determine the
• amount of goods needed immediately. It can then
• have that amount sent using express/expedited
• services, while the balance of the shipment can be
• sent using a standard (lower-cost) service.
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• Planes, trains and automobiles-Which is
• cheapest? In general, rail is more cost-effective than
• trucking or air. Water is cheaper than air shipment.
• No matter the mode of delivery, always try to get
• three quotes for movements.
• Be aware of non-tariff trade barriers -Companies
• need to be more aware of the increasing level of
• non-tariff trade barriers that are in force to reduce
• sweatshop labor and support human rights and
• animal welfare issues. These restrictions can bring
• importers increased liability and compliance costs.
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Distribution & Warehousing Mgmt
• A warehouse management system, or WMS, is a
key part of the supply chain and primarily aims to
control the movement and storage of materials
within a warehouse and process the associated
transactions, including shipping, receiving, put
away and picking. The systems also direct and
optimize stock put away based on real-time
information about the status of bin utilization.
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• Warehousing, material handling, and packaging are
• an integral part of other logistics areas. For example,
• merchandise typically needs to be warehoused at
• selected times during the logistics process.
• Transportation vehicles require material handling for
• efficient loading and unloading. Finally, the individual
• products are most efficiently handled when
• packaged together into shipping cartons or other
• types of containers.
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• When warehouses are required in a logistical system, a firm
• can choose between obtaining the services of a specialist or
• operating its own facility. The decision is broader than simply
• selecting a facility to store inventory, since many activities
• essential to the overall logistical process are typically
• performed while products are warehoused. Examples of such
• activities are sorting, sequencing, order selection,
• transportation consolidation and, in some cases, product
• modification and assembly.
• Within the warehouse, material handling is an important
• activity. Products must be received, moved, sorted, and
• assembled to meet customer order requirements.
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Physical Distribution
• The area of physical distribution concerns
movement of a finished product to customers. In
physical distribution, the customer is the final
destination of a marketing channel. The availability
of the product is a vital part of each channel
participant's marketing effort. Even a
manufacturer's agent, which typically does not own
inventory, must depend on inventory availability to
perform expected marketing responsibilities. Unless
a proper assortment of products is efficiently
delivered when and where needed, a great deal of
the overall marketing effort can be jeopardized.
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• It is through the physical distribution process that
the time and space of customer service become
an integral part of marketing. Thus physical
distribution links a marketing channel with its
customers.
• To support the wide variety of marketing systems
that exist in a highly commercialized nation, many
different physical distribution systems are utilized. All
physical distribution systems have one common
feature: they link manufacturers, wholesalers, and
retailers into marketing channels that provide
product availability as an integral aspect of the
overall marketing process.
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Thank you
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