Unit 3

Logistic Management
Introduction
 Logistics management 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 to customer
requirements.
 Logistics means the art of managing the flow of
raw material and finished goods from the
source to the user.
 Logistics = Materials management +
Distribution
 Supply Chain = Suppliers + Logistics +
Customers
 Logistics involves in the integration of
information, transportation, inventory, ware
housing, Material Management and packaging.
Definition of Logistics
 Logistics is. . . the positioning of resource
at the right time, in the right place, at the
right cost, at the right quality.
(Chartered Institute of Logistics and
Transport (UK), 2005)

Logistics is defined as the “ The process of

management that encompasses efficient
and cost effective services rendered in
ensuring flow storage of materials, work in
progress, finished goods, returned,
rejected, unwanted materials and
associated information from point of
origin to point of consumption and its
subsequent recovery and disposal to
conform to customers and government’s
requirements”.
Scope of logistic & Importance of Logistics
 Functions of logistics

[Link] service: Customer service acts as the binding and

unifying force for all of the logistics management activities.
 Each component of the logistics system can affect whether a
customer receives the right product at the right place, in the right
condition, for the right cost at the right time.
 Customer service involves successful implementation of the
integrated logistics management concept in order to provide the
necessary level of customer satisfaction at the lowest possible cost.
2. Order processing:
 The starting point of physical distribution activities is the
processing of customers orders. In order to provide quicker
customer service, the orders received from customers should be
processed within the least possible time.
 Order processing includes receiving the order, recording the
order, filling the order, and assembling all such orders for
transportation, etc. the company and the customers benefit when
these steps are carried out quickly and accurately.
3. Warehousing:
 Warehousing refers to the storing and assorting products in
order to create time utility.
 The basic purpose of the warehousing activity is to arrange
placement of goods, provide storage facility to store them,
consolidate them with other similar products, divide them into
smaller quantities and build up assortment of products.
 Generally, larger the number of warehouses a firm has the lesser
would be the time taken in serving customers at different
locations, but greater would be the cost of warehousing.
 Thus, the firm has to strike a balance between the cost of
warehousing and the level of customer service.
4. Inventory Control and Management:
 Linked to warehousing decisions are the inventory decisions which
hold the key to success of physical distribution especially where the
inventory costs may be as high as 30-40 per cent (e.g., steel and
automobiles).
 the new concept of Just-in-Time-Inventory decision is increasingly
becoming popular with a number of companies.
 The decision regarding level of inventory involves estimate of
demand for the product. A correct estimate of the demand helps to
hold proper inventory level and control the inventory costs.
 This is not only helps the firm in terms of the cost of inventory and
supply to customers in time but also to maintain production at a
consistent level.
5. Transportation:
 Transportation seeks to move goods from points of
production and sale to points of consumption in the
quantities required at times needed and at a reasonable cost.
 The transportation system adds time and place utilities to the
goods handled and thus, increase their economic value.
 To achieve these goals, transportation facilities must be
adequate, regular, dependable and equitable in terms of costs
and benefits of the facilities and service provided.
6. Information monitoring: The physical distribution managers continuously
need up-to-date information about inventory, transportation and
warehousing.
 For example, in respect on inventory, information about present
stock position at each location, future commitment and replenishment
capabilities are constantly required.
 Similarly, before choosing a carrier, information about the availability
of various modes of transport, their costs, services and suitability for a
particular product is needed.
 About warehousing, information with respect to space utilization,
work schedules, etc., is required.
 In order to receive all the information stated above, an efficient management
information system would be of immense use in controlling costs, improving
services and determining the overall effectiveness of distribution.
 Integrated logistic management
 It is a technique which utilizes various sources and channels to meet the
customer demand in time.
 It involves managing the movement of raw materials and components from
source of supply to the manufacturing plant and the movement of the finished
goods from the manufacturing plant to warehouses or to retailers or to final
consumer.
 The integrated logistics ensure that the comp. get the fully arranged logistics
services like shipping, warehousing, tracking and stevedoring(to load or
unload the cargo of (a ship) or to engage in the process of loading or
unloading ).
 The integrated logistics systems can also be incorporated in the company itself
where there is lot of movement on daily basis.
 Integrated logistics integrates the activities such as physical distribution,
material management, logistics engineering, business logistics, logistics
management, distribution management and even supply chain management.
 It is a service oriented process.
 The Integrated logistics information
Systems
 In integrated logistics systems: 1) information flow 2) Inventory flow
 “The involvement of people equipment and procedures required to
gather, sort, analyze, evaluate and then distribute needed information
to appropriate decision maker in a timely and accurate manner so they
can make quality logistics decisions.”
 Picking a particular shipment, who should receive particular package,
inventory items in stock, how much to produce and where to ship? –
Ans. to multiple question
 Conversion of accurate information to useful information
 4 components of ILIS: The order processing system, Research and
intelligence system, Decision support system, reports and output
system
 Order processing system: Impacts on customer
 Research and intelligence system: does scanning and monitoring
of the environment on a continuous basis (internal, external)
 Decision support system: are computer based systems which
provide solutions to complex integrated logistics problems making
use of analytical modeling.
 Report and outputs system: reports are used for planning,
operating and controlling integrated logistics. Planning(sales
trends, economic forecasts, other information pertaining to
market place, operating report: inventory control, transportation
scheduling and routing, purchasing and production scheduling,
control report: analyze expenses, budgets, and performance.
Strategic integrated logistic management
1. Situation Analysis
2. Setting objectives and goals
3. Generating and evaluating strategic alternatives
4. Strategy selection
5. Developing specific tactical plans for strategies
selected
6. Strategic integration
7. Strategy implementation
8. Strategic management process audit
1. Situational analysis:
 Mission Statement
 Internal Environmental analysis (attitude of management towards
integrated logistics, Purchasing, marketing plan, manufacturing
variables, inventory plan and techniques, warehousing activities,
order processing, transportation, production planning,
operational efficiency and budgets.
 External Environmental analysis (technological advancements,
electronic data interchange, new inventory software packages,
new packaging methods, trade pacts, regulatory considerations,
competition, economic conditions.
3. Generate and evaluate strategic alternatives:
Create strategy development sessions
Brain storming
Group strategy development approaches
 The Hierarchy of planning
 Organizational planning is usually carried out in a hierarchy:
1. Strategic planning: high level of management & long term (5 to
10 years) its focus on competition, resources and stake holders.
Strategic plans includes projected revenues and expenses, lines
of business, sales and profits.
2. Tactical planning: middle management level& planning horizon
for 5 yr. It is more specific. It includes capital expenditure plan
– new plant and equipment, other capital assets.
3. Operational planning: yearly basis, broken down quarterly and
yearly.
Strategic logistic plan
Strategic logistics plan depends on a number of inputs from
various functional areas. They are
Marketing: they provide information related to products
offered, pricing, promotion, sales volume types of customer,
product introduction and deletion.
Manufacturing: location of current and planned production
facility, planned volume,
finance/accounting, logistics
Evaluation and selection of channel
members
 Channel members help the management of the firm to
implement the logistics plan. Alternatives regarding choice of
carriers, warehouses and other logistics service providers
must be developed. The selection of channels members is
done by judging them according to predetermined criteria to
meet objectives. These criteria include reliability, consistency,
geographical coverage, variety service offering, use of
information technology and cost.
Procurement or purchasing
 Procurement or purchasing in supply chain encompasses the
activity involved in moving goods into a firm. It aims at
anticipating requirements, sourcing, and obtaining supplies,
moving supplies into the firm and monitoring the status of
suppliers as current asset.
Role of Purchasing in logistic
management
 It is responsible for inbound or upstream channel activities.
 Effective procurement enables for competitive advantages.
 Integrates channel members and assures quality suppliers in
the chain.
 Procurement function acts as a determinants of revenue,
costs and supply chain relationships.
 Purchasing is important for 2 reasons: 1. Cost efficiency 2.
Operational efficiency
Managing the procurement process
Need Analysis
•Identify needs
•User requirements

Make
Make or buy decision
Buy some
Buy components

Purchases Type
Select vendor
•Straight rebuy
•Market analysis
•Modified rebuy
•Potential vendors
•New rebuy
•Prescreen potential sources
•Evaluate remaining sources
•Choose vendors
Post purchase
performance evaluation Product delivery
 Supplier relationship
 Good supplier relationship helps firms to achieve efficiency and
effectiveness in implementing the procurement process and
creating and sustaining a competitive advantage to the firm.
 Quality: Technical specifications, design, product life, ease of repair
and maintenance, dependability.
 Reliability: On time delivery, Performance history, warranty
 Capability: Production capability, technical capability,
management, operating controls, labour relations
 Financial Consideration: Price, financial stability
 Desirable qualities: vendor attitude, training aids, packaging,
vendor location, repair service.
Thank you