Sales management and logistics

Exam date: 20.06.2024

NOTES
Topic 1: Introduction
1. Nature, place and rose of the sales function in the enterprise
a. Sale – party to exchange goods and services for other goods and services, or their
monetary equivalent and the transfer of ownership rights to them
b. Sales generate the income of the business unit
c. Each enterprise produces and sells its product on the market in order to achieve
profit
d. The deepening of the specialization and the division of labor leads to increase in
the number of exchanges between economic subjects
e. Drive value at the customer touch point – increase of profit
2. Aspects of sales
a. The sale – purpose and result of the commercial activity
b. Sales – a function of in the business organization
c. Sales – a business management concept
3. Indicators

4. Gross profit margin = (revenue – Cost of goods sold)/revenue

5. Customer Value
a. Value from individual transactions and customer lifecycle.
b. Sales management is crucial for maximizing customer value.
6. Sales Management Functions
a. Planning, Organizing, Directing, Controlling Sales Operations
i. Formulation: Strategic sales program integrating sales efforts with marketing.
 ii. Implementation: Directing sales staff efforts through policies and procedures.
iii. Evaluation and Control: Monitoring performance and adapting strategies.
b. Key Activities
i. Strategic Sales Program: Assess factors, select forms, organize efforts.
ii. Sales Program Execution: Manage territories, set goals/quotas.
7. Sales volume, revenue, profit quotas
i. Sales Performance Evaluation: Analyze sales by various metrics.
8. Sales Classifications and Situations
a. Types of Customers
i. Wholesale: For production/resale.
ii. Retail: For personal/household use.
b. Product Types
i. Industrial Goods: Machinery, equipment, raw materials.
ii. Consumer Goods: Convenience or optional products.
c. Market Types
i. Domestic Sales: Within the country.
ii. International Sales: Exporter and importer transactions, re-export,
international compensation.
d. Sales Strategies
i. Pull Strategy: Direct communication to end customers, demand-driven.
ii. Push Strategy: Stock-driven, promotion through sales channels.
e. Sales Goals
i. Transaction Selling: Short-term sales focus.
ii. Relationship Selling: Long-term customer relationship building.
f. Place of Sale
i. Store Sales: Physical locations.
ii. Non-Store Sales: Home delivery, catalog sales, vending machines.
g. Payment and Ownership Transfer
i. Commission Sale: Transactions by intermediaries at principal’s expense.
ii. Direct Sale: Transactions directly between buyer and seller.
9. Organizational Structures in Sales
a. Geographical Structure - Divides sales responsibility by regions.
i. Advantages: Market coverage, control, reduced travel costs.
ii. Disadvantages: Limited product knowledge, potential negative experience
effect.
b. Product Structure - Specializes in product lines.
i. Advantages: Expertise in product groups.
ii. Disadvantages: Increased transport costs, customer overlap.
c. Market Specialization - By market segments (industry or sales channel).
i. Advantages: Market knowledge, trend insights.
ii. Disadvantages: Requires extensive market research and training.
d. Combined Structure - Mix of geographical, product, and market specialization.
i. Advantages: Maximize benefits, minimize disadvantages.
ii. Applied Variants: Geographic-market, geographic-product, market-product.
 10. Sales Management Activities
a. Sales Planning and Forecasting
i. Setting objectives, policies, and procedures based on sales forecasts.
ii. Allocating resources to meet sales targets.
b. Territory Allocation and Customer Coverage
i. Determining frequency and methods of customer contact.
ii. Importance in wholesale trade.
c. Customer Acquisition - Studying potential customers, evaluating relationship
opportunities.
d. Terms of Deal - Revising payment and pricing terms based on market conditions.
e. Merchandising and Display - Ensuring optimal product presence and stock
maintenance in retail spaces.
f. Service Delivery - Providing main and after-sales services to ensure customer
satisfaction.
g. Sales Promotion - Implementing promotion strategies to boost sales.
h. Order Processing and Fulfillment - Efficient handling of orders, integrated with
customer service.
i. Distribution - Increasing sales volume through distribution intensity and sales
outlet expansion.
j. Risk Reduction - Assessing and mitigating market, business, and consumer risks.
k. Credit Control and Collection - Monitoring credit ratings and collecting overdue
payments.
l. Handling Complaints and Claims - Developing policies for customer complaints
and optimizing responses.
m. Sales Staff Training - Training in sales techniques and negotiation skills.
n. Personnel Motivation - Implementing incentive schemes for sales staff.
o. Feedback Provision - Regular communication of performance and targets to sales
teams.
p. Market Information - Collecting and processing market data from customer
interactions.
q. Executing Sales Plan - Ensuring sales targets are met through effective
management and evaluation.
Topic 2 – Stages and techniques
1. The sales and prospecting process
a. Selling involves a series of logically sequential actions by the seller to induce
customer satisfaction with the purchase
b. sales processes can vary in stages from 6 to 10, depending on the specialist
c. not every sale goes through all stages
2. Key points of the sale
a. Sales success - 40% preparation, 20% presentation, 40% post-sale activities
b. Prospecting – first step that involves identifying potential customers (prospects)
who have the necessary buying potential
i. Criteria for potential customers
 ii. Problem solving capability of the product
iii. Customer’s awareness of the problem
iv. Desire to solve the problem
v. Confidence in the product
vi. Financial resources to pay for the product
vii. Authorization to buy
viii. Efficiency of the purchase size
3. Steps of sale process
a. Prospect
b. Qualify
c. Connect
d. Identify pain & needs
e. Present
f. Handle objections
g. Issue proposal
h. Close
i. Delivery product or service
j. Upsell, cross-sell
4. Methods of gathering information – social networks, referrals, centers of influence,
exhibitions, direct mail, telemarketing, internet, advertisements, and international
company sources
a. Criteria for choosing a prospecting method
i. To meet the profile and needs of the own company
ii. To match the distribution strategy – pull or push
iii. Need for investment and current cost related to prospecting
5. Preparation for sale and choice of presentation method
a. Presentation methods
i. Pre- prepared and oral presentation
ii. Suitable for novice sales representatives and phone sales
iii. Provides control and consistency but limited feedback from the customer
b. Semi- structured method
i. Based on knowing the client’s needs and planning each step
ii. Companies often provide handbooks with rules and guidelines
c. Unstructured methods
i. Highly creative and controlled by the seller
ii. Focuses on discovering customer needs and decision criteria
iii. Suitable for industrial sales and experienced sales people
6. Customer approach techniques and elements of sales presentation
a. Approach techniques
i. Cold calling – making contact without prior arrangement – suitable in limited
cases
ii. Phone calls – plan in advance to maintain control of the conversation
iii. Personal appointments – requires preparation, product knowledge and
confidence
 iv. Third- party mediation – leveraging existing clients or other intermediaries to
arrange meetings
b. Elements of sales presentation
i. AIDA formula – attention, interest, desire, action
ii. Attract attention, build interest, present the product and form a desire to own
it
c. Effectiveness determinants
i. Persuasive Communication - Effective questioning, listening, and observing.
ii. Client Participation - Encourage client engagement and expression of doubts.
iii. Evidence Provision: - Reduce customer doubts with data, testimonials, and
guarantees.
7. Detecting and responding to customer objections
a. Techniques for handling objections
i. Listening and Understanding: Show empathy and listen carefully to objections.
ii. Clarifying Objections: Ask questions to clarify the customer's concerns.
iii. Responding Effectively: Provide relevant information and address concerns
directly.
iv. Turning Objections into Opportunities: Use objections to highlight the
product's strengths.
8. Sales and negotiation techniques
a. Closing techniques
i. Direct Request: Simply ask for the order.
ii. Summary Close: Summarize benefits before asking for the sale.
iii. Alternative Choice: Present options to encourage a decision.
iv. Assumptive Close: Act as if the decision has already been made.
v. Objection as a Purchase Incentive: Use objections to strengthen the case for
buying.
b. Negotiation techniques
i. "Bite": Request a large discount upfront to secure a desired one.
ii. "Nip": Accumulate small discounts successively.
iii. "Cherry Picking": Use various offers to prepare a counteroffer.
iv. "Interruption": Pause negotiations to check for intentionality.
v. "Presumption": Offer a complete solution after agreeing on main terms.
vi. "Obscuring": Highlight a minor issue to hide a major interest.
vii. "Burning Out": Temporarily leave unresolved conditions.
viii. "First Strike": Address known questions preemptively.
9. After sales activities
a. Post- sale focus
i. Establish the customer's satisfaction level.
ii. Identify factors influencing satisfaction.
iii. Lay the foundation for a positive, long-term relationship.
iv. Importance of after-sales activities in building customer loyalty and regular
purchases.
 Topic 3: Customer relationship management
1. The Essence of Customer Relationship Management
a. Key Concepts:
i. Customer Satisfaction: Essential for business survival; sales behavior must
adapt to market changes.
ii. Customer-Centric Approach: Focus on long-term relationships rather than
short-term sales gains.
b. Types of Relationships:
i. Social Relationships: Controlled by the salesperson, based on customer
expectations.
ii. Ad-hoc Relationships: One-off interactions with specific purposes, but lack
loyalty.
iii. Technical Relationships: Based on expertise and product quality; risk of
discomfort from information asymmetry.
iv. Partnerships: Mutually beneficial, involving deep interaction and shared
ideas.
2. Implementation Stages:
a. Assessment of Needs: Understand current customer needs and expectations.
b. Balance of Interests: Formulate a sales strategy balancing customer and company
interests.
c. Consistent Communication: Ensure clear and uniform information at all
organizational levels.
d. Sales and Resource Evaluation: Regularly assess sales results and resource use.
e. Forecasting Needs: Predict future customer needs and adapt strategies
accordingly.
f. Customer Assistance: Help customers realize their needs and guide their
purchase decisions.
g. Ongoing Contact: Maintain periodic and personalized communication with
customers.
3. Effective Customer Prospecting:
a. Situational Questions: Gather general information about the customer.
b. Problem Questions: Identify areas of dissatisfaction or difficulty.
c. Indirect Questions: Highlight future problems to stress urgency.
d. Closing Questions: Clarify how the product addresses customer problem
4. Cross-Selling Strategy - Offer multiple products to fulfill various customer needs and
boost sales.
a. Success Factors:
i. Understand client needs.
ii. Know product advantages.
iii. Adapt to different product choices.
b. Benefits of Cross-Selling:
i. Cost Reduction: Lower costs for acquiring new customers.
ii. Competitive Protection: Safeguard against competitors.
 iii. Customer Loyalty: Enhance customer retention.
iv. Reputation: Improve business reputation.
v. Personalization: Deepen customer relationship through personalized
interactions.
5. Sales and Customer Loyalty
a. CRM Benefits:
i. Administrative Cost Reduction: By 10-20%.
ii. Sales Volume Increase: Each merchant’s sales increase by 10-30% annually.
iii. Deal Closure Improvement: Increase by 5-15%.
iv. Customer Satisfaction Boost: Improvement by 3-10%.
b. CRM as a Strategy:
i. Customer Relationship Focus: Essential for business stability.
ii. Process of Customer Management: Manage customers at all points of
contact to enhance relationship value.
c. Common CRM Strategies:
i. New Customer Attraction: Resource-intensive but necessary.
ii. Current Customer Retention: Focus on valuable or high-potential customers.
iii. Customer Reactivation: Re-engage past customers, though risky.
d. Measuring Relationship Strength:
i. Duration of relationship.
ii. Client importance.
iii. Partnership level.
iv. Cooperation in product development.
v. Social distance.
e. Types of CRM:
i. Operational CRM: Focuses on operational efficiency and cost optimization.
ii. Analytical CRM: Utilizes extensive customer data to improve business
decisions.
f. CRM Approaches:
i. Marketing Approach: Exceeds customer expectations, solving problems
efficiently.
ii. Internal Approach: Maintains a detailed customer portfolio.
iii. Defensive Approach: Follows competitors and adapts their strategies.
g. CRM Requirements:
i. Customization: Adapt to business needs and future developments.
ii. Efficient Resource Distribution: Manage multiple tasks and users.
iii. Complex Process Management: Handle unexpected developments.
iv. Network Connectivity: Ensure seamless operation across multiple elements.
v. User-Friendly Interface: Easy to learn and navigate.
vi. Automation: Optimize segments, manage stock, and control time.
vii. Multilingual Support: Easy language and currency management.
viii. Data Protection: Ensure robust security measures.
6. Ethics in Sales
a. Ethical Standards:
 i. Moral Standards: Uphold values and principles in all sales activities.
ii. Sales Code: Guidelines for right or wrong conduct in business.
b. Ethical Management Levels:
i. Client Ethics: How to ethically work with clients.
ii. Colleague Ethics: Ethical conduct among colleagues.
iii. Competitor Ethics: Fair play with competitors.
iv. Organizational Ethics: Company-wide ethical practices.
v. Management Ethics: Ethics at different management levels.
c. Basic Ethical Principles:
i. Loyalty and protection of interests.
ii. Non-discrimination.
iii. Prevention of intentional damage.
iv. High professional standards.
v. Avoiding unfair practices.
d. Social Responsibility:
i. Proactive Policies: Address issues before they become urgent.
ii. Objection Handling: Resolve complaints while respecting individual interests.
iii. Social Program Participation: Engage in social and environmental initiatives.
Topic 4: Analysis, planning and forecasting of sales
1. Sales Evaluation and Analysis - Sales evaluation and analysis involve assessing both
the current state and the development of sales over time. This process uses a variety
of indicators to provide a comprehensive understanding of sales performance.
a. Key Indicators and Methods:
i. Absolute Volume of Sales: Total sales without adjustment for inflation or other
factors.
ii. Fulfillment of Goals: Measuring how well the business meets its sales targets.
iii. Average Sales Amount: Sales averages over time, by location, or across
different segments.
iv. Sales Volume Indices: Value and physical volume indices to measure sales
performance.
v. Sales Growth Rates: Annual growth rates and development rates.
vi. Evenness Ratio and Sales Risk: Indicators to assess sales stability and risk.
vii. Product Structure Analysis: Relative share and structural change coefficients.
viii. Factorial Analysis: Methods include differences, chain substitution, and
multiplicative/additive index analysis.
ix. Elasticity Coefficients: Measure responsiveness of sales to changes in price or
other factors.
b. Critical Point of Sales (Break Even Point - BEP):
i. Graph-Analytical Method: Visual representation where total revenue
intersects total costs.
ii. ABC Analysis: Based on the Pareto principle (20% of resources often yield 80%
of results), focusing on critical elements that drive the majority of sales.
c. Common Mistakes in Sales Analysis:
 i. Incorrect market definition
ii. Dispersed sales efforts
iii. Inadequate advertising targeting
iv. Ignoring future changes in the market
v. Incomplete information assessment
2. Sales Planning - Sales planning is crucial for directing future activities and achieving
business objectives.
a. Properties of an Effective Sales Plan:
i. Business Value: Defines main directions and tasks.
ii. Clarity: Clearly formulated for easy understanding and implementation.
iii. Detailed and Summary Versions: Both detailed and summary plans should be
developed.
iv. Baseline for Performance Assessment: Provides a benchmark for evaluating
sales performance.
b. Objectives of a Sales Plan:
i. Accelerate commercialization of new products.
ii. Streamline budgeting processes.
iii. Increase sales organization effectiveness.
iv. Optimize human resources management.
v. Enhance supplier relationships.
vi. Focus on customer loyalty and satisfaction.
vii. Improve cooperation with external partners.
viii. Reduce operating costs.
ix. Increase stock turnover and optimize stock levels.
x. Improve return on assets and profitability.
c. Components of a Sales Plan:
i. Current Status, Priorities, and Goals
ii. Tasks and Implementation Stages
iii. Managers and Team
iv. Deadlines and Activities
v. Budget
vi. Performance Control
d. Planning Objects:
i. Product groups and items
ii. Customer categories
iii. Territories
iv. Structural subdivisions
v. Contractors
3. Sales Forecasting - Sales forecasting involves predicting future sales based on past
data and expected market conditions.
a. Approaches to Sales Forecasting:
i. Market Test: Experimental approach in selected territories.
ii. Dynamic Data Series Analysis: Using historical data to predict future trends.
 iii. Statistical Analysis: Analyzing demand and interdependencies between sales
factors.
b. Methods Used in Forecasting:
i. Quantitative Methods: Based on historical data and statistical analysis.
ii. Qualitative Methods: Expert opinions, particularly useful when quantitative
data is unavailable.
c. Factors in Successful Sales Forecasting:
i. External Factors: Seasonality, economic stability, industry trends, tax and
monetary policies, competition, political stability.
ii. Internal Factors: Stock levels, sales quotas, resource needs, performance
variations, and time distribution.
d. SMART Approach for Forecasting Objectives:
i. Specific: Clearly defined goals.
ii. Measurable: Quantifiable outcomes.
iii. Achievable: Realistic and attainable targets.
iv. Relevant: Significant and aligned with overall objectives.
v. Time-Based: Timely and time-bound goals.
e. Critical Questions for Accurate Forecasting:
i. Who is the Object of the Forecast? Define the product, segment, or
assortment.
ii. What is the Time Horizon? Short-term (<3 months), medium-term (up to 2
years), or long-term forecasts.
f. Advanced Forecasting Techniques:
i. Correlation and Regression Analysis: To assess relationships between variables.
ii. Market Index Analysis: Comparing general and own economic development.
iii. Market Demand Forecasting: Using factors like the number of buyers,
purchase frequency, and consumer spending.
Topic 5: Control and promotion of sales
1. Essence of Sales Control - Sales control involves monitoring sales specialists'
performance and analyzing changes against the sales plan.
a. Tools and Processes: Management uses these to influence performance and
achieve business goals.
2. Types of Control Systems:
a. Effect-Based Systems - Measures final results (sales volume, number of new
customers, etc.).
i. Focuses on achieving short-term results, often leading to extrinsic motivation
through rewards like money and recognition.
ii. Disadvantage: Lacks mechanisms for preventing system errors and can reduce
service quality.
b. Behavior-Based Systems - Monitors individual behaviors and activities (sales
contacts, orders entered).
i. Helps specialists understand successful or failed sales, promoting better sales
techniques.
 ii. Examples: Product knowledge, adaptive selling, teamwork, sales planning.
c. Socially Oriented Systems - Emphasizes company values, trust, and customer
social influence.
i. Stimulates both extrinsic and intrinsic motivation through career
development opportunities and satisfactory pay.
e. Sales Control Objectives - Optimize sales volume by increasing sales contacts or
value per contact.
i. Control gross income, which includes trade discounts, costs of sales activities,
and profit.
4. Receiving and Processing Customer Complaints
a. Key Points:
i. Legal Aspect: Complaints are considered a form of irrevocable legal guarantee.
ii. Seller's Responsibility: The seller is responsible for product compliance and the
agreed commercial sale terms.
b. Types of Claims:
i. Refund of the amount paid.
ii. Replacement of goods.
iii. Price deduction.
iv. Free repairs (commercial warranty).
c. Common Weaknesses:
i. Insufficient staff training on consumer rights.
ii. Poor customer service culture.
iii. Ignorance of regulations and sales register keeping.
d. Reasons for Increase in Complaints:
i. Rising purchasing power.
ii. Product variety and short life cycles.
iii. Higher consumer quality demands.
iv. Safety requirements for goods.
e. Dedicated Employee's Role:
i. Organize and improve complaint policy.
ii. Resolve customer disputes.
iii. Identify weaknesses in sales and service.
iv. Communicate with customers effectively.
5. Nature and Trends in Sales Promotion - Increase sales and consumer satisfaction through
short-term initiatives.
i. Tools: Encourage impulse purchases, accelerate sales cycles, and target specific
segments.
6. Decision Areas for Sales Promotion:
a. Merchandise Supply:
i. Complexity and profitability of the product portfolio.
ii. Product range management and environmental impact assessment.
iii. Stock management and product brand assessment.
b. Trade Process Technology:
i. Organize commercial services efficiently.
 ii. Optimize time and space in the commercial establishment.
iii. Select appropriate locations for sales presentations.
c. Activities at Purchase Points:
i. Ensure product visibility.
ii. Create a pleasant shopping experience.
iii. Organize promotions and provide in-store information.
iv. Motivate impulsive purchases.
7. Merchandising Techniques to Increase Sales in Retail Outlets - Merchandising involves
the development, protection, pricing, maintenance, and communication of the
merchandise offering.
a. Goal: Attract consumers and induce impulsive purchases.
b. Principles of Good Visual Presentation:
i. Balance: Avoid overloading visual perception.
ii. Emphasis: Highlight the user's interest.
iii. Harmony: Combine goods, light, color, and texture pleasingly.
iv. Proportion: Maintain correct ratios between elements.
v. Rhythm: Guide the customer's attention smoothly through the display.
c. Merchandising Coverage:
i. Macro Scale: National level.
ii. Meso Scale: Product realization channel level.
iii. Micro Scale: Within the retail outlet.
d. Benefits of Merchandising:
i. Increased sales volume.
ii. Optimization of commercial areas.
iii. Procurement system control.
iv. Standardized commodity supply.
v. Active promotional events.
vi. Enhanced product image and vision.
vii. Direct customer feedback.
e. Developing a Merchandising Mix:
i. Identify customers contributing most to profits.
ii. Determine key customer needs and purchase triggers.
iii. Create a business profile that adds unique value compared to competitors.
Topic 6: Information base for sale management
1. Information base for sales management - Essential for collecting storing and using
info to drive sales and profit growth
a. Key components include info about customers, products and employees
b. Steps to create and maintain an info system
i. List categories of info
1. Customers – current and potential
2. Products – manufacturer, origin, composition, shelf life, etc.
3. Employees – profiles, skill, competencies
ii. Create a working model
 1. Prioritization and systematization
2. Information collection guidelines for different segment
iii. Develop collection tools
1. Forms and questionnaires
2. Program provisions and personal profiles
iv. System for storing information – archiving, security and access rights
v. Habits for using info
1. Regularly reviewing and updating info
2. Aligning with company goals and sales plans
c. Information deficit factors
i. Lack of new tech or high costs
ii. Incomplete knowledge of customer habits
iii. Quality of labor resources
iv. Changes in commercial tech and market dynamics
2. Effects of sales management system integration
a. Enhanced competitiveness and market opportunity capture
b. Improved sales strategy and labor productivity
c. Reduced operating costs and better service quality
d. Compliance with legal requirements
3. Utilization of information resources
a. Order tracking, customer analysis, pricing strategy
b. Sales forecasting and equipment monitoring
c. Innovation and product development
d. Budget development and sales activity expectations
4. POS systems – Point of sale systems enhance trading company competitiveness and
efficiency
a. Key technological element in modern commercial business since the 1980s
b. Types of commercial establishments
i. High- performance – maximized tech adaption
ii. Medium- performance – most but not all tech adopted
iii. Limited- performance – selective tech adoption
c. Factors Driving POS Adoption
i. Intense market competition and need for detailed reporting.
ii. Flexible management of trade allowances and pricing.
iii. Stock control and anti-theft systems.
d. Benefits of POS systems
i. Speed and accuracy of operations and transactions.
ii. Access control, error minimization, and real-time reporting.
e. System requirements
i. Durability, compatibility, competent maintenance.
ii. Data protection, self-diagnosis, and problem detection.
iii. Hardware and software guarantees.
f. Acquisition options
i. Complete solutions from specialized suppliers.
 ii. Separate hardware and software suppliers.
iii. Customized systems with various components from different suppliers.
g. Key features
i. Functionality, minimal setup time, data entry speed.
ii. Open solutions with wireless technologies, touch active consoles.
iii. Real-time information processing and error minimization.
5. Nature, characteristics and trends in electronic sales
a. Development of electronic sales
i. Driven by the Internet and WWW (World Wide Web).
ii. Five main identities of the Internet: Global network, communication
channel, open market, transaction platform, software development
platform.
b. Significance of e-commerce
i. Integral part of e-business.
ii. Major revenue generator and central to e-business structure.
iii. Convenience in selection and purchase processes.
c. Prerequisites for e- sale
i. Developed technological infrastructure.
ii. Skills to use the Internet and new technologies.
iii. Physically distant entities communicating electronically.
iv. Exchange of valuable resources.
d. Changes in participant roles
i. Suppliers: Traditional manufacturers and internet-based service providers.
ii. Traders: Main participants on the supply side.
iii. Consumers: Expanded range and changing dynamics.
iv. Financial Institutions: Facilitate online payments and financial services.
e. Objectives of electronic sale
i. Solid Products: Real products with added online services.
ii. Soft Products: Digitized items like software, media, and digital publications
f. Trends in E-sale
i. Increasing number of online merchants.
ii. Integration of online and offline sales models.
iii. Expansion of digital goods and services.
iv. Focus on consumer share and individualized service.
v. Development of networks with suppliers, partners, and consumers

Topic 7: Introduction to logistics

1. What is logistics? - Coordination and management of the flow of resources from the
point of origin to the point of consumption to meet customer needs.
a. Core objectives - Ensure the effective and efficient fulfillment of all supply chain
activities.
i. Activities: Planning, implementing, and controlling the forward and reverse
flow and storage of goods, services, and related information.
2. Economic and company benefits of logistics
a. Economic benefits
i. Investment in infrastructure (warehousing, transportation)
ii. Job creation
iii. Dependence of all economic activities on logistics efficiency
iv. Facilitation of international business and trade
b. Company benefits
i. Reduced production and distribution costs
ii. Access to new markets
iii. Improved process efficiency and control
iv. Better inventory and transport management
3. Basic types of logistics
a. Inbound logistics - Movement of inventory, raw materials, or supplies from
suppliers to a business.
i. Activities
1. Sourcing and procurement
2. Ordering, receiving, and material handling
3. Storage and warehousing
4. Inventory management, expedition, distribution
5. Tracking and reverse logistics
ii. Challenges
1. Inefficient shipping costs
2. Lack of information and poor planning
3. Non-standardized procedures (receiving, returns)
4. Supplier-related challenges
b. Outbound logistics - Movement of finished products to customers or end-users.
i. Activities
1. Warehouse and storage management
2. Inventory management
3. Distribution channel management
4. Delivery management
ii. Challenges
1. Coordination
2. Achieving the 7Rs (Right product, quantity, condition, place, time,
customer, price)
3. High inventory and transport costs
4. Meeting customer expectations
c. Third-party logistics (3PL) - Outsourcing logistics services to streamline delivery
workflows.
i. Types
1. Transportation 3PL
2. Warehousing and distribution 3PL
3. Information 3PL
ii. Advantages
 1. Time optimization and increased efficiency
2. Risk mitigation
3. Improved inventory management
4. Enhanced customer satisfaction
d. Fourth- party logistics (4PL) - Overseeing the entire supply chain as a lead logistics
provider.
i. Advantages
1. Data visibility and reduced supply chain complexity
2. Improved core competencies
3. Facilitated corporate expansion
4. Enhanced customer connectivity
e. Fifth- party logistics (5PL) - Comprehensive outsourcing of supply chains to a
service provider who manages all networks and negotiates prices.
i. Role - Engages in planning, organizing, and implementing logistics solutions
using 3PL and 4PL services.
Topic 8: Elements of logistics p1
1. Ordering Process
a. Purchase Ordering Process (Procurement) - Procurement involves acquiring
goods and services required by an organization to operate. This includes the
entire process from identifying needs to obtaining and managing suppliers
and their contracts.
b. Sales Ordering Process - Sales Ordering refers to the activities involved in
selling goods or services to customers. This includes order placement,
processing, and fulfillment.
c. Procurement VS Purchasing
i. Procurement - encompasses a broader range of activities, including
strategic sourcing, contract negotiation, and supplier relationship
management.
ii. Purchasing - is a subset of procurement, focusing mainly on the
transactional aspects of buying goods and services
2. Warehousing - Warehousing involves storing physical inventory for sale or
distribution. It is used by businesses to store products in bulk before shipping them
to other locations or directly to consumers.
a. Elements of Warehousing
i. Warehouse Management - Ensuring efficient storage, handling, and
movement of goods.
ii. Warehouse Operations - Activities including receiving, storing, picking,
and shipping.
iii. Warehouse Management Software (WMS) - Systems designed to
optimize warehouse operations and inventory management.
b. Types of warehouses
i. Private Warehouses - Owned and operated by a single company for
their own storage needs.
 ii. Public Warehouses - Available for use by multiple companies, typically
on a rental basis.
iii. Bonded Warehouses - Storage facilities where goods can be stored
without paying import duties until they are released for sale.
iv. Co-operative Warehouses - Owned and used by multiple organizations
collectively.
v. Distribution Centers - Specialized warehouses focused on efficiently
distributing goods to retailers or consumers
c. Terms and systems of warehousing
i. ASN (Advance Shipping Notice) - Notification of a pending delivery,
detailing the contents and arrival time.
ii. ERP (Enterprise Resource Planning) - Integrated management of core
business processes, often in real-time.
iii. TMS (Transport Management System) - Platform designed to
streamline shipping processes.
iv. MES (Manufacturing Execution System) - Systems that monitor and
control production on the shop floor.
v. EDI (Electronic Data Interchange) - Electronic communication method
that provides standards for exchanging data.
vi. QMS (Quality Management System) - Formalized system that
documents processes, procedures, and responsibilities for achieving
quality policies and objectives
d. Benefits of warehousing
i. Inventory Accuracy - Improved tracking and management of inventory
levels.
ii. Decreased Costs - Cost savings through bulk storage and efficient
distribution.
iii. Goods Protection - Secure storage minimizes damage and loss.
iv. Reduced Transport Costs - Consolidation of shipments lowers
transportation expenses.
v. Minimized Risks - Mitigates risks associated with supply chain
disruptions.
vi. Price Stability Maintenance - Allows businesses to manage inventory
to stabilize prices against market fluctuations
Topic 8: Elements of logistics p2
1. Inventory management - Inventory includes all the raw materials, products in
process, and finished goods available for sale that a company owns. It is also referred
to as "stocks" and is always physical.
a. Process - Inventory management involves ordering, storing, using, and selling
a company's inventory.
2. Strategies of inventory management
a. Pull Strategy:
i. Based on actual demand levels during a certain period.
 ii. Reactive strategy aiming to lower inventory costs.
iii. Not efficient with rapid changes in demand; can cause supply gaps.
b. Push Strategy:
i. Based on expected demand levels during a certain period.
ii. Proactive strategy aiming to lower operational costs.
iii. Can result in oversupply.
3. Methods
a. Stocks Review:
i. Constant monitoring of available inventory.
ii. Suitable for small businesses but can involve labor mistakes.
b. Just-In-Time (JIT):
i. Only the needed inventory is kept, reducing storage, insurance, and
wastage costs.
ii. Not flexible.
c. ABC Analysis:
i. Classifies inventory based on "value-quantity" levels.
ii. Better management of high-value inventory but requires substantial
resources.
d. FIFO (First-In First-Out):
i. Oldest inventory sold first to keep inventory fresh.
ii. Suitable for goods with a limited shelf life.
e. LIFO (Last-In First-Out):
i. Newest inventory sold first, often to save costs when recent inventory
purchase value or production costs are higher.
f. Safety Stock:
i. Buffer volume kept for emergencies.
4. Transportation - Transportation is the movement of goods from one location to
another and is a sub-unit of logistics. It includes land, air, or sea transport.
a. Functional areas
i. Operations Management - Organizing processes involved in making
goods and delivering services.
ii. Vehicle and Fleet Organization - Coordinating delivery vehicles for
optimum and efficient use of resources.
iii. Infrastructure Administration - Securing infrastructure involved in
logistics (e.g., roads, ports, airports, canals, rails, pipelines).
b. Benefits of well-managed transport logistics
i. Increases efficiency
ii. Lowers costs
iii. Optimizes inventory flow
iv. Supports environmental sustainability
5. Information flow and logistics information systems (LIS) - Logistics Information
Systems (LIS) are digital programs used to facilitate decision-making and manage
operations such as procurement, storage, order picking, shipment, and
transportation of goods.
 a. Domestic and international sales logistics
i. Domestics sales logistics - Involves organizing, tracking, and
coordinating the flow of goods and services from their sources until
the customer receives the final product within the same country.
ii. International sales logistics - Involves the study, planning, and
implementation of moving physical goods and materials from supplier
to customer across international borders.
1. Includes managing the international movement of money and
information.
Topic 9: Elements of transport
1. Road transport
a. Advantages
i. Flexible Service: Timings and routes can be easily adjusted to suit
individual needs.
ii. Door-to-Door Assistance: Provides direct services from origin to
destination.
iii. Service in Rural Areas: Can reach remote locations inaccessible by
other transport modes.
b. Disadvantages
i. Accidents and Breakdowns: High risk of accidents and mechanical
failures.
ii. Weather Vulnerability: Susceptible to adverse weather conditions.
iii. Not Suitable for Heavy Cargo and Long Distances: Limited efficiency
for transporting heavy goods over long distances.
2. Rail transport
a. Advantages
i. High Speed for Long Distances: Ideal for covering extensive distances
quickly.
ii. Dependable: Least affected by weather conditions.
iii. Suitable for Heavy and Bulky Goods: Cost-effective and efficient for
large-scale transport.
b. Disadvantages
i. Huge Capital Outlay: Requires significant investment for infrastructure.
ii. Centralized Administration: Public utility service with limited flexibility.
iii. No Rural Service: Not economically viable in rural areas due to high
costs.
3. Water transport
a. Advantages
i. Helpful in Defense: Vital for national defense strategies.
ii. Essential for Foreign Trade: Crucial for international trade activities.
b. Disadvantages
i. Riskier: Higher risk of accidents like sinking.
ii. Slow Speed: Time-consuming compared to other transport modes.
4. Air transport
a. Advantages
i. Rapid Speed: Fastest mode of transportation.
ii. Unbroken Journey: Continuous travel over land and sea.
iii. Emergency Services: Operable during natural disasters when other
modes fail.
b. Disadvantages
i. Very Expensive: High costs make it less accessible.
ii. Unreliable and Uncertain: Weather-dependent and prone to delays.
iii. Specialized Skills Needed: Requires highly trained personnel for
operations.
5. Pipeline transport
a. Advantages
i. Low Maintenance Cost: Economical in terms of upkeep and operation.
ii. Less Energy Requirement: Minimal energy consumption.
iii. Less Rate of Delays: Reduces losses and delays in transporting
materials like oil and gas.
b. Disadvantages
i. Leakage Issues: Requires prompt repair in case of leaks.
ii. High Initial Cost: Expensive to construct and lay pipelines.
iii. Security Concerns: Vulnerable to vandalism and terrorist attacks.
6. FAQs
a. Importance of Modes of Transportation:
i. Facilitates trade, communication, and business.
ii. Manages traffic flows and ensures smooth movement between
locations.
b. Cheapest Mode for Long-Distance:
i. Rail transportation is the most cost-effective for long-distance travel.
c. Difference Between Modes and Means of Transportation:
i. Modes of Transportation: Refers to the medium (e.g., waterway,
railway).
ii. Means of Transportation: Refers to the vehicle (e.g., car, bus).