Logistics Management
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DEFINITION OF LOGISTICS MANAGEMENT CONCEPT OF LOGISTICS MANAGEMENT ROLE OF LOGISTICS MANAGEMENT IN AN ORGANIZATION ROLE OF LOGISTICS IN SCM & INTEGRATION OF LOGISTICS OPERATIONS THE FIVE ARMS OF LOGISTICS MANAGEMENT TRANSPORTATION, WAREHOUSING, MATERIALS HANDLING, INFORMATION & PACKAGING. PHYSICAL DISTRIBUTION MANAGEMENT BULLWHIP EFFECT
DEFINITION
Logical extension of transportation and related areas to achieve an efficient and effective goods distribution system Design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to customer). Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory( and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders
Integrated Logistics
The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods or service –producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way. Inbound logistics
Formal Definition of logistics management
Design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to consumer) Integrated view of a number of activities/functions may be required.
Decisions in logistics management 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Product Design (moulded plastic water tanks) Plant Location Choice of Markets/Sources Production Structure (cement manufactures) Distribution/Dealer Network Design (two wheeler) Location of Warehouses (two wheeler) Plant Layout Allocation Decision Production Planning Inventory Management – Stocking Levels
11. Transportation – mode Choice, Shipment Size and Routing Decision, and Transport Contracting 12. Packaging 13. Materials Handling 14. Warehouse Operations
Key Actors in effective logistics system Shippers Suppliers - Carriers (rail, road, air,water, pipeline) - Ware house providers - Freight Forwarders - Terminal Operators (Ports etc.) Government (regulator of logistics)
Role of government (legislations that affect logistics)
Central Sales Tax and Local Sales Tax Consignment Tax Excise Duties Octroi and Entry Tax Use of Packaging Material MODVAT (modified value added tax) Motor Vehicles Act and similar acts for other models Distribution Policies
Classification of logistics applications
Decision – wise Actor – wise Inbound logistics and outbound logistics Private vs public sector Single vs multiple plants Nature of the product Made to stock vs made to order
Total Logistics Cost
Product inventory at source Pipeline inventory Product inventory at warehouses and dealers Transit losses/insurance Storage losses/insurance Handling and warehouse operations Packaging Transportation Customer’s shopping
DAY 2
Explain the integrated logistics model Discuss the major activities associated with integrated logistics Discuss the service response logistics concept Discuss the value added concept in the context of integrated logistics Explain the financial impact of logistics on the firm Identify and discuss the major interfaces with logistics
THE INTEGRATED LOGISTICS MODEL
The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods
– or service – producing a network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way. Creates a sustainable, competitive, strategic advantage
Logistics management of services
Process of coordinating nonmaterial activities necessary to the fulfillment of the service in a cost – and customer service – effective manner Service response logistics activities waiting time capacity delivery
Models in logistics management
Forecasting models Mathematicals programming models location models allocation models distribution network design models Inventory Models Routing Models Scheduling Models
Financial impact of integrated logistics on the firm Macro level impact Micro level impact
1.
2.
3.
4. 5. 6.
Superior integrated logistics accounting system How do integrated logistics costs affect
contribution by product, by territory, by customer, and by salesperson? What are the costs of additional customer service? What trade-offs are necessary and what are the incremental benefits or losses? What is the optimal amount of inventory? How sensitive is the inventory level to changes in warehousing patterns or to changes in customer service levels? How much does it cost to hold inventory? What mix of transport modes/carriers should be used? How many field warehouses should be used and where should they be located? How many production setups are required? Which plants will be used to produce each product? What are the optimum manufacturing plant capacities based on alternative product mixes and volumes?
Supply chain (logistics network)
Supply chain is defined as the sequence of business processes and information that provides a product or service from suppliers through manufacturing and distribution to the ultimate customer. (marketing, logistics, production) Buy-make-move-store-sell
Characteristics of supply chain Decision in each part of the supply chain affect the other parts Accelerator or Bullwhip effect Demand changes by the end user create an accelerator effect in the supply chain which magnifies the size of demand changes on upstream supply chain elements (wholesalers, Warehouses, factories) Reduce total replenishment time (the sc to react rapidly to real demand changes and reduces the inventory needs)
Supply chain management vs logistics management CLM The process of planning, implementing and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements SCM seems to be replacing more of the traditional terms of management of material and service flows.
SUPPLY CHAIN STRATEGY
DELL VS CAMPBELL SOUP SUPPLY CHAIN SHOULD BE STRUCTURED TO MEET THE NEEDS OF DIFFERENT PRODUCTS AND CUSTOMER GROUPS The efficiency of the supply chain can be measured based on the size of the inventory investment in the supply chain Inventory turnover & weeks-of-supply Inventory turnover = cost of goods sold/ average aggregate inventory value
The cost of goods sold is the annual cost for a company to produce the goods or services provided to customers The average aggregate inventory value is the total value of all items held in inventory for the firm valued at cost. (includes the raw material, work-in-process, finished goods, and distribution inventory owned by the company) Weeks of supply is a measure of how many weeks worth of inventory
4 types of supply chain strategies
Efficient supply chains
Risk-hedging supply chains
Responsive supply chains
Agile supply chains
Efficient supply chain
Highest cost efficiency Non value added activities should be eliminated Scale economies should be pursued Optimization techniques should be deployed to get the best capacity utilization in production and distribution Information linkages should be established to ensure the most efficient, accurate, cost-effective transmission of information across the supply chain
Risk-hedging supply chains Pooling and sharing resources in a supply chain so that the risks in supply disruption can be shared. Alternative supply sources reduce the risk of disruption Sharing the safety stock with other companies IT is important for the success (Hydro electric power, food produce)
Responsive supply chains Responsive and flexible to the changing and diverse needs of the customer Companies use build to order and mass customization processes as a means to meet the specific requirements of customers (Fashion apparel, computers, popular music)
Agile supply chain
Supply chains that utilize strategies aimed at being responsive and flexible to customer needs, while the risks of supply shortages or disruptions are hedged by pooling inventory and other capacity resources. Ability to be responsive to the changing, diverse, and unpredictable demands of customers on the front end, while minimizing the back-end risks of supply disruptions
DEFINITION OF LOGISTICS MANAGEMENT CONCEPT OF LOGISTICS MANAGEMENT ROLE OF LOGISTICS MANAGEMENT IN AN ORGANIZATION ROLE OF LOGISTICS IN SCM & INTEGRATION OF LOGISTICS OPERATIONS THE FIVE ARMS OF LOGISTICS MANAGEMENT TRANSPORTATION, WAREHOUSING, MATERIALS HANDLING, INFORMATION & PACKAGING. PHYSICAL DISTRIBUTION MANAGEMENT BULLWHIP EFFECT
DEFINITION
Logical extension of transportation and related areas to achieve an efficient and effective goods distribution system Design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to customer). Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory( and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders
Integrated Logistics
The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods or service –producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way. Inbound logistics
Formal Definition of logistics management
Design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to consumer) Integrated view of a number of activities/functions may be required.
Decisions in logistics management 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Product Design (moulded plastic water tanks) Plant Location Choice of Markets/Sources Production Structure (cement manufactures) Distribution/Dealer Network Design (two wheeler) Location of Warehouses (two wheeler) Plant Layout Allocation Decision Production Planning Inventory Management – Stocking Levels
11. Transportation – mode Choice, Shipment Size and Routing Decision, and Transport Contracting 12. Packaging 13. Materials Handling 14. Warehouse Operations
Key Actors in effective logistics system Shippers Suppliers - Carriers (rail, road, air,water, pipeline) - Ware house providers - Freight Forwarders - Terminal Operators (Ports etc.) Government (regulator of logistics)
Role of government (legislations that affect logistics)
Central Sales Tax and Local Sales Tax Consignment Tax Excise Duties Octroi and Entry Tax Use of Packaging Material MODVAT (modified value added tax) Motor Vehicles Act and similar acts for other models Distribution Policies
Classification of logistics applications
Decision – wise Actor – wise Inbound logistics and outbound logistics Private vs public sector Single vs multiple plants Nature of the product Made to stock vs made to order
Total Logistics Cost
Product inventory at source Pipeline inventory Product inventory at warehouses and dealers Transit losses/insurance Storage losses/insurance Handling and warehouse operations Packaging Transportation Customer’s shopping
DAY 2
Explain the integrated logistics model Discuss the major activities associated with integrated logistics Discuss the service response logistics concept Discuss the value added concept in the context of integrated logistics Explain the financial impact of logistics on the firm Identify and discuss the major interfaces with logistics
THE INTEGRATED LOGISTICS MODEL
The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods
– or service – producing a network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely way. Creates a sustainable, competitive, strategic advantage
Logistics management of services
Process of coordinating nonmaterial activities necessary to the fulfillment of the service in a cost – and customer service – effective manner Service response logistics activities waiting time capacity delivery
Models in logistics management
Forecasting models Mathematicals programming models location models allocation models distribution network design models Inventory Models Routing Models Scheduling Models
Financial impact of integrated logistics on the firm Macro level impact Micro level impact
1.
2.
3.
4. 5. 6.
Superior integrated logistics accounting system How do integrated logistics costs affect
contribution by product, by territory, by customer, and by salesperson? What are the costs of additional customer service? What trade-offs are necessary and what are the incremental benefits or losses? What is the optimal amount of inventory? How sensitive is the inventory level to changes in warehousing patterns or to changes in customer service levels? How much does it cost to hold inventory? What mix of transport modes/carriers should be used? How many field warehouses should be used and where should they be located? How many production setups are required? Which plants will be used to produce each product? What are the optimum manufacturing plant capacities based on alternative product mixes and volumes?
Supply chain (logistics network)
Supply chain is defined as the sequence of business processes and information that provides a product or service from suppliers through manufacturing and distribution to the ultimate customer. (marketing, logistics, production) Buy-make-move-store-sell
Characteristics of supply chain Decision in each part of the supply chain affect the other parts Accelerator or Bullwhip effect Demand changes by the end user create an accelerator effect in the supply chain which magnifies the size of demand changes on upstream supply chain elements (wholesalers, Warehouses, factories) Reduce total replenishment time (the sc to react rapidly to real demand changes and reduces the inventory needs)
Supply chain management vs logistics management CLM The process of planning, implementing and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements SCM seems to be replacing more of the traditional terms of management of material and service flows.
SUPPLY CHAIN STRATEGY
DELL VS CAMPBELL SOUP SUPPLY CHAIN SHOULD BE STRUCTURED TO MEET THE NEEDS OF DIFFERENT PRODUCTS AND CUSTOMER GROUPS The efficiency of the supply chain can be measured based on the size of the inventory investment in the supply chain Inventory turnover & weeks-of-supply Inventory turnover = cost of goods sold/ average aggregate inventory value
The cost of goods sold is the annual cost for a company to produce the goods or services provided to customers The average aggregate inventory value is the total value of all items held in inventory for the firm valued at cost. (includes the raw material, work-in-process, finished goods, and distribution inventory owned by the company) Weeks of supply is a measure of how many weeks worth of inventory
4 types of supply chain strategies
Efficient supply chains
Risk-hedging supply chains
Responsive supply chains
Agile supply chains
Efficient supply chain
Highest cost efficiency Non value added activities should be eliminated Scale economies should be pursued Optimization techniques should be deployed to get the best capacity utilization in production and distribution Information linkages should be established to ensure the most efficient, accurate, cost-effective transmission of information across the supply chain
Risk-hedging supply chains Pooling and sharing resources in a supply chain so that the risks in supply disruption can be shared. Alternative supply sources reduce the risk of disruption Sharing the safety stock with other companies IT is important for the success (Hydro electric power, food produce)
Responsive supply chains Responsive and flexible to the changing and diverse needs of the customer Companies use build to order and mass customization processes as a means to meet the specific requirements of customers (Fashion apparel, computers, popular music)
Agile supply chain
Supply chains that utilize strategies aimed at being responsive and flexible to customer needs, while the risks of supply shortages or disruptions are hedged by pooling inventory and other capacity resources. Ability to be responsive to the changing, diverse, and unpredictable demands of customers on the front end, while minimizing the back-end risks of supply disruptions
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