Introduction to Logistics and Supply Chain Management

By 9211 - Pradnya Chavan 9219 - Dhiraj Gawande 9238 - Amit Mundhe

Logistics Management
Logistics management is the process of planning, implementing & controlling of efficient, effective flow & storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to the customer expectations.

Evolution Of Logistics Concept

Independent Business Function (Till 1950) Limited Internal Integration (1960-70)

Externally Integrated Function (1990 onwards)

Fully Internally Integrated Function (1980-90)

Independent Business Function Era (Till 1950s)

Each function performed independently Long history of application in wars but no formal concepts or theory for business existed. Post war-large demands and acute shortages of products Mindset-Increased capacities and high volume production Main object- maximize profit by volume sales Role of logistics limited to warehousing & transportation of raw materials and finished products. Focus: Production

Limited Internal integration Era (1960-70s)

Hard to convert products into cash
Recession of 1958 New players entered into market Demand saturated

Limited Internal Integration of- Materials

Management and Distribution Management.

Reason To reduce the cost in material handling & Physical distribution

Objective: Cost Control

Fully Internally Integrated Functional Era(1980s)

More critical business
Steep increase in oil price Sharp increase in transport costs-reduced profitability Very high inflation- significant increase in interest rates Pressure for increased internal efficiencies Production productivity was almost at a PEAK

Fully Internally Integrated Functional Era(1980s)..contd

Business need- maximize profitable sales volume and cost reduction Major development- Integrated logistics management i.e. Materials Management, Production Management and Distribution Management Main Focus- increased productivity, profitability

Focus: Internal Efficiencies

Externally integrated Functional Era (1990s)

Rapid privatization, Liberalization and globalization Business scenario becomes still more competitive New pattern for survival- provide most value at least cost Rapid technology development, many new concepts developed- TQM, MRP, JIT, etc Major thrust of era- Core Competence and high degree of specialization Do what you can do the best and outsource the rest
(Third party logistics services)

Focus : Core Competencies

Importance Of Logistics Management

Smooth flow Ability to meet customer expectations Delivery of Quality products Optimization of resources Enhances productivity and profitability Customer service at least possible cost

Components of Logistics
Generic component Primary component Supportive component

 Generic component
customer service
Customer service for competitive advantage Infrastructure requirement Service expectations of customer & response

Primary component
Network design
Number, size & location of facility network Relationship Infrastructure of each facility

 Transportation
Requirement , availability & regularity Modes of transport and coordination Transport cost

Inventory management
Stocking policies for raw material Various strategies: JIT, zero-inventory Inventory cost Lot size

 Supportive component
Storage & warehousing
Warehouse location Infrastructure facilities Operation mechanism Up-to-date recording of goods stock positioning cost

Material Handling
Safe, smooth & speedy flow MHE selection MHE cost, operating cost

 Protective packaging
Protection from damage & loss Design of package Reuse of packages Scrap value of packages Packaging cost

Procurement
Make or buy decision Vendor selection & management Quality specification Vendor development

Forecasting
Nature & trend of demand Forecast techniques

Logistical Competitive Advantage

Firms ability to differentiate itself with others , in the eyes of the customer Ensuring economies of scale in operation Cost advantage by low cost physical distribution system, a highly efficient assembly process or superior sales force utilization Value chain for competitive advantage

Michael Porters Value Chain

Dells Value Chain:

Components like disk drives, CD-ROM drives, power systems, cables and connectors are shipped from Asia Motherboards largely procured locally Build to order and JIT, inventory remains with suppliers Assembles 80,000 PCs a day. no warehouse Assembly factories hold inventory for maximum of 2 days

Dells Value Chain:

It sells 90% of its product through direct model. Receives payments from customer either through internet or credit cards Places orders on component vendors and proceeds on assembly Pays to suppliers 36 days after the product is shipped to customer Eliminates intermediaries, charge 20-30% margin

Logistics Cost and Value Advantage

High
-Low Inventory -No Stock Out -In tact Delivery -Capacity Utilization -High Working Capital Turnover -Integrated Total Logistics System a d v a n t a g e Value Advantage -Quality -Availability -Quick Response -Best Service -Consistency Of Logistical performance

c o s t

Low

High

Integrated Logistics Systems

Objectives
To ensure better customer service by value addition To ensure higher productivity and further curtailment of logistics cost by means of synergy between all three logistical functions To avoid repetition of similar types of logistical functions by diff departments at different levels To properly monitor the performance of existing logistics system, to make continuous improvement

Integrated Logistic System

Logistics Procurement Production Function Management
Inventory Producti on Schedul e Inputs Value

System Physical Distribution

Function

Function
Protecti ve Packagi ng O/p
Inventory Manage ment

Inputs Need

Sources Study

Shipme nt

Inventor y Manage ment

Custom er

Quality

Order Placem ent N & SC

Material Handlin g Packagi ng

C o n s u m e r

Storage

Transpo rt
DW

Order

Cash

Info

Framework for SC Strategy

Challenges and Opportunities in Supply chain
Huge scope for logistical cost reduction and substantial improvement in service level Innovations in the field of IT, communication tech and inventory control technology provide scope for their extensive use in solutions to logistics problems Orthodox mindset of corporate world

Framework for SC Strategy

Government
Micro-level policies and regulations for smooth flow of products in the interest of nation Privatization of existing infrastructure, to improve quality of service Participation of industrial association should be encouraged

Framework for SC Strategy

3rd party logistics service provider
Significance of customer service components affected by logistics Efforts for reducing logistics costs and improvement of customer service Co-ordination with other supply chain members Continuously identify scope for further reduction of cost

Vendors
Identifying their role in supply chain process and their contribution in terms of services

Framework for SC Strategy

Vendors
How their supply affect a clients customer service capability Recognize the growing importance of supply of only quality-certified products, quick response,flexibility in approach,gradual improvement of their productivity, for reducing their own costs and improving service capability

Framework for SC Strategy

Industry
Organization of seminars, workshops and conferences for development of awareness Organizing the unorganized sectors like vendors, distributors, transport industry etc Lobbying with govn for infrastructural development, uniformity and streamlining of taxes, incentives and motivation

Alignment of Supply Chain Strategy to Corporate Level Strategy

Business level strategy is an integrated and coordinated set of actions designed to exploit core competencies and gain a competitive advantage To establish how you work with your supply chain partners including suppliers, distributors,customers A firms supply chain strategies are usually formulated by middle level managers and are often done to reflect the business level strategy.

Dells SC strategy
With emergence of inter net, it started integrating operational components and developed the supply chain Supply chain strategy focused on being the low cost produces and business strategy gave emphasis on customer service

The real kings of Logistics

And the winner is

THANK YOU!!!