Elements of Logistics Management

Er. H. Manjunath

Project Report:

Logistic Information System

and Logistics Planning
Process

Subject

Elements of Logistic Management

Presented to :

Er. H. Manjunath

Prepared by :

Naqeeb S. (05), Mustafa Bootwala (31),

Roma khot (32), Nida Shaikh (33),
Adil Shaikh (34), Amir Reza (35).

Date

10/10/2008

Elements of Logistics Management

Er. H. Manjunath

Index:

Sr No.

Contents

Page
Nos.

Chp-1 Logistics Information System

1.1

Definition

1.2

Importance of information

1.3

Main functions of LIS

1.4

Presentation of Information

1.5

Characteristics of Information

1.6

Technologies Involves

1.7

Knowledge Management

1.8

Logistics Information Flow Architecture

Chp-2 Logistics Planning Process

2.1

Definition

2.2

Factors Required For Planning

2.3

Mission Statement

2.4

The Mission Of Logistics

Elements of Logistics Management

Er. H. Manjunath

2.5

Planning Methodology

2.6

Planning Structure in the Organization

2.7

Logistics Planning

2.8

Influencing Factors on Strategy and Planning

2.9

Planning, Budgeting and Controlling

2.10

Action On Operational Level

2.11

Logistics Plans In Coordination With Other

Departments

LOGISTIC INFORMATION SYSTEM

DEFINITION:
LIS is an interacting structure of people, equipment, and
procedures

that

together

make

relevant

information

available to the Logistic manager for the purpose of

planning, implementation, and control. The information is
the data processed to get meaningful picture of the
situation and generate thoughts for further actions.
Comprehensive relational database that contains the type of
information required to make effective decisions. This has
greatest use in all the parts of logistics management such as
the transportation, inventory, and product areas with
warehousing and customer areas showing less progress.

IMPORTANCE OF INFORMATION
In the new competitive world success is measure of more
sales, increased profit or a growing customer base. More
important is to get an edge over the competitor. For that

Elements of Logistics Management

Er. H. Manjunath

purpose basic business demands to simply get better at

what we do. In the field of logistics, there has always been
an abundance of data. Shipping bills alone make a lot of
information. Gathering the data is important; evaluating the
information,

setting

benchmarks

and

measuring

performance and progress is critical.

The purity of the raw data is important. The small issues
can have a major impact. Simple spelling errors or listing an
address as a road can confuse during the evaluation
process. Logistics has to develop some simple, yet powerful
tools to quickly cleanse raw data from virtually any ad all
sources.
From the data available many reports are generated, which
Definition & Importance

can pinpoint simple solutions that can generate cost savings

and/or service improvements. These can have significant
impact on profitability and customer satisfaction. Further
the decisions have to be taken at every stage which impact
throughout the entire organization, from operations to
finance.

The

critical

factors

are

the

quality

of

the

information, the ability to recommend and implement the

changes.

Elements of Logistics Management

Er. H. Manjunath

For some square meters of warehouse space and few lacks

worth of inventory, the information is a critical factor in
seeking continuous improvements.
The information is power. The evolution of new profession
depends on putting that high quality information into the
hands

of

decisions

the

professional.

that

can

make

The
a

logisticians

measured

can

take

difference

for

companies.
Example-In the small enterprises like hotel industries the
practice of ordering has progressed from phone to fax. And
now it is shifting from faxing to Internet mode.

MAIN FUNCTIONS OF LIS

The functions are as follows.
Take proper decision at all levels in the organization.
Provide Database at appropriate stage.
Support Planning function.
Provide Controls in the operations.
Communication with concerned persons.

Importance
D
A
T
A

I
N
F
Contd..,
O
R
M
A
T
I
O
N

Policy Level
Functions

Decision Level
Control Level
Operating Level

D
E
C
I
S
I
O
N
S

Elements of Logistics Management

Er. H. Manjunath

The organization has different levels. Each level has

different needs of the information. The lowest level is the
operating level. Here the activities are at the level of
workmen;

charge

hand,

loading-unloading,

warehouse

material handling functions take place. Generally the data

gets generated here. This data has to be transferred to
further levels of control level to take decision form of
information.
At control level the efforts are to be taken to improve
efficiency

of

the

operating

level

by

analyzing

the

information. At the decision level the manager has to

evaluate and analyze the information to see the operations
and customer needs are equalized. At the top level the
logistics management has to decide the policy on the basis
of factors of warehouse, transportation system the future
plans.
The customer needs, satisfaction is given prime
importance while making policy. At every level some data is
generated and same is processed in to relevant information

6
Functions Contd..,

Elements of Logistics Management

Er. H. Manjunath

for every level in the organization. As the material keeps

moving in the organization from supplier to the customer
the data keeps on generating. Analyzing this data and
taking the needful decisions and implementing these
decisions improves organizational efficiency to provide the
right supply to the customer at right time at right place. The
proper decisions can be taken by logistics management by
having

quality

information

at

every

point

in

the

organization.

PRESENTATION OF INFORMATION:
The style of presenting the information is important. It
is to be seen by whom the information is to be used and the
purpose. Generally the people are anxious about getting
some or other information. As much as transparency is
there in the organization the flow of information is fast and
clear. In the absence of transparency the people are left
without

needful

information.

The

presentation

of

information has to be eye catching as well as meaningful.

Following are the different methods of presenting the
information.

Elements of Logistics Management

Er. H. Manjunath

Written Form
The

written

information

is

called

as

proper

communication. However in order to use it for the purpose

it is intended efforts have to be taken to avoid essay type
write up. There are situations where the matters have to be
written in sentences. For example the remarks are to be
written at the end of some charts or graphs.
The reports on number of subjects by employees, visit
reports, tour reports training reports, etc are the example
of the information in the written form.

Charts
In the similar way bar charts are useful to get comparative
picture of different attributes.
As
shown
in figure the comparison is given for two year
Presentation
of Information
performance of the company in view of different attributes,
such as sales, profits, reserves, pending orders, etc.
The attribute is displayed in the bar chart like shown in the
figure. There are cases which are well presented by pie
charts. Different constitutes are properly indicated on these
pie charts.
The figure shows the bar chart shows the data to compare
the information. These types of charts are good for the top
management to get them right comparison for attribute.

Elements of Logistics Management

Er. H. Manjunath

Graphs
The

graphs

are

important

method

to

present

the

information. It gives the data in a proportional manner,

related to some other attribute.

For Example
The extent of rejection due to a typical problem on the
production shop is shown on the Y axis and the X axis the
dates are given. Such a graph gives information to the
production manager.
The sales figure related to the date or month are indicated
on the graph the management to get an idea of the growth
of dispatches.

Columns sheets
The charts are useful to get the data in tabulated forms.
Different attributes are given in the tabulated form.
This method is good for the middle level management. They
Presentation of Information contd

need different types of information in the tabulated form.

Proper units like Tones, Millions of Rupees etc need to be
given. Each column is given or mathematical functions
derived are provided. So that no one needs to calculate
further.

Elements of Logistics Management

Er. H. Manjunath

Often it is observed that people concerned do not know the

purpose of the statement has come to them and what action
they need to take. So many computerized statements
coming to a person, he is confused and may ignore some of
the important data from them.

Black Board
Black Boards are provided in the departments, shop floor.
On these boards the important information is mentioned.
This information is usually the company matters related the
working of that department. For example on shop floor it is
indicated, as to what is the production planned and
scheduled for that period. What is major problem and
hurdle to achieve that scheduled quantity? Important data
should be highlighted on these boards to make clear the
needs to all concerned. Also the same should be explained
to the proper persons.

Hoarding
Very important information is displayed on the hoardings,
which are displayed at important place in the organization.
Generally all are concerned with this information. This may
be generally a one line statement. This may the statement
indicating a receipt of the large order from important
Presentation of Information contd

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Er. H. Manjunath

customer. Or it can be the welcome visit of an esteemed

customer.

Verbal/Telephonic
What ever the mechanism available, it can not eliminate the
speaking of the people with each other. In the department
matter people should continue telling information to each
other and check the communication in complete and it is
understood by the concerned persons. At long distance
appropriate use of the telephone/mobiles has to be used to
convey the problems and information. The heap of computer
statements or the emails can not become the substitute for
verbal transfer of information.

Other Methods
This is the system in Amada company in Tokyo, Japan. We
were taking lunch in the staff canteen. It was a big size
descent place. Staff and important clients were enjoying
delicious food. Few sweet beautiful girls came in the gallery
area in good music. They displayed big banner. It showed
the Orders which were received by company yesterday. The
value of those orders. The order completion is scheduled
etc.

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Er. H. Manjunath

This type of information is conveyed to the people as pride,

esteem, to get ready to satisfy the requirements of the
order, etc.

CHARACTERISTICS OF INFORMATION
The information is the major factor, which helps to create
data to take actions, make perfect plans, as well as decision.
Proper planning and utilization of space delivers improved
warehouse inventory visibility.
Enhanced

visibility

decrease

buffer

stock,

increase

Presentation of Information contd

efficiency,
and reduces movement.

Real Time Information

The information has to be available fresh at any time when
taken by the needy person. It should be available to all the
people who so ever logs in. Real time means the activity,
which has taken place should be reported to all the points
immediately, without any delay.
The perfect time delivers near 100% accuracy, eliminating
waste and redundancy Imp roved order fulfillment errors
and improved fulfillment cycles. Perfect time can be
maintained by having quick measurement devices, good
scanning instruments. Manual data updating has limitations

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Elements of Logistics Management

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although many depend on that. The accuracy of the decision

is possible on time information.

Accuracy
The information should be accurate. The facts and figures
should match the real position, where the event takes place.
As the event changes, the information also should be
updated. Old information will lead to wrong decision. This
increase labour efficiency through system directed picking.
Pick rates are improved. No more lost or misplaced
inventory.

Accurate

real-time

data

decrease

or

even

eliminates cycle counts. The inventory reduction is possible

due to accurate information.

Regular
Availability
Characteristics
of Information
The information should be available on regular basis,
constantly and any place. It should not be difficult to
retrieve from the source. Rapid availability can only make
right person to take right decision. The managers, client,
supervisors should be in position to get information and any
uncertainty of order, production should be understood
immediately. Such a thing is only possible in the computer
system. Management can respond the customer and take
right decision for any change. Since the logistics area is
highly

spread

geographically

it

is

required

to

have

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Elements of Logistics Management

Er. H. Manjunath

accessibility for the information at any place on continuous

basis.

Relevant to right person

The right information has to be given to the right person at
time is the method of logistic management. Great amount of
information of high variety is not at all useful to take proper
decision and action. For example the report indicating the
production completed and stores credited for last week is
important to the production manager and ales manager.
However it may not be useful to the purchase manager.
Legal adviser needs the detailed report of the dispute o the
shop floor, but it may not be of use to the sales manager.
Production reports may be useful as information to the head
of marketing, but it may not be relevant for the people who
move in the market.

TECHNOLOGIES INVOLVES
With the advent of the improvement computer technology
the information system in the organization is becoming easy
job. It provides all the necessary needs of the perfect
information system. The speed , the real time information ,
Characteristics of Information contd

customers and vendors data along with inventory are all

14

Elements of Logistics Management

satisfied

by

Information

the

Er. H. Manjunath

application

systems

help

of

computer

managers

to

technology.
monitor

pre

negotiated prices and rebates, and to better manage

inventory tracking.

Internet Connectivity
Internet-enabled Information systems have great potential to improve the
efficiency and effectiveness of supply chain activity.
Direct

link

between

the

companies

is

possible,

eliminating the middle points like retailers, distributors,

agents, etc giving straight service to the customers. The
warehouse of the company is placed at distant places.

They need to have quick connections with each other as

well as with the main office and the manufacturing plants.
Now the plants are also placed at different palaces. The
LAN system with the internet connectivity is the great boon
to the information network. The people can do the job easily
with this facility.
Many firms view effective management of logistics and
supply chain activities as prerequisites to overall cost
efficiency, and keys to ensuring their ability to competitively
price their products and services. The company meets the
logistic needs of its customers. Management indicates that
highest priorities are on customers, productivity, and
Technologies Involves
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Elements of Logistics Management

Er. H. Manjunath

performance. It is clear that Internet and E-commerce

issues are both recognizable and critical..

E - Commerce:
This is the emergence of new system of selling, buying
through the internet connectivity. The
long chain between the real consumer
and the manufacturer is eliminated by
this method. Thus resulting is much
cost reduction of logistic operations on
both the sides. The consumer ticks on the list of articles that
he needs and places the order to the manufacturer on the
internet. The internet connectivity is now available to the
common

people

at

their

home

places.

They

find

it

convenient to use it and place the orders. As the confidence

increases regarding the quantity and quality the system will
definitely grow.
Three key types of Information System (IS) personnel
needed:
Architect to design process
System

programmer

to

assemble

hardware

and

software.
Data manager to build data warehouse.

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Elements of Logistics Management

Er. H. Manjunath

Bar - Coding / Scanning

This

is

most

commonly

used

automatic

identification technology. Consistency of this

technology is the important factor in efficiency
and effectiveness.
Here optical scanner reads the bar codes on
the

container

of

the

product

accurately.

The

read

information
is in
the digital form. This gets fed to the
Technologies Involves
contd
computer immediately. This information is available to be
used immediately.

Electronic Data Interchange (EDI)

This helps B2B, computer exchange of business data in a
structured, machine- process able format. This is the direct
transfer of information from a company to other company
without the human intervention. The speed and the
accuracy is maintained at level.

Extensible Markup Language (Xml)

This is the method of packing information for movement on
they Internet. This may replace EDI in the future.

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Elements of Logistics Management

Er. H. Manjunath

Data Management and Imaging

This is the image processing method of documents like
drawings, bill of material, etc. These are
handheld input devices and optical scanning
popular in data management. These documents
can be stored and instantaneously transmitted
to the customers for evaluation, quotation, etc,
making the logistics operation quick. Both photographic and
facsimile processes are being used to image documents.

RF Technology
This uses radio frequency to transmit computer outputs,
possibly from an expert system to human operated devices,
such as, a forklift. This optimizes quality, efficiency, and
accuracy. This helps two way communications. On board
Technologies Involves contd

computers and satellite tracking. This technology uses

systems such as GPS to track and communicate with mobile
and / or remote vehicles.
This is used for broader, non-optimum solutions. It is
Responsible for short-term, day-to-day functioning that help
manage warehousing, transportation, international trade,
and inventory.

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Elements of Logistics Management

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Many recent advances in technology and these advances

will most likely continue to evolve and impact logistics
management in this future.

Artificial intelligence
This is a system where the actual happening in future can
be predicated by the equipment. In logistic management
this is used to get idea of transportation time, type and cost
involved, inventory levels in the warehouses, customer
service response, and time required for delivery. These
issues are generated as model by feeding the relevant data
to the system.

Export System
This is the computer program which gives solution to the
problem

by

the

computer.

It

offers

to

common

inexperienced man the solution which experts and highly

experienced teams of the persons. This is used for the
problems in logistics, designing the modes of transportation
and monitoring the activity.

KNOWLEDGE MANAGEMENT
Technologies
Involves
contd
To
maximize
the
results of an environmental scan, the

logistics manager needs to consult:

Logistics area employees

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Elements of Logistics Management

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Channel partners
Internal audit or external consultant
Other internal logistics initiatives
It is increasingly popular to dedicate a website to hold
information from the scan.
Many logistics managers do not believe that reports
communicate effectively. Firms must have a scientific and
intuitive knowledge of customers and suppliers information
requirements. Lack of co-ordination and integration are the
key logistics and supply chain processes. See that logistics
organization strategies move from a functional to a process
orientation. Early implementation efforts may suffer due to
poor data or the non-availability or none sharing of future
data.

Adapting to new information technologies

The organization must have the financial resources needed
to assure a smooth, full implementation and the people
willing to accept and the people willing to accept and use
new technologies.
Firms must create opportunities for interaction and team
efforts among logistics managers and those others most
knowledge about information technologies.

Knowledge Management

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Er. H. Manjunath

LOGISTICS INFORMATION FLOW

ARCHITECTURE:
The operations in the organization are planned in a
particular strategic plan. These plans are made as per the
forecast by marketing department. On the basis of this
forecast the logistic plans and further production plans are
made. This chain of operations has to be converted in to
information. The center point happens to be inventory
management to help the development of the inventory. The
information architecture has to be developing to organize
these operations. Without the accurate information the
regular activities are not possible. The figure on the next
page indicates logistic information architecture.
This includes the information from both the sides such as
customer order on one side and purchase, production and
inventory management on the other side. Data warehousing
should provide information for planning and coordination of
production and deploy inventory to satisfy customer orders.
Co-ordination Flow
Strategic
plan

Capacity
plan

Forecast

Logistics
plan

Production
plan

Procurement
plan

Inventory
Deployment
Inventory
Management

21
Order
Management

Order
processing

Distributio
n

Transportation
&

dispatch

Purchase
Function

Elements of Logistics Management

Er. H. Manjunath

Operation Flow
For accuracy requirements the hardware and software parts
of the computer system become backbones of the total
information system. These include computers, servers, and
internet connectivity, input and output devices as hardware.
The relevant logistic program becomes the software part.
Logistics Information orders
Flow
Replenishment
on the production shops as well as
ARCHITECTURE:

vendors shops depend on the movement of finished goods

to the customers. The logistics activities of transportation
and warehousing depend on the strategy and the flow of the
goods to the customers.

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LOGISTICS PLANNING PROCESS

DEFINITION:
Planning is the list of the activities to achieve a typical
goal, which is fitting in the budgeted expenses and possible
to achieve.
The
planning
Logistics
Information
Flow is the main function at each and every
group in the company. At the top of company people have to
device the mission for the company. They have to set a goal
for the company. To achieve the goal of the company proper
planning has to be done.

FACTORS REQUIRED FOR PLANNING

The function of planning has needs following important
factors.
Aim to be achieved. The description and definition of
the project-activity has to be crystal clear. It should
have sanction from right authority. Projects are failure
if they are not clearly defined.
Resources in terms of money, men, place. Success of
the project needs these factors with sanction of senior
management. Proposing number of projects and not
providing the resources results in mess. We observe

23
LPP Definition & Factor

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Er. H. Manjunath

number of incomplete projects by government, roads

and railways etc. The transportation and logistics is
poor in India due to poor infrastructure. There are
many good projects in India. Many of them are lying in
incomplete stage. So money is spent but fruits are not
there. The people continue suffering.
Time period to achieve the aim is required. If the
project setting up needs a period of say one year, it
should be given one year. That period should be
available.
Mechanism to coordinate, control the activities. Use of
software,

Bar

charts,

PERT/CPM.

Third

party

monitoring is useful. Timely review is important.

Critical path method is the best known system of
controlling and monitoring any project plan. These
charts will indicate how the time period in the project
and finance management can be done.
Involvement of people. Any project will be found failure
if right people who will be working on the matter in
future. Appropriate involvement of the people will
result in success even in the difficult projects.

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MISSION STATEMENT
For any organization, planning is essential for its survival
and growth in its business. While planning, management
should take into consideration the overall mission statement
of the organization and develop specific action plans to
enable the organization to move in the proper direction. For
the rapidly changing business environment, managers need
to

anticipate

changes

and

equip

their

organizations.

Managers should be proactive rather than being reactive in

a crisis mode and should be able to move forward in
achieving theirs companys mission.
A mission of any company is a statement indicating goals of
the organization. As per TQM it is to be generated by all the
employees of company.
It indicates the aims and targets, dealing with customers,
goals,
ethics
etc. itStatement
is not expected that to be just elusive
Factor contd
& Mission
statement. As per ISO requirements the company has to be
explained and shown in documents, as to what actions are
being taken for achieving the mission.
In order to fulfill the needs of mission of the organization,
the top level persons have to decide line of action.
Strategies have to be selected for implementation in order
to meet the objectives and goals that will suit the mission.

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Elements of Logistics Management

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Plan of the organization is to decide activities to achieve the

corporate mission. The strategic or long-term plans for the
firm are developed at the highest levels of management of
the company.

THE MISSION OF LOGISTICS

An organization achieves competitive advantage over its
competitors by fulfilling customers requirement, by means
of value advantage or Effectiveness at the lowest cost of
product by improvement in productivity Efficiency.
Logistics aims to achieving a decided quality requirement of
customer

service

through

efficient

operations.

Thus,

integrated logistical systems aim to fulfill the service at the

level required by the customer by performing the necessary
operations at the lowest possible total cost.
For example the mission of leading Logistics Company in
India, Shipping Corporation of India is as follows.

Mission Statement of Shipping Corporation of

India
To serve Indias overseas and coastal seaborne trades as its
primary flag carrier and be an important player in the field
of global maritime transportation as also in diverse fields
like Offshore and other marine transport infrastructure.
Mission Statement contd, Mission of log..

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PLANNING METHODOLOGY
The strategic plan is generally developed at the top level
with the basis of long term needs. The strategy is based on
the mission. On the basis of the yearly budgets made. These
are passed on to the concerned departments to create their
project plan, which are functional plans.
Mission of the company gives rise to the strategic plan at
top level. The plan for each department like marketing,
production, design, logistics, etc., is derived from the
companys strategic plans, which are developed at the top
level.
The planning vision for strategic planning may vary from 2
to 5 years. It is less detailed and its focus is on competition,
resources and stake holders. It integrates the corporate and
the supply chain. The strategic plan usually include
projected

revenues

and

expenses,

lines

or

business

anticipated relative share of the market, and sales and

profits from existing business lines

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PLANNING STRUCTURE IN THE ORGANIZATION

MISSION
STRAREGIC PLAN
Planning Methodology

FUNCTIONAL PLAN
ORERATIVE PLAN

The functional plans are developed at each department

level. Here the budgets are made under different heads to
achieve the plans. These plans are in the line of strategic
plans decided at the top level. Detailed operational plans
are made at the operational levels of management in the
respective

department.

Controlling

activities

during

implementation is essential to meet the operational plans.

This plan includes a combination of marketing and financial
objectives and defines the markets, products, services, and
activity levels relevant to logistical activities. The activity in
the logistical function takes care of the activities from order
receipt to procurement to customer delivery.

LOGISTICS PLANNING
The internal production capacity expansion plans and
also suppliers expansion plans are concurrently decided on

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Planning Structure & logistic Planning

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Er. H. Manjunath

the basis of sales forecast. Outsourcing is given priority only

after internal capacity is fully used. The money is already
spent for internal capacity in from of plant machinery and
persons the cost already gets added due to those expenses.
So vendoring out should be considered only after the
internal capacity is fully used up. The extent of future
logistical activities is based on forecasts customer orders
and promotions.
The budget for the inventory has to be made plan for
efficient

logistical

operations

and

the

plans

for

Manufacturing and procuring the inventory items have to be

synchronized

this synchronizing should be preferably done

by dedicated software dedicated Software is available in

MRP and MRP1 packages
The

procurement

of

materials

required

for

manufacturing and order fulfillment the logistics activity

flows outline the sequence of logistics Operations from
order receipt through order processing distribution And
dispatching and transportation to customer delivery this
involves
Inventory management activities in order to reconcile
inventory availability based on prior planning and ordering
for actual requirements.

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INFLUENCING FACTORS ON STRATEGY AND

PLANNING
Company strategy and further logistics plan depend on the
number of factors.
They are as follows.

Government and legal political factors.

Technological innovations in the company.

Outsourcing opportunities available

Economic and social factor, and

General competitive atmosphere in the

markets.

Government Regulatory Factors

The

government

rules

and

regulation

make

lot

of

differences on the decisions of strategic planning. Some

governments give tax holiday for company for specific
logistic Planning contd.., Influencing

period. There is some regulations for pollution control.

Some areas like Div, Daman, Goa, which are ruled by
central

government.

They

offer

some

concessions

to

carryout business in that area. Following are the matters to

be considered.
Regulatory issues
Taxation

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Elements of Logistics Management

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Pollution control
Special interests

Outsourcing Opportunities
There

are

areas

where

the

small

industries

have

mushroomed very nicely. The companies find easy to do

outsourcing. The places around Pune, Bangalore, etc. are
the places where small industries have grown and private
entrepreneurship has been increasing. These areas will
reduce the cost of transportation. For example M/S

Tata

motors has number of suppliers in the vicinity of 5 KMs.

Here the company can reduce inventory levels also, by
implementing JIT type activities.
Number of sources
Availability of power.

Competitors in Market
The field in which the company is working are to be
considered to get an edge over them. New entrants are
more attacking and aggressive. Many small unorganized
Influencing contd..

sector companies can be challenge to the product sales.

Complete data of the following type is necessary while
taking decisions of strategic plans.

31

Elements of Logistics Management

Er. H. Manjunath

It may be essential to fight with the competitors product in

the market on any issue accepting the price alone. However
there are example that good companies have to make a
collaborative deals with even competing companies.
Such decisions have to be a part of strategic plans.
Number of competitors
Relative strengths
Locations
Degree of integration
Partnerships

Economy and finance:

Banking

system

and

economic

situation

has

to

be

considered.
Rate of change
Availability
Cost
Interfaces
These factors interact with each other. Based on the
forecasted trends in factors and the projected inflation and
economic growth rates, the corporate strategic planning is
carried out.
Influencing contd..

32

Elements of Logistics Management

Er. H. Manjunath

PLANNING, BUDGETING, CONTROLLING

For the function of logistics, the strategic plans are
developed for the company at the top level. Further the
functional plans are developed at department level. These
have to be implemented. The activities are precisely defined
and budgets are prepared.
No plan can be implemented unless the budgets are made
available

by

senior

managements

and

the

accounts

department. The activities are monitored throughout the

period and strict watch is kept on the expenses. The
controls on the expenses are the important function of
planning.
Strategy by logistics managers will enable them to take
decisions in the best interest of the organization. The
logistics strategy will be based on the corporate strategy.
Logistics managers would choose road transport over rail
transport.

Low

cost

is

the

primary

objective

of

transportation. Hence a logistics plan must be develop so as

to execute a logistics strategy and monitor progress.
Functional planning is done at the middle management level
and generally having a planning vision of one to three years.
The resulting plan is a medium range plan. Functional plans
have to be more specific than strategic plans in terms of

33
Planning, Budgeting, Controlling

Elements of Logistics Management

product lines.

Er. H. Manjunath

This will be further split into detailed

quarterly revenues and expenses at the middle level

management. Their implementability has to be positive.
Activities generally considered are such as follows.
Some activities are regular type while some are one time
activities. Regular types of activities are budgeted on the
basis of historical figures. For example transportation,
material handling, etc.
As against that one time activities do need specific sanction
by senior management. The historically planned matters are
related with production forecast. If the forecasted figures of
sales are more by 10%, these budgets can get sanctions to
the extent of 10%. But in the case of regular type activities
also

management

will

expect

some

cutting

down

in

expenses even when the sales and production increase. That

will cut the logistics cost.
Procurement budget-regular type
Transportation budget-regular type
Internal material handling budget- regular type
Building new warehouses- one time type
Purchasing

material

handling

or

transportation

equipments and other major expenditure to support

the logistic infrastructure one time type

34

Elements of Logistics Management

Waste,

rework,

Er. H. Manjunath

rejection,

pilferage

budget-Cost

reduction drive projects

For example, the objectives of cost reduction for a firm
would lead to strategies to reduce total logistics costs.
These strategic plans could take the form of, reducing the
number of warehouses, transportation consolidation, or
purchase

of

management.

new

software

Maintaining

for
and

logistics
running

information
number

of

warehouses is very costly. So it will be issue of planning to

consider reviewing number of warehouses.
Operational planning is carried out in more detail on yearly
basis. That is further split to quarterly or monthly plans.
Planning,
Budgeting,plan
Controlling
contd operating plan which breaks
The
resulting
is called

down revenues expenses and associated cash flows and

activity by month for a one year period. The detailed
operating

plan

guides

management level

and

the

activities

at

the

junior

facilities monitoring of actual

performance by comparing it with planned performance

production scheduling and material purchases are based on
the operating plan. A company can use its operating plan to
anticipate its logistics needs from warehouse capacity to
shipping. It permits logistics to anticipate its labour costs

35

Elements of Logistics Management

Er. H. Manjunath

and to negotiate contracts with third party logistics

providers.

ACTION ON OPERATION LEVEL

The planning at the operational or control is about the basic
work

level.

These

activities

like

dispatching,

raising

invoices, responding to customer enquires etc. here the

performance and efficiency and discipline of the persons
working on the job is important. This is the control level of
management. The level of performance of the work is also
measured continuously at this level of performance of the
work is also measured continuously at this level and reports
prepared for the functional level of management. The
performance measurement is in relation to costs, customer
service, and productivity.
At the strategic planning level, the reports from the tactical
level

help

to

refine

logistical

strategic

plans

like

development of alliances and improving competencies in

strategic areas.

LOGISTIC PLANS IN COORDINATION WITH

OTHER DEPARTMENTS
Main

intension

of

Action on Operation Level

integrated

planning

logistics
process,

strategic
to

planning

achieve

is

an

competitive

advantage through increased value and customer service.

36

Elements of Logistics Management

Er. H. Manjunath

Or get superior customer satisfaction, by anticipating future

demand for logistics services. Or it may be managing the
resources of the entire supply chain. This is to achieve
overall corporate goals and plan.
Logistics strategy

has

to

be properly

formulated

by

understanding the corporate strategy. Also it has to be

related to plans of other departments such as production,
design, etc. however plans of production, or marketing or
design departments are given importance.
Production
Plan

Marketing
Plan

Logistics
Plan

Design
Plan

Materials
Plan

Logistic Plan in Co-Ordination

37

Elements of Logistics Management

Er. H. Manjunath

Logistics strategic planning and logistics planning is well

spread in the different departments so it does not get
highlighted.
The activities concerning to logistic functions need to be
consolidated

and

coordinated

appropriately.

Strategic

logistics plan depends on a number of inputs from various

functional areas.
They are (I) marketing, (ii) production (iii) Design, and (iv)
Materials.
Marketing is closely related to logistics and hence provides
the key inputs to logistics. Marketing provides information
about product / service offerings, pricing, and promotion for
each channel. This information includes: (i) Sales volume by
month, (ii) type of customer, (iii) regional area, (iv) product
introductions

and

deletions,

(v)

customer

and

(iv)geographical area.
Logistics does contribute t6o and support an organizations
strategic planning process in a number of ways. They are as
follows.
Reduction in inventory resulting reliability of delivery
time.
Achieving improvement in customer service.

38

Elements of Logistics Management

Er. H. Manjunath

Undertaking number of time saving projects in the

production department to improve shop through put.
That not only saves cost but also improves delivery of
products to customers.
Reducing inventory levels through shorter cycle time
in production shop.
Improving

marketing

advantage

from

consistent,

shorter order cycles.

Uninterrupted supply of in-bound materials.
Reduced total costs by incorporating logistics into the
corporate planning process.
Customer service policies are critical to logistics
strategy.

Logistics

must

participate

with

the

Logistic
Plan in Co-Ordination
contd
organizations
management
in setting such policies to

ensure

that

they

are

feasible

and

economical.

Customer service policies should include the following

information by type of customer and region:
(i) Order placement methods, (ii) order entry, (iii) target
cycle, (IV) order cycle variability, (v) desired fill-rate or instock levels. Also, customer service policies should be
related to product substitution, expediting, transshipment,
and customer pickup. Production department provides some
key information to logistics strategic plan.

39

Elements of Logistics Management

Er. H. Manjunath

Locations of present and future production facilities,

and
Planned production volume and product mix for each
location.
When the same product is produced at multiple locations,
logistics can decide how to serve each market most
efficiently.
Accounts department provides forecasts of costs related to
inflation rates and growth assumption to project future
costs. It provides the cost data required to perform cost
trade-off

analysis.

Also

it

is

responsible

for

capital

budgeting which determines the availability of capital for

improving logistics equipments and infrastructure.
Logistics provide data and analysis related to the existing
logistics network to the other functions, including current
storage and distribution facilities owned and rented, both at
manufacturing

locations

and

in

the

field,

equipment

capacity and capabilities at each location. And current

transportation

arrangements

between

various

channel

members.
SEMESTER V
Logistic Plan in Co-Ordination contd

UNIVERSITY QUESTION PAPER (November 2004)

SECTION I
I) Answer the Following Question In Brief

40

Elements of Logistics Management

Er. H. Manjunath

(1) Cross-docking.
(2) Economic order Quantity.
(3) Fill rate.
(4) Bill of Materials.

II) Case study

Mumbai flour mills provide high-quality bakery flours to
commercial bakers as well as to the consumer market.
The commercial have consistent demand and brand-loyalty,
whereas consumers have minimal brand-loyalty but also
generally prefer known names over store brands. Demand is
seasonal for the flours with the annual break occurring just
before Diwali and slacking off dramatically during January
and February. To offset these both, Mumbai flour mills and
sales promotions.
The production planning department of the company
located at Akola, Maharashtra, has the responsibility for
controlling the inventory levels at the plant warehouse at
Nagpur as well as three distribution centres located at
Nasik in Maharashtra, Bhopal in Madhya Pradesh and
Hyderabad in Andhra Pradesh. Planning has been routinely
based on past experience and history. No formal forecasting
is performed. Distribution centres get their requirements by
rail from Nagpur. The lead time of replenishment from

University Question Paper (November, 2004)

41

Elements of Logistics Management

Er. H. Manjunath

Nagpur to distribution centers is 7 days. The replenishment

rate is 48 to 54 pallets per wagon depending upon the type
of wagon used. In case of any emergency demand, eighteen
pallets can be made available by truck with a 3 days transit
time.
Recently the company has experienced two major stocks out
for its consumer-size 5Kg. sacks of refined quality white
flour. One of these was due to problems in milling
operations, the other occurred when marketing initiated a
buy one, get one free coupon promotion. Since these
events, the planning has become overly cautious and errs on
the side having excess inventories at the distribution
centers.

Additionally,

two

other

events

have

affected

Distribution Centers throughput: (1) implementation of

direct factory supply for replenishing the five largest super
market chains, and (2) a price increase making Mumbai
flour more expensive than its national brand competitors
such a Pillsbury or TATA Media.
Of 1500 pallets in the Hyderabad distribution centre the
Mumbai flour M<Ills shows only 3-9-6 pallets for open
orders. This has led the company to use outside overflow
storage, where there are another 480 pallets. Flour is easily
damaged; hence, Mumbai flour Mills prefers to minimize

42

Elements of Logistics Management

Er. H. Manjunath

handling. Over stocking at Distribution centers alone cost

Rs.1.85/per pallet for outside storage to which must be
added Rs.4.25per pallet extra handling and Rs.225per
truckload for transportation.
Similar scenarios are being played out at the DCs as well.
Mr. Mohan, the distribution manager is contemplating
various approaches to solving the inventory problem. It is
clear that the product must be in place at time a consumer
is making a decision to buy the product, but the company
cannot tolerate the overstocking situation and the stress
that it is putting on facilities and cash flow Mr. Mohans first
thought is a better information system which will provide
University Question Paper (November, 2004)

timely

and

accurate

information

throughout

the

organization.
QUESTION:

1) Evaluate

the

alternative

solution

that

could

be

considered by Mr. Mohan.

2) What additional solution do you propose?
3) Examine the transportation system and its drawbacks.
SECTION II

Explain

the

various

factors

deciding

the

number

of

warehouses. Also discuss the basic layout and design

objectives of a warehouse.

43

Elements of Logistics Management

Er. H. Manjunath

(5) (a) Explain the strategic role of Information Technology

in Logistics Management.
(b) Discuss the various factors of performance
measures of logistics activities.
(6) What is selective inventory control? What are various
methods adopted in selective inventory control policy?
Explain with examples.
(7) Answer any two from the following:
(1) Functions of packaging.
(2) Third party logistic.
(3) Unitization and containerization.
(4) Lead time in inventory management.
QUESTION PAPER SOLUTION

I]Answer the following questions in brief:

University Question Paper (November, 2004)

1) Cross Docking

Cross Docking is a relatively new logistics technique

used in the retail and trucking industries to rapidly
consolidate

shipments

from

different

sources

and

economically transporting to the customers.

Cross

docking

eliminates

the

inventory

holding

function of the warehouse, allowing it to serve consolidation

44

Elements of Logistics Management

Er. H. Manjunath

and dispatching functions. Incoming shipments directly

transported without storing them in between. Dispatching
takes place in less than 24 hours at the facility, sometimes
less than an hour.
It is taking of finished goods from the manufacturing
plant and delivers it directly to the customer with little or
no handling in between. Cross docking reduces handling
and storage of inventory. Filling a warehouse with inventory
before dispatching materials out is virtually eliminated.
Cross docking means receiving goods at one door and
shipping out through the other door almost immediately
without putting them in storage.
Cross docking shift the focus from supply chain to
demand chain. For example- stock coming into cross
docking centre has already been pre-allocated against
replenishment order generated by a retailer in the supply
chain. It helps retailers to streamline the supply chain from
point of origin to point of sale.
Objectives
It helps in reducing operating cost.
ItUniversity
reduces
inventory
Q. Paper
Solution levels.
It increase throughput.

45

Elements of Logistics Management

Er. H. Manjunath

It increases sales space.

2) Economic Order Quantity

The order quantity depends upon the cost of the inventory
items, the rate and nature of demand (whether constant or
fluctuating), the replenishment time, and the inventory
carrying costs and ordering costs for the inventory items. As
the order quantity increases, the inventory carrying cost
increases due to the increased average inventory held
during a period. However, the ordering costs per period
decrease since the number of orders to be placed during the
period are fewer. Hence, if we assume that all the other
variables

that

determine

the

order

quantity

remain

constant, we can economize the total cost of inventory

carrying plus ordering. This optimization results in the
Economic Order Quantity or EOQ.
The assumptions of the simple EOQ model are as follows:
The price or cost of inventory is constant, and does not
depend upon the order quantity or time (no discounts);
Continuous, constant, and known demand rate;
Satisfaction of all demand; that is, there are no
inventory shortage;

46

Elements of Logistics Management

Er. H. Manjunath

Replenishment time is known and constant, and each

replenishment is in a single lot;
No inventory in transit
Infinite planning horizon
A single
inventory
item and no interaction with other inventory items; and
University
Q. Paper
Solution
No limit on capital availability.

3) Fill Rate:
When orders are received, you want to be able to
confidently

promise

availability

and

meet

those

commitments in a timely order.

Order fulfillment gives real time, constraint based
facilities for accelerating order execution in environments
spanning

multiple

groups,

departments,

plans,

and

companies. It is essential to accurately calculate product

availability dates based on the actual status of supply chain.
When a precise configuration wont meet a customers
required

date,

flexible

business

rules

let

you

define

alternative ways to respond to the customer based on

customer priority, order size, location, cost, time, or other
factors. Whats more, customers can get update their orders
in real time to change certain configurations.
Cost of goods sold

47

Elements of Logistics Management

Er. H. Manjunath

Days in inventory
Days sales outstanding
Fixed assets utilization
Revenue growth
Order fill rate
Customer turnover
Order to invoice lead time
Manufacturing equipment utilization
Fulfillment
accuracy
University
Q. Paper Solution
Use

substitute

components

or

products

to

meet

customer orders
Manage availability, stock-outs, partial shipments, and
returns
Stop using fixed quoted lead-times on sales orders
Reduce or eliminate errors and inaccurate deliveries
for configurated products
Reduce time needed to prepare and process sales
quotations.
Reduce partial order shipments
Reduce customer change orders

48

Elements of Logistics Management

Er. H. Manjunath

4)Bills of Materials
The bill of material is prepared from the product design
documents. Each product is basically the assembly of the
number of components. Before reaching to the final
assembled product for convenience the engineering person
has to make several sub assemblies depending upon the
complexity and the size of the product. It is never true that
all the components come to one assembly station and the
full product gets assembled.
Obviously the components are made from some raw
material. The raw material is required to be planed I if the
said components is made in factory.

Product A
University Q. Paper Solution
SA 1

SA 2

SA 3

C1

C2

C3

C4

C5

C6

C7

C8

C9

R
M

R
M

R
M

R
M

R
M

R
M

R
M

R
M

R
M

49

Elements of Logistics Management

Er. H. Manjunath

This information is essentially indicated in the design and

assembly process sheets. This is fed to the MRP software.
On the basis of this, production requirements the BOM
extrapolates the requirements for the components and raw
materials are to arrive in the factory. According to the lead
time requirements the requisites release documents are
prepared.
II) CASE STUDY
Mumbai flour mills provide high-quality bakery flours to
commercial bakers as well as to the consumer market.
The commercial have consistent demand and brand-loyalty,
whereas consumers have minimal brand-loyalty but also
generally prefer known names over store brands. Demand is
seasonal for the flours with the annual break occurring just
before Diwali and slacking off dramatically during January
and February. To offset these both, Mumbai flour mills and
sales promotions.
The production planning department of the company
University
Paper
SolutionMaharashtra, has the responsibility for
located Q.at
Akola,

controlling the inventory levels at the plant warehouse at

Nagpur as well as three distribution centres located at
Nasik in Maharashtra, Bhopal in Madhya Pradesh and

50

Elements of Logistics Management

Er. H. Manjunath

Hyderabad in Andhra Pradesh. Planning has been routinely

based on past experience and history. No formal forecasting
is performed. Distribution centres get their requirements by
rail from Nagpur. The lead time of replenishment from
Nagpur to distribution centers is 7 days. The replenishment
rate is 48 to 54 pallets per wagon depending upon the type
of wagon used. In case of any emergency demand, eighteen
pallets can be made available by truck with a 3 days transit
time.
Recently the company has experienced two major stocks out
for its consumer-size 5Kg. sacks of refined quality white
flour. One of these was due to problems in milling
operations, the other occurred when marketing initiated a
buy one, get one free coupon promotion. Since these
events, the planning has become overly cautious and errs on
the side having excess inventories at the distribution
centers.

Additionally,

two

other

events

have

affected

Distribution Centers throughput: (1) implementation of

direct factory supply for replenishing the five largest super
market chains, and (2) a price increase making Mumbai
flour more expensive than its national brand competitors
such a Pillsbury or TATA Media.

51

Elements of Logistics Management

Er. H. Manjunath

Of 1500 pallets in the Hyderabad distribution centre the

Mumbai flour M<Ills shows only 3-9-6 pallets for open
orders. This has led the company to use outside overflow
storage, where there are another 480 pallets. Flour is easily
damaged; hence, Mumbai flour Mills prefers to minimize
handling. Over stocking at Distribution centers alone cost
Rs.1.85/per pallet for outside storage to which must be
University Q. Paper Solution

added Rs.4.25per pallet extra handling and Rs.225per

truckload for transportation.
Similar scenarios are being played out at the DCs as well.
Mr. Mohan, the distribution manager is contemplating
various approaches to solving the inventory problem. It is
clear that the product must be in place at time a consumer
is making a decision to buy the product, but the company
cannot tolerate the overstocking situation and the stress
that it is putting on facilities and cash flow Mr. Mohans first
thought is a better information system which will provide
timely

and

accurate

information

throughout

the

organization.
QUESTION:

52

Elements of Logistics Management

Er. H. Manjunath

1) Evaluate the alternative solution that could be

considered by Mr. Mohan.
Ans) The alternative solutions to be considered by Mr.
Mohan are as follows

LOGISTICS PLANNING
Logistic master planning is a systematic approach to
logistic-engineering

based

on

logistics

planning.

The

planning process decides following:

Performance measures and goals,
Processes,
System requirements, and

Organization requirements

for customer

service

and

ore... processing,
Inventory planning and management,
Supply,
Transportation and distribution.
Short-term and long-term recommendations are evaluated
University Q. Paper Solution

on regular basis and time-phased with the principles of

incremental justification and implementation. The Logistic
planning process requires the client;.: assemble a crossfunctional logistics planning and management team These
include detailed, prioritized, and scheduled short and longterm action plans for performance measures and goals,

53

Elements of Logistics Management

Er. H. Manjunath

processes, information systems,

design;

logistics

information

and

organization

system requirements;

detailed material and information flows; and detailed'

organizational
importance

and

training

requirements.

The

of information flow has to be kept in mind.

In some cases Logistics Resources International equips the

clients with decision support tools for on-going computeraided logistics planning and management.

MRP
The computers can be great help to the material manager.
Further with the help of specialized software experts
MATERIIAL

REQUIREMENT

PLANNING

(MRP)

is

developed as computational f technique.

This software converts the master schedule to the useful
activities like requirements raw material, components,
subassemblies and assemblies For meeting the master
schedule requirement, MRP indicate the quantities and
when precisely they are required to be brought in. It is the
integrated approach to the inventory management, taking in
to the account purchase and the in house production
program. The deliveries of the products week by week are
University Q. Paper Solution

indicated.

54

Elements of Logistics Management

Er. H. Manjunath

LIS (logistics information system)

LIS is an interacting structure of people, equipment, and
procedures

that

together

make

relevant

information

available to the Logistic manager for the purpose of

planning, implementation, and control. The information is
the data processed to get meaningful picture of the
situation and generate thoughts for further actions.
Comprehensive relational database that contains the type of
information required to make effective decisions. This has
greatest use in all the parts of logistics management such as
the transportation, inventory, and product areas with
warehousing and customer areas showing less progress.

Main Functions of LIS

The functions are as follows.
Take proper decision at all levels in the organization.
Provide Database at appropriate stage.
Support Planning function.
Provide Controls in the operations.
Communication with concerned persons.

55

Elements of Logistics Management

University Q.
D
A
T
A

I
N
Paper
F
O
R
M
A
T
I
O
N

Er. H. Manjunath

Policy Level

D
E
C
I
S
I
O
N
S

Solution

Decision Level
Control Level
Operating Level

2) What additional solution do you propose?

Mr. mohan should consider Cross Docking as a
additional solution since, Cross Docking is a relatively new
logistics technique used in the retail and trucking industries
to rapidly consolidate shipments from different sources and
economically transporting to the customers.
Cross

docking

eliminates

the

inventory

holding

function of the warehouse, allowing it to serve consolidation

and dispatching functions. Incoming shipments directly
transported without storing them in between. Dispatching
takes place in less than 24 hours at the facility, sometimes
less than an hour.

56

Elements of Logistics Management

Er. H. Manjunath

It is taking of finished goods from the manufacturing

plant and delivers it directly to the customer with little or
no handling in between. Cross docking reduces handling
and storage of inventory. Filling a warehouse with inventory
before dispatching materials out is virtually eliminated.
Cross docking means receiving goods at one door and
shipping out through the other door almost immediately
without putting them in storage.
University Q. Paper Solution

Cross docking shift the focus from supply chain to

demand chain. For example- stock coming into cross

docking centre has already been pre-allocated against
replenishment order generated by a retailer in the supply
chain. It helps retailers to streamline the supply chain from
point of origin to point of sale.
Objectives
It helps in reducing operating cost.
It reduces inventory levels.
It increase throughput.
It increases sales space.

Functioning Of Cross Docking:

In a traditional warehouse, goods are received from vendors
and stored in devices like pallet racks or shelving. When a

57
University Q. Paper Solution

Elements of Logistics Management

Er. H. Manjunath

customer (e.g., the consumer or perhaps a retail outlet)

requests an item, workers pick it from the shelves and send
it to the destination. In a cross dock, goods arriving from
the vendor already have a customer assigned, so workers
need only move the shipment from the inbound trailer to an
outbound Trailer bound for the appropriate destination. The
already part should make you think of information system
requirementsa chief obstacle to implementing crosses
docking successfully. Pre-distribution is definitely more
difficult to implement because the vendors of the cross dock
must know which customers of the cross dock need what
before they send the shipment. This involves quite a lot of
information transfer, system integration, and coordination.
The problem is big for a distributor with many vendors.

Q:3 )Examine the transportation system and its

drawbacks.
the company madly needs to have their own transportation
system. The product has to reach the customer quickly and
directly to the customer. The seemed figures of the product
have to reach production centre directly and the product
supply ahs to be done to the customer directly.

58

Elements of Logistics Management

Er. H. Manjunath

There has to be pull system for the product. The product

should not be supplied thought the distribution centre.
In choosing a transportation mode, the transportation
managers consider the following criteria.

Cost:
Cost per ton-mile is considered. Tariff charges, extra
inventory, warehousing, buffer stock, broker fees customs
are the contents of the cost. The air transport is costly. Still
from the point of view of the product the right combination
has to be derived.

Transit Time:
The time from the shipment of the order at the origin to the
receipt of the order at the destination, with Security of the
goods is considered.
System stops may jeopardize goods; risks lessen when
goods are in transit. Modal Characteristics and Selection is
to be done. Hazards and regulations differ for each mode of
transportation. The transporter's efficiency depends in
observing the time when material in movement, as against it
is lying stationary at his yard.
University Q. Paper Solution

Safety:
Concerns about safety at all levels from start to end of
delivery. Proper storage and handling equipment, customer

59

Elements of Logistics Management

Er. H. Manjunath

service goals, and all aspects of integrated logistics have to

be considered. Selection of the mode of transport have to be
careful so that any damage, theft must be avoided at any
means. Also the proper packaging needs to be done to avoid
damage by available quality of the people.

Reliability:
It is meeting schedules on time as per requirement of the
customer. From the point of view of logistics this is
important. Faster the mode the reliability increases. But it
has to be weighed against the cost. However the systematic
working improves reliability.

Claims record:
The damage of the goods is important problem. Damaged
goods cannot be used by the client. Damage, pilferage and
theft type of matters is the blunt on the name of transporter.
The supplier has to fill up claim forms and get the money.
The customer remains dissatisfied since he does not get the
material. The insurance expenses increase in such type of
cases.

Responsiveness:
The ability to handle various products is considered. The
transporter has to respond the changing needs of the
supplier. Services to be provided without following rigidity

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Elements of Logistics Management

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of the rules and regulations. However the material should

be shifted with responsibility.

Speed:
With this attribute the door to door delivery time is
considered. Time starts from releasing the product from
supplier. Although the mode of transportation is important,
the methodological working at the transporter's place
makes the difference. Those methods should display ability
to deliver on time.

Capability
Here the number of geographic points served is import a: it.
The transporter should be in position to deliver the goods at
any remote place. Also the ability to move special,
hazardous materials is considered.

Accessibility
The transporter has to be capable of door-to-door pick up as
well as delivery. The Terminal Operations have to be known
perfectly.

Terminals

serve

to

sort

and

consolidate

shipments. Organize pickup and delivery systematically.

Truck

terminal

operations,

Railroad

yard

operations,

knowledge of warehouses and distribution centers have to

be known.

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Elements of Logistics Management

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SECTION II
3) Explain the various factors deciding the number of
University Q. PaperAlso
Solutiondiscuss the basic layout and design
warehouses.

objective of a warehouse.
In order to take decisions regarding warehouses, a firm
needs to consider the following:
The ownership: whether owned or hired;
The number of warehouses;
The location of the warehouses;
The

size

and

type

of

warehouse

and

materials/

products stored; &

The layout of the warehouse.

The Number of Warehouses:

The number of warehouses is another decision parameter
impacting a number of cost variables and customer service.
If customer service is taken in cost terms as cost of

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Elements of Logistics Management

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customer dissatisfaction, the number of warehouses will

affect

transportation,

inventory,

and

warehousing

and

customer dissatisfaction costs.

Transportation costs initially decrease with increasing
number of warehouses. This is due to the transportation
economies obtained by having large-volume long-range
transportation from consolidation warehouses and shortrange

small-volume

warehouses.

transportation

However,

as

the

from

number

of

break-bulk
warehouses

increases beyond a certain value/ the transportation cost

starts increasing due to the large number of transportation
trips

in-between

the

larger

number

of

warehouses.

University Q. Paper
Inventory
costsSolution
continuously increase with the increasing

number

of

warehouses

because

the

increased

space

available needs to be utilized and firms increase the

commitment of inventory at these warehouses beyond those
actually

needed.

Transit

inventory

costs

continuously

decrease with the increased number of warehouses due to

the

shorter

transportation

times

between

the

larger

numbers of warehouses. The warehousing costs increase

with more warehouses due to the maintenance and facility
costs associated with each warehouse. For the same space,

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Elements of Logistics Management

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a single warehouse incurs less warehousing cost than two

warehouses.
Increasing number of warehouses leads to increasing
customer

service

levels,

thus,

decreasing

customer

dissatisfaction costs.

LAYOUT AND DESIGN OF WAREHOUSE

The efficient layout and design of warehouse is very
important from point

of view

of its

working,

which

is

linked to the overall fuctionning of the company.

A good layout must be as follows.
To

achieve

minimum

waste

of

space

and

flexibility of arrangement.
Supplying right material to customer as and when
required. Ensure easy movements of the material
handling equipments. Minimize of material handling
requirements. Minimize of material deterioration and
pilferage.
To

assist the

marketing

to

meet

the

objectives,

following information should be generated from the

records:
Classification of store items by size, number, weight,
frequency of handling
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Elements of Logistics Management

FSNFast

Er. H. Manjunath

moving.

Slow

moving.

Non-moving,

handling arrangements, considering perish ability of

material.
Consider the quantities to be withdrawn at a time.
Maximum number of units to be stored at one time.
Storage facility best suiting the item.
List of available storage space for different kinds of
storage facilities.
Size and shape of the space available for laying out the
warehouse.
Prepare a diagram of the flow

of materials

through

the warehouse,
REL Chart for the storage of different classes of
materials can be prepared.
While planning the layout and design of the stores, following factors should be
considered:

The

space

for

receipt and

inspection

should be

provided Adjacent to the main warehouse.

Use of third dimension (height) must be made effectively

different storage facilities should be situated in clearly

defined lanes, so that items are quickly stored and located.
Main lanes should usually be 1.5 to 3 meters wide.

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Elements of Logistics Management

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Depending upon the type of material and the amount of

traffic involved.

Clear markings should be made at storage space to

facilitate location and identification.

The fast moving items should be stored near the

dispensing window; the slow moving should be away from

the window.

The layout should permit the use of modern material

handling equipment.

Stores layout should encourage the FIFO, i.e. the old

stock should be used earlier and the storekeeper should not

University Q. Paper Solution

be compelled to keep the new stock above the old one.

Due space should be left for expansion purposes in each

portion,
A pleasing and hygienic environment must be provided
within the warehouse.

This may be done by proper selection of the colors of

walls, provisions of exhaust removal, provision of cleaning

etc.

Adequate and clear lighting arrangements should be

provided.

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Elements of Logistics Management

Adequate

equipment,

safety
alarms,

Er. H. Manjunath

provisions
accident

including

control

and

fire-fighting
prevention

methods should he inbuilt in the warehouse design.

Special facilities, such as cold room, heating equipment,

air- conditioning etc, if required, should be carefully

planned in advance.
5) a) Explain the strategic role of

Information Technology in logistics

Management?
LIS is an interacting structure of people, equipment, and
procedures

that

together

make

relevant

information

available to the Logistic manager for the purpose of

planning, implementation, and control. The information is
the data processed to get meaningful picture of the
situation and generate thoughts for further actions.
Comprehensive relational database that contains the type of
information required to make effective decisions. This has
greatest use in all the parts of logistics management such as
the transportation, inventory, and product areas with
warehousing and customer areas showing less progress.

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IMPORTANCE OF LIS:
In the new competitive world success is measure of more
sales, increased profit or a growing customer base. More
important is to get an edge over the competitor. For that
purpose basic business demands to simply get better at
what we do. In the field of logistics, there has always been
an abundance of data. Shipping bills alone make a lot of
information. Gathering the data is important; evaluating the
information,

setting

benchmarks

and

measuring

performance and progress is critical.

The purity of the raw data is important. The small issues
can have a major impact. Simple spelling errors or listing an
address as a road can confuse during the evaluation
process. Logistics has to develop some simple, yet powerful
tools to quickly cleanse raw data from virtually any ad all
sources.
From the data available many reports are generated, which
can pinpoint simple solutions that can generate cost savings
and/or service improvements. These can have significant
impact on profitability and customer satisfaction. Further
the decisions have to be taken at every stage which impact
throughout the entire organization, from operations to
finance.

The

critical

factors

are

the

quality

of

the

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Elements of Logistics Management

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information, the ability to recommend and implement the

changes.
For some square meters of warehouse space and few lacks
worth of inventory, the information is a critical factor in
seeking continuous improvements.
The information is power. The evolution of new profession
depends on putting that high quality information into the
hands

of

decisions

the

professional.

that

can

make

The
a

logisticians

measured

can

difference

take
for

companies.
Example-In the small enterprises like hotel industries the
University Q. Paper Solution

practice of ordering has progressed from phone to fax. And

now it is shifting from faxing to Internet mode.

Main Functions of LIS

The functions are as follows.
Take proper decision at all levels in the organization.
Provide Database at appropriate stage.
Support Planning function.
Provide Controls in the operations.
Communication with concerned persons.
Policy Level

D
A
T
A

I
N
F
O
R
M
A
T
I
O
N

Decision Level
Control Level
Operating Level

D
E
C
I
S
I
O
N
S

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Elements of Logistics Management

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In the organization from supplier to the customer the

data keeps on generating. Analyzing this data and taking
the organization has different levels. Each level has
different needs of the information. The lowest level is the
operating
level.
Here the activities are at the level of
University Q. Paper
Solution
workmen;

charge

hand,

loading-unloading,

warehouse

material handling functions take place. Generally the data

gets generated here. This data has to be transferred to
further levels of control level to take decision form of
information.
At control level the efforts are to be taken to improve
efficiency

of

the

operating

level

by

analyzing

the

information. At the decision level the manager has to

evaluate and analyze the information to see the operations
and customer needs are equalized. At the top level the
logistics management has to decide the policy on the basis

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Elements of Logistics Management

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of factors of warehouse, transportation system the future

plans.
The customer needs, satisfaction is given prime
importance while making policy. At every level some data is
generated and same is processed in to relevant information
for every level in the organization. As the material keeps
moving needful decisions and implementing these decisions
improves organizational efficiency to provide the right
supply to the customer at right time at right place. The
proper decisions can be taken by logistics management by
having

quality

information

at

every

point

in

the

organization.

Logistics Information Flow Architecture:

The operations in the organization are planned in a
particular strategic plan. These plans are made as per the
forecast by marketing department. On the basis of this
forecast the logistic plans and further production plans are
made. This chain of operations has to be converted in to
information. The center point happens to be inventory
management to help the development of the inventory. The
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information architecture has to be developing to organize

these operations. Without the accurate information the

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Elements of Logistics Management

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regular activities are not possible. The figure on the next

page indicates logistic information architecture.
This includes the information from both the sides such as
customer order on one side and purchase, production and
inventory management on the other side. Data warehousing
should provide information for planning and coordination of
production and deploy inventory to satisfy customer orders.
Co-ordination Flow
Strategic
plan

Capacity
plan

Forecast

Logistics
plan

Production
plan

Procurement
plan

Transportation

Purchase
Function

Inventory
Deployment
Inventory
Management

Order
Management

Order
processing

Distributio
n

&

dispatch

Operation Flow

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Performance Measurement:
Performance measurement is necessary to evaluate whether
logistics activities are efficient and effective. Like the pilot
of an aircraft obtains feedback regarding the performance
of the aircraft from the measures displayed on the panel,
logistics

managers

need

performance

measures

for

evaluating the logistical performance of the firm. The basic

University Q. Paper Solution

objectives for developing and implementing performance

measurement systems include monitoring, controlling, and
directing logistics operations.
Performance measurement helps in ensuring the proper
utilization of scarce resources and comparing performance
in relation to plans internally, and enables benchmarking
with the competition and customer perception evaluation
external to the firm.
4) b) Discus the various s factors of performance measure of logistic activity

Performance measures can be classified as follows:

Output-related

and

process-related

performance

measures.
Function-based or activity-based and process-based
performance measures.
Internal and external performance

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Elements of Logistics Management

The

experience

obtained

Er. H. Manjunath

by

managers

from

quality

measurement of manufactured products has resulted in the

realization that improvements in quality can be achieved by
measuring the process rather than the output. Logistics is
basically a process resulting in customer satisfaction. In
order to ensure that the output of customer satisfaction is
ultimately achieved, it is necessary to monitor and control
the process by measuring the logistics variables in the
process

which

ultimately

affect

customer

satisfaction.

However, the output also needs to be measured to ensure

that the process being measured is resulting in the desired
output. Examples of output-related measures are order
cycle time and product availability.
University Q. Paper Solution

Function-based

measures

are

metrics

that

measure

performance of the activities within functions. These are

measures like warehouse space utilization, transportation
costs, obsolete inventory, and documentation accuracy
which are related to functional areas. Functionally oriented
measures fail to consider the cross-functional nature of
logistics management, and so, can lead to functional
optimization and overall logistics sub optimization. For
example, the perfect order process metric measures the
percent of customer orders that are flawlessly fulfilled. This

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Elements of Logistics Management

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metric measures the effectiveness of the order fulfillment

process, crossing the boundaries of functions.
Internal performance measures are related to measurement
of activities and processes internal to the firm by focusing
on

historical

performance

and

goal

performance

comparisons. Thus, actual logistical costs and customer

service during this period can be compared to the previous
period's actual performance and the goals set for this
period. External performance measures focus on metrics
concerned with customer perceptions and benchmarking
against the competition. This classification of logistical
performance measures shall be utilized to understand the
various performance measures which can be utilized in
practice.

INTERNAL PERFORMANCE MEASURES:

These measures are concerned with the activities and
processes that ultimately service customers. Due to the
focus

of

these

measures

on

comparison

of

present

performance with past performance and performance goals,

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Elements of Logistics Management

Er. H. Manjunath

these facilitate performance appraisal and improvement.

Internal performance measures can be classified into the
following categories:

Time:
Time is an important measure of logistics performance
related to effectiveness. Some of the measures in this
category are order fulfillment lead time and variability,
response time, on-time product shipment/ delivery, and
forecasting/planning cycle time.

Cost:
Cost measures are the basic measures used traditionally for
measuring performance by most firms. The most commonly
utilized logistics cost measures are cost to serve, total
delivered cost, order processing costs, warehouse cost,
freight cost, and cost trend analysis.

Customer service:
These metrics measure the ability of firms to satisfy
customers. Examples of customer service measures are fill
rate, stock outs, on-time delivery, back-order duration, cycle
time components and variability, customer feedback, and
customer satisfaction survey results.

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Elements of Logistics Management

Er. H. Manjunath

Quality:
Quality measures involve measurement of the output of a
process

or

series

of

activities.

Logistics

quality

performance measures like processing accuracy, frequency

and amount of damage, number of customer returns,
forecast and planning accuracy, cost of returned goods, and
schedule adherence are frequently utilized. One of the most
comprehensive measures of quality in logistics is the perfect
order measure. This conceptual performance measure
concerns the overall logistics performance of the firm. The
perfect order fulfillment means completeness of order, ontime delivery, complete and accurate documentation, and
perfect condition on delivery or installation.

Asset:
Metrics related to assets like facilities, equipment, and
inventory measure the extent of their utilization. Measures
like inventory turns, inventory accuracy, inventory carrying
costs, obsolete inventory, and inventory days of supply, cashto-cash cycle time return on net assets, and return on
investment are common.

Productivity:
Productivity of a system is the ratio of the output produced
to the resource inputs utilized for producing that output.

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Logistics productivity related measures commonly utilized

are units picked per employee, orders per sales employee,
orders shipped per hour, container utilization and orders
processed per employee.

EXTERNAL PERFORMANCE MEASURES:

Whereas

internal

performance

measures

evaluate

the

logistics performance of processes and functions within the

University Q. Paper Solution

control of a firm, external measures concern the effects of

these

operations

on

the

customer

and

compare

the

operations and effects with those of competitors. The

external performance measures in most common use are
those related to customer perception and competitor
benchmarking.

Customer Perception:
Customer

perception

measurement

is

achieved

by

conducting post-order customer feedbacks and general

customer surveys sponsored by the firm or the industry.
These obtain customer feedbacks regarding response to
customer enquiries, availability, and lead time, response to
order information requests, problem resolution, repeat
purchases, and product support.

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Competitor Benchmarking:
Competitive benchmarking might simply be defined as the
continuous

measurement

of

the

company's

products,

services, processes, and practices against the standards of

best competitors and other companies who are recognized
as leaders.
It is not sufficient to measure performance internal to the
firm, but more so performance relative to the competition.
The first step in benchmarking is the understanding of the
Processes involved in logistics fulfillment. The performance
of

these

processes

is

then

compared

against

the

competitors' performance in those processes. Further, these

processes are compared with the processes and practices,
concerning the benchmarking areas, utilized by the best
firms in comparable related and non related industries. This
University Q. Paper Solution

is known as best-practice benchmarking. The benchmarking

areas in logistics could involve cost, customer service,
strategy, technology, order processing, or any other logistics
area. The practices would relate to organizational structure
and relationships, facilities and equipment, and information
systems. Benchmarking information may be obtained either
by sourcing published information, private benchmarking,
or information sharing between firms.

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6) What is selective inventory control?

What are various methods adopted in selective
inventory control policy? Explain with
examples.
Ans: Selective inventory may be defined as usable but ideal

resource. If resource is some physical and tangible object

such as materials then it is termed as stocks. Selective
inventory control means to keep as much inventory is
required by the firm and does not involve overstock of
inventory.
Various methods adopted in selective inventory control
policy are as follows:
JUST IN TIME (JIT)

Definition:
This is a technique from TQM process.
Basically this is waste control method. It is not the inventory
control technique, but the result is that. It is organized
approach to introduce in manufacturing cycle.
Timeliness,
Quality,
Productivity,
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Elements of Logistics Management

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Flexibility,
Work simplification and Waste reduction.

Techniques used in JIT

Although it is very attractive and beneficial to have JIT, but
it does not come easy way. The employees of the company,
suppliers will have to exert very much. They have to adopt
high level discipline, dedication, togetherness to resolve the
problem. Basically number of improvements has to be done
in the manufacturing set up. Low lot quantities will have to
be manufactured in lesser expenses. The higher lot quantity
is main need of production department. For this purpose
"JIT" gave birth to many 'common sense' techniques in the
organization such as:
Pokayoke,
Kanban,
Push pull method,
TPM,
Jidoka (low cost automation),
Single minute exchange of Dies (SMED), etc.
These processes are implemented in the manufacturing set
ups. However they were found extendable in the nonmanufacturing set ups also, to improve the productivity.

81
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Elements of Logistics Management

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SQUARE ROOT LAW

The Square Root Law states that The Total Inventory in a
System is proportional to the Square Root of the Number of
Locations at which a product is stocked. The Square Root
Law has been discussed as far back 15 1962 and was
proven mathematically by D. H. Maister in his 1975,
International Journal of Physical Distribution article entitled
Centralization of Inventories and The Square Root Law".
The significance of The Square Root Law is that a firm
currently

operating

out

of

five

warehouses

which

centralizes to one warehouse can theoretically reduce

inventory carried in stock by 55 per cent. This will of course
result in large inventory carrying cost savings, which will be
slightly offset by more rapid transport to meet current
delivery service levels.
In the quest of reducing inventory and number of locations
for keeping the finished products, the companies are
looking for avenues. This has to be done be with out
reducing service to customers. In general t he inventory is
more as the number of locations increase. And the reverse
is true.

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The Law
The square root law determines the extent to which
inventory reduces by reducing the number of locations. The
assumption is that the total customer demand remains the
same.
The square root law states that total safety stock inventories
in a future number of facilities approximates be multiplying
the total amount of inventory at existing facilities by the
square root of number of future facilities divided by number
of facilities.
L

(LI) (-X/W2/W1) Where

total Inventory in future Warehouses

LI

total inventory in existing Warehouses

University Q. Paper Solution

WL =

Number of existing warehouses

W2 =

Number of future Warehouses

For Example
In a company there are 40 warehouses. These are reduced
to 10 numbers. We use the above mentioned Square Root
Law formula. This gives us the reduction in the inventory by
50% as follows.
Wl = 40 existing Warehouses
W2 = 10 future Warehouses
LI = total units in the existing 40 Warehouses

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L = Total units at future 10 warehouses

= (2, 00,000)
=

(2, 00,000) (0.5) = 1, 00,000 There will be 1, 00,000

units stocks giving reduction of 50%.

It will be seen that if the number of Warehouses increased,
the Total Inventory will increase.

Assumptions
We find the assumptions are as follows.
(1)

Inventory transfer from one warehouse to other is not

done.
(2)
(3)

Lead time does not vary.

Customer service level does not change from any

Warehouse.
(4)

Demand level is well distributed from all the

Warehouses.
CROSS DUCKING
University
Q. Paper Solution
Cross
Docking
is a relatively new logistics technique used in

the retail and trucking industries to rapidly consolidate

shipments

from

different

sources

and

economically

transporting to the customers.

Cross docking eliminates the inventory holding function of
the warehouse, allowing it to serve consolidation and
dispatching

functions.

Incoming

shipments

directly

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Elements of Logistics Management

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transported without storing them in between. Dispatching

takes place in less than 24 hours at the facility, sometimes
less than an hour.
It is taking of finished goods from the manufacturing plant
and delivers it directly to the customer with little or no
handling in between. Cross docking reduces handling and
storage of inventory. Filling a warehouse with inventory
before dispatching materials out is virtually eliminated.
Cross docking means receiving goods at one door and
shipping out through the other door almost immediately
without putting them in storage.
Cross docking shift the focus from supply chain to
demand chain. For example- stock coming into cross
docking centre has already been pre-allocated against
replenishment order generated by a retailer in the supply
chain. It helps retailers to streamline the supply chain from
point of origin to point of sale.
Objectives
It helps in reducing operating cost.
It reduces inventory levels.
It increase throughput.
It increases sales space.

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Functioning Of Cross Docking

In a traditional warehouse, goods are received from vendors
and stored in devices like pallet racks or shelving. When a
customer (e.g., the consumer or perhaps a retail outlet)
requests an item, workers pick it from the shelves and send
it to the destination. In a cross dock, goods
,i raving from the vendor already have a customer assigned,
so workers need only move the shipment from the inbound
trailer to an outbound Irailer bound for the appropriate
destination. The already part should make you think of
information system requirements- a chief obstacle to
implementing crosses docking successfully.
Pre-distribution is definitely more difficult to implement
because the i'cndors of the cross dock must know which
customers of the cross dock need what before they send the
shipment. This involves quite a lot of information transfer,
system integration, and coordination. The problem is big for
a distributor with many vendors.

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Q: 7) Answer any two from the following:

1) FUNCTIONS OF PACKAGING:
Packaging serves three functions in the context of the
product it contains within itself:
University Q. Paper Solution

Protection:
This

involves

contamination,

protection
physical

from
effects

damage,
and

pilferage,

environmental

conditions. It is generally not economical to provide

absolute protection to the product from all possibility of
damage and environmental conditions. Hence, packaging
design and material utilized is a balancing of economic
considerations and adequate protection. The higher the
value of the product, the more the protection it deserves;
and so, the more expensive the packaging.
logistical

During

the

process, a packaged product can be damaged in

transportation, handling, and storage. The physical effects

that cause damage are impact, vibration, piercing and
crushing. The environmental conditions that can affect a
packaged

product

are

temperature,

humidity,

and

contamination. Packaging can provide protection against

physical effects. Protection from environmental conditions

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Elements of Logistics Management

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can only be achieved by maintaining the product in the right

environment during the logistics process. For example,
chocolates cannot be prevented from melting when exposed
to

high

temperatures

by

any

amount

of

packaging.

Packaging is generally tested for the degree of protection

provided.
Utility:
In

this

functionality,

efficiencies

of

packaging

materials

helps

handling

in

improving
procedures,

"transportation, storage and order picking. Packaging the

products in the form of master cartons, unit loads, and
containers
promotes
University Q. Paper
Solution handling, transportation and storage
efficiencies by speeding up handling, enabling higher
quantities to be transported, more quantity storage in the
same space and faster retrieval from storage. Packaging
facilitates securing and stacking during transportation,
storage, and handling.
Communication:
Packaging enables product identification and tracking, and
displays product care information. This is facilitated by
labels on the packages. Product identification improves
efficiency in receiving and order picking. Tracking of the
product during the logistics process improves logistical

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Elements of Logistics Management

efficiency.

Improvements

Er. H. Manjunath

in

technology

enable

the

utilization of bar code scanners for improved efficiency in

product identification and tracking and the resulting overall
logistical efficiency improvement. Packaging also provides
the facility of displaying handling instructions to ensure
proper care of the product during handling, transportation,
and storage. In case the product is hazardous, requiring
special handling, this functionality becomes critical.

2) THIRD PARTY LOGISTIC:

Third party logistics providers enable companies to achieve
reduction in operating costs and increased revenues in new
and existing markets. Third party logistics companies
provide companies an opportunity to enhance their market
value by reducing ownership of assets, which translates to a
higher return on remaining assets and greater return on
stockholder investment. These companies also bring to the
relationship. I heir specialized expertise in managing
logistics
contemporary technology and systems. The
University Q.with
Paper Solution
decision to outsource company logistics operations to the
third party logistics is often justified solely on the favorable
difference between the more efficient price for the services
and the company's higher costs of existing operations. The

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Er. H. Manjunath

marketing manager views the enhanced services and

distribution reach of third party, in existing and new
markets as translating into increased sales and better longterm relationships with customers. The company removes
property, plant, equipment, and even inventory from the
balance sheet. This releases cash for more productive uses,
instantaneously

and

"permanently"

improving

the

company's returns on assets. It is easy to have access to the

third party systems and technology resources, .1 voiding the
cost and trauma of upgrading their own. The company
employees can focus on their core competencies, doing
more of what II icy are good at and less of what can be done
better by the third party logistics provider. Main logistics
manager realizes that ownership of resources is not
necessary to achieve control over the results.

(3) UNITIZATION AND CONTAINERIZATION:

Unitization -- The practice or technique of consolidating many small pieces of
freight into a single unit for easier handling.

Benefits of Unitisation:
The reasons given by the different countries for reforming
their systems may be ordered differently or have different
emphases, but the concerns behind these aims tended to
have a lot in common. These commonalities have been

90
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Elements of Logistics Management

Er. H. Manjunath

distilled into the following list of aims, all of which are

associated to some extent with Unitisation:
Rationalisation and simplification
Access and progression
Uptake
Flexibility and responsiveness
Quality of learning
Quality assurance of qualifications

Containerization
Containerization

(or

containerization)

is

system

of

intermodal freight transport cargo transport using standard

ISO

containers

(known

as

shipping

containers,

ITUs

(Intermodal Transport Units) or is obtainers) that can be

loaded and sealed intact onto container ships, railroad cars,
planes, and trucks.

(4) LEAD TIME IN INVENTORY MANAGEMENT

No business can operate without inventories. It needs
inventory as a protection against uncertainty, for efficient
processing of material, and to permit transit and handling.

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Er. H. Manjunath

Inventory is a necessary evil. Because, it aims at absorbing

the uncertainties of demand. So the companies carry
inventory when the business uncertainty in lead times.
The supplier is usually not in position to supply the goods as
decided or as he promises. In the context of the vendors in
India it is observed that there is rather rare supplier who
supplies as per promises and of the quality essential. This
situation leads to overstock the quantity.
University Q. Paper Solution

EOQ formulas are best applied when there is little

uncertainty about delivery promises. When lea- time is long
delivery is less certain, the order quantity should be
adjusted to reflect the materials managers evaluation of the
situation.

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Er. H. Manjunath

BIBLIOGRAPHY

Books:
Elements of Logistics Management S. D. Aphale
Elements of Logistics Management Vijay Kumar Bhatia
Websites:
www.yahoo.com
www.
en.wikipedia.org
www.google.com
www.answers.com

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Er. H. Manjunath

www.businessworld.com

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