Introduction

Department of Management Studies,

BSA Crescent Institute of Science & Technology
Logistics
Originated from the Greek work Logistikos & the Latin
word logisticus
Means the science of computing or calculating
Usage can be traced back to the 17 th century when it was
probably used for the first time by the French army
Is considered to have originated in the military's need to
supply themselves with arms, ammunition and rations as
they moved from their base to a forward position

 Department of Management Studies,

 BSA Crescent Institute of Science & Technology
Gained importance during World War II in army
operations, covering movement of supplies, troops and
equipment
In recent times Logistics has acquired wider meaning
& is used in business for the movement of raw material
from suppliers to the manufacturers and finally the
finished goods to consumers
Also referred to as physical distribution

 Department of Management Studies,

 BSA Crescent Institute of Science & Technology
The Broad Scope of Logistics
Definition
Philip Kotler defines Logistics as “Planning,
implementing and controlling the physical flow of
materials and finished goods from point of origin to
point of use to meet the customer's need at a profit”
The American Council of Logistics Management defines
Logistics as “The process of planning, implementing
&controlling the efficient, cost effective flow & storage of
raw materials, in-process inventory, finished goods and
related information related information from point of
origin to point of consumption for the purpose of
conforming to customers' requirements”
Logistics is not limited to manufacturing
organizations alone
Logistics is relevant to all types of organizations,
government, NGOs, service related organizations such
as schools, restaurants, hospitals, bank, retail outlets
etc
Logistics Management
Application of management principles to logistics
operations for efficient and cost effective movement of
goods and personnel–Is an integrative process which
optimizes the flow of materials & supplies through an
organization & its operations to the customer
Is that part of Supply Chain Management that plans,
implements, and controls the efficient, effective,
forward, and reverse flow and storage of goods, services,
and related information between the point of origin and
the point of consumption in order to meet customers’
requirements
Logistics – A System Concept
Concept of logistics is based on the system approach
Flow of material from supplier to manufacturing plant
to end customer is viewed as a single chain, ensuring
efficiency & effectiveness to achieve customer
satisfaction at lowest possible cost
Logistics recognizes that all activities of material
movement across business processes
Are interdependent & need close coordination
Are to be managed as a system
Objectives
Primary objectives of Logistics Management
To move inventory in a supply chain effectively and
efficiently
To extend the desired level of customer service at least cost
To achieve this, the following subsets of the primary
objectives need to be achieved
Inventory Reduction
Reliable & Consistent Delivery Performance
Quick Response
Minimum Product Damages
Freight Economy
Quick Response
Logistics Functions
Major Logistics functions are–
Order Processing
Inventory Management
Warehousing
Transportation
Material Handling & Storage
Logistical Packaging
Information
Order Processing
Starts when a purchase order is placed by a buyer on
the supplier
Consists of the following activities
Order checking for any deviations in agreed or
negotiated terms
Prices, payment & delivery terms
Checking the availability of materials in stocks
Material & Production scheduling to avoid shortages
Acknowledging the order, indicating deviations, if any
Inventory Management
Is maintaining the requisite level of stocks to meet
customer requirements simultaneously ensuring
minimal carrying cost
In the overall supply chain, inventory costs indirectly
chews profits because of inventory carrying costs
Two approaches to Inventory management
 Cost approach
 Customer satisfaction
Businesses try to strike a balance between these two
approaches
With improvements in infrastructure &communication,
business firms are adopting JIT techniques
Warehousing
Storage place where finished goods are stored until
they are brought to point of sales
Location of warehouse impacts the ability of a firm to
deliver desired level of customer service
In Logistics, warehousing is a key decision area
involving following decisions
Location of warehousing facilities
Number of warehouses
Size & layout of warehouse
Ownership of warehouse
Transportation
Goods have to be moved from supplier to buyer through
different transportation modes
Usually for low value products transportation cost is 20% of
product cost
Is very critical for perishable goods such as milk, ice-creams
Common modes are road carriers, railways, airways, ships,
pipelines & ropeways
Key decisions involved in Transportation is should the firm
have its own fleet or go in for outsourcing?
Choice of Transportations depends on reach, investment
required, operating costs, expertise & reliability
Material Handling & Storage
Speed of inventory movement across the supply chain
depends on the material handling methods
Improper methods of material handling could lead to
product damage and delayed deliveries, resulting in
incidental overheads
Mechanization & automation in material handling
enhances productivity of logistics system
Considerations for material handling are volumes to be
handled, speed required for material movement and level
of service to be offered to the customer
Choice of storage system should maximize space
utilization (floor and cubic) in the warehouse
Logistical Packaging
AKA Industrial Packaging
Differs from product packaging which is based
on marketing objectives
Influences the efficiency of the logistical system
Plays an important role in damage protection, ease of
material handling and storage space economy
Information
Logistics is an information based activity of inventory
movement across the supply chain
Information systems play a vital role in delivering
superior customer service
Involves usage of IT tools for information
identification codes, access, storage, analysis and
decision support
Scope / Activities of Logistics
Inbound Logistics
Outbound Logistics
Manufacturing Logistics
AKA Operations / Process / Production Logistics
The purpose of production logistics is to ensure that each
machine and workstation is being fed with the right
product in the right quantity and quality at the right time
Ensures that the production resources - 4Ms are used
efficiently
Involves synchronizing the flow of material with the
production processes
The concern is not the transportation itself, but to
streamline and control the flow through value-adding
processes and eliminate non–value-adding ones
Manages the production cycle involving the following
tasks
Material planning
Packaging
Inventory management
In-house transport
Storage
Logistics in the Value Chain
Logistics in the Value Chain
Concept of Value Chain was formulated by Michael
Porter
The Value Chain is composed of value activities and
margin which is achieved by these activities
Value activities are divided into two groups of
activities
Primary Activities
Secondary Activities
Primary Activities
Those activities which are directed at the physical
transformation and handling of goods& services the
organization delivers to its customers
Includes the following categories
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Services
Secondary Activities
Those activities which enable and support primary
activities
Includes the following categories
Procurement
Technology Development
Human Resources Management
Firm Infrastructure
Value - Added Role of Logistics
Four principle types of economic utilities add value to
a product or service viz
Form Utility
Time Utility
Place Utility
Possession Utility
Generally, professionals credit–
Manufacturing activities with providing form utility
Logistics activities with providing time & place utility
Marketing activities with providing possession utility
Logistics for Competitive Advantage
Concept formulated by Martin Christopher
3Cs in business are–
Customer
Company
Competition
All 3Cs are important & healthy for a business & the
economy
A buying decision is always triggered by a need / want
experienced by a customer
Customer: Whilst making a buying decision, Customer is
attracted by value offered by a company
Company: Tries to give a better offering to the customer than
competition by efficient & effective utilization of its assets
Competition: Ensures its assets are almost similar to industry
players
Hence product differentiation in terms of product quality &
cost is nearly impossible
Opportunity exists for Company to differentiate its products
&services through superior logistics
When this happens, Customer sees better value in Company's
products than Competition
This provides the Company with a means of beating
Competition viz competitive advantage