Logistic Management Sem IV Dabs- Unit i

8/6/2019 Logistic Management Sem IV Dabs- Unit i

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LOGISTIC MANAGEMENT

The transportation of goods from manufacturer toretailer is logistics


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INTRODUCTION

The term Logistics Management or supply

chain management is that part of Supply

Chain Management that plans, implements,

andcontrols the efficient, effective, forward,

andreverse flow andstorage ofgoods,

services,and relatedinformation between the

point of originand the point of consumptionin order to meet customers requirements.


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Plan

A plan is typically any procedure used to achieve anobjective. It is a set ofintended actions, through which oneexpects to achieve a goal.

Plans can be formal or informal:

Structured and formal plans, used by multiple people, aremore likely to occur in projects,diplomacy, careers,economic development , military campaigns, combat, or inthe conduct of other business. In most cases, the absenceof a well-laid plan can have adverse effects: for example, a

non-robust project plan can cost the organization time andmoney.

Informal or ad-hoc plans are created by individualsin all oftheir pursuits.


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Contd.

The most popular ways to describe plans are by theirbreadth, time frame, andspecificity; however, theseplanning classifications are not independent of oneanother. For instance, there is a close relationshipbetween the short- and long-term categories and thestrategic and operational categories.

Itis

common

for less

formal plans

to be created

asabstract ideas, and remainin that form as they are

maintained and put to use. More formal plans as usedfor business and military purposes, while initiallycreated with and as an abstract thought, are likely tobe writtendown,drawn up or otherwise storedin aform that is accessible to multiple people across timeandspace. This allows more reliable collaborationinthe execution of the plan.


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Planning The term planning implies the working out ofsub-componentsin

some degree of elaborate detail. Broader-brush enunciations ofobjectives may qualify as metaphorical roadmaps.Planning literally

just means the creation of a plan; it can be assimple as making alist. It has acquired a technical meaning, however, to cover the areaof government legislation and regulations related to the use of

resources. Planning can refer to the planned use of any and all resources, asin

the succession of Five-year plans through which the government ofthe Soviet unionsought to develop the country. However, the termis most frequently usedin relation to planning for the use of landand related resources, for example in urban planning,

transportation planning, etc. Thus,in a governmental context, "planning" without any

qualificationis most likely to mean the regulation ofland use.


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LAND USE

Land use is the human use of land. Land use

involves the management and modification of

natural environment or

wilderness,(wildland)into built environment

such as fields, pastures, andsettlements. Ithas also beendefined as "the arrangements,

activities andinputs people undertake in a

certain land cover type to produce, change or

maintainit"


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Natural environment

The natural environment, encompasses all living andnon-living thingsoccurring naturally on Earth or some region thereof. It is an environmentthat encompasses the interaction of all living species. The concept of thenatural environmentcan be distinguished by components:

Complete ecological units that function asnatural systems without

massive humanintervention,including all vegetation, microorganism,soil,rocks, atmosphere andnatural phenomenon that occur within theirboundaries.

Universal natural resources and physical phenomenon that lack clear-cutboundaries,such as air , water, and climate, as well as energy, radiation,electric charge, and magnetism,not originating from human activity.

The natural environment is contrasted with the built environment, whichcomprises the areas and components that are strongly influenced byhumans. A geographical area is regarded as a natural,if the humanimpactonit iskept under a certain limited level


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Built environment

The term built environment refers to the human-made surroundings that provide the setting forhuman activity, ranging inscale from personal

shelter and buildings to neighborhoods and citesthat can ofteninclude their supportinginfrastructure,such as water supply or energynetworks.The built environment is a material,

spatial and cultural product of human labor thatcombines physical elements and energy in formsnecessary for living, working and playing.


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Implementation

Implementation is the realization of an

application, or execution of a plan,idea,

model,designspecification,standards

algorithm , or policy.


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Types of implementation

Hot standby or Hot spare

Parallel running or asknown as parallel

Pilot introduction or asknown as pilot

Well-trade


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Control (management)

Control is one of the managerial functions likeplanning,organizing,staffing anddirecting. It isanimportant function because it helps to checkthe errors and to take the corrective actionso

that deviation from standards are minimized andstated goals of the organization are achievedindesired manner.According to modern concepts, control is aforeseeing action whereas earlier concept ofcontrol was used only when errors weredetected. Control in management meanssettingstandards, measuring actual performance andtaking corrective action.


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Characteristics ofControl

Control is a continuous process Control is a management process

Control is embeddedin each level of

organizational hierarchy Control is forward looking

Control is closely linked with planning

Control is a tool for achieving organizationalactivities


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The elements of control

The four basic elementsin a control system

(1) The characteristic or condition to be

controlled.

(2) The sensor,(3) The comparator

(4) The activator


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Comparator

The comparator,determines the need forcorrection by comparing what is occurring withwhat has been planned. Some deviation from

planis usual and expected, but whenvariationsare beyond those considered acceptable,corrective actionis required. It is often possibleto identify trendsin performance and to take

action before an unacceptable variation from thenorm occurs. Thissort of preventative actionindicates that good control is being achieved.


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Activator

The activator,is the corrective action taken to returnthe system to expected output. The actual person,device, or method used to direct corrective inputsintothe operating system may take a variety of forms. It

may be a hydraulic controller positioned by a solenoidor electric motor in response to an electronic errorsignal, an employee directed to rework the parts thatfailed to pass quality inspection, or a school principalwho decides to buy additional books to provide for an

increasednumber ofstudents. As long as a planisperformed within allowable limits, corrective actionisnot necessary.


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Efficient

In economics, the term economic efficiency refers to theuse of resourcesso as to maximize the production of goodsandservices. An economic system issaid to be moreefficientthan another (in relative terms)ifit can provide

more goods andservices for siciety without using moreresources. In absolute terms, a situation can be calledeconomically efficient if:

No one can be made better off without making someoneelse worse off.

No additional output can be obtained without increasingthe amount ofinputs.

Production proceeds at the lowest possible per-unit cost.


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effective

Having power to produce an effect or efftcts

Producing a decided or decisive effect

Efficient, Serviceable or Operative

Actually in effect


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Nature and Concepts of Logistic Management

The evolution of logistics and Supply Chain Management

(SCM)in the 1990s can be traced back to physicaldistribution management in the 1970s when there wasno

coordination among the various functions of an

organization, and each was committed to attainits own goal.

This myopic approach then transformedinto integratedlogistic management in the 1980s that called for the

integration ofvarious functions to achieve a system-wide

objective. Supply Chain Management (SCM) further widens

thisscope by including the suppliers and customersinto theorganizational fold, and coordinating the flow of materials

andinformation from the procurement of raw materials to

the consumption of finished goods.


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Contd.

The objectives of Supply Chain Management (SCM) are to

eliminate redundancies, and reduce cycle time andinventory so

as to provide better customer service at lower cost. The focushasshifted from the share of the market paradigm to the

share of the customer paradigm, wherein the goal is to create

customer value leading to increased corporate profitability,

shareholder value, andsustained competitive advantage in the

long run.

Logisticsinvolves getting,in the right way, the right product,in

the right quantity and right quality,in the right place at the right

time, for the right customer at the right cost. The logistic

network consists of the suppliers, the retailer and the users. Thepurpose of anintegrated logistic networkin a supply chainis to

fulfill customer orders through providing place utility to deliver

products andservices to end users. The place utility is achieved

by managing a number ofkey functions of a supply chain.


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Scope of Logistics

Logisticsisnot confined to manufacturing operation

alone. It is relevant to all enterprises,including Govt.institutionssuch as Hospitals andschools andserviceorganizationsuch as retailers, banks and financialservice organizations. The study of logisticsis especially

important for bulk raw materials, where substantialoutflow of freight isinvolved. Management of Logisticsis an art which is extremely difficult to perfect in India,JIT ends up being SHIT (some how in time.)

The study of logisticsisimportant to establish a leansupply chain which would give an advantage of quickproduct change over, capability, excellent short and longterm forecast visibility and JIT capability.


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For More Information

Members M/s.ganesh Logistics [BANGALORE]India (www.Ganeshlogistics.Com )

Trustman & Co [New Delhi] India

(www.trustman.org, www.delhilaw.firm.in) Kandla LogisticsPvt. Ltd. [Rajkot] India

1 Logistic [Navi Mumbai] India

Globe Ecco Logistics Limited[lucknow] India

Above are few Logistic companies check the detailsof these companies for further study.


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Contd.

Logistics play a significant role in ensuring efficiency andcost marginsin retail businesses. The competitive retailscenario, rapidly changing consumer preferences,diversified retail formats, as well as retail storesspreadfar and wide, are some of the factors contributing to theincreased efficiency in retail logistics. Logisticsinvolvesmanaging the flow of merchandise as well asinformation

related to the movement of goods. A retailer can have either own logistics arrangements

(in-house logistics) or hire some other company for logisticsservices(outsourcing of logistics activities). In order toincrease efficiency in their supply chain, companies areincreasingly going for logistics outsourcing.Transportationis an essential part of logistics formaintaining flow of goods between manufacturers,suppliers and retailers.


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Contd

The infrastructure available for moving goods fromone place to another in India includes roads,

railways, airways and ports. The nature of providing logistic services has

changeddramatically in recent years. It is graduallybecoming a specialist field, with increasing requests

for the integration of complex flows of goods.Vertical integration, by aligning processes within onesupply chain, as well as horizontal integration, byallowing collaboration betweendifferent supplychains. The logistics provider isincreasingly

expected to act as a thinking partner. Thisin turncalls for considerable investmentsin technology andinformation management, as these two factors willbe essential in the field of logisticsin the future.


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Customer value Chain


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Contd

The customer focusedvalue chainis conceptually underpinned by theprinciple that ..the purpose of a businessis to create andkeep acustomer.. (Theodore Levitt).The concept looks at the organizationinterms of a series ofvalue creating activities and considers the best inclass approaches to enhancing value and reducing the cost ofdelivery.

The concept is based on bringing together the following elementsintoa holistic approach to creating andsustaining customer value in orderto maintain competitive edge:-

Strategy andstructure aligned to creating andserving the customer(Johnson& Scholes)

Business processes engineered to add customer value throughService Breakthroughs (Heskett)

Business controls performance management principlesi.e. theBalanced Scorecard(Kaplan& Norton), to ensure the business

continually monitors and manages the chain of events which drivecustomer value. Namely, people perform business processes whichcreate customer value which creates business profitability.

Culture the creation of a learning environment (Garratt)


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Objectives of Logistic Management

The General objectives of the logistics can be summarized as:

Cost reduction

Capital reduction

Service improvement

The specific objective of anideal logisticssystem is to ensure theflow ofsupply to the buyer, the:

Right product

Right quantities and assortments

Right places

Right time

Right cost / price and,

Right condition


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Contd..

Thisimplies that a firm will aim at having a logisticssystem which maximizes the customer service and

minimizes the distribution cost. However, one canapproximate the reality by defining the objective oflogisticssystem as achieving a desired level of customerservice i.e., the degree ofdelivery support given by theseller to the buyer. Thus, logistics management starts

with as curtaining customer need till its fulfillmentthrough product supplies and,during this process ofsupplies,it considers all aspects of performance whichinclude arranging the inputs, manufacturing the goodsand the physical distribution of the products. However,

there are some definite objectives to be achievedthrough a proper logisticssystem. These can bedescribed as follows:


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Contd

1.Improving customer service: As we know, the marketing conceptassumes that the sure way to maximize profitsin the long runisthrough maximizing the customer satisfaction. Assuch, animportantobjective of all marketing efforts,including the physical distributionactivities,is to improve the customer service. An efficient managementof physical distribution can help inimproving the level of customerservice by developing an effective system of warehousing, quick andeconomic transportation, all maintaining optimum level ofinventory.But, asdiscussed earlier, the level ofservice directly affects the cost of

physical distribution. Therefore, while deciding the level ofservice, acareful analysis of the customers wants and the policies of thecompetitorsisnecessary. The customers may be interestedinseveralthings like timely delivery, careful handling of merchandise, reliabilityofinventory, economy in operations, andso on. However, the relativeimportance of these factorsin the minds of customers may vary.

Hence, an effort should be made to ascertain whether they valuetimely delivery or economy in transportation, andso on. One therelative weights are known, an analysis of what the competitors areoffering in this regardshould also be made. This, together with anestimate about the cost of providing a particular level of customerservice, would help indeciding the level of customer service.


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2.Rapid Response: Rapid response is concerned with afirms ability to satisfy customer service requirementsin atimely manner. Information technology hasincreased thecapability to postpone logistical operations to the latestpossible time and then accomplish rapiddelivery ofrequiredinventory. The result is elimination of excessive

inventories traditionally stockedin anticipation ofcustomer requirements. Rapid response capability shiftsoperational emphasis from an anticipatory posture basedon forecasting andinventory stocking to responding tocustomer requirements on a shipment-to-shipment basis.Because inventory is typically not movedin a time-basedsystem until customer requirements are known andperformance is committed, little tolerance exists foroperational deficiencies


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Contd

3.Reduce total distribution costs: Another mostcommonly stated objective is to minimize the costof physical distribution of the products. Asexplained earlier, the cost of physical distributionconsists ofvarious elementssuch as transportation,warehousing andinventory maintenance, and anyreductionin the cost of one element may result inanincrease in the cost of the other elements. Thus,the objective of the firm should be to reduce thetotal cost ofdistribution andnot just the costincurred on any one element. For this purpose, thetotal cost of alternative distributionsystemsshouldbe analyzed and the one which has the minimumtotal distribution cost should be selected.


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Contd

4.Generating additional sales: Another

important objective of the physicaldistribution/logisticssystem in a firm is togenerate additional sales. A firm can attractadditional customers by offering better

services at lowest prices. For example, bydecentralizing its warehousing operations orby using economic and efficient modes oftransportation, a firm can achieve larger

market share. Also by avoiding the out-of-stocksituation, the loss of loyal customers canbe arrested.


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Contd

5.Creating time and place utilities: The logistical systemalso aims at creating time and place utilities to the

products. Unless the products are physically moved fromthe place of their origin to the place where they arerequired for consumption, they do not serve any purposeto the users. Similarly, the products have to be madeavailable at the time they are needed for consumption.

Both these purposes can be achieved by increasing thenumber of warehouses located at places from where thegoods can be delivered quickly and where sufficientstocks are maintainedso as to meet the emergencydemands of the customers. Moreover, a quicker mode of

transport should be selected to move the products fromone place to another in the shortest possible time. Thus,time and place utilities can be createdin the productsthrough an efficient system of physical distribution.


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Contd

6.Price stabilization: Logistics also aim at achievingstabilizationin the prices of the products. It can be

achieved by regulating the flow of the products tothe market through a judicious use of availabletransport facilities and compatible warehouseoperations. For example,in the case ofindustriessuch as cotton textile, there are heavy fluctuationsin the supply of raw materials. Insuch casesif themarket forces are allowed to operate freely, the rawmaterial would be very cheap during harvestingseason andvery dear during offseason. By stocking

the raw material during the period of excesssupply(harvest season) and made available during theperiods ofshort supply, the prices can be stabilized.


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Contd

7. Quality improvement: The long-term objective of the logistical systemis to seek continuous quality improvement. Total quality management

(TQM) has become a major commitment throughout all facets ofindustry. Overall commitment to TQM is one of the major forcescontributing to the logistical renaissance. If a product becomesdefective or ifservice promises are not kept, little,if any,value isadded by the logistics. Logistical costs, once expended, cannot bereversed. In fact, when quality fails, the logistical performancetypically needs to be reversed and then repeated. Logisticsitself mustperform to demanding quality standards. The management challengeof achieving zero defect logistical performance is magnified by the factthat logistical operations typically must be performed across a vastgeographical area at all times of the day andnight. The qualitychallenge is magnified by the fact that most logistical workisperformed out of a supervisorsvision. Reworking a customers order

as a result ofincorrect shipment or in-transit damage is far morecostly than performing it right the first time. Logisticsis a prime part ofdeveloping and maintaining continuous TQM improvement.


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Contd

8. Life-Cycle support: A good logistical system helps to support the lifecycle. Few items are sold without some guarantee that the product willperform as advertised over a specified period. Insome situations. thenormal value-addedinventory flow toward customers must bereversed.Product recall is a critical competency resulting fromincreasingly rigid quality standards, product expirationdating andresponsibility for hazardous consequences. Return logisticsrequirements also result from the increasing number of laws prohibitingdisposal and encouraging recycling of beverage containers and

packaging materials. The most significant aspect of reverse logisticaloperationsis the need for maximum control when a potential healthliability exists(i.e.. a contaminated product). In thissense, a recallprogram issimilar to a strategy of maximum customer service that mustbe executed regardless of cost. Firestone classical response to the tyrecrisisis an example of turning adversity into advantage. The operational

requirements of reverse logistics range from lowest total cost,such asreturning bottles for recycling, to maximum performance solutions forcritical recalls. The important point is that sound logistical strategycannot be formulated without careful review of reverse logisticalrequirements.


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Contd

9. Movement consolidation: As the logistical system aimsat cost reduction through integration, consolidation Oneof the most significant logistical costsis transportation.Transportation cost isdirectly related to. the type ofproduct,size ofshipment, anddistance. Many Logisticalsystems that feature premium service depend on high-speed,small shipment transportation.Premiumtransportationis typically high-cost. To reducetransportation cost,it isdesirable to achieve movementconsolidation. As a general rule, the larger the overallshipment and the longer the distance it is transported,the lower the transportation cost per unit. This requires

innovative programs to group small shipments forconsolidated movement. Such programs must befacilitated by working arrangements that transcend theoverall supply chain.

Logistic Management Sem IV Dabs- Unit i

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