1. introduction to l&scm

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Introduction to Logistics and Supply

Chain Management

By

9211 - Pradnya Chavan

9219 - Dhiraj Gawande9238 - Amit Mundhe


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Logistics Management

Logistics management is the process ofplanning, implementing & controlling ofefficient, effective flow & storage of goods,services and related information from thepoint of origin to the point of consumption

for the purpose of conforming to thecustomer expectations.


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Evolution Of Logistics Concept

IndependentBusinessFunction(Till 1950)

LimitedInternal

Integration

(1960-70)

ExternallyIntegratedFunction

(1990 onwards)

FullyInternallyIntegratedFunction(1980-90)


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Independent Business FunctionEra (Till 1950s)

Each function performed independently Long history of application in wars but no formal

concepts or theory for business existed. Post war-large demands and acute shortages of

products Mindset-Increased capacities and high volumeproduction

Main object- maximize profit by volume sales Role of logistics limited to warehousing &

transportation of raw materials and finishedproducts.

Focus: Production


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Limited Internal integration Era(1960-70s)

Hard to convert products into cash

Recession of 1958

New players entered into market

Demand saturated

Limited Internal Integration of-MaterialsManagement and Distribution Management.

Reason

To reduce the cost in material handling & Physicaldistribution

Objective: Cost Control


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Fully Internally IntegratedFunctional Era(1980s)

More critical business

Steep increase in oil price

Sharp increase in transport costs-reduced profitability

Very high inflation- significant increase in interest rates

Pressure for increased internal efficiencies

Production productivity was almost at a PEAK


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Fully Internally IntegratedFunctional Era(1980s)..contd

Business need- maximize profitable sales volumeand cost reduction

Major development- Integrated logistics

management i.e. Materials Management, ProductionManagement and Distribution Management

Main Focus- increased productivity, profitability

Focus: Internal Efficiencies


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Externally integrated FunctionalEra (1990s)

Rapid privatization, Liberalization and globalization

Business scenario becomes still more competitive

New pattern for survival- provide most value at leastcost

Rapid technology development, many new conceptsdeveloped- TQM, MRP, JIT, etc

Major thrust of era- Core Competence and highdegree of specialization

Do what you can do the best and outsource the rest(Third party logistics services)

Focus : Core Competencies


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Importance Of LogisticsManagement

Smooth flow

Ability to meet customer expectations

Delivery of Quality products

Optimization of resources

Enhances productivity and profitability

Customer service at least possible cost


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Components of Logistics

Generic component

Primary component

Supportive component


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Genericcomponent customer service

Customer service for competitive advantage

Infrastructure requirement

Service expectations of customer & response

Primary component Network design

Number, size & location of facility network Relationship

Infrastructure of each facility


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Transportation Requirement , availability & regularity

Modes of transport and coordination

Transport cost

Inventory management Stocking policies for raw material

Various strategies: JIT, zero-inventory Inventory cost

Lot size


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Supportive component

Storage & warehousing

Warehouse location

Infrastructure facilities Operation mechanism

Up-to-date recording of goods stock positioning

cost

Material Handling

Safe, smooth & speedy flow

MHE selection

MHE cost, operating cost


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

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

Forecasting Nature & trend of demand Forecast techniques


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Logistical Competitive Advantage

Firms ability to differentiate itself with

others , in the eyes of the customer

Ensuring economies of scale in operation

Cost advantage by low cost physicaldistribution system, a highly efficientassembly process or superior sales forceutilization

Value chain for competitive advantage


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Michael Porters Value Chain


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Dells Value Chain:

Components like disk drives, CD-ROMdrives, power systems, cables andconnectors are shipped from Asia

Motherboards largely procured locally

Build to order and JIT, inventory remainswith suppliers

Assembles 80,000 PCs a day. no

warehouse

Assembly factories hold inventory formaximum of 2 da s


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Dells Value Chain:

It sells 90% of its product through directmodel. Receives payments from customereither through internet or credit cards

Places orders on component vendors andproceeds on assembly

Pays to suppliers 36 days after the productis shipped to customer

Eliminates intermediaries, charge 20-30%margin


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Logistics Cost and Value Advantage

c

o

st

a

d

v

a

nt

a

g

e

-Low Inventory-No Stock Out

-In tact Delivery-CapacityUtilization

-High WorkingCapital Turnover-Integrated Total

LogisticsSystem

-Quality-Availability

-QuickResponse

-Best Service-Consistency Of

Logisticalperformance

ValueAdvantage

High

Low High


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Integrated Logistics Systems

Objectives

To ensure better customer service by valueaddition

To ensure higher productivity and furthercurtailment of logistics cost by means ofsynergy between all three logistical functions

To avoid repetition of similar types of logisticalfunctions by diff departments at different levels

To properly monitor the performance ofexisting logistics system, to make continuous

improvement


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Integrated Logistic System

InputsNeed

Shipment

Quality

SourcesStudy

OrderPlacem

ent

N & SC

Production

Schedule

Inventory

Management

Inputs

MaterialHandlin

gStorage

Packaging

Protective

Packaging

Customer

O/pInventoryManage

ment

Transport

Order

DW

Inventory Value

Cash Info

C

onsumer

Logistics

Procurement

Function Management

Production

Function

System

Physical Distribution

Function

EC U S T O M E R S E R V I C


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Framework for SC Strategy

Challenges and Opportunities in Supplychain

Huge scope for logistical cost reduction and

substantial improvement in service level

Innovations in the field of IT, communicationtech and inventory control technology provide

scope for their extensive use in solutions tologistics problems

Orthodox mindset of corporate world


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Government

Micro-level policies and regulations for smoothflow of products in the interest of nation

Privatization of existing infrastructure, toimprove quality of service

Participation of industrial association should

be encouraged


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3rd party logistics service providerSignificance of customer service components

affected by logistics

Efforts for reducing logistics costs andimprovement of customer service

Co-ordination with other supply chainmembers

Continuously identify scope for furtherreduction of cost

Vendors

Identifying their role in supply chain processand their contribution in terms of services


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Vendors

How their supply affect a clients customer

service capability

Recognize the growing importance of supplyof only quality-certified products, quickresponse,flexibility in approach,gradualimprovement of their productivity, for reducingtheir own costs and improving servicecapability


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Industry

Organization of seminars, workshops andconferences for development of awareness

Organizing the unorganized sectors likevendors, distributors, transport industry etc

Lobbying with govn for infrastructural

development, uniformity and streamlining oftaxes, incentives and motivation


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Alignment of Supply Chain Strategyto Corporate Level Strategy

Business level strategy is an integratedand coordinated set of actions designed toexploit core competencies and gain a

competitive advantage To establish how you work with your

supply chain partners including suppliers,distributors,customers

A firms supply chain strategies are usuallyformulated by middle level managers andare often done to reflect the business level

strategy.


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Dells SC strategy

With emergence of inter net, it startedintegrating operational components anddeveloped the supply chain

Supply chain strategy focused on being thelow cost produces and business strategygave emphasis on customer service


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The real kings ofLogistics


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And the winner is


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THANK YOU!!!

1. introduction to l&scm

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