LOGISTICS & SUPPLY CHAIN MANAGEMENT

Well . . . . Is This Logistics ?

Actually . . . . . This Is Logistics

Logistics ManagementLOGISTICS …………IS “THE PROCESS OF PLANNING IMPLEMENTING

AND CONTROLLING THE EFFECTIVE AND EFFICIENT FLOW AND STORAGE OF GOODS, SERVICES AND RELATED INFORMATION FROM THE POINT OF ORIGIN TO THE POINT OF CONSUMPTION FOR THE PURPOSE OF CONFORMING TO CUSTOMER REQUIREMENTS.”

( COUNCIL OF LOGISTICS MANAGEMENT/USA)

ITS ORIGINS BELONG TO MILITARY OPERATIONS RELATING TO THE COMPLETE SYSTEM OF MOVING, SUPPLYING AND QUATERING TROOPS AND ALL THE RESOURCES THEY NEED.

IN TODAY’S HIGHLY COMPETITIVE INDUSTRIAL SCENARIO OF GLOBAL COMPETITIVENESS, LOGISTICS HAS TRULY BECOME A STRATEGIC WEAPON AND MOST IMPORTANT FACTOR IN THE SUPPLY CHAIN

Contd……

“Getting the right product to the right place in the right quantity at the right time, in the best condition and at an acceptable cost. “

(The Chartered Institute of Logistics & Transport)

Logistics involves ‘8 Rs’- Logistics involves 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.

Global : Logistics Industry Scenario

The logistics industry is valued at US$ 3.5 trillion. The U.S., which contributes to over 25% of the global industry value, spends

close to 9% of its GDP on logistic services. The sector currently employs over 40 million people in the world

Countries Logistics Cost/GDP

India/China 13-15%

U.S 9.90%

Europe 10%

Japan 11.40%

Technology19%

Retail17%

Industrial19%

Health Care4%

Consumer23%

Chemical4%

Automotive10%

Others3%

Global Industry Verticals - Logistics Activ-ity

Countries Logistics Cost / GDP

India : Logistics Industry Scenario Total GDP US$ 3 Trillion. India spends 13% of its GDP on logistics compared to an average of

10% in other developing countries. India logistics market to double by 2012. The industry would need 4,20,000 skilled people in the ‘Senior

Resource Category’ in warehouse management it self, by 2015. Currently, India logistics industry has only 14,000 Warehouse

Managers but required are approx. 35,000 . Technological change in the logistics industry demands a trained

workforce in all areas of the sector. Indian logistics industry is at an inflection point and will reach a

market size of over $125 billion in year 2010. The organized logistics, which is about 6% of the total logistics market,

is growing @ 15-20% a year.

Logistics Mix

Logistics covers the following functional areas, and are termed as Logistics Mix by Martin Cristopher.

1. Information flow- Order registration, order checking & editing, order processing, coordination

2. Warehousing- Material storage, material handling, site selection & network planning, despatch documentation

3. Packaging- Handling & damage prevention

4. Transportation- Route planning, mode selection & vehicle scheduling

Logistics Functions

The major logistics functions are:

1. Order processing2. Inventory management3. Warehousing4. Transportation5. Material handling & storage system6. Logistical Packaging7. Information

Objectives of Logistics ManagementThe objective of Logistics management

are:1. Inventory reduction2. Reliable and consistent delivery

performance3. Freight economy4. Minimum product damages5. Quick response

What is Supply chain?

Consists of all parties involved, directly or indirectly, in fulfilling a customer request, include not only manufacturers & suppliers, but also transporters, warehouses, retailers & even customers.

Supplier Manufacturer Distributor Retailer Customer

Is supply chain so simple?

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Upstream Downstream

Reverse Logistics

After Sales Logistics

Suppliers Production Distribution Sales Channel Value-Added

Services End User Distribution

Distribution Logistics

Manufacturing Logistics

Inbound Logistics

Supply Logistics

Basic Supply Chain Process

Manufacture & Raw Materials

Export &ImportActivities

PrimaryMovement

DistributionCentres

SecondaryMovement

B2B & B2CDistribution

After-SalesServices

Definition Of Supply ChainAmerican Production & Inventory

Control Society(APICS) defines Supply Chain as:

“The processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies”

“The functions within and outside a company that enable the value chain to make products & provide services to the customer”

SUPPLY CHAIN MANAGEMENT(SCM)

Supply chain management involves planning, design,& control of flow of material, information and finance along the supply chain to deliver superior value to the end customer in an effective & efficient manner

Evolution of Supply Chain ManagementStatement made by the chief executive of an

automobile industry:“Our aim is always to arrange the material &

machinery and to simplify the operations so that practically no orders are necessary. Our Finished inventory is in transit. So is most of our raw material inventory. Our production cycle is about eighty-one hours from the mine to the finished machine(automobile) in the freight car.”

Contd……………….The First Revolution(1910-1920): The

Ford Supply Chain

The Second Revolution(1960-1970): The Toyota Supply Chain

The Third Revolution(1995-2000): The Dell Supply Chain

Objective of Supply ChainObjective of every supply chain should be

to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customer’s request

Reduced inventory, reduced lead times, reduced warehouse costs, helps in forecast accuracy.

Contd…..

Objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost.

Major Drivers of Supply Chain

The major supply chain drivers are:

1. Production2. Inventory3. Location4. Transportation5. Information

Importance of the Supply ChainMajor trends that have emerged to

make supply chain management a critical success factor in most industries:

1. Proliferation in product line2. Shorter product life cycles3. Higher level of outsourcing4. Shift in power structure in the chain5. Globalization of manufacturing

Decision Phases in a Supply Chain

Successful supply chain management requires many decisions relating to the flow of information, product & funds. The decision falls in three categories:

1. Supply chain strategy or design: 2. Supply chain planning3. Supply chain operation

Process views of a Supply Chain

There are two ways:

1.Cycle view: Customer order cycle, replenishment cycle, manufacturing cycle, procurement cycle

2. Push/pull view: Pull are initiated by customer order & push by anticipation of customer orders

Process ViewCustomer

Retailer

Distributor

Manufacturer

Supplier

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Push vs Pull processPush process ,execution is initiated in

anticipation of customer orders whereas pull is initiated in response to a customer order

Pull process customer demand is known with certainty whereas in push, demand is not known and must be forecast

Pull process is referred to as reactive & push as speculative process.

Logistics Versus Supply Chain Management

Four unique perspectives on the relationship between logistics and SCM.

Four perspectives: traditionalist , relabeling ,unionist , inter-sectionist

The result of an international survey of logistics / SCM experts are reported.

For logistics educators, researchers and practitioners

SCM versus Logistics: Four Perspective

Traditionalist Re-Labeling

Unionist Intersectionist

Logistics=SCM

SCM

Logistics

SCM

Logistics

Logistics

SCM

TRADITIONALIST

Traditionalist position SCM within logisticsSCM is one small part of logistics.SCM as “Logistics outside the firm” & this reduces

SCM to a special type of Logistics, external or inter-organisational logistics

LOGISTICS

SCM

Re-labeling

The relabeling perspective simply renames logistics; what was logistics is now SCM.

“Logistics Manager” = “Supply Chain Manager” Supply Chain = Logistics NetworkRe-labeling narrows the scope of SCM, since SCM

equals logistics

LOGISTICS= SCM

Unionist

This perspective treats logistics as a part of SCM; SCM completely subsumes logistics.

SCM= purchasing+ logistics+ operations+ marketing+…..

SCM

Logistics

Mentzer et al. (2001)“all the traditional business functions should be included”

1. Marketing & Sales2. Research & development3. Forecasting4. Production5. Purchasing6. Logistics7. Information systems8. Finance9. Customer service

According to Council of Logistics managementSCM “encompasses the planning and

management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities.”

“Importantly, is also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.”

Intersectionist

The intersection concept suggests SCM is not the union of logistics, marketing, operations management purchasing and other functional areas.

SCM Logistics

•SCM is not the union of logistics, marketing, operations management, purchasing and other functional areas. Rather it includes strategic, integrative elements from all of these disciplines. For example purchasing area, and in logistics area hiring a third party logistics

•At the intersection, SCM co-ordinates cross-functionalefforts across multiple firms. SCM is strategic, not tactical

Method of surveyResearchers created lists of topic/technique items. Combining these lists yielded over 120 items. This list was trimmed to 88 survey items,.Rated from 0 (no importance) to 5 (very high importance)

for both Logistics & SCMThe 88 Survey Items: Strategic management, Supplier

development, Supply chain management (SCM),Information technology..

Total sample = 208(logistics educators) were sent via fax All members of the CLM(Council of Logistics Management). Total of 98 usable surveys was received, response rate R

= 98/208 = 4.47% Survey recipients were from North America, Europe, South

America and Asia

Results34 survey items, significantly more important

for SCM compared to logistics. (SCM>Logistics) 16 items, significantly more important for

logistics compared to SCM. (Logistics>SCM) 38 survey items, there were no significant

differences in importance between logistics and SCM.

the top 10 lists, share seven common items: Customer service, Logistics management, Inventory management, Information technology Cycle time reduction, e-commerce, Supply chain management

ConclusionLogistics typically refers to activities that occur within

the boundaries of a single organization and supply chain refers to networks of companies that work together and coordinate their actions to deliver a product to market.

Logistics focuses its attention on activities such as procurement, distribution, maintenance & inventory management. Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance and customer services.

Supply chain management views supply chain and the organizations in it as a single entity. It brings a system approach to understanding and managing different activities needed to coordinate the flow of products and services to best serve the ultimate customer.