STUDY ON LOGISTICS AND SUPPLY CHAIN MANAGEMENT

ARJUN N G Student No: CLBA6060A4 GREAT EASTERN MANAGEMENT SCHOOL Bangalore 2010_11

STUDY ON LOGISTICS AND SUPPLY CHAIN MANAGEMENT

ACKNOWLEDGEMENT
I express my utmost gratitude to my project guide Prof. KANNAN faculty MBA program, who has enthusiastically imparted relevant information and support in carrying out this project. I would also like to express my sincere gratitude to my friends for being a constant source of support and encouragement.

Place: Bangalore Date:

ARJUN N G

CONTENTS
CHAPTER 1_Consumer Behavior 1. INTRODUCTION
2. LOGISTICS ACTIVITIES AND DECIUSIONS 3. INTEGRATED LOGISTICS MANAGEMENT 4. MODES OF TRANSPORTATION IN LOGISTICS 5. THIRD PARTY LOGISTICS 6. FOURTH PARTY LOGISTICS 7. USE OF BALANCED SCORECARD SYSTEM IN LOGISTICS 8. LOGISTICS FOR CUSTOMER SATISFACTION 9. THE VALUE OF LOGISTICS 10. PULL VS. PUSH SYSTEMS 11. DISTRIBUTION/WAREHOUSING/MANUFACTURING 12. SUPPLYCHAIN MANAGEMENT 13. DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT 14. GLOBAL SUPPLY CHAIN MANAGEMENT CONCLUSIUON BIBLIOGRAPHY

ABSTRACT

CHAPTER 1
INTRODUCTION

INTRODUCTION TO LOGISTICS

Logistics (according to CLM) is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in- process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements The mission of logistics is to get the right goods or services to the right place, at the right time and in the desired condition and quantity in relation to customers order

Origins and definition The term "logistics" originates from the ancient Greek "" ("logos""ratio, word, calculation, reason, speech, oration"). Logistics 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. In ancient Greek, Roman and Byzantine empires, there were military officers with the title Logistikas who were responsible for financial and supply distribution matters. The Oxford English dictionary defines logistics as: The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities. Another dictionary definition is: "The time-related positioning of resources." As such, logistics is commonly seen as a branch of engineering which creates "people systems" rather than"machine systems."

Main logistics activities and decisions:

cooperate with marketing to set customer service levels, facility location decisions transportation activities (eg. transportation mode selection, vehicle scheduling, carrier routing ), inventory management (inventory short -term forecasting, planning and control, cooperate with production to calculate EOQ, sequence and time production), information collection and flows and order processing, warehousing and materials handling, packaging and packing,

INTEGRATED LOGISTICS MANAGEMENT: The Integrated Logistics Management process encompasses the support resources required to keep a system or item in an operational ready status throughout all of its operational life. Dalma Techs knows the effectiveness of an integrated logistics support system requires strong management involvement, a tailored integrated logistics system Management Team, and close coordination among the Management Team members so that the Integrated Logistics Management process is integrated throughout the material course of any contract.

Dalma Tech understands the purpose for Integrated Logistics Management and has established benchmarks for success:

Identify and document functional and physical characteristics of a configuration item Control changes to those characteristics Record and report change processing and implementation status Verify compliance with specification and other related requirements

With any successful process, consistency is sometimes the measurement of any accomplishment. Dalma Techs experience with Integrated Logistics Management processes, consistency becomes the standard. The configuration identification process must be incrementally established and maintained to create a definitive basis for control and status accounting throughout the life cycle of hardware and software. In partnership with our customers, GE has developed a reputation for excellent performance in its Integrated Logistics Management (ILM) solutions. We support more than 1,800 aircraft under Performance Based Logistics (PBL) programs, Integrated Operational Support (IOS) or ILM contracts. Core to our ILM delivery is our team of logistics engineering specialists. These programs are tailored to meet the specific requirements of the customer individually, whether civil or military, and involve a close working relationship between GE and the customer. Establishing an effective support plan for a customer requires a detailed knowledge, not only of the systems, but also of the customer's operation and needs. Our Logistics Support Group will undertake a detailed planning exercise covering all aspects, such as required inventory, IT systems, repairs, distribution, documentation, configuration, engineering change control,

reliability trend analysis, test equipment, and whether or not a GE representative is recommended to be based on site. Support programs such as these maximize aircraft availability for the customer with guaranteed reliability of an item. This forms a link between equipment reliability and improved performance, making it a more efficient operation for the customer for the future.

In the modern age of technology business is run at a very high pace. There is not time to look around. Every market is full packed, and thus there is tough competition. As result, businesses need to be constantly developing and improving. In order to expand or improve ones business one needs to know what is wrong with the business at the moment. Lets make such a comparison. Imagine that you have started building a house and you failed to construct a decent basement. Will you continue building such a house? If you do, this house is sure to collapse. The same is with business. If you have small problems and decide to expand your business, these problems will all of a sudden turn really big. As known, big problems in business often lead to bankruptcy. Well, we hope you already understood that evaluation of business performance is very important. Moreover, such an evaluation should be carried out from time to time to track positive and negative trends. If often happens that problems occur in logistics department. Nowadays many customers wish to receive purchased products at home. So, this job of logistics managers to send the product or cargos. But the most important task is to minimize costs for shipping.

Evaluation of transportation indicators helps in measuring business performance

Use transportation indicators to measure performance of logistics center Evaluation of logistics department is a must for all big companies. It is very interesting to know much your logistics managers spend to send one item. If shipping costs exceed cost of a product, then you are certainly in a trouble. But with the help of Balanced Scorecard system you will be able to evaluate performance of a logistics department. Moreover, it will be possible to see what causes problems. Thus you will deal with the root of the problem but not with its consequences.

Balanced Scorecard system evaluates KPIs which are known as key performance indicators. These values represent performance of a company. Moreover, it is possible to measure different aspects in work of a logistics department. The point is that many KPIs are interrelated. For instance, increased shipping time increase freight cost per unit. Low customer satisfaction will result in decreased numbers of orders, and so on. Balanced Scorecard system offers information on company performance based on current performance values. If you want to evaluate performance of a logistic department you need to measure such KPIs as freight cost per unit, transit time, load capacity, losses, truck turnaround time and others. MODES OF TRANSPORTATION IN LOGISTICS: In order to transport material from one place to another Logistics Managers are using Rail, Road, Air, Water & Pipe Line as the modes of Transportation. A logistics expert needs to understand these modes based on priorities, product type lead time etc. to decide the appropriate mode of Transportation. Rail: Used for delivery of a wide range of goods including coal, iron ore, cement, food grains, fertilizers, steel, petroleum products and other heavy goods. Road: Used by suppliers to deliver goods in a cost effective manner and best suited for short distances. Many transport companies have expertise for fast delivery, packaging etc. for making scheduled delivery. Air: Used mostly for delivery of high value and tow volume goods from distant suppliers, usually not connected by any other mode of

Transportation. It is also suitable for emergent item to be imported for some specific requirement. Water: Used by firms for delivery of goods from distant suppliers, mostly conducted in containers of varied size. This mode is ideal for transportation of heavy and bulky goods and suitable for products with long lead times. Pipe Line: Used by oil sector companies for mass movement of Petroleum products including gases. Due to quite low operating cost it is one of the preferred mode of transportation. THIRD PARTY LOGISTICS : Third Party Logistics (3PL) provider handles all or most of freight of the organizations including the management of information by the third party, freeing the company from day to day interaction with carriers, and having to oversee hundreds or thousands of shipment. New and cheaper information flow resulting from internet enabled solutions, will lead not only achieving immediate cost reductions in operations but also to enormous productivity gains over the next few years. The tracking and control of movement of goods drive freight optimization and asset utilization. The options are: increased trailer utilisation, combining full truckload shipments, consolidation, and aggregation of smaller buyers. Purchase asset based transportation is becoming increasingly a commodity. To put simply, 3PL refers to the outsourcing of a logistics function. It could be the use of a transportation carrier, a warehouse, or a third party freight manager to perform all or part of a companys production distribution functions. The principle reasons of for this function are as under:

 Globalization of sourcing, manufacturing and distribution leading to an increase in the complexity of material movement. Competition that has forced companies towards more responsiveness and a reduction in inventories. An increased need for small but frequent shipments with 100 percent reliability, requiring core competence in logistics management. Resource constraints that require companies to concentrate only on their core manufacturing or new product development activities.

FOURTH PARTY LOGISTICS : Fourth Party Logistics (4PL) provider is a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organization with those of complementary service provider to deliver a comprehensive supply chain solution. 4PL is emerging as a path to achieve more than the one time operating cost reductions and asset transfers of a traditional outsourcing arrangement. Through alliances between best-of-breed third party service providers, technology providers and management consultants. 4PL organizations can create unique and comprehensive supply chain solutions that cannot be achieved by any single provider. According to John Gaftorna, White oufsourcing third party logistics is now a accepted business practice, Fourth Party Logistics is emerging as a breakthrough solution to modern supply chain challenges... to provide maximum overall benefits. 4PL can be described as the complete outsourcing of the logistics function including procurement of service providers. 4 PL companies are suppliers which have the expertise to manage

resources, value delivery processes and technology for their clients in order to allow their clients to totally outsource their logistics management activity. The 4PLs do not compete with 3PLs as they have superior expertise in their respective fields by virtue of their investment and specialization. 4PL providers do not own assets for transportation or warehousing, but rather leverage the solutions created by 3PL.providers, in order to identify and provide best in class services to their clients. There are many variations of the 4PL model that are practiced. Three different models are summarized as under; A) Lead logistics provider: The 4PL provider acts as an in house freight management company, it might or might not have a role in the selection of 3 PL partners. It takes care of transport invoicing and the monitoring of the performance of the 3 PLs. B) Solution Integrator: In this variant of the model, the 4PL acts as the integrator of various 3PLS and as a single window for freight negotiations, 3PI selection and freight management on behalf of its client. C) Industry Innovator: Under this model the 4PL uses its expertise and resources to create a solution not for any single client, but for offering 4PL services to a number of clients in an industry. The services provided by a 4PL provider are: Freight Negotiations with 3PLs Freight Contract Management Transport Billing Continuous Improvement Programs Management of Service Providers IT Solutions

 Risk Management and Insurance Cash-flow Management. RESERVE LOGISTICS: Increasingly, as a strategy, to compete on services, companies offer repair and replacement services for their products under the warranty periods. The defective products are often shipped across international borders to common repair centers to be refurbished and returned to the originating station. Logistics service providers who offer these services have to tackle issues pertaining to duty payment on refurbished products, customs documentation and the establishment of collection points for repair for the customers.

Use of Balanced Scorecard system in logistics:

For big, middle sized and small businesses we are merely customers who got used to get products shipped to our houses. We like to make online purchases and we like to get products on time. When two companies have business together, one of the companies is a customer while the other is a contractor that needs to make sure that products/goods are delivered on time. There is a separate department that assumes responsibility for shipment of products. This is logistics department. There are even separate logistics companies that offer their services to different companies. These days logistic managers are using special software to evaluate business performance. Customer satisfaction pretty much depends on timely delivery of products. If you ordered something on the Internet you expect the product to arrive on time. Logistic managers are the people who are in charge of this. But of course, they have more other tasks other than making sure you receive your products.

Logistics is about 100% use of transport and warehouse facilities. A logistic manager needs to contact producers (to ask when the new batch of produce will arrive), end customers which may be huge companies that accept no delays (to negotiate delivery terms), warehouse managers (to negotiate storage capacities) and drivers/airlines (to negotiate shipment terms). One delay may destroy the entire delivery chain. Logistics is also about saving money. It may be not profitable to deliver goods from town A to town B, using trucks. But if the trucks take some products on board on the way back, your logistic department can have big profits. It is not profitable to have trucks and drivers wait too long for new batches of produce as this costs money. Logistics is about making sure that all elements of delivery chain are efficiently used. In order to evaluate logistic department of your company you should not look only at revenue. There are numerous factors that influence the work of a logistic company. These factors are commonly called KPIs key performance indicators. Every business has its own indicators. Logistic is using Supply Chain Balanced Scorecard which includes 4 elements: financial issues, customer matters, internal business and training. Balanced Scorecard system evaluates KPIs which are parts of the abovementioned 4 groups. In order to evaluate performance of logistic department one needs to asses the following KPIs. Customer order cycle time. This is a figure represented by difference between creation date of the order and delivery date. Cycle time can be promised and actual. If the values have only slight differences then your logistic company is doing OK. 2. Line count fill rate. This is amount of order lines delivered on the shipment versus the number of lines which have been ordered.
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Inventory carrying rate. This figure includes costs for storage, handling, damage, administrative costs, costs related to loss of shipment. 4. On time shipment is calculated as a ratio of orders delivered on time and all line orders delivered. In simple words, this indicator shows how fast your logistic department is working and if you can live up to delivery terms. 5. Perfect order measurement. An order is undergoing many stages in its cycle. Thus, if you calculate how many orders have passed all stages without any mistakes you will have a clear understanding of how logistic department works. When an error occurs a corrective credit is issued. There should be a reason code, or simply a reason for error. You can group these reasons to see what the most common causes of problems are. Isnt it the best way to evaluate performance of a logistics company? 6. Transportation KPIs
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a) Freight cost per unit. The program divides all costs related to shipment by total number of units. It is also possible to group costs by means of transportation (truck, train airplane).

b) Transit time. This is the time calculated from the moment a product leaved facility of a logistic department to the time it arrives to customers location.

c) Losses. These are expenses related to damage or loss of units. If this figure is too high take urgent measures.

d) Load capacity. This is a very interesting indicator. Imagine that your trucks can deliver 50,000 lbs of product, but yesterday

they carried only 40,000 lbs. By dividing these figures you get utilization percentage. The higher the percentage, the more efficiently your logistics company works. However, it needs saying, that 100% remain a dream! e) Truck turnaround time. This is the time a truck spends at warehouse facility before departure. This is an indication of how your warehouse personnel work.

Logistics Management A Charismatic Field:

Nowadays, logistics management is amongst the most actionpacked fields all over the world. One of the unbelievable aspects of logistics management is that it is over and over again known as a science of planning, organization, and implementation. It comes into view when any industry wants to deliver the mandatory products or services to the obligatory party on the dot at the right location. These days it has made its importance documented due to its individuality and worth worldwide. Adding to that, it can lend a hand you to improve your military operations considerably. In fact, military logistics management will engross the military groups to map, regulate, innovate, assign, and maintain resources for their military operations prolifically. In addition, it will harmonize all the actions and presentations of business employees professionally. Subsequently arrangements of military groups and bludgeon measures for accomplishing military operations are documented and determined by comprehensive logistics management. Most importantly, logistics management in the commercial sector makes use of advanced technology for safety, assessment, case study, forecasting, asset tracking, development and implementation. Therefore art of logistics would play an essential role in organizing plentiful companies with others for carrying out

distinct goals and objectives productively. Accounting, short-term analyses, performance judgment, transportation of products and services, and distribution of resources are indisputably come in collective logistics management. Consequently it will represent an insight to boost measures for matching the commercial operations and efficacy efficiently. Perfect strategy, means & possessions, ways and carters for transportation at a cut rate will be professionally determined by extensive logistics management. Commercial operational procedures are acknowledged for organizing different activities of the business sector proficiently. Market surveys to weigh up the buyer needs also come under top logistics management. Defense options in business and military group are enclosed to make available friendly settings for enhanced performance. Unprejudiced and money-spinning supply chain in trade can be determined by a precious service of outsourcing, transport, distribution, and property organization. Logistics management would then show a single-minded performance knack that can be accomplished by a thriving contribution. In short, logistics management is mandatory for a booming operational procedure of order processing, manufacturing, delivery, financial planning, allocation, distribution of resources, and judicious consignment of obligatory wares and services at the right location. Thus a flourishing logistics and supply chain management can provide plentiful benefits to the business sector for example enhanced delivery process, increased sales volumes, instant revenue generation, customer & employee satisfaction, and business identity development. LOGISTICS FOR CUSTOMER SATISFACTION: Introduction

The term logistics is often misinterpreted to mean transportation. In fact, the scope of logistics goes well beyond transportation. Logistics forms the system that ensures the delivery of the product in the entire supply pipeline. This includes transportation, packaging, storage and handling methods, and information flow. The impact of logistics in the ability of a company to satisfy its customers cannot be overstated. All other efforts at modernization within a company would not bear fruit until the logistics system is carefully designed to facilitate the smooth and efficient flow of goods in the system. The topic of logistics is relatively new in India. There have been some companies that have done work in this area, but a large number of companies are only now beginning to realize the benefits of designing and managing the entire supply chain. With India joining the global marketplace, the role of logistics assumes greater importance. The industrial policies in India have prompted manufacturers to build plants in remote, backward areas due to inexpensive land and tax benefits. This poses some serious logistical problems. Apart from a poor road and transportation network, the existing communications system in India leaves a lot to be desired by any international standard. It is in this context that logistics has to be considered in India.

The value of logistics

Material handling and storage are typically labelled as "non-value adding" activities. While one can appreciate the motivation behind such labeling as one directed towards waste reduction, it can lead to is an erroneous assumption that all material handling and storage can be avoided. While manufacturing processes provide "form utility", logistics related activities provide "time and place" utility to a product. The challenge is to provide the time and place utility at a competitive cost. If a company can achieve this goal, it will

gain a significant competitive advantage in the marketplace.

Pull vs. Push Systems:

There are two basic approaches of bringing the product to its final destination, i.e., the customer. In a Push system products are pushed from the manufacturing plants to distribution points based on a sales forecast. The second approach is the Pull system which requires that the product be pulled from the plants based on actual demand. In a Push system, since all the product is deployed based on the sales forecast for each region, an inaccurate sales forecast incurs several severe penalties which include: Increased safety stock Larger Distribution Centers/Godowns Higher stock transfer rates The pre-order deployment of product increases safety stock. Since there is greater uncertainty associated with forecasts, which are often little better than educated guesses, the system must provide for variations in the demand in a particular region serviced by the particular godown. In addition the system must provide for errors in the overall forecast for the country as a whole. These concerns lead to the carrying of larger safety stocks, which necessitate larger godowns. The irony in the concept of safety stocks is that although sufficient stocks may exist in the system, the product mix demanded in a particular region may not exist in the regional godown. This necessitates inter-godown transfer of goods. The result is an increase in the transportation costs system-wide, in addition to

handling and shipping costs, information costs, product loss and damage, and poor customer service. The more points of distribution in the system, the greater the penalties incurred for unpredictable order fluctuations. The goal of any logistics system is to maintain or improve customer service. In the Push mode of operation, the penalties of higher safety stock, larger godowns, and inter-godown transfer are not the only penalties. Stock rotation becomes more difficult to maintain. Handling of all products at each godown involves unloading, staging, storing, picking, staging and loading for shipment. All these activities involve an element of cost. In addition, there is a potential for product damage each time a product is handled. There are some positive aspects of a Push system as well. These are: Small plant warehouses Potential for higher customer service Lower transportation costs Since the majority of the product is stored at the godowns, the plant needs to maintain a low inventory of finished goods. This allows the plant to utilize its space for production and eliminate the need for a full warehouse staff. If the forecast is accurate, the Push system provides the potential for higher customer service by having the product ready for delivery directly to the customer/retailer. Finally, by having the products deployed in the godowns, the plants have the capability of shipping full truckloads and thereby reducing the system-wide transportation costs. A Push system works best when sales are consistent, the product variety is small, and there are a few regional distribution points.

Tracking in virtual space In virtual space technology, a tracking system is generally a system capable of rendering virtual space to a human observer while tracking the observer's body coordinates. For instance, in dynamic virtual auditory space simulations, a real-time head tracker provides feedback to the central processor, allowing for selection of appropriate head-related transfer functions at the estimated current position of the observer relative to the environment. Tracking in real world Within the real world, there are a variety of technologies employed within asset tracking systems. Some are 'lag time' indicators, that is, the data is collected after an item has passed a point for example a bar code or choke point or gate. Others are 'real-time' or 'near real-time' like Global Positioning Systems depending on how often the data is refreshed. There are bar-code systems which require a person to scan items and automatic identification (RFID auto-id). For the most part, the tracking worlds are composed of discrete hardware and software systems for different applications. That is, bar-code systems are separate from Electronic Product Code (EPC) systems, GPS systems are separate from active real time locating systems or RTLS for example, a passive RFID system would be used in a warehouse to scan the boxes as they are loaded on a truck - then the truck itself is tracked on a different system using GPS with its own features and software. The major technology silos in the supply chain are:

Distribution/Warehousing/Manufacturing
Indoors assets are tracked repetitively reading e.g. a barcode, any passive and active RFID and feeding read data into Work in Progress models (WIP) or Warehouse Management Systems (WMS) or ERP software. The readers required per choke point are meshed auto-ID or hand-held ID applications.

However tracking could also be capable to provide monitoring data without binding to fixed location by using a cooperative tracking capability, e.g. an RTLS. Yard management Outdoors mobile assets of high value are tracked by choke point, 802.11, Received Signal Strength Indication (RSSI), Time Delay on Arrival (TDOA), active RFID or GPS Yard Management; feeding into either third party yard management software from the provider or to an existing system. Fleet management Fleet management is applied as a tracking application using GPS and composing tracks from subsequent vehicle's positions. Each vehicle to be tracked is equipped with a GPS receiver and relays the obtained coordinates via cellular or satellite networks to a home station. Fleet management is required by: Large fleet operators, (vehicle/railcars/trucking/shipping) Forwarding operators (containers, machines, heavy cargo, valuable shippings) Operators who have high equipment and/or cargo/product costs Operators who have a dynamic workload

Mobile phone services Location-based services or LBS is a term that is derived from the telematics and telecom world. The combination of A-GPS, newer GPS and cellular locating technology is what has enabled the latest LBS for handsets and PDAs. Line of sight is not necessarily required for a location fix. This is a significant advantage in certain applications since a GPS signal can still be lost indoors. As such, A-GPS enabled cell phones and PDAs can be located indoors and the handset may be tracked more precisely. This enables nonvehicle centric applications and can bridge the indoor location gap,

typically the domain of RFID and RTLS systems, with an off the shelf cellular device. Currently, A-GPS enabled handsets are still highly dependent on the Location-Based Service (LBS) carrier system, so handset device choice and application requirements are still not apparent. Enterprise system integrators need the skills and knowledge to correctly choose the pieces that will fit the application and geography. Operational Requirements Regardless of the tracking technology, for the most part the enduser just wants to locate himselves or wants to find any things of interested. The reality is that there is no "one size fits all" solution with locating technology for all conditions and applications. Application of tracking is a substantial basis for vehicle tracking in fleet management, asset management, individual navigation, social networking, asset management, or mobile resource management and more. Company, group or individual interests can benefit from more than one of the offered technologies depending on the context. GPS applications GPS has global coverage but can be hindered by line-of-sight issues caused by buildings and urban canyons. RFID is excellent and reliable indoors or in situations where close proximity to tag readers is feasible, but has limited range and still requires costly readers. Real-time Locating Systems (RTLS) RTLS are enabled by Wireless LAN systems (according to IEEE 802.11) or other wireless systems (according to IEEE 802.15) with multilateration. Such equipment is suitable for certain confined areas, such as campuses and office buildings. RTLS require system-level deployments and server functions to be effective. RTLS systems are affordable and accurate for industrial

and yard applications. RTLS systems are not appropriate for all indoor applications, there fuzzy locating systems with unilateration may apply more economically. A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers,transport busin esses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload goods from trucks. Sometimes warehouses load and unload goods directly from railways, airports, or seaports. They often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks. Nature of goods stored Stored goods can include any raw materials, components, or finished goods associated with agriculture, manufacturing, or commerce.

Types of warehouse storage systems 19th century warehouses in Gloucesterdocks in the United Kingdom, originally used to store imported corn

So-called Sust, a Middle Ages type of warehouse, in Horgen, Switzerland Some of the most common warehouse storage systems are:

Pallet rack including selective, drive-in, drive-thru, doubledeep, pushback, and gravity flow Mezzanine including structural, roll formed, rack supported, and shelf supported Cantilever Rack including structural and roll formed Industrial Shelving including metal, steel, wire, and catwalk Automated Storage and Retrieval System (ASRS) including vertical carousels, vertical lift modules, horizontal carousels, robotics, mini loads, and compact 3D Temporary warehousing is possible with use of a fabric structure[1]

Processes and IT Major warehousing processes include:

Receiving Put away Order preparation / picking Shipping Inventory management (cycle counting, addressing...)

Warehouses frequently provide services, such as:

Co-packing Kitting

Material direction and tracking in a warehouse can be coordinated by a Warehouse Management System (WMS), a database driven computer program. Logistics personnel use the WMS to improve warehouse efficiency by directing putaways and to maintain accurate inventory by recording warehouse transactions.

Automation and optimization Automatic storage warehouse for small parts Some warehouses are completely automated, and require no workers inside. Pallets and product move on a system of automated conveyors,cranes and automated storage and retrieval systems coordinated by programmable logic controllers and computers running logistics automationsoftware. These systems are often installed in refrigerated warehouses where temperatures are kept very cold to keep product from spoiling, and also where land is expensive, as automated storage systems can use vertical space efficiently. These high-bay storage areas are often more than 10 meters (33 feet) high, with some over 20 meters (65 feet) high. For a warehouse to function efficiently, the facility must be properly slotted. Slotting addresses which storage medium a product is picked from (pallet rack or carton flow), and how they are picked (pick-to-light, pick-to-voice, or pick-to-paper). With a proper slotting plan, a warehouse can improve its inventory rotation requirementssuch as first in, first out (FIFO) and last in, first out (LIFO)control labor costs and increase productivity. (1)

Modern trends

Aisle with pallets on storage racks Traditional warehousing has declined since the last decades of the 20th century, with the gradual introduction of Just In Time (JIT) techniques. The JIT system promotes product delivery directly

from suppliers to consumer without the use of warehouses. However, with the gradual implementation of offshore outsourcing and offshoring in about the same time period, the distance between the manufacturer and the retailer (or the parts manufacturer and the industrial plant) grew considerably in many domains, necessitating at least one warehouse per country or per region in any typical supply chain for a given range of products. Recent retailing trends have led to the development of warehousestyle retail stores. These high-ceiling buildings display retail goods on tall, heavy duty industrial racks rather than conventional retail shelving. Typically, items ready for sale are on the bottom of the racks, and crated or palletized inventory is in the upper rack. Essentially, the same building serves as both warehouse and retail store. Large exporters/manufacturers use warehouses as distribution points for developing retail outlets in a particular region or country. This concept reduces end cost to the consumer and enhances the production sale ratio.

Internet impact

19th century warehouse in Frankfort,Kentucky, United States used to agebourbon whiskey casks, seen closely through the warehouse windows The internet has had an influence on warehouses. Internet-based stores do not require physical retail space, but still require warehouses to store goods. This kind of warehouse fills many

small orders directly from end customers rather than fewer orders of many items from stores. Having a large and complex supply chain containing many warehouse can be costly. It may be beneficial for a company to have one large warehouse per continent, typically located centrally to transportation. At these continental hubs, goods may be customized for different countries. For example, goods get a price ticket in the language of the destination country. Small, inwarehouse adjustments to goods are calledvalue added services.

Supply chain management

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy.[6] In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network

concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance (Mintzberg, 1979). In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices.[7] Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network (Coase, 1998). Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System".[8] In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans, 2001). The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC. Developments in Supply Chain Management Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and Two, and SCM 2.0.

1. Creation Era The term supply chain management was first coined by a U.S. industry consultant in the early 1980s. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, reengineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management. 2. Integration Era This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of supply chain evolution is characterized by both increasing value-adding and cost reductions through integration. 3. Globalization Era The third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back several decades (e.g., in the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, value-adding, and reducing costs through global sourcing. 4. Specialization EraPhase One: Outsourced Manufacturing and Distribution

In the 1990s industries began to focus on core competencies and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond company walls and distributing management across specialized supply chain partnerships. This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI). The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers, who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands. 5. Specialization EraPhase Two: Supply Chain Management as a Service Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non-asset-based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management. At any given moment, market forces could demand changes from suppliers, logistics providers, locations and customers, and from any number of these specialized participants as components of

supply chain networks. This variability has significant effects on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to more complex requirements including the configuration of the processes and work flows that are essential to the management of the network itself. Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain-specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity. Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root primarily in transportation and collaboration categories. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model currently in focus today. 6. Supply Chain Management 2.0 (SCM 2.0) Building on globalization and specialization, the term SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era". Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is to help navigate the vast amount of information available on the Web in order to find what is being sought. It is the notion of a usable pathway. SCM 2.0 follows this notion into

supply chain operations. It is the pathway to SCM results, a combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near-/farand off-shoring, and talent scarcity. Global supply chain management Global supply chains pose challenges regarding both quantity and value: Supply and Value Chain Trends Globalization Increased cross border sourcing Collaboration for parts of value chain with low-cost providers Shared service centers for logistical and administrative functions Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums Complex problems involve also midsized companies to an increasing degree,

These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in supply chain management, there will be many more challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer. Furthermore, there are more issues involved such

as multi-currencies, different policies and different laws. The consequent problems include: 1. Different currencies and valuations in different countries; 2. Different tax laws (Tax Efficient Supply Chain Management); 3. Different trading protocols; 4. Lack of transparency of cost and profit. Idea More common and accepted definitions of Supply Chain Management are: Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al, 2001).[2]

Global Supply Chain Forum - Supply Chain Management is the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders (Lambert, 2008)[3].

According to the Council of Supply Chain Management Professionals (CSCMP), Supply chain management encompasses the planning and management of all activities involved insourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across

companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise. A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management' (Mentzer et al., 2001).[4] Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes. Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised. Supply chain management problems Supply chain management must address the following problems: Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owneroperated, private carrier, common carrier, contract carrier, or 3PL).

Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy. Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods. Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional. Activities/functions Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The

effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels. The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification Framework a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. Strategic Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities. Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics. Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities. Information technology chain operations. Where-to-make and what-to-make-or-buy decisions. Aligning overall organizational strategy with supply strategy. It is for long term and needs resource comittement.

Tactical Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition. Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. Milestone payments. Focus on customer demand.

Operational Daily production and distribution planning, including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. Inbound operations, including transportation from suppliers and receiving inventory. Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities, warehousing and transportation to customers. Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

CONCLUSION: Logistics is one of the area of the supply chain i.e. growing at a tremendous case as the Internet and E-Commerce is drastically changing the range, delivery time and the speed of information as well as ordering and payment process. Due to the big boon of information technology, greatly influencing and enhancing the effectiveness of logistics, the time is not far when 5 PLs and 6 PLs may emerge which will probably we doing part of the manufacturing and marketing for the organizations.

BIBLIOGRAPHY Websites : www.wikipedika.com www.Investopedia