Logistics

Management

Submitted By Submitted To :

Anjana Prof. Sachin Sharma

Class: MBA 4th

Roll No: 1712

 Logistics Management

– Logistics management is a supply chain management component that is used to meet

customer demands through the planning, control and implementation of the effective
movement and storage of related information, goods and services from origin to
destination.

– Logistics management consists of the process of planning, implementing and controlling

the efficient flow of raw-materials, work-in-progress and finished goods and related
information-from point of origin to point of consumption; with a view to providing
satisfaction to the customer.
 Definition

– According to Phillip Kotler, “Market logistics involve planning, implementing and

controlling physical flow of material and final (finished) goods from the point of origin to
the point of use to meet customer requirements, at a profit.”
 Logistics as a part of Supply Chain
Management

– Logistics management is that part of supply chain management that plans, implements,
and controls the efficient, effective forward and reverses flow and storage of goods,
services and related information between the point of origin and the point of
consumption in order to meet customers' requirements.

– The complexity of logistics can be modeled analyzed, visualized and optimized by

dedicated simulation software. The minimization of the use of resource is a common
motivation in all logistics fields.
 Logistics costs

– Logistics costs are defined differently by different companies. Some companies do not
account interest and depreciation on inventories as logistic costs. Others include the
distribution costs of their suppliers or the purchasing costs. In some cases, even the
purchase value of the procured goods is included in the logistic costs. So, there is no
generic definition of this term but every company needs to define the logistics costs for
itself and the KPI’s it will be tracking to lower the costs.
 Various logistic cost

Logistic cost

Lobour Transportati Administra Ordering Packaging Advertisin

cost on cost tion cost cost cost g cost
Models in Logistics management

Models

Mathematical
Forecasting Model
programming model

Location Model Allocation Models Distribution network

design model
 Logistics Sub System

– Logistics sub-systems Physical Supply or Management of flow of raw materials, spare

parts, consumable stores and machinery & tools from suppliers.

– A distribution subsystem includes the people, processes, equipment, and policies that
exist to distribute products or services from an organization to individual customers.
These components might include delivery trucks, an order entry process, inventory, and
employees to make it all happen.
Logistics sub system
 Inbound logistics

– Inbound logistics; which is concerned with the smooth and cost effective inflow of
materials and other inputs (that are needed in the manufacturing process) from
suppliers to the plant. For proper management of inbound logistics, the management
has to maintain a continuous interface with suppliers (vendors).

– Inbound logistics refers to the transport, storage and delivery of goods coming into a
business. It is the sourcing, expediting and receiving of goods, that is coming to the
business organization.
 Outbound logistics

– Outbound logistics (also called physical distribution management or supply chain management); is
concerned with the flow of finished goods and other related information from the firm to the customer. For
proper management of outbound logistics, the management has to maintain a continuous interface with
transport operators and channels of distribution.
– outbound logistics is all about warehousing, packaging and transporting of goods, going out of the
organization.
 Bullwhip effect

– The bullwhip effect can be explained as an occurrence detected by the supply chain
where orders sent to the manufacturer and supplier create larger variance then the sales
to the end customer. These irregular orders in the lower part of the supply chain
develop to be more distinct higher up in the supply chain. This variance can interrupt
the smoothness of the supply chain process as each link in the supply chain will over or
underestimate the product demand resulting in exaggerated fluctuations.
 Contribute to the bullwhip effect

Bullwhip effects

Lack of Price
Demand Order Free return
Disorganization communicati variations
information batching policies on
 Contribute to the bullwhip effect

– Disorganization between each supply chain link; with ordering larger or smaller amounts
of a product than is needed due to an over or under reaction to the supply chain
beforehand.

– Lack of communication between each link in the supply chain makes it difficult for
processes to run smoothly. Managers can perceive a product demand quite differently
within different links of the supply chain and therefore order different quantities.

– Free return policies; customers may intentionally overstate demands due to shortages
and then cancel when the supply becomes adequate again, without return forfeit
retailers will continue to exaggerate their needs and cancel orders; resulting in excess
material.
To be cont..

– Order batching; companies may not immediately place an order with their supplier; often
accumulating the demand first. Companies may order weekly or even monthly. This creates
variability in the demand as there may for instance be a surge in demand at some stage
followed by no demand after.

– Price variations – special discounts and other cost changes can upset regular buying patterns;
buyers want to take advantage on discounts offered during a short time period, this can cause
uneven production and distorted demand information.

– Demand information – relying on past demand information to estimate current demand

information of a product does not take into account any fluctuations that may occur in
demand over a period of time.
 Causes of bullwhip effect

Causes

Behavioral causes Operational causes

 Behavioral causes

– Misuse of base-stock policies

– Mis- perceptions of feedback and time delays
– Panic ordering reactions after unmet demand
– Perceived risk of other players' bounded rationality
 Operational causes

– Dependent demand processing

– Forecast errors
– Adjustment of inventory control parameters with each demand observation
– Lead time variability (forecast error during replenishment lead time)
– Lot-sizing/order synchronization
– Consolidation of demands
– Transaction motive
– Quantity discount
– Trade promotion and forward buying
- Anticipation of shortages
– Allocation rule of suppliers
– Shortage gaming
 Distribution management

– Distribution management refers to the process of overseeing the movement of goods

from supplier or manufacturer to point of sale. It is an overarching term that refers to
numerous activities and processes such as packaging, inventory, warehousing, supply
chain, and logistics.

– Distribution management is an important part of the business cycle for distributors and
wholesalers. The profit margins of businesses depend on how quickly they can turnover
their goods. The more they sell, the more they earn, which means a better future for the
business. Having a successful distribution management system is also important for
businesses to remain competitive and to keep customers satisfied.
 Objectives

– To Give Better Customer Service

– To Enhance Sales
– To Decrease Cost
– It Creates Utilities Of Time And Place
– Determines Standard Of Living
 Objectives

– To Give Better Customer Service:

By improving the physical distribution system, the company’s promotional efforts are strengthened.

– To Enhance Sales
By making sure that basic products in regular demand are always available, and having contingency
plans for quick order processing of items.

– To Decrease Cost:
By intelligently organizing the physical distribution system and determining the optimum number and
location of warehouses, improving materials handling, increasing stock turnover, and using sealed
containers to ship products.
To be cont..

– It Creates Utilities Of Time And Place: By making available a product at the place
where and when it is needed.

– Determines Standard Of Living: This is so because proper distribution of products

makes them available to a large number of people, at a relatively lower cost. Thus it can
be said that physical distribution directly affects sales, customer service and satisfaction,
and costs.
 Warehouse Management

– A warehouse management system is a software application, designed to support and

optimize warehouse functionality and distribution center management. These systems
facilitate management in their daily planning, organizing, staffing, directing, and
controlling the utilization of available resources, to move and store materials into,
within, and out of a warehouse, while supporting staff in the performance of material
movement and storage in and around a warehouse.
– A warehouse is a large, spacious and secured building intended for commerce and
government use. It functions as a storage place for large quantities of goods.
Warehousing is not simply about storage though. It also covers the administration and
manual labor required in storage such as delivery, documentation, examination and
certification.
 Types of Warehouses

owned by third party

logistics

Types of Warehouses Public

company-owned
To be cont..

– There are three types of warehouses: public, owned by third party logistics (3PL) and
company-owned. The government through its arm uses public warehouses to store
shipments and contrabands they confiscated temporarily. The business sector usually
resorts to company-owned or 3PL-owned warehouses to meet their storage needs.
Wholesalers, exporters, importers and manufacturers are the common clients
of warehousing service providers. Raw materials and finished goods alike are kept in
warehouses