LOGISTICS & SUPPLY CHAIN

MANAGEMENT
Well . . . . Is This Logistics ?
Actually . . . . . This Is Logistics
 Logistics Management
LOGISTICS …………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

Global Industry Verticals - Logistics Activity

Others
4%
Automotive Technology
10% 19% Countries Logistics Cost /
Chemical GDP
4%
Countries Logistics Cost/GDP

India/China 13-15%
Consumer Retail U.S 9.90%
23% 17%
Europe 10%
Japan 11.40%

Health Care Industrial

4%
19%
 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 processing
2. Inventory management
3. Warehousing
4. Transportation
5. Material handling & storage system
6. Logistical Packaging
7. Information
Objectives of Logistics Management
The objective of Logistics management are:
1. Inventory reduction
2. Reliable and consistent delivery performance
3. Freight economy
4. Minimum product damages
5. Quick response
 What is Supply chain?

Supplier Manufacturer Distributor Retailer Customer

 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.
 Is supply chain so simple?

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Supplier Manufacturer Distributor Retailer Customer

Upstream Downstream
 Basic Supply Chain Process

Export &
Manufacture Primary Distribution Secondary B2B & B2C After-Sales
Import
& Raw Materials Movement Centres Movement Distribution Services
Activities

Value-Added
Suppliers Distribution Production Distribution Sales Channel End User
Services
Inbound Manufacturing Supply Distribution After Sales
Logistics Logistics Logistics Logistics Logistics

Reverse Logistics
Definition Of Supply Chain
American 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 Management
Statement 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 Chain
 Objective 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. Production
2. Inventory
3. Location
4. Transportation
5. Information
Importance of the Supply Chain
Major trends that have emerged to make supply
chain management a critical success factor in
most industries:
1. Proliferation in product line
2. Shorter product life cycles
3. Higher level of outsourcing
4. Shift in power structure in the chain
5. 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 planning
3. 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 View
Customer
Customer
Order Cycle

Retailer
Replenishment
Cycle

Distributor

Manufacturing
Cycle
Manufacturer

Procurement
Cycle
Supplier
Push vs Pull process
 Push 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

Logistics
Logistics=SCM
SCM

Unionist Intersectionist

SCM

SCM Logistics
Logistics
TRADITIONALIST

LOGISTICS

SCM

 Traditionalist position SCM within logistics

 SCM 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
Re-labeling

LOGISTICS= SCM

 The relabeling perspective simply renames logistics; what

was logistics is now SCM.
 “Logistics Manager” = “Supply Chain Manager”
 Supply Chain = Logistics Network
 Re-labeling narrows the scope of SCM, since SCM equals
logistics
 Unionist

SCM

Logistics

 This perspective treats logistics as a part of SCM; SCM

completely subsumes logistics.
 SCM= purchasing+ logistics+ operations+ marketing+…..
Mentzer et al. (2001)
“all the traditional business functions should be included”

 1. Marketing & Sales

 2. Research & development
 3. Forecasting
 4. Production
 5. Purchasing
 6. Logistics
 7. Information systems
 8. Finance
 9. Customer service
According to Council of Logistics management

 SCM “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

SCM Logistics

 The intersection concept suggests SCM is not the union of

logistics, marketing, operations management purchasing and
other functional areas.
•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-functional

efforts across multiple firms. SCM is strategic, not tactical
 Method of survey
 Researchers 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 & SCM
 The 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
Results
 34 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
 Conclusion
 Logistics 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.