Role of Logistics

in
Supply Chain Management

Presented by
Deepa John
Navya Jolly
Yazhini
 Order Processing
• Demand drives the logistics system

• Time to complete the activities of order

processing is at very heart of customer
service and represents a significant
portion of the fulfillment process.
 Components of order
processing
❑Order Preparation

❑Order Transmittal

❑Order Entry

❑Order Filling

❑Order Status Reporting

Managing Order Processing
• Order processing activities can serve as a framework for logistics control.
• It can improve the customer service
• Reduce inventory level.

Bullwhip Effect
It is the phenomenon of exaggerated order swings and inventory
level ,Order batching done in order processing activities is one of the
major causes of bullwhip effect.

Perfect Order
It is relatively new simple and comprehensive measure of customer
service and logistics effectiveness.
 Inventory
⮚It is a complete list of items such as property, goods in stock, or
the contents of a building.

⮚“Flow of goods” or “flow of materials” from the source of raw

materials to ultimate end use consumers.

⮚It provides means to combat uncertainties on

component/product supply and demand, take advantage of
scale economies in processes used to transform and transport
components and products, and target specific levels of
components/product availability necessary to meet customer
expectations.
Factors Influencing Inventory Levels
Several factors influence inventory policy and practice
for the firm these includes:

⮚Desired levels of customer service

⮚Production economies
⮚Purchasing economies
⮚Transportation savings
⮚Seasonality of demand or supply
⮚Supply source maintenance.
Types of Inventories

❑Cycle stock
❑In process stock
❑Safety stock
❑Seasonal stock
❑Promotional stock
❑Speculative stock
❑Dead stock
 Inventory Management
HOW MUCH TO REORDER?
WHEN TO REORDER???

Major Approaches to inventory management:

⮚Economic Order Quantity(EOQ)
⮚Material Requirement Planning(MRP)
⮚Distribution Requirement Planning(DRP)
⮚Just In Time(JIT)
 Transportation
Transportation is the spatial linkage for the physical flows of supply chain. Together
with staging, defined here as the temporary holding of commodities materials, parts,
or products for market-timing or value-added processes, transportation creates the
time and place utilities that drive the "product" and "place" components of
marketing's four Ps (along with price and promotion).
During the 1950s and 1960s there were probably four primary factors that shaped the devilment of
distribution thinking (La Londe et al, 1993):

1. Renewed interest in scientific management of the business enterprise (whichmay bleeding

again in the form of renewed interest in modeling due to entereniewide data and tools such as
Geographic Information Systems),
2. Advent of new technology in data processing (a driver again today as desktopcomputing far
surpasses the mainframe computing of the 1950s and 1960,
3. Management recognition of the importance of providing customer satisfaction(with delivered
eustomer value as a driver and the recognition of the total maristructure for the supply chain,
this again has come into focus), and
4. Profit leverage available from reduced logistics costs (today the profit conceptshould include
the other half of the profit equation-revenues).
These factors, which are "new again,"are also complemented by
LaLonde'sfour factors (La Londe et al., 1993) that in the 1970s were
considered key ele-ments that "will shape" the development of distribution:

1. Increased acceptance of the systems approach,

2. Increased customer or user demands,
3. Challenges of multinational distribution, and
4. Increased governmental influence in distribution policy and practice,
still some-what of a factor due to non economic issues (environmental,
labor, international relations), even though economic deregulation has
effectively occurred in the United States).
The supply chain concept may be starting to look at transportation in the context of its total value
and cost/profit trade-offs. In addition, the last few years have seen (La Londe et al., 1993)

1. Inventories being pushed back in the channel romales anderen intheir attempts to cut inventory
holding costs.
2. Reliability of delivery gaining a new focus coming from the realization of what safety stock is
required to cover at delivery patterns.
3. More concerned with reliability or consistency than with speed.
4. International trade and deregulation leading to middlemen with multi capability and a wide
range of intermediate distribution functions.

All these changes in the nature of the global marketplace will continue to drive supply chains and
their transportation components. A goal for the future will be to enhance the relationships between
carriers and members of the supply chain and explore ways to meet time and place utilities while
maximizing profit for all members of the supply chain. The goal may mean a powerful new role for
transportation as a partner in the supply chain.
 LOGISTICS STRATERGY
Objectives of logistics strategy are:-
Ballou,1992
1. Cost Reduction - Evaluate alternative course
of action
2. Capital Reduction - maximize return on
investment
3. Service Improvement – recognize the
function of the levels of stratergy
 LOGISTICS STRATERGY ORIENTATION

Bowersox and Daugherty (1987)

1. Process -Value addition
2. Market – Multiple business units
3. Information - Performed jointly with dealers
and distributors
⮚ Not mutually Exclusive
• 10 advanced commonalities
 LOGISTICS CAPABILITIES AND
COMPETITIVE ADVANTAGE
• Aim to establish profitable and sustainable
position against the forces that determine
industry competition (porter,1985)
• 2 basic types of competitive advantage
• Cost leadership entails being able to perform
value chain activities at lower cost than
competitors
Differentiation
1. Dimension of Differentiation relative to
competitors
2. Dimension to uniqueness
⮚ Achieved by marketing activities, superior
service, strong brand name, innovative
features, superior product quality.
 CAPABILITIES
• Capabilities are compliex bundles of skills and
collective learning, excerised through
organizational processes, that ensure superior
coordination of functional activities.
• Sustainable competitive and superior
profitability.
 Today’s Business World
• Not onlt quality in product and servic but also
all the areas in the company.
• Time and quality based wased reduction
• QR, JIT,ECR
• The Council of Logistics
Management defines Logistics as follows:
“Logistics is part of the supply chain process
that plans, implements, and controls the
efficient, effective flow and storage of goods,
services, and related information from the
point of origin to the point of consumption in
order to meet customers' requirements
 DIMENSTIONS OF LOGISTICS
CAPABILITIES
• Demand management interface capabilities
Product or service differentiation and
service enhancement.
• Supply management interface capabilities
Operational capabilities- Distribution, total
cost minimization,lower total cost
distribution.