Meaning of Logistics

• Logistics means having the right thing, at the right

place, at the right time.”
• Word ‘Logistics’ is derived from French word ‘loger’,
which means art of war pertaining to movement and
supply of armies.
•To get goods from where they arise to the right place in
the right form, at the right time, at the right cost, “
Logistics or physical distribution or distribution logistics is
an integral part of Marketing Process”.
 Definition of Logistics Management
• According to Council of logistics management:
“ Logistics is the process of planning,
implementing and controlling the efficient,
effective flow and storage of goods, services and
related information from point of origin to point
of consumption for the purpose of conforming
the customer requirement”.
 Definition of Logistics Management
• Logistical management includes the design and
administration of systems to control the flow of
material, work – in – process, and finished
inventory to support business unit strategy.
• Logistics is the designing and managing of a
system in order to control the flow of material
throughout a corporation.
Importance of Logistics Management
• Transportation cost rose rapidly due to the
rise in fuel price.
• Production efficiency was reaching a peak.
• Fundamental change in inventory philosophy.
•Product line proliferated.
•Computer technology.
•Increased use or computers.
 Objectives of Logistics Management
• Rapid Resources - Rapid response is concerned with a firm
ability to satisfy customer service requirements in a timely
manner.
• Minimum Variance - Variance is any unexpected event that
disrupts system performance. Variance may result from any
aspect of logistical operations. Delay in expected time of
customer order receipt, an unexpected disruption in
manufacturing, goods arriving damaged at a customer’s location
, or delivery to an incorrect location – all result in a time
disruption in operations that must be resolved.
 Objectives of Logistics Management
•Minimum Inventory: The objectives of minimum variance
involves assess commitment and relative turn velocity.
Total commitment is the financial value of inventory
deployed throughout the logistical system. Turn velocity
involves the rate of inventory usage over time. High turn
rates, coupled with inventory availability, means that
assets devoted to inventory are being effectively utilized.
The objective is to reduce inventory deployment to the
lowest level consistent with customer service goals to
achieve the lowest overall total logistics cost.
Objectives of Logistics Management

• Movement consolidation : One of the most

significant logistical costs is transportation.
Transportation cost is directly related to the
type of product, size of shipment, and
distance. Many Logistical systems that feature
premium service depend on high – speed,
small – shipment transportation.
Objectives of Logistics Management
• Quality Improvement – A fifth logistical objective
is to seek continuous quality improvement. Total
quality management ( TQM) has become a major
commitment throughout all facets of industry.
•Life cycle support – The final ,logistical design
objective is life cycle support. Few items are sold
without some guarantee that the product will
perfom as advertisied over a specified period. In
some situations. The normal value – added inventory
flow towards customers must be reversed.
 Inbound Logistics
• Inbound Logistics: The network that
transports goods or materials to your business
is referred to as “ inbound logistics”. Your
inbound logistics network includes everything
you need to transport, store, and deliver
goods from other suppliers to your company.
In bound logistics encompasses everything
your business operations require to create the
finished product that you will eventually sell.
 Outbound Logistics
• Outbound Logistics: The transportation ,
storage and delivery systems that bring your
products to your customers a referred to as “
outbound logistics.” Outbound logistics refers
to the transportation of finished goods to
their final destinations. Outbound logistics
networks typically collaborate with different
partners that inbound logistics networks.
 Outbound & Inbound Logistics
•Understanding the difference between inbound and
outbound logistics processes is critical to gaining a
complete picture of logistics montreal strategy.
Modern business require both inbound and
outbound logistics. Inbound logistics are to bring
goods and raw materials into your company and
outbound logistics processes, transport your finished
goods to their final destination. Both of these systems
necessitate the use of specialized networks and tools,
as well as the collaboration of multiple partners.
Bullwhip in supply chain management
• Bullwhip effect is a phenomenon in forecast
driven distribution channels detected by
supply chain.
• In bullwhip effect order sent to the
manufacturer and supplier create larger
variance then the sales to the end customers.
 Effects of Bullwhip
• In a supply chain plagued with Bullwhip
effect, the distortion in information is
escalated as it moves up in the 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 i.e exaggerated flucuatons.
Contribution towards bullwhip effects
• There are many factors to cause bullwhip effects
•Disorganization : between each supply chain link
if it occurs then due to non uniformity in
ordering leads to over or under reaction to the
supply chain beforehand.
• Lack of communication: between each link in
the supply chain makes it difficult for the process
to run smoothly and therefore order different
quantities.
Contribution towards bullwhip effects
• There are many factors to cause bullwhip effects
•Lack of communication: between each link in the
supply chain makes it difficult for the process to run
smoothly and therefore order different quantities.
•Free return policies: customers order more demand
intentionally to meet there inventory but cancel in
between when supply becomes adequate.
•Order batching: creates variability in the demand as
there may be surge in demand at some stage
followed by no demand.
 Centralized and Decentralized Purchasing
• Centralization and Decentralization are the two
types of structures that can find in the organiszation,
government, management and even in purchasing.
Centralization of authority means the power of
planning and decision making are exclusively in the
hands of top management. It alludes to the
concentration of all the powers at the apex level. On
the other hand, Decentralization refers to the
dissemination of power by the top management to the
middle or low – level management.
 What is centralized purchasing
• Under centralized purchasing purchases are
made at one central point for the whole
organization and material is issued to respective
departments or jobs as and when needed. Also,
Centralized purchasing is suitable in cases where
the organization runs one plant. It will bring about
economies of purchasing and buying in small lots
will avoid.
 What is centralized purchasing
• Centralized purchasing is further helpful to the
vendors since their selling costs are reduced as
they can easily coordinate and supply goods to a
single buyer instead of a large number of buyers.
The most important benefit which can draw from
centralized buying is that it keeps the inventories
in control and checks the wasteful investment
in materials and equipment etc. thereby ensuring
the overall economy in purchasing.
 What is Decentralized purchasing
• Decentralized purchasing is just the reverse of
centralized purchasing. This is suitable for
organizations running more than one plant. Under
this type, each plant has its purchasing agents. In
other words, every department makes its
purchases. This also calls localized purchasing.
Also, Decentralized purchasing is quite flexible and
can quickly adjust following the requirements of a
particular plant.
 What is Decentralized purchasing
• More attention can pay by the departmental
head to buying problems as he will be carrying the
limited number of activities in his department and
he can hold responsible for the purchase of goods
and the overall performance of the plant. The
serious drawback which emerges from this type is
the lack of uniformity in purchasing procedure in
the organization.
 What is Decentralized purchasing
• More attention can pay by the departmental
head to buying problems as he will be carrying the
limited number of activities in his department and
he can hold responsible for the purchase of goods
and the overall performance of the plant. The
serious drawback which emerges from this type is
the lack of uniformity in purchasing procedure in
the organization.
 Role of Purchasing Department
• To understand how the purchasing department works, it is
important to explore the role it plays in the overall business
workflow & P2P cycle Purchasing departments play two roles
in an organization:
• Strategic Purchasing: In this role, the purchasing department
plans high-level procurement activities based on the
organization’s business goals. Strategic purchasing department
responsibilities help in sourcing goods strategically (e-
sourcing at economical prices and optimum quality. Decisions
such as in-house manufacturing or procurement from external
suppliers are taken at the strategic purchasing stage.
 Role of Purchasing Department
• Operational Procurement: This role is also
defined as “tactical purchasing”, where all the
purchase department responsibilities are focused
on taking care of business operations and
administration. Repeat orders, inventory
restocking, and invoice payments are maintained
to keep the production line running at its optimal
capacity. Operational procurement primarily
caters to the long-term needs of the company.
 Key Function of Purchasing Department
All purchasing department functions are aligned with the business objectives of
an organization.  Here are some of the basic purchasing department functions:

• Identify business requirements for goods, materials, and services

• Find reliable suppliers to meet these requirements
• Negotiate prices, build quality, and delivery terms
• Set up the order quantities and making bid requests on supply contracts
• Coordinate delivery and storage operations
• Run quality control and product testing
• Manage budgets based on ROIs and payments

Let’s explore the three main purchase department functions in detail.

 Stores Management
• Introduction
• The term stores storehouse, warehouse etc refer to the physical place be it a
building or a room etc, where materials of all variety are kept.
• The function of stores is to receive store and issue materials.
• Stores are normally divided into various sections such as
•Receiving section
•Tool Stories
•General Stores
•Raw Materials stores
•Finished parts stores etc.
• Stores plays a vital role in the operations of a company
•Stores networks are incredibly complex and therein lies the opportunity of
improvement.
 Stores Management
• Stores function as an element of materials department has an interface with
many user departments in its daily operations.
•The basic purpose served by stores is in the provision of uninterrupted service
to manufacturing divisions.
•Stores act as a cushion between purchase and manufacturing on one hand and
manufacturing and marketing on the order.
•The inherent limitation of forecasts make the stores function a necessity.
•Stores function is an inseparable part of all business and non – business
concerns, whether they are industrials or service oriented, public or private,
small or large.
•The task of store keeping relates to safe custody and stocking of materials,
their receipts, issues and accounting with the objectives of efficiently and
economically providing the right material at the right time whenever required in
the right condition to all user departements
 Inventory Fundamentals
• Inventory = material + supply
• For sale
• Input or supply to the production process
• Substantial part of the total assests
• 20% to 60% of total assets on balance sheet,
when used value is converted into cash, improve
cash flow and return on investment ( ROI)
 Inventory Fundamentals
• Cost for carrying inventories
Increase operation cost
Decrease profit
• Inventory Management is responsible for
• Planning inventory from raw material to customer.
•Controlling inventory from raw materials to customer.
 Inventory Fundamentals
• It involve the following.
• Flow and kind of inventory needed
•Supply and demand pattern
• Function that inventories preform
•Objectives of inventory management
• cost associated with inventory.
 Inventory Fundamentals
• Cost for carrying inventories
Increase operation cost
Decrease profit
• Inventory Management is responsible for
• Planning inventory from raw material to customer.
•Controlling inventory from raw materials to customer.
 Inventory Fundamentals
• Item inventory management
Item level, not aggregate
Management establishes decision rule about inventory
item
Rules
Which inventory items are most important
How individual items are to be controlled
How much to order at one time – when to place an
order.
 Inventory Fundamentals
• Item inventory management
Item level, not aggregate
Management establishes decision rule about inventory
item
Rules
Which inventory items are most important
How individual items are to be controlled
How much to order at one time – when to place an
order.
 EOQ ( Economic Order Quantity)
• Quantity of materials which can be purchased at
minimum costs.
•It is size of the lot to be purchased which is economically
variable
•The framework used to determine this order quantity is
also known as Wilson EOQ Model or Wilson Formula.
•In Determing EOQ, it is assumed that cost of managing
inventory is made up solely of two parts
(1) Ordering costs/ buying costs.
(2) Carrying costs / holding costs.
 JIT (Just in Time)
• JIT ( Just in a Time) is a manufacturing
philosophy involving an integrated set of
procedure/ activities designed to achieve a
volume of production using minimal inventories
• A highly coordinated processing system in which
goods move through the system, and services are
perfomed, just as they need.
 JIT (Just in Time)
• Evolved in Japan after world war – II, as a result
of their diminishing market share in the auto
industry.
•Founded by Taiichi Ohno a vice president of
Toyota.
•Basically implemented in Toyota plant 1950, well
established after 1970.
 ERP
•Definition
•Enterprise resource planning ( ERP) is a cross
function enterprise system driven by an integrated
suite of software modules that supports the
basical internal business processes of company.
 What is ERP
• The practice of consolidating an enterprises
planning manufacturing sales and marketing
efforts into one management systems.
•Combine all database across departments into a
single database that can be accessed by all
employees.
•ERP automates the tasks involved in perfoming a
business process.
 Vendor Management Inventory
• VMI is essentially an integrated approach whereby
the inventory at the distributor / retailer
( downstream) is monitored and managed by the
manufacturer ( upstream).

• VMI includes
• Determining appropriate order quantities.
• Managing proper product mixes.
• Configuring appropriate safety stock.
 Typical benefits to Manufacturers
• Lower inventory investments ( raw and finished).
•Better scheduling and planning.
•Better market information.
•Closer customer ties and preferred status.

Types benefits to Retailors

• Fewer stock – out with higher inventory turnover.
• Better market information
• More optimal product mix
• Less inventory in channels ( transfer costs).
• Lower administrative replenishment costs.
 Supplier Relationship Management
• Supplier Relationship Management: (SRM) is the discipline of
strategically planning and managing, all interactions with third
party organizations that supply goods or service to an
organization in order to maximize the value of those interactions.
Components of SRM
Organizational structure
Governance
Supplier engagement Model
Value Measurement
Technology and Systems
 Supplier selection Defined
• Supplier: “External entity that supplies
relatively common, off the shelf, or standard
goods or service.” ( Business Dictionary).
•Supplier Selection: “The stage in the buying
process when the intending buyer chooses the
preferred supplier or suppliers from those
qualified as suitable.”( West burn Dictionary).
 Warehouse

• Warehousing is the act of storing goods that will be sold or distributed later.
While a small, home-based business might be warehousing products in a spare
room, basement, or garage, larger businesses typically own or rent space in a
building that is specifically designed for storage.
• Place where goods are kept is called WAREHOUSE.
• The person in charge of warehouse is called warehouse keeper.
• A commercial buildings for storage of goods.
• Used by manufacturers, importers , exporters , wholesalers, transport, business
, customers, etc.
Definition
Warehousing refer s to the activities involving storage of goods on a large
scale in a systematic and orderly manner and making them available
conveniently when needed.
 Types of Warehouse

• Private warehouse
• Public Warehouse
• Government Warehouse
•Co-operative warehouse
• Bonded warehouses
•Distribution centers or warehouses
• Cold Storage
•Export and Import
•Climate controlled
• Field Warehouse
•Agricultural Warehouse
 Integrate Logistics

• Process of anticipating customer needs and

wants.
• Acquiring the capital, materials, people,
technologies and information necessary to meet
those needs and wants.
• Optimizing the goods or service producing a
network to fulfill customer requests.
•Utilizing the network to fulfill customer request in
a timely frame.
 Integrate Logistics

• Cross functional teamwork inside the company.

• Building channel partnerships
• Third party logistics.
 Packaging system
• Packaging is the science, art and technology of
enclosing or protecting products for distribution,
storage, sale, and use.
• Packaging also refer to the process of design,
evaluation and production of packages.
• packaging may also defined as the collection of
different components ( example: bottle, vital , closure,
cap , ampoule, blister) which surround the
pharmaceutical product from the time of production
until its use.
 Type of Packaging
• Primary Packaging: is the material that first envelops the
product and holds it. This usually is the smallest unit of
distribution or use and is the package which is in direct
contact with the contents.
Example: Ampoules, Vials, Containers, Dosing dropper, Cloures
(plastic, metal), syringe, strip package, blister, packaging.
• Secondary Packaging: is outside the primary packaging
perhaps used to group primary packages together.
• Tertiary Packaging: is used for bulk handling warehouse
storage and transport shipping. The most common form is a
palletized unit load that packs tightly into containers.