Chapter 1

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Logistics Management: At the
Centre of World Trade

Logistics Management, 3e Author: Vinod V. Sople

 Learning Objectives

• To understand concepts, scope and objectives of logistics.

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• To understand logistics mix (logistics components).
• To understand present and future perspective of logistics.
• To understand role of logistics in customer value delivery
chain.

Logistics Management, 3e Author: Vinod V. Sople

Forces Shaping Perspective of Logistics

• Concept of supply chain

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Cost pressure
Speed to market
Customer delight
• Movement towards globalization

Time-place utility
• ‘Hollowing out’ of industry

Outsourcing

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Management

• The process of strategically managing the movement and

storage of material, parts and finished goods from suppliers,
through the firm to the customers.

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.....Council of Logistics Management
• Logistics is the information based activity of material
movement from suppliers to manufacturer and finished goods
to the customer.
.....Martin Christopher
• Planning, implementing and controlling the physical flows of
materials and finished goods from point of origin to point of use
to meet the customers’ need at profit.
.....Philip Kotler

Logistics Management, 3e Author: Vinod V. Sople

 Pervasiveness of Logistics

• 24 Hours ATM

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• Dabbawalas of Mumbai
• Laundry service in a five star hotel
• Indian Postal Service
• Gulf War in 1991
• Public distribution system (FCI)

Logistics Management, 3e Author: Vinod V. Sople

Logistics – A system Concept- Logistics Mix

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Logistics Management, 3e Author: Vinod V. Sople
 Logistics Chain

S C
U U

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P S
P T
L
Buy Make Deliver O
I (Procurement) (Processing) (Distribution) M
E E
R R
S S

Inbound Process Outbound

Logistics Logistics Logistics

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Chain
• Inbound logistics
Operation preceding manufacturing. This includes movement
of raw materials and components from supplier to the plant.

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• Process logistics
Operations directly related to processing. This includes
storage and movement of raw materials and components
within the factory premises as per the manufacturing
schedule.

• Outbound logistics
Operations following the manufacturing. This includes
warehousing, transportation and inventory management of
finished goods.
Logistics Management, 3e Author: Vinod V. Sople
 Distribution of Logistics Cost

Transportation 12%

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Inbound logistics Storage 8%
Inventory 8%
Transportation 2%
Process logistics Storage 5%
Transportation 33%
Storage 15.50%
Inventory 6.50%
Outbound logistics Order processing 10%

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Integration

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S Material flow C
U U
P S
P T
Procurement Processing Distribution
L O
I M
E E
Information flow
R R
S S

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Mix

• Warehousing
Depot location, storage system, material handling, unitization

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and packaging
• Transportation
Mode decision and scheduling
• Inventory
Service level planning and MRP
• Information
Order processing and demand forecasting

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Decision Levels
Strategic Level
Customer service

Structural Level

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Channel design
Network strategy

Functional Level
Warehousing design
Freight management
Inventory control

Implementation Level
Policies and procedures
Information flow
Facilities and equipment
Organization and change management

Source: Anderson Consultants

Logistics Management, 3e Author: Vinod V. Sople

 Objectives of Logistics Management

• Inventory reduction

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• Reliable and consistent delivery performance

• Freight economy

• Minimum product damages

• Quick response

Logistics Management, 3e Author: Vinod V. Sople

 Logistics Functions

• Order processing

• Inventory control

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• Warehousing

• Transportations

• Material handling

• Logistical packaging

• Information analysis, processing and flow

Logistics Management, 3e Author: Vinod V. Sople

Logistics: Macro Level Growth Variables

• Country's economic growth

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• Government policies for trade development

• Regulatory environment

• Transportation Infrastructure

• Warehousing and cold chain network

Logistics Management, 3e Author: Vinod V. Sople

Logistics for Business Excellence

1. Integration of logistics into the Business

2. Integration of components of logistics

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Logistics Management, 3e Author: Vinod V. Sople
Customer Service Phase

Phase -I : Pre-transaction
• Customer service policy
• Service organization

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• Structuring service
• Customer education
• System design
Phase- II: Transaction Phase
• Order fulfilment reliability
• Delivery consistency
• Order convenience
• Order postponement
• Product substitute

Logistics Management, 3e Author: Vinod V. Sople

Phase-III: Post-transaction
• Order status information
• Customer complaint, claim and return
• Installation, commissioning and technical snag
• Education and training

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Logistics Management, 3e Author: Vinod V. Sople
Mapping the Supply Chain

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Logistics Management, 3e Author: Vinod V. Sople
E Business Solutions for supply chain

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Logistics Management, 3e Author: Vinod V. Sople