LOGISTICS Introduction:

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.
Logistics has gained importance due to the following trends:
Raise in transportation cost.
Production efficiency is reaching a peak
Fundamental change in inventory philosophy
Product line proliferated
Computer technology
Increased use or computers
Reduction in economic regulation
Growing power of retailers
Globalization

OBJECTIVES OF MARKETTING LOGISTICS

The General objectives of the logistics can be summarized as:
1. Cost reduction
2. Capital reduction
3. Service improvement

The specific objective of an ideal logistics system is to ensure the flow of supply to
the buyer, the:
right product
right quantities and assortments
right places
right time
right cost / price and,
right condition
However,there are some definite objectives to be achieved through a proper logistics system.
These can be described as follows:
1. Improving customer service:
As we know, the marketing concept assumes that the sure way to maximize profits in the long run
is through maximizing the customer satisfaction. As such, an important objective of all
marketing efforts, including the physical distribution activities, is to improve the customer service.
2. Rapid Response:
Rapid response is concerned with a firm's ability to satisfy customer service requirements
in a timely manner. Information technology has increased the capability to postpone
logistical operations to the latest possible time and then accomplish rapid delivery of required
inventory. The result is elimination of excessive inventories traditionally stocked in anticipation of
customer requirements. Rapid response capability shifts operational emphasis from an anticipatory
posture based on forecasting and inventory stocking to responding to customer requirements on a
shipment-to-shipment basis. Because inventory is typically not moved in a time-based system
until customer requirements are known and performance is committed, little tolerance exists for
operational deficiencies
3. Reduce total distribution costs:
Another most commonly stated objective is to minimize the cost of physical distribution of
the products. As explained earlier, the cost of physical distribution consists of various elements
such as transportation, warehousing and inventory maintenance, and any reduction in the cost of one
element may result in an increase in the cost of the other elements. Thus, the objective of the firm
should be to reduce the total cost of distribution and not just the cost incurred on any one element.
For this purpose, the total cost of alternative distribution systems should be analyzed and the one
which has the minimum total distribution cost should be selected.
4. Generating additional sales:
Another important objective of the physical distribution/logistics system in a firm is to generate
additional sales. A firm can attract additional customers by offering better services at lowest prices.
For example, by decentralizing its warehousing operations or by using economic and efficient
modes of transportation, a firm can achieve larger market share. Also by avoiding the out-of-stock
situation, the loss of loyal customers can be arrested.
5. Creating time and place utilities:
The logistical system also aims at creating time and place utilities to the products. Unless the
products are physically moved from the place of their origin to the place where they are required for
consumption, they do not serve any purpose to the users. Similarly, the products have to be made
available at the time they are needed for consumption. Both these purposes can be achieved by
increasing the number of warehouses located at places from where the goods can be delivered quickly
and where sufficient stocks are maintained so as to meet the emergency demands of the customers.
Moreover, a quicker mode of transport should be selected to move the products from one place to
another in the shortest possible time. Thus, time and place utilities can be created in the products
through an efficient system of physical distribution.
6. Price stabilization:
Logistics also aim at achieving stabilization in the prices of the products. It can be achieved by
regulating the flow of the products to the market through a judicious use of available transport
facilities and compatible warehouse operations. For example, in the case of industries such as
cotton textile, there are heavy fluctuations in the supply of raw materials. In such cases if the market
forces are allowed to operate freely, the raw material would be very cheap during harvesting season
and very dear during off season. By stocking the raw material during the period of excess supply
(harvest season) and made available during the periods of short supply, the prices can be
stabilized.
7. Quality improvement:
The long-term objective of the logistical system is to seek continuous quality improvement. Total
quality management (TQM) has become a major commitment throughout all facets of industry.
Overall commitment to TQM is one of the major forces contributing to the logistical renaissance. If a
product becomes defective or if service promises are not kept, little, if any, value is added
by the logistics.
8. Life-Cycle support:
A good logistical system helps to support the life cycle. Few items are sold without some
guarantee that the product will perform as advertised over a specified period. In some situations. the
normal value-added inventory flow toward customers must be reversed. Product recall is a critical
competency resulting from increasingly rigid quality standards, product expiration dating and
responsibility for hazardous consequences. Return logistics requirements also result from the increasing
number of laws prohibiting disposal and encouraging recycling of beverage containers and packaging
materials. The most significant aspect of reverse logistical operations is the need for maximum
control when a potential health liability exists (i.e.. a contaminated product). In this sense, a
recall program is similar to a strategy of maximum customer service that must be executed
regardless of cost. Firestone classical response to the tyre crisis is an example of turning
adversity into advantage. The operational requirements of reverse logistics range from lowest total
cost, such as returning bottles for recycling, to maximum performance solutions for critical recalls.
The important point is that sound logistical strategy cannot be formulated without careful
review of reverse logistical requirements.
SCOPE OF THE MARKETING LOGISTICS
The development of interest in logistics after industrial revolution and world war II contributed to the
growth in scope of logistical activities. The following areas are the major scope of logistics:
Demand forecasting
Distribution communication
Inventory Control
Material Handling
Order Processing
Part & Service Support
Plant and Warehouse side selection
Procurement
Packaging
Salvage & scrap disposal
Traffic & transportation
Warehousing & Storage
Time & Place Utility
Efficient Movement to Customer
Return goods handling
Customers Service

DIFFERENCES BETWEEN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Logistics Supply Chain Management
1. It is concerned with getting goods &
services where they are required & when
they
are desired
1. SCM encompasses all those activities
associated with movement of goods from raw
material stage to the end user
2. Logistics is used within a single
organization.
2.Supply chain management requires coordination and
implementation through
various organizations in the supply chain.
3. Logistics is a part of Supply Chain
management
3. Supply chain management is an extension of Logistics
management.
4. Logistics adds value when inventory is
correctly positioned to facilitate sales
4. Effective SCM excels in reducing operating costs,
improves asset productivity and reduces order cycle time
5. The concept of Logistics management
is relatively old
5. The concept of Supply chain management is relatively
new
6. Logistics management is a narrower
concept
6. Supply chain management is a broader concept






GLOBAL SUPPLY CHAIN:
History
Global supply chain management is directly linked to the rise of globalization. Pinpointing an exact
date in history as the advent of global supply chain management isn't possible because its origin
varies by company.
As companies began looking overseas for inexpensive parts and labor, managers were hired to
orchestrate these complex operations.
Global supply chain management trend is evolving as new technologies emerge. Instead of
vendors mailing their products and assuring its delivery, companies are now able to track the
product's exact location through GPS tracking devices. These devices are imperative for global
supply chains. The farther the goods are from the final destination, the riskier its arrival. Before
RFID scans, supply chain managers took inventory weekly or monthly to track sales and supplies.
Now, many companies like Wal-Mart track their products with RFID technology. The moment a
product is purchased; inventory levels are updated to reflect the sale. A third trend affecting global
supply chain management is the lowered barriers of economic trade. The General Agreement on
Tariffs and Trade (GATT) enabled companies to buy products from other countries for lower costs.

Definitions of global supply chain management:
(Any company that uses parts and services from another factory overseas faces issues with global
supply chain management. Douglas C. Long "International Logistics: Global Supply Chain
Management" when he explains every business operation incorporates logistics from shipping food
to assembling cars. As such, he explains that logistics affects everyone and in his words, can be a
matter of life and death).
(The facilities, functions, and activities involved in producing and delivering a product or service,
from suppliers to customers).
(A global supply chain is made up of the interrelated organizations, resources, and
processes that create and deliver products and services to end customers. In the instance
of global supply chains, it is extended around the world).

Why do we need GSCM (GLOBAL SUPPLY CHAIN MANAGEMENT)?
GLOBAL MARKET FORCES
Foreign competition in local markets
Growth in foreign demand
Global presence as a defensive tool
Companies forced to develop and enhance leading-edge technologies and
products.
TECHNOLOGICAL FORCES
Knowledge diffusion across national boundaries, hence need for technology sharing
to be competitive
Global location of R&D facilities
Close to production (as product cycles get shorter)
Close to expertise (Indian programmers?)
GLOBAL COST FACTORS
Availability of skilled/unskilled labor at lower cost
Integrated supplier infrastructure (as suppliers become more involved in design)
Capital intensive facilities like tax breaks, price breaks etc.
POLITICAL AND ECONOMIC FACTORS
Trade protection mechanisms:
Tariffs, Quotas, Voluntary export restrictions, Local content requirements,
Environmental regulations, Government procurement policies (discount for
local)
Exchange rate fluctuations and operating flexibility
Global Supply Chain System Components:
International distribution systems :
- Manufacturing(domestically), Distribution (overseas)
International suppliers :
- Raw materials and Components(foreign suppliers), Final assembly/
Manufacturing(domestically)
Offshore manufacturing :
- Product is sourced & manufactured in a single foreign location,
- Shipped back to domestic warehouses for sale and distribution.

Fully integrated global supply chain :
- Products are supplied, manufactured and distributed from factories located
throughout the world
- In a truly global supply chain, it may appear that the supply chain was
designed without regard to national boundaries.
- The true value of a global supply chain is realized by takingadvantage of
these national boundaries

GSCM Factors
Costs
- Local labor rates / International freight tariffs
- Currency exchange rates
Customs Duty
- Duty rates differ by commodity and level of assembly
- Impact of GATT/WTO: Changes over time
Export Regulations & Local Content
- Denied parties list / Export licenses
- Local content requirement for government purchases
Time
- Lead time /Cycle time /Transit time /Customs clearance
Taxes on Corporate Income
- Tax havens and not havens
- Make vs. buy effect
OBJECTIVES OF GLOBAL SUPPLY CHAIN

International manufacturing sourceswhether company-owned or external suppliershave in
recent years been sought out by managers because of reduced cost, increased revenues, and
improved reliability. Manufacturers typically set up foreign factories to benefit from tariff and trade
concessions, low cost direct labor, capital subsidies, and reduced logistics costs in foreign markets
(Ferdows, 1997).

Advantages:
The main reason for any business to exist is to increase sales and profits.
When you go global, then the likelihood of increasing sales goes up as you open up your
market to consumers all over the world.
This allows businesses to reduce dependence on their local and national economies.
The potential for expansion for businesses increase as they enter into more markets.
Diversified business and trading
Lower supply chain costs
Reduced cycle time
Competitive advantage
Disadvantages:
The biggest disadvantage of global supply chain management is the heavy investment of
time, money, and resources needed to implement and overlook the supply chain.
The decision to outsource a production facility or call center lowers the cost of doing
business for a company using global supply chain management, but the decision to
outsource or not can lead to consumer backlash.
Inefficient and undersized transportation and distribution systems
Market instability
Integrating the supply chain and choosing the correct suppliers is much more difficult than
one can imagine.
Not only do companies have to strongly consider price and quality, but they also have to
make sure that all the organizations are willing to cooperate to benefit the group.
Benefits of Global Supply Chain:
1. As opposed to a poorly organized supply chain a global supply is extremely competitive
and so you can obtain a really good price for supplies that will all be produced to excellent
standards, without even having to search widely. Excellent products completed to the
highest standard of quality controls can be sourced quickly and efficiently.
2. A global supply chain therefore brings with it benefits in terms of companies who are
involved in a global supply chain being able to shave their costs right down and therefore
ensure the economic viability of their business. Global supply chains are often one of the
first methods used for Supply chain cost reduction activities
3. If you have sufficient contacts and suppliers internationally, then you can really reduce the
amount of stock that you have to retain, which means that you will save costs in terms of
storage/thefts/transporting goods etc. These costs can add up, so this certainly helps
sharpen the competitive edge that comes with a global supply chain.