MODULE-7

DIMENSIONS OF LOGISTICS
Introduction. A Macro, Micro Dimension.
Logistics interfaces with other areas.
Approach to anal!ing logistics sstems.
Logistics and sstems analsis.
"actors affecting cost and important of logistics.
Introduction
#ood logistics is $usiness power, %er appropriate $ecause it helps
$uild competiti%e ad%antage. At the end of the da, if ou can&t deli%er our
products to our customers, ou will not sta in $usiness %er long. 'hat
doesn&t appl that good (ualit products and mar)eting are not needed. *ut
the must $e com$ined with effecti%e and efficient logistics sstems for long
run success and financial %ia$ilit.
*ig challenge is to manage whole logistics sstems in such a wa that
order fulfillment meets and perhaps e+ceeds customer e+pectations. At the
same time, the competiti%e mar)et place demands efficienc, controlling
transportation, in%entor and other logistics related cost centers effecti%eness
and efficienc are important in toda&s competiti%e en%ironment, at the same
time $alancing the added customer ser%ice at low cost to $ring down the
total cost of logistics.
,erspecti%e on suppl chain management is that it is a networ) of the
logistics sstems and related acti%ities of all the indi%idual companies -
organi!ations that are part of a suppl chain. 'he indi%idual logistics sstems
o$%iousl pla a role in the success of the o%erall suppl chain.
'he coordination or integration of logistics sstem in a suppl chain
is a challenge. In order to full appreciate the dnamics of the challenge, it is
necessar to e+amine and dissect an indi%idual logistics sstem.
In $ound part of a manufacturers logistics sstem interfaces with the
out$ound side of its %endors logistics sstem. 'he out$ound portion of the
manufacturer&s logistics sstem interfaces with the in$ound side of its
customer&s logistic sstem.
'he growing appreciation of the %alue associated with good logistics
and the impro%ed management of logistic sstems ha%e resulted in
significant change and impro%ed efficienc.
Supply Chain Pipeline
A MACRO, MICRO DIMENTION
A Macro ,erspecti%e
In the econom logistical acti%ities, increase the growth of econom
in terms of gross domestic product .#.D.,/. 0ence, one need to measure
total logistical cost in terms of #D,, which is a widel accepted $arometer
or metric used to gauge the rate of growth in the econom.
The ituation o!" lo#itic cot a percenta#e o! GDP $IN%S&
1222 2.23
1224 15.13
1226 15.73
1228 15.93
1225 11.93
1248 1:.73
1245 18.73
Source" ;o$ert Delane, <lass Information =stems.
0as declined from a$out 163 in 1245 to 153 in 1222.
It indicates, a significant impro%ement in the efficienc of the o%erall
logistics sstems of the %arious companies operating in the econom.
'his reduction ma)es an organi!ation to $e more competiti%e since it
directl impacts the cost of producing goods. .<O#=/
'he measure of annual logistic cost includes the following as per -
Delane =tudies.
1. <arring <ost
:. 'ransportation <ost
7. Administrati%e <osts
1. <arring <osts> Include interest e+penses, warehousing, ris) related
.O$solescence, Deterioration, Damage/ ser%ice related cost
.Insurance, 'a+es etc./
:. 'ransportation <ost> Associated with mo%ement of freight $
Motor <arriers ? 'ruc) intercit, truc) local
Other <arriers ? ;ailroads, water .International, Domestic/
- Oil pipelines, air .International and domestic/
- "orwarders
7. Administration <ost
<ost associated in managing logistical acti%ities
;eduction in total cost of logistics is due to>
1. Deregulation of transportation ? fle+i$ilit to carriers to ad@ust their
rates and ser%ice in response to competition less regulated
en%ironment.
:. Impro%ed management if in%entor le%els ? a%aila$ilit of $etter
management tools and techni(ues for more effecti%e decisions.
The trend o! in'entory to ale ratio
Logistics management re(uires loo)ing at the total cost of all logistics
acti%ities, not @ust one cost ? such as transportation.
Also 'rade ? Off> ;esponsi%eness As Efficienc matters.
Airfreight at higher rates As sa%ings in in%entor related costs.
'he Micro Dimension ? Logistics in a firm
Micro perspecti%e of logistics in a firm needs to e+amine the
relationship $etween logistics and other functional areas in a compan
Mar)eting
Manufacturing - Operations
"inance and accounting .;ef. logistics interface with other areas/
Logistics interfaces with operations - Manufacturing
a. Long As =hort ,roduction ;uns> Management to weight the
ad%antages and disad%antages. =hort ccle time is preferred $
industries nowadas. Bust in time is the approach towards
in%entor and scheduling. In%entor and scheduling ? trend is
towards C,ULL& sstem not C,U=0&, to $e in response to demand
achie%ing lower in%entor le%els and decrease in logistics costs.
$. =easonal Demand> E.g. snow s)is or snow mo$iles,
,roduction manager is interested in producing well ahead of
season. Logistics department, in con@unction with production,
must $e prepared to accept seasonal in%entor, which can start to
accumulate three to si+ months $efore sales occur.
c. =uppl side interfaces> since the logistics manger is responsi$le
for the in $ound mo%ement and storage of raw materials that will
feed the production line, logistics and production also interface on
the suppl side. A shortage or stoc) out situation could result in
the shutdown of a production facilit or an increase in production
cost. Optimi!ation of in%entor le%els is nowadas rest with
logistics department.
d. ,rotecti%e pac)aging> 'he principle purpose of pac)aging is to
protect the product from damage. Another interface of logistics
and operations is pac)aging this is distinct from whate%er %alue
the product pac)age ma ha%e for mar)eting or promotional
reasons.
e. "oreign and third part alternati%es> certain raw materials and
other production inputs are nowadas needs to $e procured from
foreign sources. 0ence man firms toda resort to third part
manufacturer or co pac)ers ? to produce, assem$le. All or some of
firms finished products pre%alent in food industr, where man
firms manufacture onl food items to $e sold under someone
else&s la$el.
LOGISTICS INTERFACES (IT) OT)ER AREAS
Ma@or important internal areas
1. Manufacturing
:. Mar)eting
7. "inance
Finance
'he impact logistics can ha%e upon return on assets .;OA/
;OA D ;e%enue ? E+pense - Assets O;
;OA D #ross profit - Assets
Logistics to impact on ;OA possi$ilit
;eduction in in%entor since in%entor is an asset-reducing in%entor
increases ;OA.
;OA also can also impro%e as long as increase in sales is not offset $
higher cost for customer ser%ice.
"inancial %ia$ilit of a compan is gauged $ its current ;OA or ;OI,
hence logistics gains importance, in terms of - reduced in%entories, -
and reduced customer ser%ices e+penses, - also utili!ation of
warehouses and less in%estment on transportation e(uipment.
'o sum up, logistics interface with other areas, in order impro%e ;OA - ;OI
is directl related to the three logistics dri%ers namel.
L* Dri'er Lo#itic related action
1. In%entor> ;educed le%el for effecti%e operations.
:. Eare 0ouses> 'o optimi!e no. of ware houses, ensure
*etter utili!ation of the same.
7. 'ransportation> A ma@or area of e+pense and hence to
;educe in%estment on transport, go more
"or 7 ,L and 9 ,L consolidate material
Mo%ement etc.
+uality o! Lo#itic Analyi"
'hough, in earlier accounting sstems, the logistics related e+penses ware
included in the o%er head, the current product profita$ilit and the related
cost accounting sstem %i!. acti%it $ased costing .A*</ has $een $eneficial
to impro%ing the (ualit of logistical analses. 'his tpe of accounting
sstems is also critical for measuring suppl chain trade ? offs and
performance.
Lo#itic inter!ace ,ith -ar.etin#
,hsical distri$ution and a$ilit to pro%ide the product at the right time in
the right (uantities ma $e the critical element in ma)ing a sale. 'hese
acti%ities are the responsi$ilities of firms logistics sstem. Each principle
area of mar)eting mi+ Ai!> ,rice, product, promotion, places, apart from
interface area $etween logistics and mar)eting are rele%ant for discussion.
a* Price" ;ail road transportation econom as a logistics re(uirement
depends on the si!e of the shipments. Larger the si!e, lower the unit rate
charged, since the transportation compan e+periences econom if the
customer sends large shipments. 0ence price is directl related to %olume
hence price schedules are related to %olumes ordered logistics manager to $e
prepared for ad@ustment of in%entor re(uirements to meet pro@ected
demand.
/* Product" for $oth, the current products and new products, logistics
sstem to economicall mo%e and store products, depends on ? si!e, shape,
weight, pac)aging etc. and such %ital data are %er rele%ant to logistics point
of %iew to plan for - <arriers the firm can use ? 7,L - 9,L
- E(uipments needed ? damage rates, storage a$ilit
- Use of materials handling e(uipment %i!> <on%eers, pallets,
E+terior, pac)ing etc
<onsumer pac)aging, to at into CIndustrial ,ac)age& offers protection offered
and the phsical dimension affect the logistics sstem in the area of
transportation, material handling and warehousing.
c* Pro-otion" 'o impro%e sales lot of mone is spent $ firms on
ad%ertisement and other promotional practices.
C,ush& As C,ull&> Logistics sstem either need to push the product through
distri$ution channel to reach the customer or pull it through.
,roduct sale also, depends on wholesalers and retailers pro%iding space in
their outlets for $etter attention and appeal of $uers. ,ulling ? the product
needs e+tensi%e sales campaign ad%i etc. ,ush ? strateg re(uire channels of
distri$ution to stimulate consumer sales sometimes, manufacturer resort to
national ad%ertising, or on a $road regional scale.
d* Place" decision on logistics points of %iew refers to distri$ution channels
decisions. "or certail, retailers win do not allow sufficient lead time,
logistics need to do time ? sensiti%e transportation ser%ice at a premium
price to meet deli%er needs.
;ecent trends> customer ser%ice ? an interface acti%it $etween mar)eting
and logistics and ha%e aggressi%el and effecti%el promoted customer
ser%ice as a )e element of mar)eting mi+.
Eg. "ood, <hemicals, ,harmaceuticals.
Inte#rated Lo#iticActi'itie
'he acti%ities in a integrated logistics process are>
,rimar logistics acti%ities responsi%e
- transportation, warehousing, pac)aging, in%entor management
- material handling ? communication and information
ser%ice logistics acti%ities
- ;esponse time, order completeness, accurac, shipment and
deli%er.
Tranportation> deals with mo%ement of a product into, through and
out of the plant or warehouse, the product is mo%ed $ modes of
transportation ? air, motor.'ruc)s/, pipeline, railroad and water
transportation is the most e+pensi%e logistics acti%it, accounting for
853 or more of total logistics costs.
(arehouin# and pac.a#in#> 'he strategic placement of ware
houses, ser%ice centres and plants throughout the suppl chain
includes decisions a$out the num$er and tpe of ware houses, their
location, pac)aging to suit product tpe and customer preferences and
operation etc.
In'entory -ana#e-ent> ;efers to efficient wa of optimi!ing the
stoc) of raw materials, wor) in process and finished goods also
holding $uffer - safet stoc)s for supplier lead time, demand
fluctuations.
Material )andlin#> is concerned with the efficient and effecti%e
mo%ement of products at different stages of manufacture inside plants
and warehouses includes tpes of containers, tpes of material
handling sstem, and the integration of material handling sstem
within the facilit structure.
Co--unication and In!or-ation> order processing, forecasting, this
acti%it holds the entire integrated logistics sstem together.
- <hanges in an one of the acti%it affects the other
- Understanding and coordinating these acti%ities is the @o$ of
manager integrated logistics.
Repone ti-e> refers to the time a customer must wait $efore the
ser%ice is rendered or product deli%ered.
Order co-pletene> accurac is the managing, scheduling and
staffing of people and e(uipment to meet the pre determined le%el of
customer ser%ice with pre esta$lished cost trade ? offs. =cheduling for
little capacit ma lead to lost sales, scheduling too much ma
enhance customer ser%ice le%els $ut lower profits.
Ship-ent Deli'ery> choosing the distri$ution channels to deli%er the
product - ser%ices to the customer.
'hese ser%ice response logistics acti%ities must operate together to meet the
customer ser%ice re(uirements. If the do not operate as a sstem, the do to
ield the full $enefits. Also, ser%ice response logistics must coordinate with
the rest of logistics. Almost all products ha%e ser%ices attached to them.
Glo/al Inte#rated Lo#itic Acti'itie
1. 'ransportation
:. Earehousing
7. ,ac)aging
9. In%entor Management
8. Material 0andling
6. Information sstems
7. ;esponse time 'hese re(uire special attention
4. Order completeness and Accurac from the glo$al logistics manager
2. =hipment condition and deli%er
Role o! Lo#itic in upply chain -ana#e-ent
;ole of logistics are co%ered in the following acti%ities.
- 'raffic and transportation ? material handling
- Earehousing and storage ? in%entor control
- Industrial pac)aging ? order fulfillment
- Demand forecasting ? plant and warehousing site location
- ,roduction planning ? return goods handling
- ,urchasing ? parts and ser%ice handling
- <ustomer =er%ice le%els ? sewage and waste disposal
Tranportation> a %er important part of the logistics sstem. A
ma@or focus in logistics ? the phsical mo%ement - flow of goods - the
networ) that mo%es the product. Fetwor) is composed transportation
agencies that pro%ide the ser%ice for the mode or modes of
transportation used in mo%ing the raw material and finished goods or
for de%eloping pri%ate transportation as an alternati%e.
Stora#e> it as a trade ? off relationship with transportation in%ol%es
in%entor management and warehousing. Eg> A firm with slow means
of transport ma ha%e higher in%entor le%els and more space for
warehousing. 'he can o%ercome these $ using faster transport.
Aarious options on ? in%entor le%els, location, si!e and num$er of
warehouses is essential to optimi!e the o%erall logistics sstem.
Pac.a#in#> .Industrial/ tpe of transportation selected affects the
pac)aging re(uirements for $oth finished goods and in$ound
materials. ;ail or water transportation usuall re(uires additional
effort in pac)aging. Air transportation ma re(uire economical
pac)ing. Eg> clothing is fre(uentl shipped on hangars
Material handlin#> is important t efficient warehouse operation in a
tpical manufacturing organi!ation. Logistics managers are concerned
with - Mo%ement of goods into warehouse.
- ,lacement of goods in a warehouse.
- Mo%ement of goods from storage to order pic)ing are and
- 'o doc) areas for transportation out of warehouse.
Materials handling mechanical e(uipment are ? usuall for short
distance mo%ement ? such e(uipments are> con%eers, for)lift truc)s, o%er
head crane and containers. In production, managers use pallets and
containers. It is desira$le to ma)e those compati$le with material handling
e(uipment. Also it is $etter to deplo same tpe of for)lift truc)s in the
plants and in the warehouses.
Order Ful!ill-ent> Is acti%ities in%ol%ed in completing customer
orders. Logistics loo)s at phsical distri$ution factor is the time
elapsing from customer placing an order to fill those goods are
actuall deli%ered in a satisfactor condition i.e. the lead time. 'his is
(uite important to the logistics function. 'o plan for economical
transportation and processing the orders $ speed communication.
Forecatin#> In%entor of raw materials, parts is an essential acti%it
especiall in companies practicing @ust- in-time or materials
re(uirement planning .M;,/ to control in%entor forecasting $
mar)eting reflect sales of product onl not in%entor.
Production plannin#> "or effecti%e in%entor control and to decide
on indicating product deli%eries $ased on current in%entor close
coordination of logistics and ,,< is re(uired as an integrated
approach in large corporations.
Purchain#> logistics ? transportation costs directl related to the
geographic location of raw materials and parts purchased for an
organi!ation production needs. Aim is economical mo%ement during
75s G 45s certain companies added purchasing to logistics.
Cuto-er er'ice> Decisions a$out in%entor, transportation, and
ware housing relate to customer ser%ice re(uirements. Logistics plas
an important role in ensuring that the customer gets the right product
at the tight place and time.
Site location> of plant and warehouses is important in logistics since
will affect transportation rates and ser%ice, customer ser%ice,
in%entor re(uirements and possi$l other areas. ,lant location is as
important as warehouses location and transportation cost is a decider.
Other acti'itie> considered as part of logistics are>
"or industries in the *usiness - parts and ser%ice support.
of consumer Dura$le or - return goods handling
Industrial products. - sal%age and scrap disposal
Offers input to - product design
- maintenance and suppl ser%ices
=ince transportation and storage decisions affect these areas.
Lo#itic cot>
<ompetition is narrowl interpreted onl in forms of priceH <ustomer
ser%ice can $e %er important form of competition.
Eg. In a compan can relia$l pro%ide customers with its products in a
relati%el short time period, then its operations can minimi!e in%entor costs
which is as important as product price .low/and will contri$ute to more
profit or in turn ena$le seller to $e more competiti%e.
Order ccle>
Units of in%entor
Order ccle .das/-hrs-minutes
=horter the ccle, less in%entor is re(uired. Order ccle is the time it ta)es
for a customer to recei%e an order once decided to place orders. 'he ccle
includes order transmittal time, order preparation time and transportation
time.
=u$stituta$ilit> the more su$stituta$le a product, higher the re(uired
customer ser%ice ? can spend more on in%entor or more on
transportation.
In%entor effect>
"low
'< D 'otal cost
IFA D In%entor cost
<OL= D cost of lose sale
'; D transport cost
* increasing in%entor costs .increasing in%entor le%el or increasing
reorder point/ arms can usuall reduce cost of lost sales.
- "irms are generall willing to increase in%entor costs onl
until total costs start going up i.e. Marginal cost of carring
added in%entor.
'ransportation effect>
"low
A similar relationship e+ists with transportation.
'rade off ? increased transportation cost
Against ? decreased lost sales costs.
0igher transportation ma also $e as a result of shipping more fre(uentl in
smaller (uantities. At higher rates to impro%e customer ser%ice.
=trateg>- firms go up to the point where the marginal sa%ings in lost sales
costs e(ual to marginal sa%ings in lost sales costs e(ual to marginal
increment associated with increased transportation cost.
- "irms do spend more for in%entor and transportation
simultaneousl to reduce the cost of lost sales.
- Impro%ed transportation will result in lower in%entor cost $
means of smaller carring and faster transit times.
'here are other product related factors affecting cost and importance of
logistics.
Ai!> ;upee %alue, densit, suscepti$ilit to damage, and need for special
handling costs.
;upee %alue> tpicall affects> warehousing costs, in%entor costs,
transportation cost, pac)aging cost and material handling costs.
"low
IFA D In%entor cost ? including storage
'; D 'ransport cost
,I# D ,ac)aging costs
E0 D Eare housing
As rupee %alue increases cost of each indicated area also rises. 'he lope and
cost functions %ar from product to product.
Impact on rates transportation costJ high %alue products are charged higher
rates. =ince firms can afford and will cost more to transport companies to re-
im$rues in the e%ent of damage to goods.
Impact on ware housing
,roportionall warehousing and in%entor cost go up as rupee %alue of
product increase leads to ? higher o$solescence and depreciation cost.
- also storing high %alue goods re(uire special arrangements with
sophistication results in increased warehousing cost with more
;s %alue.
Impact on pac)aging
Use of protecti%e pac)aging increases pac)aging costs against damage or
loss increase of higher %alue.
,ac)aging impact on material handling
Material handling e(uipment used to meet the needs of higher %alue
products is %er often sophisticated. "irms willing to use more capital
intense and e+pensi%e e(uipment to speed higher %alue goods through the
warehouse and to minimi!e chance to damage.
Densit> weight - space ratio
Densit affects transportation costs. E.g. house hold furniture low densit.
As we go from low densit to high densit transportation costs tend to fall
since for gi%en space more material can $e stuffed and more efficient use of
ware housing space.
=uscepti$ilit to damage
#reater the ris) of damage, the higher, the transportation and ware housing
costs.
E.g. #lass items
=pecial handling re(uirements
=ome sophisticated products re(uire speciall si!ed transportation units.
E.g. refrigeration, heating or stepping in transit
=pecial handling re(uirements generall results in higher pac)aging
transportation and warehousing costs.
INTEGRATED LOGISTICS MANAGEMENT
During 1245s integrated logistics management concept $egan. 'o $e used in
a growing num$er of organi!ation. Logistics, in its simplest form, added
in$ound logistics to the out $ound logistics of phsical distri$ution. #lo$al
transportation presents some special challenges for production scheduling.
0ence it is apparent that coordination with out$ound logistics sstem is
critical for success.
Inte#rated lo#itic -ana#e-ent
"ragmentation E%ol%ing integration 'otal integration
1265s 1245s :555
Demand forecasting
,urchasing
;e(uirements planning
,roduction planning
Manufacturing industr
Earehousing
Materials handling
Industrial pac)aging
"inished goods in%entor
Distri$ution planning
Order processing
'ransportation
<ustomer ser%ice
1265 1225
'he a$o%e are the sstems of total concept de%eloped as a tool for
competiti%e analsis and strateg.
Aalue chain> in $ound and out $ound logistics are important, primar
components of the %alue chain that is contri$uting C%alue& to the firm&s.
<ustomers and ma)ing the compan financiall %ia$le. 'he more integrated
nature of mar)eting, sales and manufacturing with logistics is also an
important dimension of the %alue chain.
A competiti%e ad%antage
"irm Infrastructure
0uman ;esource Management
'echnolog De%elopment
,rocurements
In$ound Operations out$ound Mar)eting =er%ice
logistics logistics G sale
'erminologK
E+tension of the logistics concept logicall is the suppl chain management
also )nown as ? demand chain management
- demand flow management
- %alue chain management
- %alue networ)s
- snchroni!ation management
Logistics ? suppl chain, demand chain, %alue networ), %alue chain
Syte- approach
Logistics sstem analsis re(uires different %iews or perspecti%e of logical
acti%ities. 'he $est perspecti%e to ta)e depends on the tpe of analsis that is
needed. 'here are four approaches for anal!ing logistics sstems>
1. Material management As phsical distri$ution
:. <ost centres
7. Fodes As lin)s
9. Logistics channels
0* Material -ana#e-ent 1 Phyical ditri/ution .In$ound and Out$ound
L/
It is %er useful to logistics management and control in an
organi!ation. A different logistics re(uirement e+ists $etween MM G ,D and
ma ha%e important implications for the design of an organi!ation logistics
sstem. <lose coordination $etween them is necessar.
<ompanies can $e grouped into 9 different tpes $ased on in$ound out$ound
perspecti%e re(uirements.
a. *alanced sstem> on the in$ound and out$ound sides. E.g.> general
foods, mills etc.
$. 0ea% in$ound> flow and simple out$ound flow. E.g.> *oeing ? on
completion .Aircraft/
=impl deli%ered to customer ? no warehousing, no special transport -
pac)ing etc. in$ound side re(uires detailed scheduling, coordination and
planning to get the parts in time. Aaring lead times post comple+ logistics
challenge. E.g.> Auto industr 1:,555 to 17,555parts - car.
c. 0ea% out$ound> tpe industr ? E.g.> chemical compan ? Dow.
In$ound ? crude oil, salt water, other raw materials from limited
sources- low %olume. Out$ound side ? wide %ariet of industrial and
consumer products ? needs storage, pac)aging and transportation to
the final customer. 0ence MM G ,D is more comple+.
d. ;e%erse sstems> on the out$ound side ? in some companies. E.g.>
dura$le products> ma return for trade-in, for repairs, sal%age and
disposal computers, tel. e(uipments, cop machines etc. also re%erse
logistics re(uirement to dispose of pac)ing materials .enroute
re(uirement where e+penditure is incurred ? on used products.
2* Cot centre> Acti%ities in logistics are Ai!> 'ransportation,
warehousing, in%entor materials handling and industrial pac)ing ? trade
off $etween these acti%ities could result in lower o%erall cost and - or
$etter ser%ice. 'rade-offs> logistics into %arious cost centres or acti%it
centres for logistics sstem analsis reducing total logistics cost and
impro%ing ser%ice will occup $ trading off one acti%it center against
another. E.g.> shifting from rail to motor caries ma result in faster and
more relia$le ser%ice. Lower in%entor costs which offset higher motor
carrier rate. Another wa increasing ware houses, there $ increasing
ware housing and in%entor cost $ut possi$l reducing the cost of
transportation and lost sales total costs enough to lower.
Analsis of total logistics cost with a change to a higher cost mode
Mode of transport
<ost centres ;ail Motor.'ruc)/
'ransportation ;s.7.55 ;s.9.:5
In%entor ;s.8.55 ;s.:.78
,ac)aging ;s.9.85 ;s.7.:5
Eare housing ;s.1.85 ;s.5.78
<ost of lost sales ;s.:.55 ;s.1.55
'otal cost ;s.16.55 L ;s.11.25 L
L <ost per unit
7. Fodes As Lin)s> Fodes are esta$lished spatial points where goods
stop for storage or processing. i.e. plants and ware houses, where
acti%ities are con%ersion into finished goods or goods in finished form
for sale to customers.
Lin)s> ;epresent the transportation networ) connecting the nodes in
the logistics sstem.
'he networ) can $e indi%idual modes of transportation .;ail, motor,
air, water, pipelines, or com$inations and %ariation
One node sstem ma use simple lin) is suppliers to a com$ined plant
Earehouse and then to customers in a relati%el small mar)et area.
Other case> Large multiple product firms with multiple plant and
warehouse location logistics $eing a comple+ networ)s in%ol%ing 7 or
9 different nodes and pri%ate transportation.
=stem - Impro%ement ? where $asic elements form A con%enient
$asis for see)ing possi$le sstem impro%ement.
<omple+it of a logistics sstem often relates to %arious time and
distance relationship $etween nodes and lin)s and to the regulator,
predicta$ilit and %olume of goods entering, lea%ing and mo%ing
within the sstem.
Fodes and Lin)s in a logistics sstem
E D Eare 0ouse
, D ,lant
M D Mar)et
9. Logistics <hannel> 'he networ) of intermediaries engaged in transfer,
storage, handling, communication and other functions that which includes in
addition to logistical flow, transaction flow of specific logistics channel can
$e simple or comple+>
E
,
E
E E E
,
, E
,
E
A simple logistics channel

<ontrol relati%el simple the indi%idual manufacturer controls the logistical
flows since deals with customer directl.
A Multi ? Echelon Logistics <hannel
,lant
<ontrol different due to additional storage and transportation.
Man large organi!ations confront situations where comple+, comprehensi%e
channel is to $e followed and not $eing a$le to achie%e an effecti%e logistical
flow>
E.g. > some products, steel, aluminum, chemicals ma complicate since
companies ma $e part of more than one channel, auto manufacturer,
container manufacturer, file ca$inet producer. Duplicate of storage facilit,
"low
Manufacturing
,lant
Mar)et
<ustomers
Mar)et
<ustomers
Mar)et
<ustomers
;aw Materials
=uppl ,oint
;aw Materials
=uppl ,oint
"low
Manufacturing
,lant
;etailer
;etailer
;etailer
;etailer
;etailer
;etailer
;aw Materials
=uppl ,oint
;aw Materials
=uppl ,oint
Eare
0ouse
Eare
0ouse
;aw Materials
=uppl ,oint
small shipment transportation, conflict o%er mode choices, etc. contri$ute to
inefficienc in the channel apart from communications pro$lems. 'o o%er
come these pro$lems, the strategies adopted $ different firms are> - Aertical
integration in order to control products o%er se%eral stages in the logistics
channel. ? =ome strong companies dominate channel to achie%e efficienc.
A <omple+ Logistics <hannel>
Lo#itic and yte- analyi> Logistics de%elopment ta)en place along
with sstem analsis and sstem concept.
Syte- concept> is a set of interacting elements, %aria$les, parts, or o$@ects
that are functionall related to one another and that form a coherent group.
Eg> Engine design> the o%er all performance of engine as a sstem is more
important that the efficienc of indi%idual parts.
Cot perpecti'e> 'ransportation decision has to $e coordinated with related
areas such as in%entor, warehousing, pac)aging to optimi!e o%erall sstem,
not @ust transportation. 'he logic is we do not focus on indi%idual
.optimi!ation/ %aria$les $ut now the interact as a whole. 'he o$@ecti%e is to
operate the whole sstem effecti%el, not @ust the indi%idual parts.
Le%el of optimi!ation .functional relationship/
- Le%els of optimalit e+ists in the firm
- A firm should not optimi!e transportation at the cost of other
related logistics areas Ai!> ware housing, pac)aging.
- Also logistics $eing one of the sstems and hence it should $e
optimi!ed at the cost of another areas e+pense.
;aw
Materials
=uppl
=ources
;aw
Materials
=uppl
=ources
;aw
Materials
=uppl
=ources
Mfg.
,lant
Mfg.
,lant
Eare
0ouse
Eare
0ouse
Eare
0ouse
;etailer
;etailer
;etailer
;etailer
;etailer
;etailer
;etailer
Eholesaler
;etailer
Eholesaler
;etailer
Eholesaler
<ertain decisions will ha%e to $e ta)en at senior e+ecuti%e le%el to e+amine
the trade offs $etween ? mar)eting and logistics in terms of total
organi!ations efficienc or profit.
.<onstraints/> In addition to mar)eting. 'he firm has to consider production,
finance and other areas. Logistics ma ha%e to wor) with constraints such
as>
- Deli%er times.
- Minimum productions run orders.
- "inance limits for warehouse moderni!ation the ma $e
fle+i$le within reason.
- Logistics manager decision eg> short-run $asis deli%er ma
ha%e constraint from operational stand point.
Le%els of optimalit in economic en%ironment.
=ocial ,olitical
Integrated logistics information re(uirements and information sstems
Logistics information sstem ma $e defined as>
MAs interacting structure of people, e(uipment process and procedures
that together ma)e information a%aila$le to the logistics manager for the
purpose of ,lanning Information and <ontrolN.
'he principle su$ sstems-modules that constitute logistics
information sstem are> ,lanning, e+ecution, research and intelligence,
;eports and outputs.
,ro%ide the logistics manager with timel and accurate information
for the $asic management functions> ,lanning, Implementation and control
Logistics information sstems>
Aendors
<ustomers
Mar)eting
"inance
Logistics
,roduction
'he functional scope of suppl chain> ,lanning and e+ecution.
=cope> In addition to identifing e+ample technologies that characteri!e each
of the elements of the logistics information sstem, this figure suggests the
decision scope and li)el time hori!ons rele%ant.
Operational
,lanning
deci
-sion
scope
'actical
,lanning
=trategic
,lanning
Minutes 0ours wee)s (uarters Oears
=econds das months
'IME 0O;IPOF
Module 3
DEMAND MANAGEMENT AND C%STOMER SER1ICE
Logistics
management
functions.
,lanning
Implementation.
<ontrol.
Logistics Information =stem
,lanning
sstem
E+ecuti%e
sstem
;esearch
intelligence
sstem
;eports
and outputs
sstem
Logistics en%ironment
<orporate-
general
$usiness.
Logistics
Management.
Logistics
=E E%ent management
Order management
Earehouse management
'ransportation management
International trade logistics management
In%entor management
,roduction scheduling
Manufacturing planning
Distri$ution planning
=uppl planning
=uppl chain colla$oration
Demand "orecasting G planning
=uppl chain networ) design
Out $ound to customer logistics sstems.
Demand management. 'raditional forecasting
<,";,> <olla$orati%e, ,lanning forecasting and ;eplenishing
<ustomer ser%ice
E+pected cost of stoc)s
<annels of distri$ution
O%T 4O%ND TO C%STOMER LOGISTICS S5STEMS"
'his is otherwise )nown as phsical distri$ution, effort to ser%e their
customers. Essentiall refers to the set of processes, sstems, and
capa$ilities that enhance a firm&s a$ilit to ser%e its customers.
E.g. 'he wa retailers such as LL$ean etc fulfill their in$ound logistics>
which precede and facilitate %alue-adding acti%ities Ai!> manufacturing,
assem$l etc. others include are materials management and phsical suppl
and generall co%ered under procurement and suppl management.
Out$ound to customer logistics sstem> Emphasis on attri$utes such asJ
product a%aila$ilitJ o%erall responsi%enessJ post sale customer support
'o assure customers an accepta$le le%el of ser%ice and following - assuring
efficient and effecti%e flow of materials to successful companies, these das
gi%e emphasis for $oth in$ound and out$ound logistics.
Out$ound logistics ? need is customer insight>
E.g. <ar manufacture, deli%er to dealers, changing the strategies and
achie%ing close to 1553 of models of cars re(uired $ customers.
=imilar is the case of a ma@or computer disc dri%e manufacturer who $
$ringing together eight different companies operating in eight different
wasK ;apid consolidation in its suppl chain, dri%ing out inefficiencies and
a$le to reduce production time $ 853 shortening forecast was another
$enefit of this effort. A monthl forecast to wee)l forecast as a result, costs
are e+pected to continue to decline, with ser%ice to the customer e+pected to
impro%e.
Logistics planning and strateg
DEMAND MANAGEMENT"
Demand management ma $e thought of as focused efforts to estimate and
manage customer&s demand, with the intention of using this information to
Mshare operating decisions& attention paid to demand management will help
to unif channel mem$ers with the common goal of satisfing customer and
sol%ing customer pro$lems ? $ following the was gi%en $elow.
#athering and anal!ing )nowledge a$out customers, their pro$lems
and their unmet needs.
Identifing partners to perform the functions needed in demand chain.
Mo%ing the functions that need to $e done to the channel mem$ers
that can perform them most effecti%el and efficientl.
=haring with other suppl chain mem$er&s )nowledge a$out
consumers and customers, a%aila$le technolog and logistics
challenges and opportunities.
De%eloping products and ser%ices that sol%e customer&s pro$lems.
De%eloping and e+ecuting the $est logistics, transportation, and
distri$ution methods to deli%er products and ser%ices to consumers in
the desired format.
"irms while wor)ing on impro%ed demand management face pro$lems li)e -
I. Lac) of coordination $etween departments ? little response.
II. Less attention on colla$orati%e effort and the strategic and operational
plans that needed to $e de%eloped from the fore casts.
III. Demand information used for tactical and operational purposes than
for Cstrategic purposes..used for short term $enefits instead of long
term/
;e(uired>
Demand Information should $e used to create collecti%e and
realistic scenarios of the future.
Emphasis on understanding li)el demand scenarios and
mapping their relationships to product suppl alternati%es.
'o Achie%e ? $etter match demand as it occurs with appropriate
a%aila$ilit of needed product in the mar)et place.
'o lin) demand management information to corporate strateg.
'o use demand data strategicall
i. 'o enhance a compan&s growth ? portfolio.
ii. ,ositioning and in%estment strategies.
'o help companies, to guide strategic resources in a num$er of
important was.
'he e+ample shows how suppl ? demand misalignment management
impact o%erall suppl chain effecti%eness>
E.g. ,.<. Industr ? =uppl Demand - Misalignment
=ource> AccentureJ =tanford uni%ersit G north western uni%ersit
1. 'rue end customer demand.
:. ,roduction not a$le to meet initial demand ? result shortages
7. <hannel partners o%er order to meet demand and stoc) their shelf.
9. As suppl chain catches up with demand, orders cancelled and returned.
8. "inance ? production planning not aligned with real demand, therefore
production continues.
6. As demand declines, all parties attempt to drain in%entor to pre%ent write
down.
- Misalignment due to> use of pre%ious periods demand as a gaugeK
- "orecasts are distorted
- Ma@orit of product sold during declining period of
- In%entor held throughout - ,rofit Opportunit
due to suppl uncertaint
=ituation needs <onsidera$le attention>
)o, de-and -ana#e-ent upport /uine trate#y"
=trateg Use of Demand Management
#rowth strateg 1. ,erform what if analses on total industr %olume
to plan specific mergers G ac(uisition might le%erage
mar)et share.
:. Anal!e to predict changes in product pricing
structure G mar)et economics $ased.
7. *uilding staffing models for merged compan
using demand data.
,ortfolio =trateg 9. Manage maturit of products in current portfolio
to optimall time o%erlapping life ccles.
8. create new product de%elopment - production plans
$ased on life ccle.
6. *alance com$ination of demand of new products.
7. Ensure di%ersification of product portfolio through
demand forecasts.
,ositioning =trateg
.*ased on Demand/
4. Manage product sales through each channel $ased
on demand and product economics.
2.Manage positioning of finished goods at
appropriate distri$ution centres, to reduce wor)ing
capital
15. Define capa$ilit to suppl for each channel.
In%estment =trateg 11. Manage capital in%estments&, mar)eting
e+penditures, research and de%elopment $egets,
$ased on demand forecasts of potential products and
maturit of current products.
1:. Determine whether to add manufacturing
facilities.
TRADITIONAL FORECASTING
A ma@or component of demand management is Cforecasting& the amount of
product that will $e purchased $ consumers or end users. Most important
forecast is that of primar demand, as it occurs in the mar)et place.
'he figure $elow outlines one firm&s approach to sales forecasting and
its integration with production scheduling acti%ities.

Integration of sales forecasting and production.
=tep I> De%elop 1: month forecast .$ month/ $ appling traditional
demand forecasting approaches, to a 7 ears histor file of data on factors
such as demand, price, seasonalit, a%aila$ilit, deals and promotions.
=tep II> *rand and product mangers re%iew this forecast and recommend
changes result in agreed upon statement of gross mar)et re(uirements for the
succeeding 1 ? 7 ears period.
=tep III> De%eloping aggregate production schedules for the ne+t 1: month
period and allocating specific production re(uirements to %arious
manufacturing facilities.
"inal =tep> Logistics function commonl assumes responsi$ilities for
scheduling production on a short ? term $asis, in order to coordinate demand
for finished product with the timing and a%aila$ilit of needed production
inputs.
0istor file 7
ears ? demand,
price, seasonalit,
deals,
promotions.
"orecasting
model mo%ing
a%erage, $o+ ?
Ben)ins,
regression
analsis
1: months
forecast .*
month/
*rand and
product managers
re%iew and
recommend
changes.
;e%ised
forecast
#ross mar)et
re(uirements .1 to
7 ear periods/
Aggregate
production
schedules
.1: months/
Allocation of
aggregate
re(uirements to
plants.
=hort term
production
scheduling
Purpoe o! !orecatin#"
Long term "orecasts> <o%er more than 7ears and used for long range
planning and strategic issues, to ta)e care production capacit, and
desired in%entor asset le%els.
Midrange "orecast> <o%er 1 to 7ears. Addressed $udgeting issues
and sales plan initial forecast on monthl $asis for 1 ear and
su$se(uentl $ (uarterl.
=hort 'erm "orecast> Most important for operational logistics process
pro@ect demand, month ahead and forecast on shorter time inter%al.
"orecasts needed in units, $ actual items to $e shipped, and for finite
period of time.
'he strategic use of demand data can help to impro%e the o%erall
profita$ilit and mar)et positioning of the compan.
Also help to anal!e product portfolio and its new product
de%elopment strategies.
COLLA4ORATI1E PLANNING, FORECASTING AND
REPLENIS)MENT$CPFRP&
Integration of suppl chain acti%ities resulted in efficienc and effecti%eness
increase. =ome of the initiati%es $ name are>
Q;D Quic) ;esponse
EDID Electronic Data Interchange, short ccle manufacturing
AMID Aendor managed in%entor
<;,D <ontinuous replenishment planning.
Most recent initiati%e is this> <,";,
It simplifies and streamlines o%erall demand planning> <,";,> effort started
with CEall Mart& with its supplier, warner ?Lam$ert. 'he product CListrine&
$rand used to $e Cout of stoc)& fre(uentl. 'wo companies colla$orate to
increase their forecasting a$ilities, so as to ha%e @ust the right amount of
in%entor, where G when it was needed.
'o $e more effecti%e- internet was used to facilitate colla$oration <,";, ?
creates a significant direct lin) $etween the consumer and the suppl chain.
Effecti%e implementation of <,";, is $ased on sstematic colla$oration
$etween trading partners, $ creation of new technolog tools to facilitate
the sharing, analsis, and ultimate application of information.
<,";, results>
- FA*I=<O, a EE#MAF= ? 853 increase on categor sales
- =A;ALEE, EALMA;' ? 193 reduction in store le%el
in%entor with 753 increase in sales.
- IMA;' G IIM*E;LO <LA;I ? achie%ed stead increases
in categor sales growth.
C%STOMER SER1ICES"
<ustomer ser%ice is a process for pro%iding competiti%e ad%antage
adding $enefits to the suppl chain in order to ma+imi!e the total %al%e to
the ultimate customer.
Aarious forms of customer ma ta)e are >
;e%amping a $illing procedure to accommodate a customers
re(uest.
,ro%iding financial and credit terms.
#uaranteeing deli%er within specified time periods.
,ro%iding prompt and congenial sales representati%es.
E+tending the option to sell on consignment.
,ro%iding material to aid in a customer&s sales presentation.
Installing - commissioning the product.
Maintaining satisfactor repair parts in%entories.
<ustomer ser%ice in%ol%ement or awareness in three le%els.
1. <ustomer ser%ice as an acti%it > A firms tas)s towards this are
Order processing ? *illing and in%oicing ? ,roduct returns.
<laims handling customer ser%ice department to handle this.
:. <ustomer ser%ice as a performance measures> - =pecific measures are>
3 orders deli%ered on time G complete G the num$er of orders
processed within the accepta$le time limits. =uggest arms to loo) $eond
these measures to achie%e actual customer satisfaction.
7. <ustomer ser%ice as a philosoph>
"irm wide commitment in pro%iding customer satisfaction through
superior customer ser%ice. A dedicated customer ser%ice is more rele%ant
than following acti%it G performance measures as a routine.
FO%R TRADITIONAL DIMENSIONS" "rom the point of %iew of
logistics function.
1. 'IME> Order ccle time, <ontrol o%er lead time, .Order processing,
;eduction preferred/ .Order preparation, Order shipment/ #uaranteeing a
gi%en le%el of lead time is an important ad%ancement in logistics
management.
:. DE,EFDA*ILI'O>
.i/ <cle time > If deli%er lead times are maintained, customers need not
plan safet stoc), adding to in%entor. 0ence dependa$le deli%eries are
%ital to ena$le customer to minimi!e in%entor le%el.
.ii/<orrect Orders > 'o ensure ? Fo wrong shipment correct order filling
is essential a to $e ensured.
7. EDI IF'E;FE' <OMMUFI<A'IOF=> Internet ena$led
communications can reduce errors in transferring order information to the
warehouse receipt. <ommunication channel constantl open G readil
accessi$le to customers two wa communication desira$le. Eg>.
=hipment date, <arrier enroute etc.
9. <OFAEFIEF<E > Logistics ser%ice le%el must $e fle+i$le.
Eg>. A customer ma li)e deli%eries with pallets, other onl truc) deli%er-
no pallets.
- "le+i$ilit
- Different customer re(uirements
- <ustomer ,rofita$ilit
0igh 3 $uing customer ? special ser%ice
Low 3 $uing customer ? Limited ser%ice
Aice %ersa.
'hese four elements is e+panded as $elow into a format that has $een used
$ companies in de%eloping customer ser%ices polic and performance
measurement standards.
ELEMENTS AND MEAS%RES OF C%STOMER SER1ICE

Ele-ent 4rie! Decription Typical
-eaure-ent
unit$&
,roduct a%aila$ilit
.ii/ Dependa$ilit
Most common measure of <.=. tar@et
performance le%el/ usuall defined as
3in stoc). In stoc). In some $ase unit
i.e .order, product, ;s/
3 a%aila$ilit
in $ase units.
Order ccle time
.i/ 'ime
Elapsed time from order placement to
order receipt. Measured in time units
and %ariation from standard to target
order ccle. Formall com$ined for
E.g. 283 orders deli%ered within 15
das
=peed and
consistenc.
Distri$ution sstem
fle+i$ilit
.i%/ <on%enience
A$ilit of sstem to respond to
special and - or une+pected needs of
customer includes e+pedite and
su$stitute capa$ilit
;esponse time
to special
re(uests.
Distri$ution sstem A$ilit of firm&s information sstem =peed,
information
.iii/ communication
to respond in timel and accurate
manner to customer&s re(uests for
information
accurac, and
message detail
of response.
Distri$ution sstem
malfunction
Efficienc of procedures and time
re(uired to reco%er from distri$ution
sstem malfunction i.e .errors in
$illing, shopping, damage, claims./
;esponse and
reco%er time
re(uirements.
,ost sale product
support.
Efficienc in pro%iding product
support after deli%er, including
technical information, spare parts -
e(uipment modification as
appropriate
;esponse time
and (ualit of
response.
,erformance measures of customer ser%ice
Orders recei%ed on time
Orders recei%ed complete
Orders recei%ed damage free
Orders filled accuratel
Orders $illed accuratel
Deli%er time windows
o 283 orders deli%ered on time.
o 273 orders filled completel.
o 273 orders
<hallenging $ut possi$le $ focusing upon acti%ities necessar to attain
the re(uired performance.
Implementing customer ser%ice standards
=etting standards
Le%els of (ualit ? close to 1553 perfect order.
<ommunication with customer ? consult to form standards
<ontrol of customer ser%ice ? amend-discontinue as appropriate.
=ummari!ed important points on customer ser%ice of <ross "unction 'eams
.<"'s/
If the $asis of customer ser%ice is not in place, nothing else matters.
<ustomer ma define ser%ice differentl.
All customer accounts are not the same.
;elationship are not one dimensional.
,artnerships and added %alue can loc) up customers in an
organi!ation to de%elop a consensus of customer ser%ice.
E6PE6TED COST OF STOC7O%TS
A principle $enefit of in%entor a%aila$ilit and hence, of customer ser%ice
is to reduce incidents of stoc) outs. Once, cost of stoc) out is calculated, it is
eas to arri%e of Me+pected stoc) out costsN. Ee can anal!e alternati%e
customer ser%ice le%els directl $ comparing e+pected cost of stoc) outs
with the re%enue enhancing $enefits of customer ser%ice.
E!!ect i! toc. out"
A stoc) out occurs when desired (uantities of finished goods are not
a%aila$le when and where a customer needs them. In that situation, one of
these e%ents ma occur,
.1/ <ustomer waits until the product is a%aila$le.
.:/ 'he customer $ac)orders the product.
.7/ 'he seller loses a sale.
.9/ 'he seller loses a customer.
'heoreticall, at .1/ i.e <ustomer waits should cost nothing, this situation is
more li)el to occur where product su$stituta$ilit is low.
.:/ *ac) order> in%ol%es additional order processing and additional
transportation e+penses, since the effort to trace the $ac)orders mo%ement
.special order processing/ G to arrange more e+pensi%e means of
transportation %i! smaller shipmen and longer distance. =eller to compare
this cost with that of carring e+cess in%entor.
.7/ Lost sales> since, customer goes for alternate source, where su$stitute
product is a%aila$le. In such case stoc) out has caused a lost sale. =eller lose
is the loss of profit on the item that was una%aila$le when the customer
wanted it, seller can determine direct loss $ calculating profit on one item
and multipling it $ the num$er the customer ordered. E.g. "or ;s 1555
worth item, if ;s. 155 is profit, then for the customer re(uirement of 155
units, the loss is, 155L 155 D ;s. 15,555 this lost profit, has to $e compared
with %arious com$inations of carring e+cess in%entor.
.9/ Lost customer> cost H i.e. when customer permanentl switches o%er to
another supplier. A supplier who loses a customer loses a future stream of
income. Estimating the customer loss that stoc) outs can cause is difficult.
Deter-inin# e8pected cot o! toc. out"
=tep I> for a product worth ;s.:55> .information a%aila$le> $ac) order, lost
sale/
=tep II> <alculate each results e+pense or loss of profit, lost customer and
then to estimate the cost of a single stoc) out.
Au-ption"
753 of all stoc) outs results in lost sale of an itemJ and $ac) order re(uires
;s.6 as special handling cost.
:53 result as in a lost sale for the item and e(uals to ;s. :5 in lost profit
margin.
153 result in lost customer.
O%erall Impact
753 of ;s. 6-- D ;s 9.:5
:53 of ;s. :5-- D ;s 9.55
153 of ;s.:55-- D;s :5.55
;s :4.:5
i.e. ;s :4.:5 is the a%erage amount a firm can sa%e $ a%erting stoc) out to
carr additional in%entor as long as that carring cost is less than ;s.:4.:5
or wor)out :5; more logistics options.
C)ANNELS OF DISTRI4%TION"
Distri$ution channel decisions are critical to o%erall success of an
organi!ationJ it is a priorit area for corporate managers. In the logistics
area, understanding and appreciating the area of channels is a prere(uisite to
effecti%e strateg formulation, operations and control.
Logistics channel refers to the means $ which products flow phsicall
from where the are a%aila$le to where the are needed.
Mar)eting channel refers to the means $ which necessar transactional
elements are managed. .E.g. customer order, $illings, two channels are
illustrated $elow>
Logistics and Mar)eting <hannels>
Logistical channel Mar)eting channel
*asic functions of logistics channel mem$ers are>
=orting out
Accumulating
Allotting
Assorting
;etail store
E ? ,rocurement
Fational account
sales
Eholesaler -
distri$utor
;etail customer
'ransportation
'ransportation
'ransportation
<onsumer
=upplier
Manufacturer
Distri$ution
centre
Direct Indirect
'raditional Aertical
Mar)eting
sstem .AM=/
<hannel =stem
Fote > Each indi%idual channels represents a uni(ue path from geocer
manufacturer to consumer, and a set of effecti%e logistics strategies must $e
de%eloped for each channel.
channel o! ditri/ution !or !ood product -anu!acturin# indutry
O%er a period, there had $een growth and importance of channel of
distri$ution
1225&s logistics related strategies were de%eloped in response to
consumers.
Anticipate retail demand and eliminate storage.
Distri$utors and third part logistics are )e mem$ers of =<M.
<hannel of distri$ution help with change, the create change.
E<; D efficient consumer response
AMI D %endor managed in%entor
<; D <ontinuous replenishment
D=D D direct store deli%er
EDL, D e%er da low pricing
Q; D (uic) response
"ood ser%ice
distri$utors
#rocer
wholesaler
"ood
$ro)ers
Internet
Direct
;esta
urants
=pecialt
Airlines
Internet
retailer
;etail chains
.Local G
regional/
;etail
#rocers
.Indepen
dent/
Instituti
onal
*uers
;etail
<hains
.Fation
al/
<onsumer of manufactured food products.
"ood manufacturing firms