LOGISTICS

&
DISTRIBUTION
MANAGEMENT

P. Udayakumar
P Udayakumar
Director (Planning & Marketing)
National Small Industries Corporation Ltd.

11-02-2016 SCM 1
 Supply
pp y Chain Overview

Transportation Transportation Customers

Warehousing

Information
flows
Factory

Transportation

Vendors/plants/ports
Warehousing Transportation
p

CR (2004) Prentice Hall, Inc. 1-2

11-02-2016 SCM SCM‐2
Logistics vs Supply Chain Management
Council of Logistics Management
• “Logistics is the process of planning, implementing and 
controlling the efficient, cost‐effective flow and storage of 
raw materials in‐process inventory finished goods and
raw materials, in‐process inventory, finished goods and 
related information from the point of origin to point of 
consumption for the purpose of conforming to customer 
requirements ”
requirements.
Handfield and Nichols
• SCM is the integration
SCM is the integration of all activities
of all activities associated with the 
associated with the
flow and transformation of goods from raw materials 
through to end user, as well as information flows,  through 
improved supply chain relationships to achieve a
improved supply chain relationships, to achieve a 
sustainable competitive advantage.

11-02-2016 SCM 3
Role of Logistics & Distribution
System
Logistics is the planning process as well as the
implementation of efficient and effective storage of
raw materials,
materials inventory,
inventory finished goods and services.
services
It also refers to the flow and transportation of product
from the warehouse to the consumer.
consumer

11-02-2016 SCM 4
 Th L
The Logistics/SCM
i ti /SCM Mi
Mission
i
• Getting the right goods or services to the right place, at the 
right time, and in the desired condition at the lowest cost and 
h d h d d d h l d
highest return on investment.

• Product / Service Utility
• Possession
Possession Utility ‐
Utility the value or usefulness that comes from a customer 
the value or usefulness that comes from a customer
being able to take possession of a product
• Form Utility ‐ in a form that can be used by the customer and is of 
value to the customer
value to the customer
• Place Utility ‐ available where they are needed by customers
• Time Utility ‐ available when they are needed by customers
• Logistics obviously help time and place utility

11-02-2016 SCM 5
Evolution of Supply Chain Management
Activity fragmentation to 1960 Activity Integration 1960 to 2000 2000+

Demand forecasting

Purchasing

Requirements planning
Purchasing/
Production planning Materials
Management
Manufacturing inventory

Warehousing
Logistics
Material handling
g

Packaging

Finished goods inventory Supply Chain

Physical Supply Chain
Management
Distribution Management
Distribution planning

Order processing

Transportation

C t
Customer service
i

Strategic planning

Information services

Marketing/sales

Finance
11-02-2016 SCM 6
A Revised Strategy is Generating Great
Top Management Interest
• Historical perspective of distribution 
(
(Peter Drucker, 1962):
, )
“The last frontier of cost economies”

• The contemporary view:
Distribution is a new frontier for demand 
generation—a competitive weapon.

• Both views are important!
p
11-02-2016 SCM SCM‐7
Critical Customer Service
Loop
Customer order p
processing
g ((and
transmittal)

Transportation
Customers

Inventory
or supply source

11-02-2016 SCM SCM‐8

Ph i l Di
Physical Distribution
t ib ti C Costs
t
Category
g y Percent of sales $/cwt.
$/

Transportation 3.34% $26.52

W h
Warehousing
i 2 02
2.02 18 06
18.06
Order entry 0.43 4.58
Administration 0.41 2.79

Inventoryy carrying
y g 1.72 22.25

Total 7.65% $67.71

Logistics cost
Add one-third for inbound supply costs
are about 10% of
sales w/o
Source: Herb Davis & Company purchasing costs

11-02-2016 SCM SCM‐9

 Importance of Logistics &
Distribution System
¾ Maintaining competitive edge
Successful business logistics provide a competitive edge against other
g
organizations. It p
provides a system
y or p
process byy which customer needs can be
fulfilled in a more efficient manner. A business should strive to provide
shipments of merchandise in a more accurate and fast manner than competitors
do. The Internet has made it possible for many companies to do this.
¾ Building Good Consumer Relations
Providing product in an efficient manner, which business logistics helps to do,
also helps to build
b ild good consumer
cons mer relations.
relations
¾ Creating Finished Product
A business needs to ensure there are enough raw materials available to make
finished products. Without quality goods, a business cannot make quality
product. Having enough products stocked is also necessary for supply and
demand purposes and to maximize customer satisfaction.

11-02-2016 SCM 10
 Type of Distribution Channels
(Direct)
1. Personal Selling
2
2. Mail Order Selling
Mail Order Selling
3. Automatic Vending
4. Franchised Shops
5. Tele‐marketing
6. Exclusive Stores/Speciality Stores
7
7. E‐marketing

11-02-2016 SCM 11
 Type of Distribution Channels
(Indirect)
1. Merchandise Agents and Brokers‐ Work on commission basis
2. Merchandise wholesalers or Trade Channels
‐Manufacturer/Producer
/ – Consumer// End User
‐Manufacturer/Producer –Wholesaler‐ Consumer/ End User
‐Manufacturer/Producer –Retailer‐ Consumer/ End User
‐Manufacturer/Producer
Manufacturer/Producer –Wholesaler/Distributor‐Retailer‐
Wholesaler/Distributor Retailer
Consumer/ End User
‐Manufacturer/Producer–Wholesaler/Distributor‐Semi
Wholesaler
Wholesaler‐
Retailer‐ Consumer/ End User
‐Manufacturer/Producer–Agent/Broker‐Retailer‐
Consumer/End
User
‐Manufacturer/Producer–Agent/Broker‐Wholesaler‐Retailer‐
Consumer/ End User

11-02-2016 SCM 12
 M d l adopted
Model d t db by NSIC

1.
1 MoU with Bulk Manufacturers 
MoU with Bulk Manufacturers
2. Agency operation with ware housing
3. Consignment stockiest 
4. Regional Sale Centres
5. RMA financing and Local raw materials supply.

11-02-2016 SCM 13
 SIGNIFICANCE OF SUPPLY CHAIN
AND LOGISTICS MANAGEMENT

• Relating marketing Channels, Logistics, and Supply 
Chain Management
• Logistics
• L i i
Logistics management
• Supply chain
• Supply chain management
pp y g

11-02-2016 SCM 14
 SIGNIFICANCE OF SUPPLY CHAIN
AND LOGISTICS MANAGEMENT

• Supply Chain Management and Marketing Strategy
• Aligning a Supply Chain with Marketing Strategy
• Understand the customer
• Understand the supply chain
d d h l h
• Harmonize the supply chain with 
the marketing strategy

11-02-2016 SCM 15
Relating
g marketing
g channels, logistics
g management,
g
and supply chain management

11-02-2016 SCM 16
The automotive supply chain

11-02-2016 SCM 17
How total logistics cost varies with number of
warehouses used

11-02-2016 SCM 18
 INFORMATION AND LOGISTICS
MANAGEMENT OBJECTIVE
IN A SUPPLY CHAIN

• Information’s Role in Supply Chain Responsiveness 
and Efficiencyy
• Electronic data interchanges
• Total Logistics Cost Concept
Total Logistics Cost Concept

11-02-2016 SCM 19
 INFORMATION AND LOGISTICS
MANAGEMENT OBJECTIVE
IN A SUPPLY CHAIN
• Customer Service Concept 
p
• Lead Time
• Quick response
• Efficient consumer response
• Dependability
• Communication
• Convenience
• Customer Service Standards
Customer Service Standards

11-02-2016 SCM 20
Supply chain managers balance total logistics cost
factors against customer service factors

11-02-2016 SCM 21
 KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

• Third‐party logistics providers
• Transportation

11-02-2016 SCM 22
 KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

• Transportation 
• Railroads
• Intermodal transportation

11-02-2016 SCM 23
 KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

• Transportation 
• Motor Carriers
• Air Carriers and Express Companies
• Freight Forwarders
• Warehousing and Materials Handling
• Order Processing

11-02-2016 SCM 24
 KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN

• Inventory Management
• Reasons for Inventory
• Inventory Costs
• Supply Chain Inventory Strategies
S ppl Chain In entor Strategies
• Just‐in‐time (JIT) concept
• Vendor‐managed inventory
g y
• CLOSING THE LOOP:  
REVERSE LOGISTICS

11-02-2016 SCM 25
Advantages
g and disadvantages
g of five modes of
transportation

11-02-2016 SCM 26
Relationship of Logistics to
Marketing and Production

LOGISTICS
Sample
activities:
ti iti MARKETING
PRODUCTION/ •Transport Interface Sample
OPERATIONS • Inventory
Interface activities: activities:
Sample activities: • Order • Customer
• Quality control activities: • Promotion
• Product processing service • Market
• Detailed
D t il d production
d ti
scheduling
scheduling • Materials standards research
• Plant • Pricing • Product
• Equipment maint. handling
location • Packaging
• Capacity planning mix
• Purchasing • Retail • Sales force
• Work
o measurement
easu e e t
l
location
ti management
& standards

Production-
Production
logistics Marketing-
interface logistics
interface

Internal Supply Chain

11-02-2016 SCM SCM‐27
 E-Commerce Boom’s Impact on
Logistics
¾ The time of elaborate,
elaborate multi‐story
multi story shopping centers is rapidly coming to a
close with the rise of e‐Commerce. In fact, total global business to
customer (B2C) e‐Commerce sales was expected to top $1.5 trillion in
2014 and it is anticipated to grow 88.4%
2014, 88 4% to $2.3
$2 3 trillion by 2017.
2017

¾ The Rise of Omni‐Channel Retail

Omni channel is a multichannel approach to sales that seeks to provide
Omni‐channel
the customer with a seamless shopping experience whether the customer
is shopping online from a desktop or mobile device, by telephone, or in a
bricks and mortar store.
store

¾ Distribution Centre Frenzy

Retail drives 40% of supply chain real estate.
estate Because of this fact,
fact there
will be a major overhaul for distribution centers on both a national and
global level. Retailers will be required to acquire distribution real estate
that will fit into their Omni Omni‐channel
channel approach in order to stay
competitive.
11-02-2016 SCM 28
 E-Commerce Boom’s Impact on
Logistics

¾ The Rise of Omni‐Channel Retail

Omni‐channel is a multichannel approach to sales that seeks to provide the customer with a
seamless shopping experience whether the customer is shopping online from a desktop or
mobile device, by telephone, or in a bricks and mortar store.
¾ In most countries, shopping for groceries is the largest category of retail
spending The global online grocery market is expected to blossom from
spending.
$36 billion in 2013, to $100 billion by 2018. In turn, this development will
encourage retailers and companies offering supply chain solutions to
rethink their current strategies for distribution centers (DC).
(DC) As the increase
for highly perishable goods goes up, the need for DCs that are of close
proximity to major population centers will go up as well.

11-02-2016 SCM 29
Common Contemporary Logistics Terms
• Value stream/logistics process
g p
• Quick response and flexible manufacturing
• Mass customization
Mass customization
• Supply chain management/ collaborative logistics
• Reverse logistics
Reverse logistics
• Service logistics
• Continuous replenishment
Continuous replenishment
• Lean logistics
• I t
Integrated logistics
t d l i ti

=> IT people have to deal with any related automation anyway 
11-02-2016 SCM 30
Reverse Logistics

A process of reclaiming recyclable and 
reusable materials, returns, and reworks
reusable materials, returns, and reworks 
from the point of consumption or sue for 
repair, remanufacturing, redistribution,
repair, remanufacturing, redistribution, 
or disposal.

11-02-2016 SCM 31
Logistics

Those activities that focus on getting the 
right amount of the right products to the
right amount of the right products to the 
right place at the right time at the lowest 
possible price
possible price.

11-02-2016 SCM 32
Logistics Management

The practice of organizing the cost‐effective flow of raw 
materials, in‐process inventory, finished goods, and 
related information from point of origin to point of 
consumption to satisfy customer requirements.

11-02-2016 SCM 33
Supply Chain

A sequence of firms that perform activities 
q p
required to create and deliver a good or 
service to consumers or industrial users.
service to consumers or industrial users.

11-02-2016 SCM 34
Supply Chain Management

The integration and organization of 
information and logistic activities across
information and logistic activities across 
firms in a supply chain for the purpose of 
creating and delivering goods and
creating and delivering goods and 
services that provide value to customers.

11-02-2016 SCM 35
Cross Docking

Practice of unloading products from 
suppliers sorting products for individual
suppliers, sorting products for individual 
stores, and quickly reloading products 
onto trucks for a particular store
onto trucks for a particular store.

11-02-2016 SCM 36
Electronic Data Interchange (EDI)

Combine proprietary computer and 
telecommunication technologies to
telecommunication technologies to 
exchange electronic invoices, payments, 
and information among suppliers,
and information among suppliers, 
manufacturers, and retailers.

11-02-2016 SCM 37
Total Logistics Cost

Expenses associated with transportation, 
materials handling and warehousing
materials handling and warehousing, 
inventory, stockouts, order processing, 
and return goods handling
and return goods handling.

11-02-2016 SCM 38
Customer Service

The ability of logistics management to 
satisfy users in terms of time
satisfy users in terms of time, 
dependability, communication, and 
convenience.
convenience

11-02-2016 SCM 39
Lead Time

Lag from ordering an item until it is 
received and ready for use or sale Also
received and ready for use or sale.  Also 
called order cycle time or replenishment 
time.
time

11-02-2016 SCM 40
Quick Response

An inventory management system 
designed to reduce the retailer’ss lead 
designed to reduce the retailer lead
time, thereby lowering its inventory 
investment improving customer service
investment, improving customer service 
levels, and reducing logistics expense.

11-02-2016 SCM 41
Third-Party Logistics Providers

Firms that perform most or all of the 
logistics functions that manufacturers
logistics functions that manufacturers, 
suppliers, and distributors would 
normally perform themselves
normally perform themselves.

11-02-2016 SCM 42
Vendor-Managed Inventory

An inventory management system 
whereby the supplier determines the 
product amount and assortment a 
customer (such as a retailer) needs and 
automatically delivers the appropriate 
items.

11-02-2016 SCM 43
Intermodal Transportation

Combining different transportation modes 
Combining different transportation modes
to get the best features from each.

11-02-2016 SCM 44
Freight Forwarders

Firms that accumulate small shipments 
p
into larger lots and then hire a carrier to 
move them, usually at reduced rates.
move them, usually at reduced rates.

11-02-2016 SCM 45
Materials Handling

Moving goods over short distances into, 
gg ,
within, and out of warehouses and 
manufacturing plants.
manufacturing plants.

11-02-2016 SCM 46
Just-In-Time Concept

An inventory supply system that operates 
y pp y y p
with very low inventories and requires 
fast, on‐time
fast, on time delivery.
delivery.

11-02-2016 SCM 47
•

• THANK YOU
THANK YOU 

11-02-2016 SCM 48