LOGISTICS MANAGEMENT

Chapter-II

What is Logistics?
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 to customer requirements.
Council of Logistics Management

The term Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers requirements

Is it different from SCM?

Not really!
Supply Chain Management deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers. (Stanford Supply Chain Forum) So, Logistics and Supply Chain are equivalent terms.

Logistics Functions
Purchasing / Procurement Inventory Control Warehousing Materials Handling Facility Location / Network Design Transportation Customer Service Order Processing

A List of Approaches in Log. Man.

Just in Time Inventory Vendor Managed Inventory Quick Response Collaborative Planning, Forecasting, and Replenishment Outsourcing / 3PLs Cross-docking

Build to Order SC Visibility Software Internet / EDI Collaborative Transportation Management Partnerships / Alliances

Nature and Concepts

Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, materialhandling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software

Evolution of Logistics

The term "logistics" originates from the ancient Greek "" ("logos""ratio, word, calculation, reason, speech, oration"). Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek and Roman empires, there were military officers with the title Logistikas who were responsible for financial and supply distribution matters. The Oxford English dictionary defines logistics as: The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities. Another dictionary definition is: "The time-related positioning of resources." As such, logistics is commonly seen as a branch of engineering which creates "people systems" rather than"machine systems.

Before 1950,No formal theory of logistics existed but those functions were performed in the corporate world without due recognition The recession of 1950s compelled the managers to examine their physical distribution system The transformation of business functions has seen the transformation in the concept of Logistics which has been systematically divided into four phases such as: Independent Business function Era( till 1950s) Limited Internally Integrated Business Function Era(196070s) Fully Internally Integrated Business function Era(1980s) and Externally Integrated Business Function Era(1990s)

IBFE(Till 1950s): In the early phase of Industrial growth, the emphasis was on production due to characteristics of economy of Abundance. Firms were under intense pressure to increase production capacity due to high demand Limited number of players In such an environment of technical; capacity for mass production, production led business functions dominated the whole enterprise They reflected the managerial mindset of capacity creation, work methods ,volume of production and their storage and transportation Logistics functions were limited only to warehousing and transportation of raw materials and finished goods. All functions such as procurement, Inventory, production, sales and distribution were independently performed
The objective was only to maximize profit by maximum sales volumes

LIIBF Era (1960s-70s):The corporate enterprises

started experiencing difficulties in the market place while converting their products into Cash due to A large no. of players entering the field Recession of 1958 and Saturation in the demand for the consumer and infrastructural goods and resulting in the profit squeeze A search for new competitive tools and techniques started for most efficient cost control system Untouched areas such as physical distribution and logistics costs were more focused The concept of materials management and PD Management were coined Material; management referred to planning, implementation and control of activities responsible for the flow of materials into an organization

It involved functions such as order placement, procurement, components and work in process, their inventory levels, inbound transportation and storage etc. PD Management deals with planning ,implementation and control of activities referring to the flow of finished goods from the last point of production to the ultimate users It included functions such as Out-bound transportation, protective packaging, distribution, warehousing and order processing ,Inventory level of finished goods and customer service The costs involved in them was to be controlled The price based Competitive capability became the tool for survival of the Business firms in the competitive market place

IIBFE(1980s): By 1980s,The business situations

became more critical as both external and internal forces continued to generate change in the business functions mainly due to the following reasons: i.) Soaring fuel prices leading to instability factor in the transportation ii.) Rising Inflation rates unprecedentedly iii.) Presence of MNCs leading to gradual change in the Economic system of the countries Quantum of Competition also increased in the Market place. This led to integration of the Manuf. Mgmt, Materials Mgmt. and the PD functions. This led to more Synchronization in the system regarding the smooth flow of all kinds of goods EXIBFE(1990s): by 1990s, the overall business scenario became more critical due to change in the following factors:

Liberalization: Rapid Innovations in Science and Technology leading to transition from Safety stock Mechanism to Real time response mechanism by means of rapid communication and exchange of Data New Inventory Management Technique like JIT, DRP and MRP Long term unbeatable core competency or Competitive Advantage to keep immediate customers Happy ,Loyal and well Motivated towards Trade by offering their best services . Emergence of 3PL service providers Thus the major objective of this era is the core competency by means of further streamlining the logistics system with other supply chain members to achieve a higher level of specialization and to reduce the financial risks.

DRPdistribution requirements planning. Software used to plan inventory requirements in a multiple plant/warehouse environment. DRP may be used for both distribution and manufacturing. In manufacturing DRP will work directly with MRP. DRP may also be defined as distribution resource planning, which also includes determining labor, equipment, and warehouse space requirements

MRPmanufacturing resources planning. Process for determining material, labor and machine requirements in a manufacturing environment. MRP was originally designed for materials planning only. When labor and machine (resources) planning were incorporated it became known as MRPII. Today the definition of MRPII is generally associated with MRP systems

Logistics in India:

In India ,Logistics is given important aspect given the countrys size, geographical Heterogeneity, population pressures, Natural Calamities, Shortage of essential commodities etc. No professional society or association professing an integrated systems approach to Logistics Giant government organization or Public sector organization like DGS&D,CWC, and FCI where total logistics system concepts can improve the supply performance with the lowest over all cost. But the importance of Logistics in Educational curriculum is Under estimated. Thus training in the Logistics management is a vital but missing link in India Customer is also at the receiving end although the concept of TQM is popular. Manager hardly realize that customer is their very cause of existence particularly in PDS

PDS

A network of Fair price shops under Bureaucratic control. Performance Appraisal system parameters for Logistics system are Hardly clear regarding good performance Quality of service is neither explicitly defines nor is objectively monitored Optimal level of service quality by judicious balancing of performance and cost is an exception rather than a rule in management of Logistics operation Visible difference in the management style of the PSU Logistics system with its private counterparts. In Public sector, supply system tends to be over controlled and Under managed, sluggish to accept any change, high in Overhead costs and low in performance levels, particularly in quality of service While the privately managed systems consider profits to be sole corporate objective and tends to exploit.

So in real sense we can say that none of the sector is doing

too well. A change of attitude is well required to induce a culture of Hard and diligent work with concern for the customer Technological Up gradation is an urgent requirement in Logistical operations. The Extent of Mechanization, Automation and DSS employed in Indian situation is much lower than required leading to poor management, delays and wastage of materials, high lead times and exce3ssive Inventories. IT also can play a vital role in improving logistical performance Managerial decision making with Play safe Approach in Public Sector systems do not lend any degree of professionalism or objectivity to the decision process Tools /techniques such as System Analysis/OR are only much talked about rather than used Vendors reliability and dependability are dubious.

Inadequate transport facilities. lack of well developed roads network, poor quality of roads with bad maintenance level, paucity of Rail-road coordination, poor communications, Nonexploitation of Waterways and unscientific storage methods constitute major Infrastructural Bottlenecks in efficient Logistics Human elements factors-training, Skills, Motivation, Attitude, Value system. Work constitute a major stumbling block The awareness level in India regarding the L&SCM can be judged on the basis of the fact that Indias first ever Conference on LM was held on 17-18 October 1997 at Chennai organized by CII Importance of Logistics Management: At the Macro Level, India spends nearly 13 % of its GDP on Logistics. There is definitely a scope for Improvement in India for reducing costs thru a better supply chain design,Inventory management and Operations

Indian companies are increasingly integrating their supply chain and outsourcing their L& SCM