- Vaibhav Agrawal

 Logistics management tries to have the “right product”, in

the “right quantity”, at the “right place”, at the “right time”,
with the “right cost”
 Logistics management must balance 2 basic targets:
 Quality of Service
 Low Cost

 Logistics / Supply Chain in a business aim to the following

contributions:
 Achieve maximum customer service level
 Ensure high product quality
 Achieve minimum (possible) cost
 Be f lexible in the constant market changes
 One quite widely accepted view shows the relationship as
shows:

 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
 Logistics Supply Chain
Logistics is the process of SCM is the integration of all
planning, implementing and activities
controlling • associated with the flow and
• the efficient, cost-effective transformation of goods
• flow and storage of • from raw materials through to
• raw materials, in-process end user,
inventory, finished goods and • as well as information flows,
related information • through improved supply
• from the point of origin to chain relationships,
point of consumption • to achieve a sustainable
• for the purpose of conforming competitive advantage.
to customer requirements.
 The logistics activities can be classified into a) core and b) supporting
 They contribute the most to the total cost of logistics or they are
essential to the effective coordination and completion of the logistics
task.
 These are mentioned below:
a) Customer service (typically defined by marketing)
b) Transportation
c) Inventory management
d) Information flows and order processing
 Support activities vary from company to company
 A comprehensive list includes:
 Warehousing (Space determination, stock layout,
configuration, stock placement)
 Materials handling ( equipment selection & replacement
policies, order-picking procedures, stock storage & retrieval)
 Purchasing (supply source selection, purchase timing,
purchase quantities)
 Protective packaging (designed for handling, storage,
protection from loss/damage)
 Cooperate with production/operations (specify aggregate
quantities, sequence & time production output, schedule
supplies)
 Information maintenance (info collection, Storage &
manipulation, data analysis, control procedures)
 Selecting a good logistics strategy may yield a competitive advantage.
It must not been seen as a less creative process than developing the
corporate strategy.
 It is suggested that a logistics strategy has three (3) objectives:
 Logistics affect many procedures and activities in a business, leading to increasing
operational costs and decreased customer service in case of “bad” logistics management.
 Logistics interfere with many business areas and, thus, it is suggested to identify and
determine several “cost trade-offs” in order to provide a positive benefit to the logistics
system as a whole.
 Four (4) different levels of trade-off are proposed:
 Within distribution components, e.g. the decision to use random storage locations
compared to fixed storage locations in a depot. The first better storage utilization, more
difficult for picking; the second has the opposite results
 Between distribution components: e.g. a company might increase the strength and
thus the cost of packaging but find greater savings through improvements in the
warehousing and storage of the product
 Between company functions: e.g. a trade-off between optimizing production run
lengths and the associated warehousing costs of storing the finished product. Long
production runs produce lower unit costs (and thus more cost-effective production) but
mean that more product must be stored for a longer period (which is less cost-effective for
warehousing).
 Between the company and external organizations: e.g. a change from a
manufacturer’s products being delivered direct to a retailer’s stores to delivery via the
retailer’s depot network might lead to mutual savings for the two companies.
 Definition of Logistics
 Different for Different companies.
 Make to Stock
 Assemble to Order
 Make to Order
 Engineer to Order

Mainly :- How much Customer is ready to Wait?

 Customer service metrics are indications of a
company’s ability to satisfy the needs of customers by
meeting customers needs on a timely basis and
creating exceptional values to the customers
 Goals  Measures
 Flexible response  Number of choices &
average response time
 Product/service  Customer contact points
innovation and product
finalization points
 Customer satisfaction  Product Error
 Order fulfillment rate
 Customer value  Customer profitability

 Delivery performance  Delivery speed &

reliability
What's located?
Sourcing points
Plants
Vendors
Ports
Intermediate points
Warehouses
Terminals
Public facilities (fire, police, and ambulance
stations)
Service centers
Sink points
Retail outlets
Plant
W/H
 2. Location Strategy
Key Questions
How many facilities should there be?
Where should they be located?
What size should they be?
Why Location is Important?
Gives structure to the network
Significantly affects inventory and transportation
costs
Impacts on the level of customer service to be
achieved
 2. Location Strategy
Manufacturing (plants & warehouses)
 Decisions are driven by economics. Relevant costs such as
transportation, inventory carrying, labor, and taxes are
traded off against each other to find good locations.
Retail
 Decisions are driven by revenue. Traffic flow and resulting
revenue are primary location factors, cost is considered
after revenue.
Service
 Decisions are driven by service factors. Response time,
accessibility, and availability are key dimensions for locating
in the service industry.
 2. Location Strategy
Key Questions
How many facilities should there be? – Depends of
Demand/ Capacity/ Fixed cost.
Where should they be located? – Discussed Above
What size should they be? – Futuristic Demand
Will be covered in Planning discussion
 Transport: moving goods from one place to another.
 Transport involves
 Facility ( Terminals, DCs, Hubs),
 equipment (trucks, planes, trains, boats, pipeline),
 people (drivers, loaders & unloaders),
 decisions (routing, timing, quantities, equipment
size, transport mode).
 Performance
 Average transit time
 Transit time variability
 Loss and damage
 Other factors including availability, capability,
frequency of movement, and various less tangible
services
 Cost
 Line haul
 Terminal/local
 Accessorial or special charges
 Fixed costs:
 Terminal facilities
 Transport equipment
 Carrier administration
 Roadway acquisition and maintenance
 Variable costs:
 Fuel
 Labor
 Equipment maintenance
 Handling, pickup, and delivery
 Warehousing and Transportation of Products /
Commodities consist of one of the core procedures in
Business Operations.
 These procedures can be performed by own resources or
by external partners:
 Common & Private Carriers (distribution)
 Freight Forwarders (distribution & storage)
 Third Party Logistics Providers (3PL) (integrated
distribution & storage)
 Each company selects (based on their needs) the types of
services to outsource to an external partner.
 3PL companies provide an wide variety of services, apart
from simple distribution and storage procedures.
 A common carrier is a business that  FF business is to:
transports people and/ or goods, offers  Hire “transport space” from
its services to the general public under transportation means (carriers, ships,
license or authority provided by a etc.)
regulatory body.  Group and integrate loads and shipments

 Common carriers typically transport  The advantages of the existence of

persons or goods according to defined freight forwarders and their provided
and published routes, time schedules services can be summarized in the
and rate tables upon the approval of following:
regulators.  They succeed in better transport means’
capacity utilization (due to consolidation
 Public airlines, railroads, bus lines, cruise of shipments)
ships, motor carriers (i.e., trucking  Consolidation of shipments and the
companies) and other freight companies handling of larger integrated loads/
generally operate as common carriers. shipments leads to efficient material
handling (loading , unloading,
transshipment, etc.)
 Due to the consolidation and the
transshipment of larger shipments, freight
forwarders succeed in lower transport
prices with the transport means’
operators, leading to minimized cost in
comparison with sending smaller
 Recent trends in logistics and business operations
have led to the 3PL providers.
 A 3PL firm provides outsourced services to companies
for part, or sometimes all of their supply chain
management function.
 Typically specialize in integrated operation,
warehousing and transportation services that can be
scaled and customized to customer’s needs based on
market conditions and the demands and delivery
service requirements for their products and materials.
 Apart from the advantages of utilizing a 3PL provider for some of the
operational procedures of a company there are also some
disadvantages that should be taken under consideration when
selecting a 3PL provider or when deciding to adapt a logistics
strategy based on 3PL services:
 Using 3PL providers may lead to lose control of the distribution and
storage procedures of the products (Usually it is managed through
contractual agreements and Key Performance Indicators-KPIs)
 3PL providers have a physical advantage in comparison to the shippers
(“since they own all related facilities, equipment's, systems) and the
shipper may start to depend on specific 3PL providers
 Shippers cannot gain expertise and experience in distribution and
storage operations and processes (and it becomes difficult to re-adapt a
non-3PL distribution and storage model)
 Service provision issues may arise: (1) the company’s sales and deliveries
to customers may not be aligned and in-time and (2) there is no direct
contact with customers.
 Trust issues may arise: 3PL companies that serve different competitive
shippers
 Definition
 Difference between SCM and Logistics
 Key components of Logistics
 Logistics Strategy
 Logistics Process Design
 Customer Service
 Location Strategy
 Transportation Strategy