Muralidhar . P B.Com- Logistics

1. SCM and Logistics Muralidhar . P B.Com- Logistics

2. Learning Objectives • To familiarize with basic concepts of logistics and supply chain management • To understand recent evolvement of logistics • To understand the reasons for its recent growth in importance • To understand the importance of IT in logistics

3. Overview of Logistics and Supply Chain Management

4. Transportation Transportation Customers Warehousing Information flows Factory Transportation Vendors/plants/ports Transportation Warehousing Supply Chain Overview

5. Logistics vs Supply Chain Management Council of Logistics Management • “Logistics is the process of planning, implementingand controllingthe efficient, cost-effective flow and storage of 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.” Handfield and Nichols • SCM is the integrationof all activities 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 sustainable competitive advantage.

6. Common Contemporary Logistics Terms • Value stream/logistics process • Quick response and flexible manufacturing • Mass customization • Supply chain management/ collaborative logistics • Reverse logistics • Service logistics • Continuous replenishment • Lean logistics • Integrated logistics => IT people have to deal with any related automation anyway 

7. The Logistics/SCM Mission • Getting the right goods or services to the right place, at the right time, and in the desired condition at the lowest cost and highest return on investment. • Product / Service Utility • Possession Utility - 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 • 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

8. Evolution of Supply Chain Management

9. Supply Chain Schematic 1-5

10. 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!

11. Critical Customer Service Loop

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

13. Customer ServicePerformance Source: Herb Davis & Company Dickson Chiu 2006

14. Business logistics Physical supply Physical distribution (Materials management) Sources of Plants/ Customers supply operations • Transportation • Transportation • Inventory maintenance • Inventory maintenance • Order processing • Order processing • Acquisition • Product scheduling • Protective packaging • Protective packaging • Warehousing • Warehousing • Materials handling • Materials handling • Information maintenance • Information maintenance Traditional Scope of the Supply Chain Internal supply chain 1-14 Dickson Chiu 2006 CR (2004) Prentice Hall, Inc.

15. Key Activities/Processes • Primary • Setting customer service goals • Transportation • Inventory management • Location • Secondary, or supporting • Warehousing • Materials handling • Acquisition (purchasing) • Protective packaging • Product scheduling • Order processing Dickson Chiu 2006

16. Logistics Strategy and Planning • The objectives of logistics strategy • Minimize cost • Minimize investment • Maximize customer service • Levels of logistical planning • Strategic • Tactical • Operational

17. Customer • service goals • The product • Logistics service • Information sys. The Logistics Strategy Triangle (4 problem areas)

18. Strategic, Tactical, and Operational Decision Making Decision area Strategic Tactical Operational Transportation Mode selection Seasonal equip- Dispatching ment leasing Inventories Location, Control policies Safety stock levels Order filling Order Order entry, transmittal, Processing processing and processing system orders, Filling design back orders Purchasing Development of supplier- Contracting, Expediting buyer relations Forward buying Warehousing Handling equipment Space utilization Order picking selection, Layout design and restocking Facility Number, size, and location location of warehouses

19. Relationship of Logistics to Marketing and Production LOGISTICS Sample activities: MARKETING PRODUCTION/ · Transport Interface Sample OPERATIONS · Inventory Interface activities: activities: Sample activities: · · Order activities: Customer · Promotion · Quality control · processing Product service · Market · Detailed production scheduling standards · Materials research scheduling · · Plant Pricing handling · Product · Equipment maint . · location Packaging mix · Capacity planning · · Purchasing Retail · Sales force · Work measurement location management & standards Production- Marketing- logistics logistics interface interface Internal Supply Chain

20. Relationship of Logistics to Marketing Product Marketing Promotion Price Place-Customer service levels Transport costs Inventory carrying costs Logistics Warehousing costs Lot quantity costs Order processing and information costs

21. Relationship of Logistics to Production • Coordinates through scheduling and strategy • make-to-order • make-to-stock • An integral part of the supply chain • Affects total response time for customers • Shares activities such as inventory planning • Costs are in tradeoff • Production lot quantities affect inventory levels and transportation efficiency • Production response affects transportation costs and customer service • Production and warehouse location are interrelated

22. Contemporary IT and Logistics

23. Wal-Mart Wins with Logistics • Costs are lower than K-Mart or Target Stores • CEO is a former logistician • Wal-Mart is the largest retailer in the world!

24. Logistics/SCM in Diverse Areas • Manufacturing - most common • Service - emerging opportunities • Environment - causing restrictions • Non-profits / Government - little explored • Military - long history Note the global evolvement into a service-oriented economy!

25. Supply Chain is Multi-Enterprise Conventional Scope Focus Company Suppliers Customers Customers/ Supplier’s End users suppliers Acquire Convert Distribute Product and information flow

26. Profit G & A Marketing Logistics Overhead Materials Labor Effect on Logistics Foreign Outsourcing Domestic sourcing Foreign sourcing Increase Profit G & A Marketing Increase Logistics Tariffs Overhead Materials Reduction Labor

27. Reality of SCM Scope

28. The Multi-Dimensions of SCM Inter-functional (Intra-organizational) coordination Inter-organizational coordination SUPPLY CHAIN MANAGEMENT Activity and process administration

29. Increasing Significance of Logistics • Costs are high • About 10.5% of GDP domestically • About 12% of GDP internationally • A range of 4 to 30% of sales for individual firms, avg. about 10% • A high as 70-80% of sales if purchasing and production are included • Customers are more demanding of the supply chain • Desire for quick response • Desire for mass customization • An integral part of company strategy • Generate revenue • Improve profit • Logistical lines are lengthening • Local vs. long distance supply • Globalization of trade • Logistics is a key to trade and an increased standard of living • Law of comparative economic advantage applies • Logistics adds value • Time and place utilities

30. Contemporary IT Applications in Logistics – Focus of this Course • Tremendous technological advances in past decades • Logistics management relies on analysis over massive information from heterogeneous sources • Disparate business functions in service-oriented economy • Internet and mobile technologies has further improved logistical effectiveness and efficiency • Enabled logisticians and management to make timely, informed, and accurate decisions • but create new dimensions of complexity • IT people work closely with logistician and management • Understand complex requirements • Choose the right technology and design appropriate IT infrastructures, architectures, and systems • Explain how contemporary IT can help to others

31. Some Useful Contemporary IT in Logistics • eXtended Markup Language (XML) • Service-oriented architecture • Process integration and interaction management • Exceptions, alerts, and relationship management in logistics • Information integration • Facilitating decision support • Mobile technologies • Radio Frequency Identification (RFID) => The key is to achieve information and process integration for efficient and effective decision support.

32. Summary

33. Summary • The logistic process plans, implements, controls the flow and storage of goods, services, and related information between the point of origin and the point of consumption to satisfy customer requirements • Logistics addresses the time utility & place utility out of the four economic utilities • Logistics becomes more important and complex because of new requirements of the service-oriented economy, disparate business functions, and the impact of various contemporary IT • Logistics involves the interaction with multiple departments within a company as well as now also across business partner organizations and customers • Application of contemporary IT, especially information and process integration for efficient and effective decision support, is a critical success factor and therefore the focus of this course.

34. THANK YOU MURALIDHAR.P