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Sunday 9 October 2011

Bms-Logistics concepts set 2

Key Words

·         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 the customer requirement. 
·         Supply chain management (SCM): is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of rawmaterials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption
·         Integrated logistics :A comprehensive, system wide- view of  the entire supply chain as a single process
·         Reverse logistics: Planning and management of the flow of surplus, used, unwanted or non-functioning goods, equipment or packaging back through the supply chain. 

Integrated Logistical systems & The supply chain

The process of planning, implementing and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements

SCM seems to be replacing more of the traditional terms of management of material and service flows. A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system.
n  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.
n  Logistics management is a design and operation of the physical, managerial, and informational systems required to allow goods to overcome space and time from the manufacturer to the consumer. On the other hand Supply chain management is a design and operation of the physical, managerial, and informational systems required to transfer products and services from the vendor to customer in an efficient and effective way.
n  The profitability and survival of many organizations is mainly dependant on the effectiveness of their supply chain performance. Logistics are considered as a link between production and marketing, within the supply chain. 
One of the main function of logistics is to make the goods and services available to the place where there is demand for the product. Supply chain is the process that is involved from the procurement of raw materials till the outcome as finished products. The logistics and the supply chain management is the two sides of a coin. They are interrelated and they function on their own simultaneously. Some experts distinguish supply chain management and logistics while others consider the terms to be interchangeable. From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier's suppliers and on the customer side by your customer's customers.The logistics plays an important role between sources of demand and sources of supply. The supply chain management is the planning and management of all activities involved in sourcing and procurement, conversions, and logistics management activities, including coordination and collaboration with suppliers, intermediaries, third party service providers and customers to facilitate integration of supply and demand management within and across companies. Supply chain management is used in filling the gaps and the logistics is used in closing the gaps. Thus we can say that the supply chain management and logistics are part and parcel of a solution to the same purpose. Overall productivity of the organization increases if the supply chain management and logistics goes hand in hand.
Integrated Logistics Management
Integrated Logistics: A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity, rather than managing individual functions separately.The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods or service –producing network to fulfill customer  requests; and utilizing the network to fulfill customer requests in a timely way.

Logistics Interfaces with other functions of the firm
Ø  Logistics & Marketing
Ø  Logistics & Operations
Ø  Logistics & Finance



Logistics Interfaces with Marketing


A.            Price:
1.     product pricing schedule often tied to
transportation pricing schedule
 (i.e., price discounts for product given at
volumes where transportation price discounts
 occur)
2.     logistics costs must be factored into product
price  - thus, logistics approach must be
consistent with firm’s product pricing strategy
B.            Product:
1.     size, shape, weight (density), packaging,
and other physical characteristics affect
logistics (e.g., size and weight affect
transportation and storage)
2.     Post cereals example
3.     shipping “knocked down”
4.     consumer packaging: compatibility with “industrial package”  and product protection and security
C.            Promotion:
·         promotion campaigns need to be coordinated with logistics staff (or run risk of not having enough product available)
·         “push” strategies vs. “pull” strategies: “push” strategies tend to make logisticians’ task easier
D.            Place: refers to the distribution channels decisions (e.g., sell through wholesalers or direct to retailers)
E.            Customer service is the output of logistics.
1.     time
2.     dependability
3.     communications
4.     convenience




Logistics & Operations
A.            Length of production run:
1.     traditionally, firms sought production economies
by producing large volumes each time they had a
production line setup or changeover
2.     however, this led to very large inventory levels
3.     move to “pull” systems rather than “push” systems
B.            Seasonal demand: build-up of seasonal inventories to meet
 demand and to smooth production
C.            Supply-side interface:
1.     “materials management”
2.     supplier relations is critical to efficient production and logistics
3.     logisticians involved in production scheduling
D.            Protective packaging: most firms consider this a logistics activity
Logistics & Finance
I.             Logistics activity areas WHERE COST INVOLVED
A.    Transportation
B.    Warehousing and storage
C.    Inventory control
D.    Order fulfillment
E.    Purchasing
F.    Materials handling
G.    Industrial packaging
H.   Demand forecasting
I.     Production planning
J.     Customer service levels
K.    Plant and warehouse/distribution center site location
L.    Return goods handling
M.   Parts and service support
N.   Salvage and scrap disposal

Integrating the firm
Logistics activities as an integrated system.
A.    Cost trade-off opportunities
B.    Recognizing the revenue impact of logistics (i.e., the cost of lost sales)
General cost relationships among logistics activities

A.    As order cycle (days) increases, inventory level (and cost) increases
B.    As inventory level increases, cost of lost sales (a customer service outcome) decreases
C.    As transportation cost increases, cost of lost sales decreases
D.    As transportation cost decreases, inventory cost increases
E.    As purchasing cost decreases, inventory cost increases



The mission of Logistics
Achievement of business objectives at minimum logistical cost [delivering- QCD expectations of  customers at minimum logistical costs, i.e. creating customer value at minimum cost
           Set of goals to be achieved at a particular type of market responsive to competition
          Mission focus is on out put of the system
           Logistics Mission is achieved by ‘single plan’ for the entire organization
           Mission of logistics is providing a means by which customer satisfaction is achieved
Supply chain integration
A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved.

Supply chain management terms and defenitions
The components of SCM are:
  • Demand planning (forecasting)
  • Demand collaboration (collaborative resolution process to determine consensus forecasts)
  • Order promising (When one can promise a product to a customer taking into account lead times and constraints)
  • Strategic network optimization (what plants and DC's should serve what markets for what products) (monthly - yearly)
  • Production and distribution planning (Coordinate the actual production and distribution plans for a whole enterprise) (daily)
  • Production scheduling (For a single location create a feasible production schedule) (minute by minute)
  • Transportation planning (For multiple supply, manufacturer, distributor and warehousing points in a network)
  • Transportation execution (Enactment of long term plans on a per shipment basis, typically performed by focused organizations called forwarders)
  • Tracking and Measuring (An ever increasing aspect of supply chain management designed to highlight potential against the plan and possible process improvements)
  • Plan of reduction of costs and management of the performance (diagnosis of the potential and the indicators, the organization and planifiaction strategic, masters dysfunctions in real time, evaluation and accounting reporting, evaluation and reporting quality)
The need of  supply chain management  has been identified as follows:
·         Improve operations
·         Increasing levels of outsourcing
·         Increasing transportation costs
·         Competitive pressures
·         Increasing globalization
·         Increasing importance of e-commerce
·         Manage inventories

Decisions in Logistic Management

  1. Product Design (moulded plastic water tanks)
  2. Plant Location
  3. Choice of Markets/Sources
  4. Production Structure (cement manufactures)
  5. Distribution/Dealer Network Design (two wheeler)
  6. Location of Warehouses (two wheeler)
  7. Plant Layout
  8. Allocation Decision
  9. Production Planning
  10. Inventory Management – Stocking Levels
  11. Transportation – mode Choice, Shipment Size and Routing Decision, and Transport Contracting
  12.  Packaging
  13.  Materials Handling
  14. Warehouse Operations
Overall perspective of the supply chain



Emerging integrated logistic concepts
Attributes of Logistic Department
#         Scope is wide spread- functions of logistics are spread across various stages of value chain in the organization
#          Provides interface between marketing and customers, marketing and operations, operations and supplier
#          Provides competitive edge to business in the current environment
#          Handles flow of information and materials
#          Large avenue for cost reduction
Models in logistic management
n  Forecasting models
n  Mathematicals programming models
n  location models
n   allocation models
n  distribution network design models
n  Inventory Models
n  Routing Models
n  Scheduling Models
n  Emerging Integrated concepts are:-
n  Service response logistics
n  Quick response logistics
n  Response logistic recovery
n  Efficient consumer response
n  Reverse logistics




HOT TRENDS IN LOGISTICS

n  Logistics is changing rapidly, driven by the overarching trends of globalization, demographic shifts, technology, and new forms of competition. Lets take a closer look at some key trends.
n  The first is the growing importance of logistics. Many companies are recognizing that the logistics functions previously buried deep in their organizations deserve A-level status, hence the emergence of the Chief Logistics Officer. Not only is logistics a critical element of costs, it is also becoming an important competitive weapon for market success. The fourth "P" of marketing, “Product, Price, Promotion, Place”, is really about product availability, which has everything to do with logistics i.e. products and materials available in the right quantities, in the right place, and at the right time.
n  The second is linked to dynamic sourcing and markets. In a global marketplace, supply chains cannot and do not remain static. Companies are constantly evaluating their source locations to be sure they are procuring the cheapest most reliable materials, and moving quickly to serve markets where they can find the greatest growth and margins. Logistics flexibility is the key to success in this more fluid environment.
n  The third is improved pipeline visibility. Some carriers can tell you where your specific shipment is right now, but most can't predict arrival times or automatically notify you of delays. With web-based tools and combinations of wireless barcode/RF/satellite/cellular tracking devices, the logistics world is slowly moving toward nirvana: fully integrated, multi-modal, multi-carrier real-time visibility down to the SKU/item level. This will drive all kinds of productivity changes for the logistics manager, and alter the competitive position of the various modes of transportation.
n  The forth is associated with collaborative demand planning (CPFR). Collaborative planning, forecasting and replenishment are taking the logistics world by storm. Fueled by supply chain management tools and web-based collaboration tools, CPFR will produce much better information about what's coming ahead, allowing more efficient resource planning and deployment by suppliers, manufacturers, and logistics service providers.
n  The fifth area involves 3PL/4PL expansion. Outsourcing logistics activities to third parties (3PLs) and fourth parties (4PLs, super entities who coordinate the 3PLs) will continue its strong momentum, driven by desires to reduce total supply chain costs and respond quickly to new sourcing and market opportunities. However, many companies have found that talented senior logistics managers are still necessary in-house to guide and control the 3PL/4PL partners.
n  The sixth initiative, which is gradually getting transformed, to a non-happening place is B2B site rationalization. There are over 100 transportation marketplaces on the Internet, and most will not survive despite strong growth in e-commerce transactions. As the dotcom failures and mergers continue, several logistics mega sites and a few mode-specific sites will emerge as the winners. These sites will prosper less on providing marketplaces for spot transactions (which represent about 20 percent of logistics buys), and more on offering process workflow, optimization, and collaborative applications. Leading companies realize that the true business value of the Internet is more than merely automating transactions. It involves real-time sharing of information that allows companies to collaborate with customers, trading partners, and other members of the extended supply chain.
n  It is an exciting time for the Third Party Logistics Industry, as technological progress enables providers to offer new services, including coordination and integration services that are necessary to support the complex new business processes that are being demanded. For the customers and service providers one critical decision will be how to organize for innovation. So we are finally in the era of the CLO and the success of the enterprise will depend heavily on good practices in Logistics and Supply Chain Management. This reality cannot change till mankind creates a scientific revolution by encrypting matter say a computer in soft form and decrypting the same at the delivery end back into matter.

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