BMS-Logisitcs concept seties set 4

particulars	Logistics management	Supply chain management
1. Scope	Inbound logistics, in process inventory [movement from one plant to another], outbound logistics	All players in the supply chain from raw material source to finished product consumer, vendors, their vendors, supplier organization[shipper], Warehouses, service providers, customers, their customers
2. How this is created in business?	By internal integration of logistics functions handled by various management functions within organization	By external integration of roles of various players in the supply chain.
2. Main objective	Logistics cost reduction by integrating resources across the pipeline	Supply chain profitability by value creation.
3. Definition	Logistics is the process of strategically managing procurement and storage of material , part and finished inventory [and related information flow] through organization and its marketing channels in such a way that current and future profits are maximized through cost effective fulfillment of order	Management of upstream and down stream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.
4. Origin	A very old concept in military planning.	As a logical extension of logistics management
5. Focus	L/M tries to take the product to the consumer at minimum logistical cost. Hence it is supply driven.	SCM focuses on value creation in the supply chain. Hence this is customer focused or demand driven.

Inbound Logistics

Creation of value in a conversion process heavily depends on availability of inputs on time. Making available these inputs on time at point of use at minimum cost is the essence of Inbound Logistics. All the activities of a procurement performance cycle come under the scope of Inbound Logistics.

Scope of Inbound Logistics covers transportation during procurement operation, storage, handling if any and overall management of inventory of inputs. Several activities or tasks are required to facilitate an orderly flow of materials, parts or finished inventory into a manufacturing complex. They are sourcing, order placement and expediting, transportation, receiving and storage. Overall, procurement operations are called inbound logistics. A procurement cycle is shown below. Inbound logistics have potential avenues for reducing systems costs.

Delivery time, size of shipment, method of transport & value of products involved are different from those of physical distribution cycles. Normally delivery time is large as a low cost transportation mode is chosen. As the value of inventory is low size of shipment is large & transit inventory costs are low. As the price of products is lower, trade off between cost of maintaining inventory in transit and low cost transport exists to the benefit of the organization.

Outbound Logistics

Value added goods are to be made available in the market for customers to perceive

value. Finished goods are to be distributed through the network of warehouses and

supply lines to reach the consumer through retailers’ shops in the market. During

conversion value is added to the raw materials and as a result value of the inventory in

this case is very high unlike inputs. Now the size of shipment, modes of transport and delivery time are different as compared to inputs. Activities of distribution performance cycle come under the scope of Outbound Logistics. They are order management, transportation, warehousing, packaging, handling etc.

Define logistics and its mission? Explain the competitive advantage available through Logistics? (May’02)

Logistics is concerned with getting the products and services where they are needed and when they are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging.

The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible.

The formal definition of the word ‘logistics’ as per the perception of Council of Logistics Management is the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.

Mission of logistics is providing a means by which customer satisfaction is achieved. Art of moving, lodging and supplying troops, supplies and equipment is logistics. Concept of logistics has moved into business to move, lodge and supply inputs and outputs.

Logistics is practiced for ages since organized activity began. Without logistics support no activity can be performed to meet defined goal. The current challenge is to perform logistics scientifically in order to optimize benefits to the organization.

Logistics is a planning function of management. Logistics function is concerned with taking products and services where they are needed and when they are needed. 

Logistics ensures that the required inputs [what] to a value adding process are made available, where they are needed, when they are needed and in the quantities [how much] they are needed. It also ensures that the outputs of the value adding process are made available where they are needed when they are needed and in the quantities [how much?] they are needed.

There are many ways of defining logistics but the underlying concept might be defined as follows: ‘Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.’

Reasons for  Logistics gained importance/ What is the necessity of logistics

Several Modern Management concepts are born or refined in the crucible of II World War.  You may remember several OR techniques like Value Analysis & PERT/CPM have their origin in the II World War. Resources come under pressure in a war, like no other time and one is expected to deliver results in spite of all odds. These trying situations forced the military planners to evolve solutions to their problems. After the war these concepts traveled to business where resource crunch is usual. In business there is no enemy, but there are competitors who pose threat to the organizations survival.

Field Marshall Rommel’s words that ‘………before they are fought, battles are won or lost by quartermasters’ speak about the importance of logistics.

There are several examples where battles are lost due to long & ineffective supply lines.

Logistics received great importance in military planning and subsequently became a very important management function in the course of last 40 years.

Logistical management includes the design and administration of systems to control the flow of material, work in process and finished inventory to support business unit strategy

Performance of the organization is measured through the perception screen of customer. These measures are used to gain insight into the practices in other industries. The two concepts for the above measures are customer perception measurement and bench marking. These two are the focus areas of external performance measures.

Customer perception measurement :customer perception is measured by carrying out surveys sponsored by the organization interested in measurement or by the industry. Either the firm, or consultants or delivery agents or industry organizations carry out these surveys. Information surveyed is about firm’s and competition’s performance in specific areas. Generally, information generated by these surveys is customer’s perception of availability of firm’s products, performance cycle time, information availability, and performance in the areas of problem resolution and product support.

Best practice bench marking

This is a tool to calibrate logistical operations of the firm. Bench marking review focuses on measures, practices and processes of a comparable organization. Review committee identifies key performance measures to improve in the firm and tracks historical and current performance levels
benchmarking methods
1. Sources of information for performance measures are published logistical data, published by periodicals and university research. This information being public knowledge lacks in competitive advantage.
2. Bench marking a non-competitive company. This leads to a comprehensive study, and being bilateral, proprietary knowledge adds value mutually. As one organization is studied the information lacks broadness of perspective.
3. Alliances of organizations: share each others bench-mark data. This yields comparatively better data. But it is difficult to maintain such alliances.
Examples of bench marking: asset management cost, customer service, productivity, quality, strategy, technology, transportation, warehousing, order processing
comprehensive supply chain measurement:

Four types of metrics developed for outcome and process in a supply chain are customer satisfaction, time, cost and assets.
External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and  2) best practice benchmarking.

·         Rigid quality standards [critical in case of contaminated products which can cause environmental hazard]

·         Transit damage [leaking containers containing hazardous material]

·         Product expiration dating

·         Rigid laws prohibiting unscientific disposal of items associated with product [packaging]

·         Rigid laws making recycling mandatory

·         Erroneous order processing by supplier

·         Reverse logistics is an important component of logistics planning

The success of reverse logistics system in achieving

The desired objectives depends on the efficiency and

Effectiveness of following sub-systems

1. Product location

The first step in the call back process is to identify

The product location in the physical distribution system of

The firm.

Product location becomes more difficult after it is sold

And handed over to the customer.

It is a bit easier in the case of industrial or high value

Products due to the limited number of customers &

Personal interaction with the clients due to direct

Selling.

2. Product collection system

Once the product location is identified, the collection

Mechanism gets into operation.

This can be done either through company’s field force,

Channel members or third party. However, proper

Instructions have to be given to motivate the customer for

Returning the products.

3. Recycling / disposal centres

These may be the company’s plant/ warehouses or some

Fixed location in the reverse logistics network.

The called back products are inspected before they are

Further processed for further repairs, refurbishing,

Remanufacturing or waste disposal.

Investments in facilities for these activities depend on the

Objectives of the system, cost implication, complexity of

The operations & expected gains.

4. Documentation system

Tracing the product location becomes easier if proper

Documentation is maintained at each channel level.

However, at the time of handing over the product to

The customer, the detailed information if collected

Through proper documentation, can form a good database

That can be used in case of product call backs .

Cost implications

The reverse logistics system is a cost centre. However,

These costs are incurred for achieving company’s certain

Objectives and can be attributed to the following

Activities

Product location (investment & operating costs)

Transportation

Product collection (customers > retailers > plant)

Disposal (plant > suppliers / disposal)

Refilling, repairs, refurbishing, remanufacturing,

Recyclling

6. Documentation (for product tracking and tracing during entry, exit and flow in the system)

Contd.

Barriers to good reverse logistics

Legal issues

Under indian regulations excise paid goods once sold by

The manufacturer cannot be brought back to the plant

Without proper documentation and declaration to

Excise authorities.

This is a very cumbersome & time consuming process and

Non-compliance may mean that the manufacturer will

Have to face legal action.

Many organizations term reverse goods as ‘ junk’ and

They don’t want to waste their resources on these

‘ junks’ . The goods are considered unworthy of any investment