OF

ARTS, COMMERCE & SCIENCE

SUBJECT : Elements of Logistic and Supply Chain

Management

SEMESTER : V
CLASS : T.Y.B.M.S.
Division :
YEAR : 2010
SUBMMITTED TO: Prof-Nitin Kulkarni..
DATE : 30/06/2010

SIGNATURE :

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 Name of Students

SR.NO NAME ROLL NO

1. Yashshree S. Ainapure. 03

2. Abhilasha A. Bhosale. 16
3. Arpita P. Desai. 26
4. Namrata R. Desai. 27
5. Ashwini V. Kadam. 48

Topics Covered
1) Operating Objectives
2) Logistical Mission
3) Logistical Performance Cycle
 Procurement Cycle
 Manufacturing Support Cycle
 Physical Distribution Cycle

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 ACKNOWLEDGEMENT

It is indeed a pleasure to bring out such beautiful idea on

such a subject. We would like to take this opportunity to thank Prof.
Nitin Kulkarni. We intend our sincere and affectionate thanks to our
sir.
We would like to thank the VIVA COLLEGE for giving
us this opportunity. We would heartily welcome helpful criticisms and
suggestion from all of you for further improvement of our project.

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 Introduction to Logistics

Meaning:-
Logistics is the management of the flow of goods, information and
other resources 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, material-handling, and packaging, and occasionally
security. Logistics is a channel of the supply chain which adds the value of time
and place utility.
Origins and definition:-
The term “logistics” comes from the Greek “logos” meaning
speech, reason, ratio, rationality, language, phrase and more specifically from the
Greek work “logistiki” meaning accounting and financial organization. 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, Roman and Byzantine 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.”

Logistics management:-
Logistics management is that part of the supply chain which 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 customer & legal requirements. A
professional working in the field of logistics management is called a logistician.
The Chartered Institute of Logistics & Transport (CILT) was established in the
United Kingdom in 1919 and was granted a Royal Charter in 1926. The Chartered
Institute is one of the professional bodies or institutions, for the logistics and

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transport sectors, that offers professional qualifications or degrees in logistics
management.
Business logistics:-
Logistics as a business concept evolved only in the 1950s. This was
mainly due to the increasing complexity of supplying one’s business with materials
and shipping out products in an increasingly globalized supply chain, calling for
experts in the field who are called Supply Chain Logisticians. This can be defined
as “having the right item in the right quantity at the right time at the right place for
the right price in the right condition to the right customer” and is the science of
process and incorporates all industry sectors. The goal of logistics work is to
manage the fruition of project life cycles, supply chains and resultant efficiencies.
In business, logistics may have either internal focus (inbound logistics), or external
focus (outbound logistics) covering the flow and storage of materials from point of
origin to point of consumption. The main functions of a qualified logistician
include inventory management, purchasing, transportation, warehousing,
consultation and the organizing and planning of these activities. Logisticians
combine a professional knowledge of each of these functions so that there is a
coordination of resources in an organization. There are two fundamentally different
forms of logistics. One optimizes a steady flow of material through a network of
transport links and storage nodes.

Operating Objectives

In order to fully exploit logistical competency, managers within an enterprise must

achieve some specific objectives referred to as operating objectives. In terms of
logistical design and administration, each firm must simultaneously achieve at least
six different operational objectives namely:

1) Rapid response :
It is concerned with the firm’s ability to satisfy customer service
requirement in a timely manner. Because of development in information
technology, firms have the capacity to postpone logistical operation to the latest
possible time and then accomplish rapid delivery of required inventory. Rapid
response capability shifts the focus of operations to customer requirement on

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shipment-to-shipment basis, rather than producing in anticipation of demand based
on the forecasting and keeping inventory to meet the anticipated future demand.

2) Minimum variance:

Variance is any unexpected event that disrupts system performance.

Variance may result from any aspects of logistical operations. For eg., delay in
expected time of customer order receipt, an a unexpected disruptions in
manufacturing goods arriving in a damage conditions at the customer’s locations
or delivery to a wrong location-all result I a time disruption of operation that must
be resolved. All the operating areas of logistical system are subject to potential
variance. A traditional solution to accommodate variance is to hold safety stock
inventory or used high cost premium transportation. Such traditional practices
have been replaced by using I.T. to achieved positive logistic control and thereby
minimized variance and improved logistical productivity as a result of economic
operations.

3) Minimum inventory:
The objective of minimum inventory involves the commitment of
assets in the form of inventory deployed throughout the logistical system and the
relative velocity which is the rate of inventory usage overtime. High turn rates
together with the inventory availability means that the assets devoted to inventory
are being effectively utilized. The objective is to reduce the inventory
development to the lowest level consistence with customer service goal to achieve
the lowest overall the total logistics costs. Concepts like zero inventory are
increasingly becoming popular with the managers who seek to reduced inventory
deployment. However inventories can provide the some important benefit in a
logistical system such as improved return on investment when they result in
economies of scale in manufacturing or procurement. The object is to reduce and
manage inventory to the lowest possible level while simultaneously achieving
desired operating objectives.
4) Movement consolidation:

Transportation cost is one of the most significant logistical costs. It

is directly related to the type of a product, size of shipment and distance
transported. Logistical systems that feature premium service depend on high speed,

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small-shipment transportation which involves high cost. Hence, to reduce
transportation cost, it is necessary to achieve movement consolidation.

5) Quality:-

Logistical objectives include the objective to seek continuous

quality improvement, which is accomplished through commitment to TQM
throughout all facets of industry. When quality fails, the logistical performance
need to be reversed and then repeated. Therefore, Logistics becomes a prime part
of developing and maintaining continuous improvement of TQM.

6) Life -cycle support:-

Majority of products are sold with some guarantee that the product
will perform as advertised over a specific period (Life of the Product). For firm’s
marketing consumer durables or industrial equipment, the commitment to life-
cycle support constitutes a versatile and demanding operational requirement.

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 THE LOGISTICAL MISSION

Logistics of a firm is an integrated effort aimed at helping to create customer value

at the lowest cost. Logistics exists to satisfy customer requirements through
relevant manufacturing and marketing operations. Logistics managers seek to
achieve the desired quality of customer service through state –of- the- art operating
competency.

The level of logistics service depends on the amount of resources a firm is willing
to commit. The limiting factor for resources is economics and not technology.

For e.g.:

1) A dedicated inventory can be maintained in a warehouse close to a major

customer.

2) A fleet of trucks can be held in a constant state of readiness for quick delivery.
But such high level of customer service would be extremely costly and not
necessary to support most marketing and manufacturing operations. Hence,
logistical service must be viewed as a balance of SERVICE PRIORITY and
COST. The cost benefit impact of logistical failure is directly related to the
importance of service performance to the customer involved. The more significant
to service failure impact upon the customer, the greater the priority placed on
logistical performance.

Basic logistics service is measured in terms of the following factors:-

1) Availability:-
Means having inventory to consistently meet customer
requirements of materials and products. High inventory availability does not
necessarily mean high investment in inventory. Technology enables new ways to
achieve high.

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2) Operational Performance:-
It is concerned with elapsed time from order receipt to delivery. It
involves delivery SPEED and CONSISTENCY. Even though many customers
want fast delivery, they also emphasise of fast delivery. To achieve smooth
operation, customer firms seek first consistency of service and then delivery speed
.Also, a firm’s operational performance is viewed in terms of FLXIBILITY.
Operational performance is also concerned with how a firm handles all aspects of
customer needs including service failure on a day to day basis.

3) Service Reliability:-

It is concerned with the quality attributes of logistics. The key to

quality is accurate measurement of availability and operational performance. To
achieve service reliability, the measures to assess inventory availability and
operational performance must be identified .If the management is committed to
continuous improvement; the firm’s logistics performance can also continuously
meet its customer expectations.

Logistical Performance Cycle

Performance cycle is the primary unit of analysis for integrated

logistics. Performance cycles provide a basic perspective of the dynamics,
interfaces, & decisions that must link to create an operating system. At a basic
level, suppliers, the firm and its customers are linked together by communications
and transportation. The facility locations that performance cycles linked together
are referred to as nodes.

In addition to nodes and links, a logistical performance cycle

requires inventory. Within nodes, inventory is stocked or flows through the node,
necessitating a variety of different types of material handling and at least limited
storage. Performance cycles become dynamic as they accommodate input /output
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requirements. The input to a performance cycle is an order that specifies
requirements for a product or a material. A high volume system will typically
require a variety of different performance cycle arrangements to satisfy overall
order requirements. When requirements are highly predictable or relatively low,
the performance cycles required to provide logistical support can be simplified. For
example, the overall performance cycle structure required to support a large retail
enterprise like Wal-Mart is far more complex than the operating structure
requirements of a direct mail-order company.

System output is the level of performance expected from the

logistical operation. To the extent that operational requirements are satisfied, the
performance cycle structure is effective in accomplishing its mission. Efficiency is
related to resource expenditure necessary to achieve logistical effectiveness. The
effectiveness and efficiency of performance cycles are key concerns in logistical
management.

Depending on the operating mission of a particular performance

cycle, required activity may under the complete control of a single firm or may
involve multiple firms. In contrast performance cycle related to physical
distribution and procurement normally involved customer or suppliers
participation. Performance cycle span the overall supply chain and link
participating firms. Some performance cycles are established to facilitate a onetime
purchase or sale, in such case the cycle is designed implemented and then
abolished once the transaction is complete. Other performance cycles represent
long term arrangements. Regardless of the no. and different types of performance
cycle a firm uses to satisfy its logistical requirements. The performance cycle is the
basic unit of design and operational control. It is important to satisfy logistical
requirements.

The three points are important to understand the architecture of integrated

logistical systems.

1) The performance cycle is the fundamental unit for integrated analysis of

logistical functions.

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 2) The performance cycle structure in terms of link and node arrangement is
basically the same whether one is concerned with physical distribution,
manufacturing support, or procurement.
3) Regardless of how vast and complex the overall logistical systems structure
is, essential interfaces and control processes must identified and evaluated in
terms of individual performance cycle arrangements when seeking the
process integration.

Types of Logistical Performance Cycle

To better understand the similarities and differences in the nature of physical

distribution, manufacturing support and procurement performance cycle are
discussed below.

1) Procurement cycle (Inbound):-

Procurement is concerned with purchasing and arranging inbound

movement of materials, parts and/or finished inventory from supplier to
manufacturing and assembly plants, warehouses or retail stores. The acquisition
process is called purchasing in manufacturing organization, in government
organisation it is called procurement and in retailing and whole selling it is called
buying. All these three term namely purchasing procurement and buying are
referred to as inbound logistics. These activities are related to product and
materials from outside suppliers.
It includes-
(i) Resource planning,
(ii) Supply sourcing, negation,
(iii)Order placement,
(iv) Quality assurance,
(v) Inbound transportation,
(vi) Receiving and inspection
(vii) Storage and handling.

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2) Manufacturing support performance cycle:-

The manufacturing support performance cycles provides production

logistics. Manufacturing can be viewed as being positioned between the physical
distribution and procurement operations of firm. Manufacturing logistical support
has the primary objective of establishing and maintaining an orderly and economic
flow of materials and work in process inventory to support production schedules.

The isolation of manufacturing support as a distinct operating area is a

relatively new concept in logistic management. The justification for focusing on
performance cycles to support manufacturing is found in the unique requirements
and operational constraints of modern production strategies. It is important to once
again stress that the mission of logistics manufacturing support is to facilitate the
what, where, and when of production, not the how.

Manufacturing support is significantly different when compared with

either physical distribution or procurement. Manufacturing support logistics is
typically captive to firm, whereas the other two performance areas must deal with
behavioural uncertainty of external customers and suppliers. Even in situation
when contract manufacturing is used to augment internal capacity, overall control
is greater than in the other two operating areas.

Within a typical manufacturing organization, procurement provides

materials and externally manufactured components when and where needed. Once
a firm's manufacturing operation is initiated, subsequent requirements for
interplant movements of materials or semi finished products are classified as
manufacturing support.

When a firm has multiple plants that specialize in specific production

activities, the manufacturing support system may require a vast network of
performance cycles manufacturing support operations, as contrasted to either
physical distribution or procurement, are limited to movement under internal
management control.

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3) Physical Distribution Performance Cycle (Outbound Logistics):-

Physical distribution operations involve processing and delivering

customer order. Physical distribution is integral to marketing and sales
performance because it provides timely and economical product availability. The
overall process of gaining and maintaining customers can be broadly divided into
transaction creating like advertising and selling and physical fulfilment activities.

From the logistical prospective physical distribution links a firm

with its customers. It resolves marketing and manufacturing initiatives into an
integrated effort. The interface between marketing and manufacturing can be
conflictive. On the other hand marketing is dedicated to delighting customers. The
expectation is that zero defect service will be achieved and customer focused
marketing efforts will be supported.

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