UNIT 1((All the lessons and the details of the Unit 1 to 5 are

for study for the students and not for any book printing or any
other sale purpose)

LOGISTICS
MANAGEMENT
INTRODUCTION
Origin of Logistics is attributed to military and defense
organizations. Military departments make use of
detailed and extensive planning to collect supplies and
move men and materials to various locations and
bases.
Logistics initially was a military activity concerned
subject for getting soldiers and munitions and other
battle equipments to the battlefront in time for fight
and thereafter their reinforcements and replenishments
of all immediately required items.
But it is now seen that logistics as an integral part of
the modern production andsupply chain management
process.
During the periodof world wars 1 & 2, Logistics played a
very important & constructive role for the Allied & Axis
Forces.

Logistics is unique and it happens around the globe 24

hours*7 days a week and 52 weeks a year and it never
stops. Logistics is concerned with getting products &
services where they are needed and when they are
desired to the satisfaction of customers.
The word Logistics is a recent addition in the
jargon of INTEGRATED BUSINESS MANAGEMENT
(IBM).
Logistics refers to the management of flow of goods
and
Supplieswith its information about the product,itsdata
and essential documentation concerning the product.
Logistics plays an important role for procurement
function for deliveryof raw materials from the supplier
and then to the point of
Production and thereafter dispatch from factory
To the point of delivery to the consumer.
The customer service management is another very
important section of the logistics management studies.
The logistics functions of procurement, manufacturing
and physical distribution has no meaning if a proper
and dignified customer service management is not
planned and executed by the management through
eminent staff who are qualified in Customer
RelationshipManagement(CRM).

The probable Origin of the term Logistics

The probable origin of the term is the Greek Word

logistikos, meaning skilled in calculating and the science
of computing & calculating. It has been performed since the
beginning of civilization and it is not a new subject.
There after the development in logistics has been tremendous
and various scholars have added their respective thesis in
theoretical and practical field and logistics volumes have
increased tremendously.
Today one cannot think of planning and completion of any
task without the reference of logistics applications.

Logistics: Definition
According to the Council of Supply Chain Management
Professionals
(previously
the
Council
of
Logistics
Management)

Logistics is the process of planning, implementing and

controlling procedures for the efficient and effective
transportation and storage of goods including services and
related information from the point of origin to the point of
consumption for the purpose of conforming to customer
requirements

A simple Definition ofLogistics

1. In simple terms and in a common mans

language,Logistics isa science

Menand Materials

dealing

with

2. From the business point of view, Logistics can

be defined
asaBusiness
planning
framework
for
the
management of Materials, Services, Information
and Capital Flow.

In general,Logisticscan be defined
as
The
processofPlanning,
controlling

implementing&

The efficient & costeffective forward &reverse

flow and
storageofraw materials, In-process Inventory,
Finished goods, servicesand
the related
Information
from the point of origin to the point of
consumption for the purpose, conforming to the
customer requirement

Significance
Management

of

Logistics

With globalization and shortened product life

cycles, the Indian Industry is focusing to reengineer their logistics & supply chain activities
to achieve a competitive edge.
This has created the need for a range of logistics
& transportation solutions for the industry
ranging from solutions for multi model transports,
freight, material handling, warehousing, shipping,
air cargo, packing, inventory management and
more importantly integrating logistics & supply
chain etc.
There is definitely a scope for improvement in
India for reducing costs through a better supply
chain design, inventory management and
operations.
A potentially huge demand for logistics &
transportation solutions and a developing
infrastructure has made India the logistics market
of the
21st
century and thrown open
unprecedented opportunities for companies
involved in the logistics business.

Concept of Logistics Management

 The concept of Logistics is concerned with coordinating the

inventory movement processes by maximizing the flow of
materials and supplies through various business activities to
make it reach finally the customers.

Today, getting products and services wherever they are

needed, whenever they are desired and required is possible
with the entire support of logistics.
It is extremely difficult to think of procurement
of any material orproduction or physical distribution without
logistical support and information technology.

TYPES OF LOGISTIS ACTIVITY

There are specifically two types of logistics activities as

under:-

Inbound Logistics
Inbound Logisticsis procuring and arranging the inbound
movement of materials, parts, and finished goods from
suppliers to manufacturing or assembly plants, warehouses, or
retail stores.

Outbound Logistics

Outbound logistics is the storage and movement of the final

product and the related information from the production
center to the consumer
It involves transportation of goods from a manufacturing site to
the locations where it has to be kept in a warehouse or place of
sale to the customer. This aspect of logistics is called physical
distribution also.

The main activities of logistics can be mentioned as

follows:
Procurement Logistics
Distribution Logistics

After-sales Logistics
Disposal Logistics
Reverse Logistics
Green Logistics
Global Logistics
DomesticsLogistics
Asset Control Logistics
Emergency Logistics
Production Logistics

EVOLUTION OF LOGISTICS

There are many historical backgrounds to tell us

regarding the evolution of logistics.
World War II was the major motivation for
logistics to increase its recognition and emphasis
its importance.
Thecontribution to the logistics & supply chain
advancementby the Allied and Axis Forceswas
great.
Starting from the early 60s, many factors, such
as competitive pressures, information
technology, globalization, profit leverage, etc.,
contributed to the development of logistics
science that helped to achieve the state of
logistics, thatwe experience today.

Components of Logistics Management

1.
Generic
Service)

(that

deals

withCustomer

2. Primary(Net
work
Design,
Transportation, Inventory Management and
Order Processing)
3. Supportive(Storage & Warehousing,
Material Handling, Protective Packaging,
Procurement, forecasting and Information).

Objectives of Logistics
Management
The objectives of logistics management are
summarized as under:1.Right Response (Ability to meet the service
requirements of its customers
2.Right quality ( Consistency in quality)
3.Right Quantity (Maintenance of minimum
possible level of inventory required for a
desired level of customer service)
4.Right Value(Dontlet products remain in the
stock, its value will decrease, cost will
increase)
5.Right Costs Trade-offs (This objective
ensures a proper balance between total
logistics cost & a desired level of customer
service performance)
6.Right Information (Accurate, specific & real
time
informationdetermines the success ofany
logistics system)

The logistical resources are as under:a) Information

b) Forecasting

c)Inventory Strategy
d) Inventory Management
e) Transportation Infrastructure
f) Transportation Regulations
g) Transportation Management
h) Warehouse Management
i) Storage
j) Material Handling
k) Packing

Role of logistics
The roleof logistics is multifarious and is
developed and formulated year by year as the
logistics strategies reformed.
. Logistics

role include the following:-

Inbound and outbound logistics management,

Fleet management,
Warehousing management,
Materials handling,
Order fulfillment,
Logistics network design,
Inventory management
Updating logistical information.

In nut shell, we can say that Logistics involves

delivering the right product in right condition at the
right time and at the right cost to the customer.
Generally we can say that the role of Logistics is that
part of Supply Chain management that enables
effective and efficient storage and flow of goods from
point of origin,then it goes through the procurement,
manufacturing and physical distribution cycle, to the
point of consumption by the customers.

Key Differences Between Logistics and Supply Chain

Management
The following are the major differences between logistics and
supply chain management:
1. The flow and storage of goods inside and outside the firm
is known as Logistics
Whereas all the movements and integration of supply chain
activities is known as Supply Chain Management
2. The aim of Logistics function is complete customer
satisfaction. On the other hand, the aim of Supply Chain
Management is achievement of substantial competitive
advantage.
3. The organization involved in Logistics may be one
Whereas more and more organizations are involved in Supply
Chain Management.
4.Supply Chain Management is a larger and multi agencies
involved in the concept as compared to Logistics

Whereas Logistics is only an activity of Supply Chain

Management

LOGISTICAL ORGANIZATIONS & PERFORMANCE

MEASUREMENTS
Introduction
Business organizations need performance
measurement and controls for efficient functioning of
logistical and connected activities. For the concept of
integration of logistical activities and derive results out

of it, there is a requirement of a system to asses it and

that is Performance Measurement.
Performance Measurement and Management has been in discussion of
both academics and logistics scholars in both private and public sectors
for several years .
Performance Measurement in Logistics Organizations is the various
Performance results, which indicate the efficiency of an organization's
logistical Capability.

Logistics Organizations
The organizational structure is different for each type of
Logistics Function. It depends on the type of products &services
that the establishment set up is designed for.

The structure of logistics organization will vary depending on

the establishment and the products that the setup is designed
for.

Top Level Management

A general & standard type of logistics organization will have a

Top Level Management headed by the Chairman followed by
the Managing Director and the respective Directors and
Executive Directors. These directors will be heading respective
Departments as per the wish of the Chairman.

The Board of Directors is headed by the Managing Director

who holds meeting and conferences as per the directions or on
behalf of the Chairman and minutes of the meeting are
prepared. The executive staff does the follow up actions on the
respective points and gives a feedback to the Chairman &MD.
This is the usual style of functioning of a general Corporate
Organization which may vary as per the wish and desire of the
Top Level Management or the Chairman.

Execution of the Orders of the Top Level Management

The execution of the orders of the Top Level Management is

executed on ground by the respective Executive Officers.

At the top of the executive section of the Organization,there will

be a Chief Executive Officer followed by Chief Operational
Officers as the case may be. All these executive officers set up
is not sacrosanct but an arrangement.

There can be General Managers, Deputy General Managers

and Assistant General Managers followed by the respective
Departmental Managers and the lower level managements
depending upon the structure of the Organization.
This set up of the hierarchical managerial arrangements will
change as per the wish and desire of the Top Level
management.

The important factor to be understood here is

that for a Government Organization, such an
organizational structure will be fixed and not any change is
expected unless moved officially and approved by the
Government.

Middle level management will be occupied by the assistant

managers and the low level management consists of the
supervisors and the executives.

Classificationof Logistics Performance Measures

It can be classified into two as under :1.Internal measures

a) Financial (operating cost)
b) Nonfinancial(Productivity, Asset, Management,
Order fulfillment, Quality)
2.External measures
a) Customer Perceptions(Service quality,
Reliability, Responsiveness, Relationship)
b) Innovations brought in the system(Best
practice in the industry)
c)Increase in productivity

OBJECTIVES OF PERFORMANCE MEASUREMENT SYSTEM

There are three different methods by which the performance

can be measured. They are as under:Monitoring: The performance of the complete organization
from the entire point of view is taken into consideration and an
assessment is achieved at
Controlling:After monitoring the entire activities, the controlling
authorities go into the controlling aspects.
Directing: Finally where it is required to direct, the authorities go
into the final task of directing

Performance items which need performance

measurements
1. An excellent image of operation of the business
2. Measure how much is the waiting time for customers
3. Quick response on orders
4. Transactional deedsSimplification
5.Economies of Supply chain
6. Speedy turnover of goods

INTEGRATED LOGISTICS MANAGEMENT (ILM)

Introduction
Integrated Logistics Management is a combination of Procurement,
Production & Physical Distribution Function to sustain in the highly
competitive wholesale &retail market, dominantly.

Definition:Integrated Logistics Management(ILM)

ILM is a technique which has been formulated byintegrating
the procurement, production and physical distribution
functions to meet the customer demand in time.
Procedure followed in ILM :The first step is to anticipate and formulate the demand of
the customer and deliver the goods with speed, accuracy
and cost effective, using the required logistical resources

where necessary with an aim to achieve utmost customer

satisfaction.
These resources range from human resource to technology,
material, transport, inventory management&Information
Technologyetc.

Objectives of Integrated Logistics

Management System
The objectives ILM are the following:1. Better and Superior Customer Service
2. Higher productivity and reduce logistics cost by integrating all
three functions of procurement, production and physical Distribution
3. To avoid same logistical functions to be repeated by different
departments & the development of a professional Integrated approach.
4. To monitor the performance of the existing logistics system to
ensure that there is a continuous progress in the entire business
structure.
5. Reduce the customer waiting time for his service because all
business activities are integrated under one umbrella of Management.

Concept of Integrated Logistics Management

System

The concept of integrated logistics system

isformulating and activatingintegrated and interactive
functional processes required for the development or
processing of materials to make it finished products
incorporating all three functions of procurement,
production and physical distribution all under one
establishment. It is a corporate level infrastructure
organized at a grand investment.
To operate effectively the system utilizes the required
support systems availablein the Organizationto achieve
an optimum level of all round business standard and
customer service.
Although originally developed for military purposes, it is
also widely used in commercial product support in
Customer service organizations. Information Technology
and other technical expertise are of highest order and
will have its own research and analysis wing for
achieving a competitive edge in its field of
specialization of the project.
FUNCTIONS OF INTEGRATED LOGISTICS MANAGEMEMT

Procurement function of logistics management ensures smooth

flow of raw materials, certain parts and components of specified
quality & quantity of items as per planned business operation
set up in the firm from quality certified suppliers to the
production centers.
This function includes 6 sub functions as shown in the diagram.

2. Production Function
Production function of logistics deals with efficient and
effectivemanagement of work in progress inventory and its
flow between different stages of manufacturing.

There are 6 sub functions of this function as shown in the

diagram shown below.

3.Physical Distribution Function

Physical distribution function refers to the movement of
finished goods from the last point of production to the
customers or end users. So it facilitates marketing and sales

performance of the enterprise by means of timely and

economical product availability.
There are 6 sub functions of this function as shown below.

Diagram of Integrated Logistics Management

(ILM)
Integrated logistics system is an interface of
procurement function, production function and physical

distribution function in order to achieve a basic logistic

mission of the best possible customer service at the
least possible cost.
In order to sustain in the competitive market place and
the retail market dominantly, managers were of the
opinion that it is the need of the hour to develop an
integrated logistics system by integrating all three
functions that have been explained earlier.
Integrated logistics system refers to a set of activities
concerned with storage and flow of all materials,
information and control system in a cost effective
manner as shown in the diagram below.

In the above given diagram of ILM, the circle represent the

procurement, production and physical distribution functions
respectively and the six small circles inside represent the 6 sub
functions in each as explained earlier.
The flow of customer service as shown by the bottom arrow right
from the procurement onwards. The consumer part has been
shown on the extreme right after the physical distribution circle.

Inventory Forward Arrow

In an ILM mission, the flow of goods or inventory
(products) is in forward direction to ensure availability
of goods at the point of use in time as per specifications
and information is exchanged between procurement &
production centers.
Cash Arrow
The arrow in the backward direction to the procurement
function shows the invoice financial transaction with
the production center.
Information Arrow
The flow of information is in both directions for
activationand improvement of the total system.
The forward direction of informationflowarrow shows
availability of goods, order processing, and status
trading, legal documents and warranty manuals etc.

In the same arrow there is a reverse direction of flow of

information which shows quantity feedback, customer
order, procurement quality, quantity, specification,
timing, production & dispatch planning etc to facilitate
co-ordination function between the production and
physical distribution function.
Value Arrow
The value arrow at the top in between the production &
the physical distribution (second & third big circle)
shows the value of the products forwarded to the
distribution section for sale in customer service. For
calculating the cost of production of any particular item,
This data is very essential for the physical distribution
Managers.

Inventory flow
What isInventory?

Inventory constitutes one of the most important

elements of the logistics system dealing with the

supply, manufacturing &distribution of goods and

services. In fact inventories are common to
farms, manufacturers, traders, hospitals,
temples, prisons, zoos, universities
&Governments etc.
In logistics management, inventory is any
valuable material resource of an enterprise
awaiting future sales, use or transformation.
It involves stocking of raw materials, in-process
inventory, finished goods,and goods under
packaging, tools & equipments, spares and other
items in order to meet an expected demand or
distribution in future. In this section of business,
there is maximum financial investment involved
of the establishment

What is Inventory Management?

Inventory management includes several activities

such as the following:1. The stock in hand of materials and other items
at a given time
2. An itemized list of all physical Assets held in
the establishment

3. To determine the quality of items in hand

under inventory management
4. To find out the value of all types of inventory
held by an organization at a given time(Financial
Accounting)

Functions of Inventory Management are as under:-

1. Balancing supply & demand

Production & demand do not match therefore it is to be
balanced in the inventory system management
2. Periodic Variation
Depending upon the season, the demand will vary and to
cater for such variations, inventory has to be updated
3. Scale Economics
Distribution of inventories is done in economical lot
sizes for system efficiencies.

Importance of Inventory Management

1. Inventory management is a very responsible
profession and the section manager and the employees
are to be specifically qualified in this profession
because there is greater investment of the establishment
in it.

2. The life cycle of the products are to be closely

monitored to see any deterioration in its quality .The
perishables and non-perishables are very sensitive items
whichneeds systemized monitoring.

What does Inventory flow and its management involve?

1.Inventory flow and its management involvethe

complete study and controlling of the ordering,
storage and usage of components that a
company will use in the production of the itemsit
will sell.
2. Also the supervision and controlling of
quantitiesof finished products for sale ensuring
the quality and total cost of production.
Why do we carry Inventory?

We do carry inventory for the following

purposes:1. To meet production requirement
2. To support the operational requirement
3. To consider the customer service aspect
4. To stock for future expectations

5. To meet the forecast requirements of

respective products
6. To carry out replenishment
uninterruptedly(Without any breakage in supply)

What is the need of Specific Attention of Inventories?

A regular, systematic handling,inspection, and

surprise checks of Inventories is a must or else
itcan create major financial setbacks tothe owner
either in terms of inventory quality deterioration
or an inventory shortage.
Theft and pilferages in inventory can only be
found out by carrying out a periodic surprise
checks and balances.
To ensure thatproper warehousing techniques are
to be used for placing and displacinggoods inside
the warehouse.
To know that the person in charge or the Manager
of the inventory department carry out checks
item wise, as a principle and the records of such
inspectionsare maintained.

Classification of Inventory
Strategies are as under :-

Managements

There are several ways in which inventories are

classified and it depends on the type of the
products being manufactured in the Firm.
However to study them, we classify it as under:-

1. Nature or condition of materials or

Products
a) Production Inventories
b) Maintenance, Repair, Operating (MRO)
inventories
c) In Process inventory
d) Finished goods inventory

2. The just-in-time type

In this method the companies plan to receive
items as and when they are needed rather than
maintaining high inventory levels in the
warehouses.

3. Inventory of Products or Materials Required for

sales:In this type inventories, materials or products as per
delivery schedulesrequired for sales are made available.
INVENTORY CONTROLS

There are various methods of inventory controls which are

as under:-

1. Selective Control Technique

ABC analysis divides an inventory into following categories:a) "A items" are those which are with very tight control and
accurate records,
b) "B items" are those which are with less tightly controlled
and good records
c) "C items" are those which arewith the simplest controls
possible and minimumrecords.
2. VED(Very Essential, Desirable)type items
3. SAP (Scarce, Available, Plenty) type items
4. FSN (Fast, Slow, Normal) type items
The above system would require qualified persons to handle
the inventories because of its sensitive and complicated
classifications as above.

Modern Inventory Control Systems

1. Material Requirement Planning (MRP)
2. Manufacturing Resource Planning
3. Distribution Requirement Planning

4. Just- In- Time System (Means the inventory activity to

be carried only when it is required)
5. Vendor Managed Inventory ( The supplier takes charge
of inventory management of product and manages the
replenishment process based on the consumption pattern
of the customer
6. Automatic Inventory Tracking System
7. KANBAN(Means a signboard or label used as a
communication tool in the inventory system to support
JIT system).
The philosophy behind it is, Use One by One. A
KANBAN is attached to every box of parts as they go to
assembly line and entries are made as and when they are
consumed and returned to serve as a record.

Inventory Related Costs

The various types of inventory costs are as under:a) Inventory Cost is the total production cost
b) Carrying the product through the required mode and its
Cost
c) Ordering Cost concerns the cost incurred in processing
the order in the channel

d) Warehousing Cost refers to the cost involved in the

entire storing process
e) Damage Cost is that which has caused to the Firm due
to any damage while production or transportation etc.
f) Pilferage Cost is incurred in case there has been any
theft or pilferage due to security lapse etc.
g) Obsolesce Cost is due to change in technology or due
to any deformity or any chemical reaction or non
availability of substitute
h) Exchange rate differentials due to fluctuations while
doing any exchange with any other product.

Information flow
What is Information Flow?

Information flow Consists of Data & Results of Inventory&

Transportation, Facilities, Customer Orders, Transportation,
Facilities, Customer Orders, Customers & Funds etc.
The transmission of above information across the supply chain
& logistics management channel for operation of the mission in
hand effectively to achieve a satisfactory customer service and
profit generation for the Firm
How does it work?

The starting point of the information in logistics is Customer

Order. These orders are processed and the supply chain action
is activated for an efficient customer service and its satisfaction.
Thus planning the material flow in the supply chain of the
enterprise is essentially dependent on the information flow in
the logistics & the supply chain management system.
Transmission of the data of these details are the maximum
emphasised information because the business depends on
these details for an effective customer service and the profit
structure and that determine the credibility and consistency of
the organization.
.

Role of Information
1.Reduce response time of the customer to get
his item
2.Redesign the business processes for
continuous improvements
3.Streamline activities to reduce costs
4.High valued supply relationship
5.Enhanced customer services for competitive
advantages
6.Attainment of a Global standard & access to
world market.
Importance of Information
Information is the key to the success of a logistics
operation. This information should be in time and it should
have quality.
With the advancement of information and communication
technologies the speed of information analysis and flow
has increased tremendously and it benefitted the logistics
operations.

Present systems available to get the

Information
1.Logistic information system (LIS) is a set of
computer hardware&software that gathers,
organizes, summarizes & reports the
Information for use by managers, customers
and others.
2.Integrated Information Technology solution
for Logistics&Supply Chain Management
connected by means of Electronic Data
Interchange(EDI), Enterprise Resource
Planning(ERP), Intranet, Extranet & Internet
3.Management ofInformation System (MIS)

What is Electronic Data Interchange(EDI)

1.EDI is Electronic Data Interchange used in
Logistics Information System(LIS)
2.EDI refers to the direct transfer of
information between computers of trading
partners.
3. To achieve the goal of paperless
transactions, there is a need for a common
standard for recognizing interflowof
information.
4. The information aredocumentsused by
trading partners,such as purchase orders.

Major Benefits of EDI

1.Reducing transaction cost
2.Increasing accuracy and productivity
3.EDIs are the main electronic component of
information stored in the Enterprise Resource
Planning (ERP).
4. EDI assists in Enhancing Supply Chain
Relationshipsbyimproving quality of decisions
to exploit business opportunities

Operational
Objectives
Integrated Logistics

of

The following are the objectives:-

1. Ensure better customer service by appropriate

value added service for superior customer
service
2. Ensure higher productivity by means of
combination of all 3. functions of procurement,
production & physical distribution
4. Cut short the extra or additional cost
incurrence for the product and make available
products to customers at reasonable rate

5. Avoid repetition of similar type logistics

functions
6. Proper monitoring the performance of existing

logistic system for continuous progress in the

system

Barriers to Integration
Barriers are obstructions or obstacles that prevent efficient
functioning of the integrated logistics system (ILS).
The probable barriers are as under:1. Organizational Structure
The structure of the organization must be designed in
such a way that it should assist in its function and in no
way there should be any shortcoming in terms structural
requirements
2. Measurement System
Measurements in terms of performance of the
organization in all respects must be monitored regularly to
get the designed results
3. Inventory Ownership
Inventory ownership is the detailed planning of the entire
structural study of it to enable timely sale, forecast,
replenishment of the products etc, which can be carried
out in time and the investment in inventory can be
planned.
4. Information Technology

Use of the latest information technology in the

organization for its functions
5. Knowledge transfer of Capability
The information technology set up must utilize the
knowledge transfer technique so that there is an overall
development in the entire functions of the organization.

LOGISTICS PERFORMANCE CYCLES

The Organization and its customers are connected together by the
network system, communications and by transportations. This bond
among these people and their various activities formulate the
performance cycle.
There are three different sets of performance cycles. They are as
under:-

Procurement Cycle
(Inbound logistics)

Several activities are required for an orderly flow

of materials to manufacturing or distribution
complex for the required production. The process
involved in this first sequence of production is
Procurement Cycle.

The activities under this cycle are as

under:1. Sourcing the requirement
In this section whatever is required as an input,
the sources from where they are available must
be planned well in advance.
2. Order placement for materialization
This section deals with the placement of
necessary orders after taking into consideration
the existing materials
3. Transportation of materials
Transportation of these materials to the place
where they required to be stored
4. Receiving the transported materials
There should be a proper arrangement for storing
the materials safe and as per priority in a
warehouse which should follow the orders on the
subject.

Manufacturing Support Performance Cycle

This cycle provides production required logistical

support for the production.
In this cycle we decide our production action
whichinclude the Following:1. What, when, and where the production
required as per forecasting and customer
demands.
2. The aim is to support all manufacturing
requirements in the most efficient manner.
3. The production activities are limited to internal
management; therefore, the variance &erratic
(disordered) supply can be controlled. This
enables the operators timely and continuous
production operations.

PhysicalDistributionPerformance Cycle
(Outbound Logistics)
It involves processing & delivering customer
orders. The activities that take place under this
cycle are as under:Transmission of received Orders (demand)

The orders that have been received are to be

transmitted to the concerned section in time
Processing the Demand Orders
The order processing is an electronic activity and
all concerned in the distribution are activated to
get the customer the ordered in all respects
Order selection
Orders are to be selected for deciding the
priorities and for sifting them to the correct
channel to avoid any wrong packaging
Transportationof the Items
Once the materialization in all respects has been
completed the item is transported to the
customer section for preparation of delivery
action
Customer delivery of the Demanded(Ordered)
item
The final stage of the physical distribution cycle
is the delivery of the right item at the right cost
with all connected information needed for the
customer followed by a feedback system from
the section of correct delivery and of the
performance of the product.
Physical distribution is integral to marketing and
sales performance because it provides timely,

cost effective and economical product

availability.
Theabove three performance cycles combine to
form supply chain network.
4017793
END OF UNIT 2

UNIT 3(Only for Students Study Purpose)

RETAIL LOGISTICS
Meaning of Retail Logistics
Retail

logistics is the process of managing the flow of goods

from the source of supply to the customer.

Large retailers deal in a wide variety of products. This has
created a need for a systematic planning of movement of
numerousgoods until they are delivered to the customer.

What does it involve?

It involves the following:1. Retail logistics ensures that everything is in place to offer
better delivery and service at lower prices by way of
efficient logistics and added value.

2. Retailing is one of the activities within the overall distribution

function. Thus we can consider retail logistics as one part of the
physical distribution systems.
3. The terminology of logistics and the boundaries between different
logistics activities are not very clearly defined or fixed.
4. Retail logistics includes transportation of goods to the points of
retail sales and storage there.
5. It also covers any additional activities for door delivery of goods to
the customers.

It takes care of the Following Two Functional Aspects:-

The increased product variety in stores has

forced the retailer to follow an effective logistics
system.
The functionsare:a) The flow of products from the producer or
intermediary to the warehouse
b) To provision themeans of transportationof
productsto reach the retail units and also to sell the
product and deliver it to the right customer.

Advantages of the Retail System

a) There is satisfaction to the customer
By ensuring the right product to the right customer, at the
right place and at the right time. This requires a planned
approach right from the starting point of processing the
order till the point of delivery by the retailer.

b) Profitability
Profit achieved by means of fulfillment of orders in a cost
effective manner.
c) It ensures the availability of infrastructure
It

ensures

the

availability

of

infrastructure

such

as

warehousing, transport, inventory and administration. It needs

an

inter-relationship

between

these

elements

that

are

effectively required to be coordinated.

d) Provide value added service to the Customer
Retail logistics system attempts to add value for the customer.
For this purpose, the cost elements in the supplychain are
brought under the direct control of the retailer.
e) Availability of a central distribution center hence well co-

ordinated.
Depending on sales volume, retailers create central or regional
distribution centers. They decide on major investment in
property, plant and equipment with associated overheads.

The functions incorporated in the retail logistics are

summarized as under :-

i.

The physical movement of goods

ii.

The holding of the goods in stock holding points

iii.

The holding of goods in quantities required to

meet demand from the consumers

iv.

The management and administration of the

process in modern complex distribution system.

Channels of Distribution
What is a distribution channel?
A Distribution Channel is a set of interdependent organizations
or establishmentsthat help make a productavailable under their
brand for use or for consumption by the consumer or for doing
further business under his arrangements.
Distribution Channel Intermediaries are,Firms or individuals
such as wholesalers, agents, brokers,sub- letters or retailers
who are involved in the business of the said products

Wholesaling
Wholesaling refers to all activities involved in selling bulk
products to those buying for resale, retailing or business
Purpose.
The activities that take place in this process are:-

Selling and Promoting their product

Buying in Bulk from factory or from approved Sources
Bulk-Breaking (Splitting into small lots)
Warehousing after buying in bulk which are fit for keeping
in the warehouses
Transportation of the products to the place of business
Financing for doing further business
Risk Bearing(Refers to consistency of Quality of the
products of perishables and non perishables))
The other activities are:-

Information about the Trend in theMarket of the particular

product

Giving information to suppliers and customers about

competitors, new products, and price developments with
an aim to bring a particular set of customers in their favor.

Tips of Market Controls and necessary Advice

Tips on product sale control methods, its accounting,
layout and training the employees on their clerical jobs etc
are promoted and advices given to the retailers by
wholesalers.

Functions of Distribution Channels

1. Products Flow
Distribution channels perform a number of functions that make
possible the flow of goods from the producer to the customer.
These functions must be handled by respective managers in the

channel. Publications and advertisements through all latest

media is maximum resorted to by eminent Distributors.
2. Functions Vary from channel to channel
The distribution function can vary from distribution channel to
channel depending upon the products, but the functions as
such cannot be eliminated.
3. Accuracy and promptness in Customer Service
They make products available very promptly when, where,
and in the sizes and quantities that customer wants at
reasonable cost.
4. Improve the efficiency of distribution function
Distribution channels provide a number of logistics orphysical distribution
functions using latest technologies that enable to increase the efficiency
of the flow of goods from producer to customer. The aim is to achieve
Zero waiting time for buying Products.

5. Reduction in the Distribution Channel

This is a very important factor because more the number of channels of
distribution more are the total cost incurred on products.
The reduction in Distribution Channels createefficiency by reducing the
number of transaction channels.
Shorter the distance of the channel through which the product traverses,
better is the retention of quality and reduction in damage to product

How dothesefunctionsoccur?
These functions occur in the following way:1 .Breaking bulk
The first function is called breaking bulk. Wholesalers
and retailers purchase large quantities of goods from

manufacturers but sell only one or a few at a time to

different customers after breaking them into small lots
2 .Creating Groups
Secondly, Distribution channel intermediaries reduce
the number of transactions by creating groups of
productsproviding a variety of products in one
locationso that customers can conveniently buy each
group of items from one seller at a time and that set of
arrangements continues.
3 .Transportation and storage of goods
The transportation and storage ofgoods are another
type of physical distribution function. Retailers and
other distribution channel members move the goods
from the production site to other locations where they
are held until they aresold to customers.
4 .Facilitating functions
Distribution Channel Intermediaries also perform a
number of facilitating functions, and these functions are
that which make the purchase process easier for
customers and manufacturers.

Physical Distribution
What is meant by Physical Distribution?
Logistics has the objective of delivering exactly what the customer wants
and at the right time, in the right place, and at the right price and inthe
right condition of goods.
While planning for the delivery of goods to customers, marketers have
usually looked at a process which is termed as physical distribution

A good distribution network in the distribution system encompasses a

number of key areas of the business that are to be considered and
questioned for the smooth functioning of the process of products
distribution.

Critical questions that need to be answered in physical

distribution are as under:1. What are the storage capacity and limitations associated with the
existing distribution network?
2.In order to be competitive,what type of servicestandards are required
for major markets being served?
3. What is the one-timeInvestment required for the logistics
Establishment set up creation?
5.Is there anyalternate arrangements to be planned, in case the planned
one does not work?
Proper answers to all the above self asked business questions are to be
reached at satisfactorily for setting up a successful distribution function.

The Internet in the Distribution Channel

By using the Internet, even small firms with limited
resources can enjoy some of the same competitive
advantages as their largest competitors for making
their products available to customers at all level
including international level at low cost.

E-commerce can result in radical changes in distribution

strategies.
Today most of the goods are produced in large quantity,
and in most cases consumers do not obtain products
directly from manufacturers.
WiththeInternet, however, the need for most of the
intermediaries will change.
It is possible in the futurethat channel intermediaries
who physically handle the product may become
nonexistent because of the introduction of zero
inventory system concept etc.,which is fast spreading
due to the advanced development in information
technology.

Third party logistics

What is meant by 3rdParty Logistics
3rd Party Logistics is using external organizations and
agencies like transportation, warehouses and other
assets to carry out logistics functions smoothly to
achieve an effective customer service.
The agencies who provide such services are expert in
one of these activities. However the one who provides
the total logistics services and offers entire logistics
solutions to customers problem is called the
Integrator

Third party logistics agents are highly trained, licensed

and qualified professionals having extensive knowledge
of tariffs,schedules and customs regulations, and know
how to ensure the fastest, safest, and most efficient
route for delivery.

The role of Third party Logistics ServiceProviders (LSP)

The role of Third party logistic service providers today

is not restricted to storing and distribution but rather to
serve as a partner by identifying problems and
implementing solutions that add value to supply chain.
Real-time data sharing and ongoing timely
responsiveness is crucial for a successful supply chain.
According to this definition, third-party logistics includes any form of
outsourcing of logistics activities previously performed in
theOrganization.
For example, if a company with its own warehousing facilities decides to
employ external transportation, this would be an example of third-party
logistics. Logistics is an emerging business area in many countries.

3PL helps to guide the shipment from one port to

destination point by navigating customs and regulatory
requirements seamlessly. Selection of a good logistic
provider is hence critical for Supply Chain
competitiveness.

3 PL include the following:Public warehousing,

Contract warehousing,
Transportation management,
Distribution management,
Freight consolidation.

3PL has the sub sections as under :1.Customer opting for outsourcing
2.Customer opting for in sourcing
3.In house operation as per products sourcing (in
sourcing or outsourcing)
The specific servicesthat 3 PL can provide are :1. Warehousing facilities
2. Transportation of all modes
3. Inventory of various types
4. Orders through marketing
5. Customers come forward for business alliance
6. In addition to the above whatever support service an
agent is specialized, in can be incorporated as a 3PL
provider.

However it depends upon the type of products that the

firm is involved in and the professional competency of
the 3PL agent.

A 3PL provider may take over all Responsibilities of the

Following:1. Arrangements for receiving a consignment,
4. Warehouse and Storage required for the
consignment
3. Requirement of Value added service
4. Need for shipping the consignment,
5. Provision of transportationof all types of modes as per
requirement

The concept of a fourth-party logistics (4PL)

Anew trend has emerged where in the IT firms are providing

logistics solutions built around domain knowledge provided by
third party logistics companies. This new breed of companies is the
4 party logistics service providers, the 4PL Firms.

Structure of 4PL is as under:There are agents namely IT,Consultancy agency

organization and other specialized supportfunctionaries
in addition to the 3PL,which constitute the 4PL and

when they all work together there is an excellent

performance achieved for the required logistics taskfor
a satisfactory customer service for the organization.This
combination of specialized agents in supply chain and
logistics is called Fourth Party Logistics.
The aim being to provide maximum overall support for
efficient logistics and customer service.
Thus a fourth party logistics provider is a supply chain
integrator that assembles and manages the resources,
capabilities and technology of its own organization with
those of complementary service provider to deliver a
comprehensive supply chain solution.

The advantages of 4PL

Whereas a third-party logistics (3PL) service provider
targets a single function, a 4PL targets management
targets the entire process like
Truckers, forwarders and others, essentially taking
responsibility of the complete process for the
customerservice so that the customer gets his item
safely in time.
Today, there is a need to meet increased levels of services
due to e- procurement, complete supply visibility, inventory
management and requisitetechnology integration.

Now Corporate are outsourcing their entire set of supply

chain process from a singledesign, make and run integrated
comprehensive supply chain solutions.
As the fourth party logistics provider caters to multiple
clients, the investment is spread across clients-thus taking
the advantage of economies of scale.

GREEN LOGISTICS
What is the Concept of Green Logistics?
Green logistics was a concept to characterize logistics
systems and approaches that use advanced technology
and equipments to minimize environmental damage
during logistical operations.
What is the Role of Logistics in Creation of Green
Logistics?
Green logistics describes all attempts to measure and
minimize the ecological impact of Logistics activities.
This includes all activities of the forward and reverse
flows of products, information and services between the
point of origin and the point of consumption.
Logistics Companies aim to create a sustainable
company value using a balance of economic &
environmental efficiency. Logistics has a whole range
of measures to protect the environment and
NationalGreen Resources. Some are new, others are
known for many years.

How can Green Logistics help in environmental protection and

Resource conservation?
The customer, market and product are connected with
the concept of green logistics
Structures and planning to create a green logistics
environment
Processes, control and measures to assist for a good
and clean environment
Technologies and resources to be effectively used for
achieving green surroundings
All employees, suppliers and service providers
connected withthe organizationshould pay attention to
maintain the concept of green logistics. It is the order
of the day & present generation should pay specific &
serious attention to this fact for our green rich future.
Some Examples that can maintain Green Logistics
More efficient packing to avoid spillage or
contamination
Route optimization so that unwanted mileage by
transport and pollution thereby can be avoided
Load optimization to avoid using more number of
transports to carry a particular load which could have
been transported by one transport.
Formation of corporate networks maximizing logistics
processes by providing an efficient IT support which is
connected by logistics service. This will add efficiency
and accuracy in performing the ensuing task.

Removal of obsolete and rusted equipments and

redundant transports etc from the place of work and
the immediate premises of work area and such
materials to be reused by fabricating them to avoid
pollution.

Reverse Logistics
What is Reverse Logistics?
Reverse logistics is the reuse of products and materials in a given
situation that it has gone bad or unworthy of continuous use buy a
consumer.
In short, we can say that it is the process of moving goods from their
final destination for the purpose of procuring some value, or proper
disposal and reuse etc.
Therefore, it has to be dealt with great importance because logistics and
supply chain establishments are increasing day by day,hence, there is a
chance of degradation of green logistics if principles of proper reverse
logistics is not followed.
The ultimate aim is to help to maintain a ecological balance of the nature
and in no way the logistical functions degrade this balance of nature.

What does it involve?

The reverse logistics process includes the management

and the sale of surplus as well as returned equipment
and machines from the hardware leasing business.
Normally, logistics deal with events that bring the
product towards the customer.

In the case of reverse logistics,it happens the other way

round wherein the products move back to the seller for
the required action decided between seller & customer.

Method to Ensure that it works is as under:An effective logistics management operation should yield 5 key
results as under:1. Spend more money for green logistics thereby
Increase company revenue
2. Procure latest machineries for production and
reduce wastage rate and bring down operating
cost structure and stabilize cost of products
3. Reduce overall usage of transportation and the
allied costs by using appropriate mode of
transport.
4. Follow modern method of customer service with
the provision required amenities for them
toimprove customer satisfaction.
5. Educate all those working in the logistics set up
and customers on this subject

What does reverse logistics Include?

The reverse logistics process includes the management

and the sale of surplus as well as returned equipment
and machines back to the seller. Normally,

Logisticsdeal with events that bring the product

towards the customer.
In the case of reverse logistics, the product goes
backward in the Supply Chain. That is to say, goods
move from the customer to the distributor or to the
manufacturer.

What are the Processes involved in Reverse Logistics?

The processes as under:When a manufacturer's product normally moves

through the Supply Chain Networkit is to reach the
distributor or customer.
Managementof products after the sale of the product
involves reverse logistics. If the product is defective,
the customer would return the product.
The manufacturing firm would then have to organize
shipping of the defective product, testing the product,
dismantling, repairing, recycling or disposing the
product.
Disposal of the product should not pollute the
environment

Scope of Reverse Logistics is:1. Growing public concern about environment pollution
2. Awareness of Government Regulations on product
recycling & waste disposal

3. The ethics of Consumerism has further ensured that

there is a real value for their money when they buy any
product and it has after sales value.
4. Competition has improved to a great extent for an
efficient activation of reverse logistics.

DESIGN OR FLOW OF REVERSE LOGISTICS

The following Procedure takes place:1. First of all, Product Distribution to customers
2. Rejected products are received by company
3. Company recycle the product
4. Checked & refurbished
5. Product goes to Warehouse
6. Further distributed back to customers after repair or
refurbishment, still if it doesnt work the product put
through salesagain after doing up the product if it is
worth reusable as ascertained by the experts.

LOGISTICS&COMPETITIVEADVANTAGE
A competitive advantage is that which distinguishes
from the competitionthat exist in the highly competitive
market environment who are striving to get a
competitive edge in their respective business field.
There is an emphasis to create an impression in the in
the minds of our customers to establish who is in the

forefront for a particular product and the corporate

sector who has achieved it, has the competitive
advantage in that particular field of products. Whether
you are an employee, a businessman in any country,
you need to have a clear competitive advantage and
communicate it to your customers.

The Determinant Factors to Achieve Competitive

Advantage are as under:1.

Know what do you Produce

Whether it is productsorservice, youve got to be very

clear on what you are providing to the customers. Use
new technology to have better and fast moving
products to ensure that it is cost effective.
2.

Target the Market and Who are your Customers

One should know who buy from you and how can you
make them more happier
This is not just a company or product, but you produce
for your customer to meet his needs. A company must
create clear goals, strategies, and operations to sustain
its competitive advantage over time and the products
that the company is producing.
3.

Decide upon the measures to achieve

logisticscompetitive advantage

Firstly,it is the ability of the organization to differentiate

itself, in the eyes customer, by its competition
providing good products.

Andsecondly, by operating at a lower cost, you arrive at

greater profit.
Considering the basis of success, commercial success
derived either from a cost advantage or a value
advantage, or, ideally both.
It is further indicated that the most profitable
competitor in any industry sector tends to be the
lowest-cost provider or the supplier providing a product
with the greatest perceived differentiated values.

LOGISTICS MIX
What is logistics mix?
When a products production procedures, price factor,
the information system, the financial operation factor,
transportation, ordering, processing the order,
warehousing, Inventory factor, and the IT etc when
clubbed together a logistics mix aspect is formulated.
This process is very sensitive and needs meticulous planning
for execution of the logistics work in hand in order to maximize
customer satisfaction and profit margins for the Organization.
Planners and dispatchers face a high variability of demand,
heavy traffic during peak hours, limited availability of trucks
and many other restrictions.
If just one item in the above mix fails, the entire plan
may collapse with customer receiving poor service and
more cost of the product, further, the reputation of the
firm also is adversely affected.

Logistics mix represents the following factors in the

following question forms:1. Transportation availability
(Own transport fleet or leased vehicles?)

2. What are the Facility decisions:

3. How are the Inventory management decisions
formulated:
4. What are the Communications decisions:

5.Hopw are the Invoicing, orders, demand forecasting,

sales reporting issues managed

6. Do we have Packaging or Containerization facility?

7.How are the schedule deliveries managed

LOGISTICS & CUSTOMER SERVICE

What is the importance of Customer Service

Customer service is an important element for making a
successful business. A business firm can have a popular and
wonderful product, but without excellent customer service, the
item will never be purchased by the customers.
The customer interacts with a company through anumber of
channels and the level of service that is afforded to the
customer goes a long way for achieving customer satisfaction
and in turn it may bring more orders of products for the Firm.

Most of the Firms think that their contact with the customer
is through the sales and marketing staff, but this is no
longer the case in this advanced field of information
technology.
It is very pertinent to note that todays customer interacts
with other departments such as shipping, quality control,
accounts or a repairs service before entering into a
purchase action .
Now a days there is a healthy practice of each of these
departments to offer the same high level of customer
service in order to maintain excellent Customer Service

Role of Customer Service in Logistics

The customer service plays an important rolein
logistics management. In the world of logistics
customer service is of utmost important.
As a shipper you will have a lot of questions right from
the time the cargo is picked from its origin until it is
delivered to its final destination.

A Logistics partner is the company that promises to

deliver your goods on time and cost-effectively.
One breakdown in the process can be disastrous to
the company. Hence it is vital that the customer be
kept informed of any developments in the process.

There are three Transaction Factors that take

place in Customer Service as under:1. Pre-Transaction Elements:Customer service factors that arise prior to the actual transaction
taking place.

Transaction Elements:
The elements directly related to the physical transaction and are those
that are most commonly concerned with logistics.

Post-transaction elements:
This involves those elements that occur after the delivery of the
product has taken place.

What is Service quality in Customer Service

1. Service Quality is a measure of the extent to which the customer is
experiencing the level of service that he or she is expecting.
2. Service quality is the match between what the customer expects
and what the customer experiences.

Formulating logistical strategies

What is formulating logistical strategy?
Formulating a logistical strategy is that, when we are
establishing an effective logistics strategy, there is a
need to understand, what is the degree of
logisticsoperation impacts your plan of action
customers satisfaction.
The timely delivery of materials for the inbound logistics
and providing finished products for business purpose is
extremely important for the sustenance of the
Establishment in this highly competitive market.

Logistics strategy is a broad term in corporate business,

which deal with the evaluation of the most cost
effective methodology of distributing goods in to the
market while retaining service level objectives with Firm
that it has planned to achieve.
If the business is to outsource the logistics operations,
make sure to use an organization that will work with
business organization hand-in-hand to assistthe logistics
aspect, in order to keep the supply chain system work
efficiently. The 3PL & 4PL are ideal for this purpose.
Consider these support facilitators as business partners
who would share all the market inputs with the Firm for
its credibility and customer satisfaction, because they all
know that customers are the backbone of any business
empowerment.

End of Unit 3

UNIT 4(Only for Students Study Purpose)

Warehousing

Warehousing: Function, Benefits and Types of Warehousing!

Need of a warehouse

A warehouse is needed to use it as a place for the storage or

accumulation of goods safely following all rules principles of storage of
goods. The function of storage can be carried out successfully by
providing all required facilities and security measures.
Warehouses are also needed to store goods or products manufactured
in excess of demand depending upon the season and availability of
cheaperraw materials.

By storing the goods throughout the year and releasing them as and
when they are needed, warehousing creates time utility and consistency
in cost of the products.

Type of Warehouses:
There are three types of warehouses as described below:

Private Warehouses:
The private warehouses are owned and operated by big manufacturers
and merchants to fulfill their own storage needs.
The goods manufactured or purchased by the owner of the warehouses
have a limited value or utility as businessmen in general cannot make
use of them.
The heavy investment required in the construction of a warehouse, some
big business firms which need large storage capacity on a regular basis
and who can afford money construct and maintain their private
warehouses.
A big manufacturer or wholesaler may have a network of his own
warehouses in different parts of the country.
There can be Cold storage, Feld warehouse, Distribution warehouse,
Buffer storage warehouse and Export and import warehouse as per the
requirement.

Public Warehouses:
A public warehouse is a specific storage facility that provides storage
facilities to the general public by paying certain charge for its utility.
Generally operated by an individual or a cooperative society. It has to
work under a license from the government in accordance with
theprescribed WarehouseRules and Regulations.
These types of warehouses are very useful for marketing agricultural
products and therefore the government is encouraging the Firms for
usage of these warehouses
A public warehouse is also known as duty-paid warehouse.
Most of the business enterprises cannot afford to maintain their own
warehouses due to huge capital Investment.
Outside Enterprises can meet their storage needs easily and
economically by making use of the public warehouses, without heavy
investment.
These warehouses are well constructed and guarded round the clock to
ensure safe custody of goods.
Locations of such warehouses are generally near the junctions of
railways, highways and waterways.
Provision of excellent facilities for easy receipt, dispatch, loading and
unloading of goods available. They also use mechanical devices for the
handling of heavy and bulky goods.

It supports businessman to serve his customers quickly with products at

reasonable and affordable costs by taking goods to regional stocks near
the important trading centers or markets.
They also permit packaging and grading of goods where it is required.
Receipts obtained from PublicWarehouses are good collateral securities
for borrowings money by providing these receipts as securities.

2. Bonded Warehouses:
Bonded warehouses are licensed by the government to accept imported
goods for storage until the payment of custom duty.
They are located near the ports. These warehouses are either operated
by the government or work under the control of custom authorities.

Functions of Warehousing:

1. ProvidingStorageFacilituy:
This is the basic function of warehousing. Surplus commodities which
are not needed immediately can be stored in warehouses. They can be
supplied as and when needed by the customers.

2. EnablesPrice Stabilization:
Warehouses play an important role in the process of price stabilization.

It is achieve d by the creation of time utility by warehousing

Fall in the prices of goods when their supply is in abundance and rise in
their prices during the slack season are avoided.

3. Risk bearing for the products kept in warehouse:

When the goods are stored in warehouses they are exposed to many
risks in the form of theft, deterioration, exploration in quality& fire etc.
Warehouses are constructed in such a way as to minimize these risks.
A warehouse keeper has to take the reasonable care of the goods and
safeguard them against various risks.
For any loss or damage sustained by goods, warehouse keeper shall be
liable to the owner of the goods.

4. Provision for Financing:

Loans can be raised from the warehouse keeper against the goods
stored by the owner.
Goods act as security for the warehouse keeper.
Similarly, banks and other financial institutions also advance loans
against warehouse receipts.
In this manner, warehousing acts as a source of finance for the
businessmen for meeting business operations.

5. Facilitates additional provision of Grading and

Packing:
Warehouses nowadays provide the facilities of packing, processing and
grading of goods.
Goods can be packed in convenient sizes as per the instructions of the
owner.

Importance of Warehousing In the Development of

Trade and Commerce:

1.Warehousing

or storage refers to the holding and

preservation of goods until they are dispatched to the

consumers.
2.Generally, there is a time gap between the production and
consumption of products.
3.By bridging this gap, storage creates time utility.There is need
for storing the goods so as to make them available to buyers as
and when required.
4.Some amount of goods is stored at every stage in the
marketing process.
5.Proper and adequate arrangements to retail the goods in
perfect condition are essential for success in marketing.
6.Storage enables a firm to carry on production in anticipation
of demand in future.

Benefits of Warehouses
1. Storage of Raw Materials for Regular
production:
Raw materials need to be stored to enable mass production to
be carried on continuously.
Sometimes, goods are stored in anticipation of a rise in prices.
Warehouses enable manufacturers to produce goods in
anticipation of demand in future.

2. Optimum Time utility:

A warehouse creates time utility by bringing the time gap
between the production and consumption of goods.
It helps in making available the goods whenever required or
demanded by the customers.
Some goods are produced throughout the year but demanded
only during particular seasons, e.g., wool, raincoat, umbrella,
heater, etc.
On the other hand, some products are demanded throughout
the year but they are produced in certain region, e.g., wheat,
rice, potatoes, etc.
Goods like rice, tobacco, liquor and jaggery become more
valuable with the passage of time.

3. Warehouses Store Surplus goods:

Basically, a warehouse acts as a store of surplus goods which
are not needed immediately.
Goods are often produced in anticipation of demand and need
to be preserved properly until they are demanded by the
customers.
Goods which are not required immediately can be stored in a
warehouse to meet the demand in future.

4. It enables Price stabilization:

Warehouses reduce violent fluctuations in prices by storing
goods when their supply exceeds demand and by releasing
them when the demand is more than immediate productions.
Warehouses ensure a regular supply of goods in the market.
This matching of supply with demand helps to stabilize prices.

5. RiskReduction:
Warehouses provide for the safe custody of goods. Perishable
products can be preserved in cold storage.
By keeping their goods in warehouses, businessmen can
minimize the loss from damage, fire, theft etc.
The goods kept in the warehouse are generally insured. In case
of loss or damage to the goods, the owner of goods can get full
compensation from the insurance company.

6. Packing and gradingFacility:

A modern warehouse provides facilities for processing, packing,
blending, grading etc., of the goods for the purpose of sale. The
prospective buyers can inspect the goods kept in a warehouse.

7. Able to Loan money using this as security:

Warehouses provide a receipt to the owner of goods for the
goods kept in the warehouse.
The owner can borrow money against the security of goods by
making an endorsement on the warehouse receipt.
In some countries, warehouse authorities advance money
against the goods deposited in the warehouse.
By keeping the imported goods in a bonded warehouse, a
businessman can pay customs duty in Installments.

Warehouse Lead- Time- Gap

A lead- time is the Gap or lapse of time between the placement of an

order and delivery process for materialization of the ordered item.

This lead time gap is to be managed by the firm and the customer is
required to wait this time gap because there may be an interim feedback

from the sales department that the item is under progress of

provisioning.

In the absence of finished goods or intermediate inventory, it is the time

it takes to actually manufacture the order without any inventory other
than raw materials.

RESPONSE BASED ORDER (QR),(AR)&(CR)

QR is quick response to the item asked for materialization and CR is

continuous response that takes place in the warehouse routine operation
structure.

Automatic Replenishment in warehousing (AR)

AR is Automatic Replenishment in a warehouse that is to say, when an
item is issued or the state of inventory level hascomedown, there is a
replenishmentof the said item required to be done in the warehouse.

The system plannedwith the help of IT is such that, there is an automatic

replenishment order that takes place in the system as indicator and the
replenishment action is executed by the operators.
The system then calculates automatically the replenishment quantity in
accordance with the maximum and minimum quantity maintained for the
product in the product master data.

ROLE OF INFORMATION TECHNOLOGY IN WAREHOUSING

Information Technologyhasbecomethe need of the hour and a necessity

in the logistics, particularly in warehouses.
Due to the advancement of IT,the opportunities for jobs required in
warehouses are increasing because most of the ware houses function
on latest IT networks for their inbound & outbound logistics.
Thus, the procurement of the necessary part is a collective effort
amongst suppliers, vendors, and the manufacturers.
It requires warehousing, distribution and logistics coordination which are
the most important parts of the supply chain.
As the warehousing activities are on the increase, it is only the
Information Technology that can substantiate the requirement of
warehouse functions.

MaterialsHandling
Definition
In a warehouse Material handling is an important function
for which qualified persons are required to handle.
The productivity of a warehouse is determined by the
efficiency of material handling function. Material handling is
highly labor intensive as compared to any other operations
in a warehouse.
Therefore, the cost incurred on the employment of persons
as operators isvery high. Most of the activities in material
handling require significant manual handling and hence the
benefits from computerization and improved information
technology are to be planned methodically to derive
maximum benefit out of it.

Involvement of Material Handling in logistics

Materialhandling involves short-distance movement
within the confines of a building or between a building
and a transportation vehicle.
It utilizes a wide range of manual, semi-automated, and
automated equipment and includes consideration of
the protection, storage, and control of materials
throughout their manufacturing, warehousing,
distribution, consumption, and disposal.
Material handling can be used to create time and place
utility through the handling, storage, and control of
material, as distinct from manufacturing, which
creates form utility by changing the shape, form, and
makeup of material

Role of material handling

Material handling plays an important role in
procurement, production and manufacturing sections of
logistics establishment functions.
The material handling operators use material handling
equipment to transport various goods in a variety of
industrial settings including moving construction

materials around building sites or moving goods into

and outside the ships.

Design of material handling systems

Efficient handling of materials needs sophisticated

material handling Equipments. Material handing is
integral to the design of most production systems. Now
a days modern technology assisted handling
Equipments are available in markets. If logistical and
warehouse activities are separated, more expensive
industrial trucks or overhead conveyors are required for
transportation. The high cost of using an industrial
truck for material transport is high ininput costs but it
will prove economical in the long term.

Types Material Handling

Manual handling
Manual handling refers to the use of a workers hands
to move individual containers by lifting, lowering, and
filling, emptying, or carrying them. It can expose
workers to physical conditions that can lead to injuries
and often involve strains and sprains to the lower back,
shoulders, and upper limbs.

Automated handling

Whenever technically and economically feasible,

equipment can be used to reduce and sometimes
replace the need to manually handle material. Most
existing material handling equipment is driven types
that are difficult and/or too costly to fully automate.
Semi-automated handling equipments need a human
operator for tasks like loading/unloading. Intelligent
robotics have made it possible to fully automate an
increasing number of handling tasks.

Material Handling Objectives,

Principles&Selection
Material handling is the movement and storage of
material at the lowest possible cost by the efficient use
of proper method and right type of equipment.

Objectives are as under:The primary objective of a material handling system is to reduce the unit
cost of production. The other objectives are:
1. Reduction in cycle timeof manufacture
2. Reduction of damage in the product&causing any delay in
production
3. Employees safety and working conditions to be improved.
4. By doing necessary product research and procuring latest
machineries,maintain & improve product quality etc.

5. Promote increased use of facilities forinventory control

6.Procurelatest machineriesfor reducing handling cost

Material Handling Principles& Selection

The principles of materials handling which ensures
effective and efficient handling of material are as
follows:Standardize the equipments handling
methods: Material handling equipment controls, and
software should be standardized. While standardizing it
should be ensured that performance objectives and
flexibility in operations are not sacrificed.
Workers Capability known as Ergonomics: It is
the Workers capabilities and limitations which are
required to be taken into consideration while designing
material handling tasks and equipments.
Determination of Unit Load: Unit load should be
properly determined.
Utilization of Space: Effective and efficient use must
be made of all available space.
Factor of Automation: Material handling operations
should be mechanized andautomated where feasible in
order to improve operational efficiency. This will reduce
potentially unsafe manual labor operations.
Factor Concerning Environmental
issues: Environmental impact and energy consumption

should be considered as criteria when designing or

selecting material handling systems.

Selection of Material Handling Equipments

While selecting the equipments it should be

taken care of that right type of equipment to be
selected for dealing with a task to achieve
optimum leverage.
Where machine handling is the only solution, it
should only be used as a principle so that no
injury to worker or no damage to goods occurs.

Packaging

What is Packaging and what is its Significance?

What is Packaging?
The productsafety is ensured by a proper Packaging of the product.
Packaging refers to the container or wrap around a product that
holds a product or group of products.
Most commercial packaging serves two basic functions:
1. Protecting the product from damage during transportation
2.Transporting or forwarding or handing over the product to the
ultimate consumer.

TRANSPORTATION
Transportations are Railways, Roadways,
Seaways,Airways, Inland Waterways, Pipelines,
and Ropeways.

Historical Background
The Industrial Revolution in the 19th century saw a
number of inventions fundamentally changed the
transportation structure. The invention of the Steam
Engine closely followed by its application in Rail
Transport made land transport independent of human
or animal efforts.

Both speed and capacity of transport increased rapidly,

allowing specialization through manufacturing various
types of transports.
The 19th century also saw the development of the
Steam Ship whichwas used as global transport.
With the development of the Combustion Engine and
the automobile around 1900, road transport became
more competitive again, and mechanical private
transport originatedand this aspect brought a
revolution in the transport system.
In 1903 the Right Brothers invented the first successful
controllable Airplane.After World War I (19141918)aircraft became a fast way to transport people
and goods over long distances. This has been the cause
of success for first and second world wars. .
After World War II (1939-1945), the automobile and
airlines took higher shares of transport, thereby
reducing the number of passengers travelling by train &
other modes of transport. Today the transportation by
all modes of transportations have tremendously
improved to the level of spacecrafts etc.
Electronic transportation of documents etc has found
out a place in modern transportation modes.

The Role of Transportation

.

1 The role that transportation plays in logistics system is very

complex and not just carrying goods for the proprietors.

2. Its complexity can take effect only through highly qualified

management. With efficient and well-handled transport
system, goods could be sent to the right place at right time
safely in order to satisfy customers demands.
3. It forms a bridge between producers and consumers
because the products are to be brought to the customers from
factory or shop.
4. Therefore, transportation is the base of efficiency and
economy in business logistics and expands other functions of
logistics system.
5.Inaddition, a good transport system performing in logistics
activities brings benefits not only to service quality but also to
company competitiveness.

Transportation Agencies
The agencies involved in transportation decisions
are as under:-

Transportation SelectionDecision
1.There are many aspects to consider when
selecting the most suitable mode of transport to
get products from point A to B.
2.The tonnage to be transported will decide the
type of transport to be used.
3. The gradient on which the load to be carried
will determine the capacity and classification of
transport
4. The effective use of transportation equipment
and modes reduces shipping and logistics costs.
5. Goods consigned to a foreign market can be
transported by road, rail, air, sea, inland,
waterways or a combination of any of these.
6. The nature of product will determine which
type transport to be used
7. Specialized transport may also be required for
transporting fuel, oil, and other inflammable
products.
8. Necessary transportation Act has to be
followed in letter and spirit.
While deciding which mode of transport to use, the
following factors should be taken into consideration:
A) Cost of Transport:

B). Reliability and Regularity of Transpot service

. Transportation decision on which mode of transport to use will be
influenced by the urgency and speed by which you would like your
goods to be delivered.

C). Safety in all Respects:

It is very important that the safety aspect is followed without any
compromise on the subject

D). goodsCharacteristics
The nature volume of the product, size and weight are to be
considered.

MODES OF TRANSPORTATION
Road,Rail, Water, Air, Pipeline and Ropeways

Introduction
Without well developed transportation systems, logistics cannot bring
its advantages into full play.
Besides, a good transport system in logistics activities can provide
better logistics efficiency, reduce operation cost and promote service
quality.
The improvement of transportation systems needs the effort from both
public and private sectors.

A well-operated logistics system canfurther improve the

competitiveness in logistics operationboth the government and
enterprises by working closely for the benefit of customers.
The result of this co-ordination is the availability of low cost goods to
customers.
E-Transportation is also a very promising mode for
communicating e- mails and other documents and this
has revolutionized the communication network system
in Business management.

LandwaysTransportation
Land ways transportation is a very important link in logistics
activities. It extends the delivery services for air and maritime
transport from airports and seaports. The most positive characteristic
of land logistics is the high accessibility level in land areas.
Landways
RoadwayTransportation
Maximum utilized transport mode is roadways. It has high
accessibility to the public in remote area and that is the top advantage
of roadways transportation. It is comparatively cheaper in our country
as compared to other countries in the other parts of the world.

Railway Transportation
ItsAdvantagesare:-

1. High carrying capacity,

2. LESS influence by weather conditions

3. Lower energy consumption while disadvantage is, high cost of

initial investment
4.

Very robust and long life but Expensive maintenance,

5. Difficulty to meet urgent demands is a disadvantage

6.Time consuming in organizing railway carriages.

PipelineTransportations,its Advantagesare:1. High capacity,

2. Less effect by weather conditions,
3. Cheaper operation fee,
4. Continuous conveyance;

The disadvantages are:1. Very expensive initial investment

2. Harder supervision,
3. Goods specialization,
4. Regular maintenance needed

Air Transportation& its Advantages

It provides the delivery with speed, lower risk of damage,
security, flexibility, accessibility and good frequency for

regular destinations, yet the disadvantage is that, it is a very

costly transportation system

The characteristics of air freight logistics are:

(1) Airplanes and airports are separated. Therefore, the
industries only need to prepare planes for operation;
(2) It allows to speed delivery at far destinations;

(3) Air freight transport is not affected bylandforms down

except that it needs a safe landing and refueling arrangements
safety and security etc as per the government orders and their
rules.

Maritime Logistics (Waterways)

Waterways transportation plays an important role in the
national &international freight forwarding operations.
To save costs and enhance competitiveness, current maritime
logistics firms tend to use large sized ships and cooperative
operation techniques.

Its main advantage

1. It is cheaper comparatively

2. For products like oil & fuel etc. it is the most suitable
transportation because large quantity can be carried by sea
routes.

Its disadvantage
1.It needs longer transportation time
2.It is affected by the weather factors.

Transport Economics
Transport Economicsis the study of the movement of people and
goods over space and time.
It is a branch of economics that deals with the allocation of resources
within the transport sector.
Topics traditionally associated with Transport Economics include are:Privatization,
Nationalization,
Regulation,
Production
Pricing,

Inter modal Transportation Operations

The movement of passengers or freight from one mode

to another mode of transport is inter modal
transportation
Transportation from one mode to another was found difficult and
costly, time consuming, therefore, inter modal transportation system
was incorporated to ease out such difficulties.

Intermodal freight transportation

It involves the transportationof freightusing multiple modes of
transportation without any handling of the freight itself when
changing modes.
This method enables cost reduction and provides proper
security to the freight because there is no handling of freight
involved in between

Transmodal Transportation: The passengers or freight movement within same modes of

Transport (Eg: ship to dockside and back to ship) and the
purpose is tomaintain continuity of the insurance factor within
same mode of transportation network

UNIT 5 (Only for Students study Purpose)

Role of IT
Distribution

inWarehouses&Physical

In Warehouses
1. Preparation of Inventory
With the help of Information Technology, the
physical specifications and characteristics of
each item in the warehouseis required be
collecting and entering into the new system and
a proper inventory has to be prepared inside the
warehouse.
2. Requirement of coordination with IT
The
system
requires
a
coordination
or
configuration to be made as to how items are to
be placed or removed from the system.
The order and type in which the materials are
placed and removed should be used and
recorded.
This Information Technology system comprises of
various operations systems that organization can
adopt in order to improve performance of various
warehouse functions.

3.

Train the Employees in IT

The employees in the warehouse to be trained in

IT so that they are able to work efficiently.

Role of IT in Physical Distribution

The role of information technology in physical
distribution are as under:-

1. Reduction in cost of Products

Business
information
through
information
Technology is an important factor to reduce the
distribution costs and run the distribution channel
managed well and successfully.
Another reason for reduction in cost of such vital
services has been due to the eradication of the
intermediaries and this has achieved only
because of widespread

2.

Widespread usage

Widespread usage will give a push to demand

and when the demand is high the cost obviously
will come down.
3. Usage of IT worldwide.
The effects of the developments in information
technologies on the distribution channels of
service have contributed tremendously for the
positive development of physical distribution.

It enables unlimited location availability of the

desired product, any time and of any type
ofproduct to the customers.

4.

Designing Distribution channel

Utilization of technology in the distribution

system is observed as an important competitive
factor.The companies have to change or improve
their distribution channel designs or structures
related
to
the
recent
technological
developments.
5. Creation of distribution IT system
As per the innovations and technological
developments the company can create its own
distribution system

5.
Creation
generation

of

IT

jobs

for

younger

Lots of IT qualified younger generation will be

encouraged to pick up jobs in this IT field

E-logistics(Electronic

Logistics)

Electronic Logistics can be defined as the application of

Internet based technologies to traditional logistics
processes.

It is also a Web based applications and services dealing

with the efficient transport, distribution, and storage of
products along the supply and demand chain.

It is also a collection of the new logistics management

practices for usage through internet facilities.

Application ofInformation
Technologyin Logistics
Introduction
Information Technology is an application used for
processing data via a computer with the required
software in it.
Logistical managers are depending heavily on
this technology to boost up their logistics
management using the latest IT Software
Applications.
Logistics operational managers are trying to find out as to when
a particular product is made and when is it sold for the first time
in the market.
Companies use the LIS systems to gain a competency for their
products or raw materials in the market.
Logistics information systems also help companies to track
internal information within a company.

The following purposes are achieved by usingIT

inLogisticsApplications
1.Factor of Modernization: Make use of the technology
to modernize the set up of the firm from the logistics &
supply chain point of view
2.Procedure of Analyzing : Analyze the assets available
with you and plan to maximum benefits out of it
3.IT Streamlining: The entire logistics system to be
streamlined using IT
4.Requirement of Connectivity: Internally as well as
externally
5.Need for Synchronization: The functioning of the
logistics functions
6.Requirement of Designing: where required do the
necessary designing
7.Facilitating Communicating world wide
Logistics Network Design
Logistics network design refers to traditional elements
of logistics strategy followed by respective Business
Firms. The strategy is followed by tactical and
operational plannings to gain a foothold for their
products and for the Firm as a whole.
Logistics Network Design include all aspects related to
the physical flow of the product through a companys
operational channel, such as the manufacturing
location from where a product is sourced and the

market through it flows right up to the esteemed

customer.
The inventory should be updated always with the
following details:1. The selection of the proper distribution network
2.The number and location of depots
3.The quantum of stock required in a particular depot
4. The variety of products keeping in view the demand
pattern
4. The final product delivery

Information Technology is used in the following sections

of Logistics:1.ElectronicData Interchange (EDI)
Electronic data interchange involves inter-company computerto-computer exchange of business documents in standard
formats.
2.Electronic Ordering System (EOS),
3.Logistics Information System (LIS),
4.Enterprise Information Portals (EIP),
5.Multi-Modal

Transportation Services

Other Area where IT used is as under:-

Data collection and exchange are critical for logistics

information management and control, as they can be
effectively utilised to deliver customers' goods more
accurately and efficiently.
The bar code system and Radio Frequency Identification
System (RFID) are data collection technologies that are
used widely for this.
Logistics Companies rely on information technology to
enable integration, order and transportation
management and warehouse management.
RFID technology is used to track vehicles, pallets, and
even smaller units to gain greater visibility.

Logistics Information System (LIS)

What is the role of LIS?
LIS is the main part of ERP (Enterprise Resource
Planning).
The role of LIS is conversion of data and designing these data in
systematic manner which are used for decision making and interfacing
the information with decision-assisting methods and that is believed to
be the backbone of Logistics information System.

This information is interpreted in the useful manner to make

decisions, related to logistics and supply chain activities.

LIS has three subsections as under:-

Input section
In this all available data are fed to the LIS forprocessing to get
the outputs
Database and associated worksheet
This involves selection of the data to be stored and retrieved
Outputsectionof LIS :This include the following

a) Summary reports of cost or performance statistics,

b) Status state of reports and progress of order
c) Comparison report between actual performance and desired
d) Summary of reports which need action at the respective level
allround performance.

LIS

works with EDI

a) Major Benefits of EDI
1. Reducing transaction cost
2. Increasing accuracy and productivity
3. Enhancing Supply Chain Relationships
4. Improving quality of decisions to exploit
business opportunities

JUST IN-TIME (JIT)

What is JIT?

JIT or Just in time is a recent method used widely in the logistics

& supply chain management system for maintaining inventoryby
the Firm to increase efficiency and decrease wastage, ordering.
Processingthe orders for receiving goods is activated onlywhen
there is a need for the production process, thereby reducing the
level of inventory and achieving an over-all inventory costs.
This method requires producers to plan methodically their
forecast procedure ofdemand of the required products accurately
and in time, taking into consideration the existing stock of each
product, its acceleration or retardation in demand and the
structure of its customers.

JIT method has many advantages as under:1.Manufacturers can switch over from one type of product to
another very easily.
2.Reduces costs by eliminating warehouse storage needs.

3. Spend less amount on raw materials and other

items,because, they are already planning to
spend money for buying JIT items

DEMAND DRIVEN TECHNIQUE (DDT)

Logistics &supply chains have transformed into a sophisticated
networks that can easily crumble if sufficient care is not taken.

One area where this could prove an issue is in demand

management.
In terms of demand management, there are two main methods
at work in the DDT system:
1. Traditional method
In this type of method,demand is processed based on past
details of data available or forecasts (usually known as a push
model where goods are produced and distributed through the
supply chain based on these forecasts).
2. Pull model or Zero inventory
In the second model process, goods are produced and moved
based on actual demand or consumption which is more of a
pull model, or zero inventory system.
As per practice in the recent past the first process was in
operational management. But now, the Second model is
practiced.

ERP(Enterprise Resource
Planning)
ERP integrates the entireresources details such
as financial, human, production, logistics, sales
etc.by means of an integrated work using EDI.
Locations, positions, jobs, groups or individuals
are programmed in this ERP and the

management follows these details for a smooth

function of the Establishment.
ERP is entirely based on Software for the
Company which is costly and includes everything
consisted in the Firm.
ERP comprisesof Electronic Data Interchanges (EDI)
which works as computer exchanges in it.
ERP software typically consists of multiple Enterprise
Software modules that are individually purchased,
based on what best meets the specific needs and
technical capabilities of the organization.

Each ERP module is focused on one area of business

processes, such as product development or marketing.

Role of ERP
The purpose of an Enterprise Resource Planning system
is to provide one central Data Center for all information
that is shared by all the various ERP facets to improve
the flow of data across the organization.
ERP software integrates all facets of the logistics
operation including planning, organizing, controlling
etc.
All relevant data regarding the employees, their salary and other details
etc. are available in the ERP as ready Information

Bar Coding System

Bar coding of products is the first step towards
store automation. Storeautomation led by barcoding systems has become indispensable in
the logistics
BCS is computer readable codes on items,
cartons and containers which is grouping of
parallel bars (usually black) of

Different widths, separated by light spaces,

(usually white) again of different width and
the coding process continues till the BCS is
complete.
These bars can be identified by an
electronic scaning system that enables to
read the cost of the item and the other
details as required.

SAP
SAP is the acronym for System Applications Products.
It is a system that provides users with a soft real-time business
application. It contains a user interface and is considered
extremely flexible.
SAP is integratedbusiness software to process all
functionalities of an organization in order to obtain a unified
solution.

Controls Required to be Followed while using SAP

1. The two major control risks that need to be monitored
with SAP are security and data integrity.
2. To ensure that both are sufficient it is important that
both be properly outlined and developed during
implementation.

3. User profiles must be designed properly and access

must be sufficiently segregated to minimize the
chance of fraud.

ORACLE
Oracle is a database which has specific purpose in Information
Technology and used in the Following:1.Logistics

management,

2.Supply Chain Management,

3.Human Resource Management,
4.Product Life Cycle Management etc.

The application includes the following:

Oracle CRM(Customer Relations Management)

Oracle Financials

Oracle Human Resource Management System (HRMS)

Oracle Logistics

Oracle Supply Chain Applications

Oracle Order Management

Oracle Transportation Management

Oracle Warehouse Management System

Role of Oracle Logistics

1. The logistics module allows users to plan, manage,

and control the flow and storage of products and
services within a business

2. It provides information to plan future safety stock &

demand within the warehouse.

3. The application can create detailed, constraint-based

production schedules and material plans.

END OF UNIT 5

(THE CONTENTS IN THE ABOVE UNITS ARE FOR STUDENTS

STUDY PURPOSE AND NOT FOR BOOK PRINTING FOR SALES
PURPOSES)