LOGISTICS MANAGEMENT

Facilitator
Dr Pramod Shetty

Logistics Management
The Process of strategically managing the movement and
storage of material, parts and finished goods from
suppliers,through the firm to the customers.
.....Council of Logistics Management

A planning, implementing and controlling the physical flows

of materials and finished goods from point of origin to point
of use to meet the customers need at profit
.....Philip Kotler

Logistics involves the integration of information,

transportation, inventory, warehousing, materials
handling and packaging

Forces Shaping Perspective of

LOGISTICS
Concept of supply chain
Cost pressure
Speed to market
Customer delight
Movement toward globalization
Time space utility
Hollowing out of industry
Outsourcing
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Pervasiveness of Logistics
24 Hours ATM
Dabbawalas of Mumbai
Laundry Service in a Five Star Hotel
Indian Postal Service
Gulf war in 1991
Public Distribution System (FCI)
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Molded plastic water tanks product design

Cement industry packaging
Two wheelers network design
Sponge iron mode of transport
Pharmaceutical production planning,
transportation
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Source of Competitive
Advantage
Competitive advantage is the ability of an
organization to differentiate itself in the eyes
of the customer, from its competition, and to
operate at a lower cost and hence greater
profit.
Competitive advantage helps organizations to
achieve commercial success which mainly
depends upon two factors cost advantage
and value advantage.
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Commercial success

Cost advantage

Value advantage

Cost advantage or Productivity advantage

- Characterized by low cost of production due to
greater sales volume, economies of scale enabling
fixed costs to be spread over a greater volume and
the impact of the experience curve.
Value advantage is in terms of product offering a
differential plus over competitive offerings.
- Based on marketing concept that customers that
customers don't buy products, they buy benefits.
- Benefits may be intangibles and may not relate to
specific product features.
- It can be an image or reputation or even some
functional aspects.
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 Adding value through differentiation is

extremely powerful is extremely powerful
means of achieving competitive edge in the
market.
One of the significant method of adding
value is service.
Service helps in developing relationship with
the customers through provision of an
augmented offer.
Augmentation takes many forms such as
delivery services, after-sales services,
financial packages, technical support etc.
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Productivity and Value Matrix

V
a
l
u
e
A
d
v

Service Leader
(3)

Cost and Service

Leader
(4)

Commodity Market
(1)

Cost Leader
(2)

Productivity Advantage
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 For companies in quadrant (1), the market is

uncomfortable place as their products cannot be
differentiated from their competitors offerings as
they do not have any cost advantage. These are
commodity markets.
Companies in quadrant (2), adopt cost leadership
strategies. Traditionally, these are based on
economies of scale gained through volume.
Another route to achieving cost advantage is through
logistics management. As logistics constitutes a major
proportion of total costs, reengineering logistics
processes results into substantial cost reduction.
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 Companies in quadrant (3), seek differentiation

through service excellence since markets are
becoming more and more service sensitive.
Customers expect greater responsiveness and
reliability from the suppliers, reduced lead times,
just-in-time delivery, and various other value added
services.
Services strategies can be developed through
enhanced logistics management.
Companies in quadrant (4) are distinctive in value
they deliver and are also cost competitive.
Competitors find it hard to attack these companies
which try to excel in all the value chain activities.
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ValueValue
Chain
Activities
Chain Activities

Primary Activities
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service

Secondary Activities
Infrastructure
Human Resource Management
Technology Development
Procurement
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 Primary activities represent the functional

areas like arranging inputs for transforming
them into output, and managing distribution,
marketing, sales, and services.
The secondary activities facilitate the
integration of all the functions across the
entire organization.

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Factors affecting value and

productivity advantage
Productivity advantage
Capacity utilization
Asset utilization
Inventory reduction
Integration with the suppliers.
B. Value advantage
- Customized services
- Reliability
- Responsiveness.
A.
-

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Underlying Philosophy Behind

Logistics Concept
Materials Flow
Suppliers

Procurement

Operation

Distribution

Customers

Information Flow

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How do we define supply chain?

A network of organizations that are having
linkages, both upstream and downstream in
different processes and activities that produce
and deliver value in the form of products and
services in the hands of ultimate consumer.
Customers

Retailers

Downstream

Shirt Manufacturer

Weavers
of Fabrics

Yarn/Fibre
mfrers

Upstream
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 A shirt manufacturer is a part of supply chain

that extends upstream through the weavers
of fabrics to the spinners and the
manufacturers of fibres, and downstream
though distributors and retailers to the final
consumers.
Though each of these organizations are
dependent on each other yet traditionally do
not closely cooperate with one another.

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Is Supply chain management

same as vertical integration?
SCM is not the same as vertical integration.
Vertical integration implies ownership of upstream
suppliers and downstream customers.
Earlier, vertical integration used to be the desirable
strategy but increasingly the companies are focusing
on their core business i.e. the activities that they do
really well and where they have a differential
advantage.
Everything else is outsourced.
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Implementation of SCM through

Logistics Management
Transferring costs upstream or downstream leads to
logistics myopia as all costs ultimately will make
way to the final market place to be reflected in the
price paid by the end user.
The prime objective of SCM is to reduce or eliminate
the buffers of inventory that exists between the
organizations in a chain through sharing of
information on demand and current stock levels.

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How does Logistics differ from

SCM?
Logistics management is primarily concerned with
optimizing flows within the organization.
Supply chain management deals with integration of
all partners in the value chain.
Logistics is essentially a framework that creates a
single plan for flow of products and information
through a business.
Supply chain builds upon this framework and seeks
to achieve linkage and coordination between
processes of other entities in the pipeline i.e.
suppliers and customers, and organization itself. 21

Objectives of Logistics
Management
Inventory reduction
Reliable and consistent delivery
performance
Freight economy
Minimum product damages
Quick response
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Logistics
- Macro Level Growth Variables

Country's economic growth

Government policies for trade development
Regulatory environment
Transportation Infrastructure
Warehousing and cold chain network

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