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OF ARTS, COMMERCE & SCIENCE SUBJECT SEMESTER : Elements of Management : V Logistic CLASS

OF ARTS, COMMERCE & SCIENCE

SUBJECT

SEMESTER

:

Elements

of

Management

:

V

Logistic

CLASS

:

T.Y.B.M.S.

Division

:

YEAR

:

2010

and

Supply

Chain

SUBMMITTED TO: Prof-Nitin Kulkarni

DATE

:

30/06/2010

SIGNATURE

:

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Name of Students

SR.NO

NAME

ROLL NO

1.

Yashshree S. Ainapure.

03

2.

Abhilasha A. Bhosale.

16

3.

Arpita P. Desai.

26

4.

Namrata R. Desai.

27

5.

Ashwini V. Kadam.

48

Topics Covered

1) Operating Objectives

2) Logistical Mission

3) Logistical Performance Cycle

Procurement Cycle

Manufacturing Support Cycle

Physical Distribution Cycle

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ACKNOWLEDGEMENT

It is indeed a pleasure to bring out such beautiful idea on such a subject. We would like to take this opportunity to thank Prof. Nitin Kulkarni. We intend our sincere and affectionate thanks to our sir.

We would like to thank the VIVA COLLEGE for giving us this opportunity. We would heartily welcome helpful criticisms and suggestion from all of you for further improvement of our project.

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Introduction to Logistics

Meaning:-

Logistics is the management of the flow of goods, information and other resources between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility.

Origins and definition:-

The term “logistics” comes from the Greek “logos” meaning speech, reason, ratio, rationality, language, phrase and more specifically from the Greek work “logistiki” meaning accounting and financial organization. Logistics is considered to have originated in the military’s need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title Logistikas who were responsible for financial and supply distribution matters.

The Oxford English dictionary defines logistics as: The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities.” Another dictionary definition is: “The time-related positioning of resources.” As such, logistics is commonly seen as a branch of engineering which creates “people systems” rather than machine systems .

Logistics management:-

Logistics management is that part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer & legal requirements. A professional working in the field of logistics management is called a logistician. The Chartered Institute of Logistics & Transport (CILT) was established in the United Kingdom in 1919 and was granted a Royal Charter in 1926. The Chartered Institute is one of the professional bodies or institutions, for the logistics and

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transport sectors, that offers professional qualifications or degrees in logistics management.

Business logistics:-

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

Operating Objectives

In order to fully exploit logistical competency, managers within an enterprise must achieve some specific objectives referred to as operating objectives. In terms of logistical design and administration, each firm must simultaneously achieve at least six different operational objectives namely:

1) Rapid response :

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

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

2) Minimum variance:

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

3) Minimum inventory:

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

Transportation cost is one of the most significant logistical costs. It is directly related to the type of a product, size of shipment and distance transported. Logistical systems that feature premium service depend on high speed,

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

5) Quality:-

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

6) Life -cycle support:-

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

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THE LOGISTICAL MISSION

Logistics of a firm is an integrated effort aimed at helping to create customer value at the lowest cost. Logistics exists to satisfy customer requirements through relevant manufacturing and marketing operations. Logistics managers seek to achieve the desired quality of customer service through state –of- the- art operating competency.

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

For e.g.:

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

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

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

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

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

3) Service Reliability:-

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

Logistical Performance Cycle

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

In addition to nodes and links, a logistical performance cycle requires inventory. Within nodes, inventory is stocked or flows through the node, necessitating a variety of different types of material handling and at least limited storage. Performance cycles become dynamic as they accommodate input /output

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requirements. The input to a performance cycle is an order that specifies requirements for a product or a material. A high volume system will typically require a variety of different performance cycle arrangements to satisfy overall order requirements. When requirements are highly predictable or relatively low, the performance cycles required to provide logistical support can be simplified. For example, the overall performance cycle structure required to support a large retail enterprise like Wal-Mart is far more complex than the operating structure requirements of a direct mail-order company.

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

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

The three points are important to understand the architecture of integrated logistical systems.

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

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

Types of Logistical Performance Cycle

To better understand the similarities and differences in the nature of physical distribution, manufacturing support and procurement performance cycle are discussed below.

1) Procurement cycle (Inbound):-

Procurement is concerned with purchasing and arranging inbound movement of materials, parts and/or finished inventory from supplier to manufacturing and assembly plants, warehouses or retail stores. The acquisition process is called purchasing in manufacturing organization, in government

organisation it is called procurement and in retailing and whole selling it is called buying. All these three term namely purchasing procurement and buying are referred to as inbound logistics. These activities are related to product and materials from outside suppliers. It includes- (i) Resource planning,

(ii) Supply sourcing, negation,

(iii)Order placement,

(iv) Quality assurance,

(v) Inbound transportation,

(vi) Receiving and inspection

(vii) Storage and handling.

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2) Manufacturing support performance cycle:-

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

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

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

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

When a firm has multiple plants that specialize in specific production activities, the manufacturing support system may require a vast network of performance cycles manufacturing support operations, as contrasted to either physical distribution or procurement, are limited to movement under internal management control.

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

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

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

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