Logistics Management - BPAS 184 PDF

BPAS - 184 Logistics Management BPAS-184 LOGISTICS MANAGEMENT School of Social Sciences Indira Gandhi National Open University EXPERT COMMITTEE Prof. C.V. Raghavulu Prof. Rajbans Singh Gill Former Vice-Chancellor of Department of Public Administration Nagarjuna University Punjabi University, Patiala Guntur (A.P.) Prof. Manjusha Sharma Prof. Ramesh K. Arora Department of Public Administration Former Professor of Public Kurukshetra University, Kurukshetra Administration Prof. Lalneihzovi Rajasthan University, Jaipur Department of Public Administration Prof. O.P. Minocha Mizoram Central University Former Professor of Public Prof. Neelima Deshmukh Administration Former Professor of Public Administration Indian Institute of Public Rashtrasant Tukadoji Maharaj Administration, New Delhi Nagpur University Prof. Arvind K. Sharma Prof. Rajvir Sharma Former Professor of Public Maharaja Agrasen Institute of Administration Management Studies, Delhi Indian Institute of Public Administration, New Delhi Prof. Sanjeev Kumar Mahajan Department of Public Administration Prof. R.K. Sapru Himachal Pradesh University, Shimla Former Professor Public Administration Prof. Manoj Dixit Panjab University, Chandigarh Department of Public Administration Lucknow University, Lucknow Prof. Sahib Singh Bhayana Former Professor Public Prof. Sudha Mohan Administration Department of Civics and Politics Panjab University, Chandigarh University of Mumbai, Mumabi Prof. B.B.Goel IGNOU Faculty Former Professor of Public Prof. Pardeep Sahni Administration Panjab University, Chandigarh Prof. E. Vayunandan Prof. Ravinder Kaur Prof. Uma Medury Department of Public Prof. Alka Dhameja Administration Osmania University, Hyderabad Prof. Dolly Mathew Prof. C.Venkataiah Prof. Durgesh Nandini Dr.B.R. Ambedkar Open Consultants University, Hyderabad Dr. Sandhya Chopra Prof. G. Palanithurai Department of Political Science Dr. A. Senthamizh Kanal and Development Administration, CBCS Programme Coordinators Ghandhigram Rural University Ghandhigram Prof. Dolly Mathew Prof. Ramanjit Kaur Johal Prof. Durgesh Nandini University School of Open Learning Panjab University, Chandigarh Course Coordinator and Course Editor (Content, Format and Language) Prof. Uma Medury School of Social Sciences IGNOU, New Delhi. Formatting of References Dr. A. Senthamizh Kanal Consultant School of Social Sciences, IGNOU, New Delhi COURSE PREPARATION TEAM Unit No. Unit Name Unit Writer Block 1 Introduction to Logistics Management Unit 1 Logistics: Concept, Principles and Forms Col. (Dr.). Rajive Kohli Unit 2 Logistics Management: Conceptual Framework, Management Consultant Scope and Importance New Delhi. Unit 3 Logistics and Supply Chain Management- Inter relationship Unit 4 Logistics Management Cycle Block 2 Logistics Management: Components Unit 5 Procurement of Material and Inventory Control Col. (Dr.). Rajive Kohli Unit 6 Material Handling and Packaging Management Consultant New Delhi. Unit 7 Transportation, Warehousing and Storage Unit 8 Information Monitoring Unit 9 Logistics Information System Block 3 Logistics Management: Emerging Trends Col. (Dr.). Rajive Kohli Unit 10 Customer Satisfaction Management Consultant Unit 11 Green Logistics New Delhi. Unit 12 Outsourcing Logistics Management: Issues Unit 13 Effective Logistics Management: Challenges PRINT PRODUCTION Mr. Tilak Raj Mr. Yashpal Assistant Registrar (Publication) Section Office (Publication) MPDD, IGNOU, New Delhi MPDD, IGNOU, New Delhi March, 2021 © Indira Gandhi National Open University, 2021 ISBN: All rights reserved. No part of this work may be reproduced in any form, by mimeography or any other means, without permission in writing from the Indira Gandhi National Open University. Further information on the Indira Gandhi National Open University courses may be obtained from the University’s Office at Maidan Garhi, New Delhi-110 068 or visit our website: http://www.ignou.ac.in Printed and published on behalf of the Indira Gandhi National Open University, New Delhi, by the Registrar, MPDD Cover Design: R.K. Enterprise, New Delhi Laser Typeset by : Raj Printers Printed at : COURSE INTRODUCTION This Course entitled Logistics Management is an Ability Enhancement Course. Logistics Management is the part of supply chain management that involves planning, implementing and controlling the movement, storage of goods and services and transmission of related information between the point of origin and the point of consumption during the various phases to meet the needs of customers. This Course attempts to introduce the learners to the concept, principles of logistics and logistics management cycle. The important components of logistics management that include procurement of material, and inventory control, packaging, transportation, warehousing, storage, and information monitoring are analysed. The emerging trends in logistics management that encompass customer satisfaction, green logistics, outsourcing, are discussed. It provides a comprehensive view of key concerns pertaining to outsourcing logistics management and challenges in striving for effective logistics management strategy. This Course has 13 Units that give an overview of the various issues and concerns in the domain of logistics management. Block I Introduction To Logistics Management This Block has four Units. It is an introductory block that attempts to introduce to the learners the concepts in the field of logistics management. Unit 1 Logistics: Concept, Principles and Forms In any organisation activities pertaining to production and delivery of goods and services assume importance. Logistics in general deals with the management of flow of things and materials in an organisation. The Unit introduces the concept of logistics and discusses various types of logistics. There are several terms used in logistics which are explained in the Unit. Logistics management aims to facilitate the flow of material across the supply chain of the enterprise to cost effectively make available the right product at the right place and at the right time. The Unit highlights central principles of logistics and brings out its key activities. Logistics are classified into inbound and outbound which are explained in the Unit. The different operating objectives of logistics are analysed. There are five forms of logistics namely procurement, production, sales, recovery, and recycling logistics which are discussed in the Unit. Unit 2 Logistics Management: Conceptual Framework, Scope, and Importance Logistics management is an integrating function which coordinates and optimises all logistics activities and integrates them with other functions including marketing, sales, manufacturing, finance, and information technology. The Unit attempts to provide various conceptual dimensions of logistics management.It familiarises the learners with specific concepts relating to logistics management such as lean logistics, agile logistics, resilient logistics and green logistics. The scope of logistics management involves order processing, inventory control, transportation, warehousing, materials handling, and packaging, integrated through a network of facilities. All these aspects are analysed. The Unit examines the significance of logistics management in terms of various dimensions such as profit maximisation, cost reduction, efficient flow of manufacturing operations and so on. Unit 3. Logistics and Supply Chain Management- Interrelationship The Unit introduces to the learners the conceptual framework of supply chain management.Supply chain management (SCM) is an umbrella concept that links multiple processes. It has a series of inter-related activities from movement and storage of raw materials, work in progress inventory and finished goods from the point of origin to the point of consumption. The Unit examines the points of distinction between logistics management and SCM. Logistics management is a segment of SCM that deals with the management of goods in an efficient way focused on transportation and storage. The Unit elaborates on the activities and processes of supply chain management. There are SCM tools that help enhance the efficiency of logistics operations. The Unit elaborates on important tools. The expansion of supply chain opportunities is posing key challenges such as manufacturing, procurement, transportation, customer service which are examined. The Unit outlines ways to circumvent these challenges to strengthen logistics and SCM. Unit 4. Logistics Management Cycle Logistics management is the component of supply chain management that attempts to meet the demands of customers through better planning, control, and implementation of movement and storage of goods and services from the point of origin to destination. In this Unit, an attempt is made to explain the logistics management cycle and the importance of all the activities. The logistics management cycle has key interrelated activities. Logistics management is a circular cycle indicating the interdependence of various elements which are discussed in detail in the Unit. The smooth functioning of logistics system needs information.Logistics Information System (LMIS) is the heart of the logistics cycle. The quality issues in managing logistics and the factors that impact the logistics environment are analysed. Block II Logistics Management: Components There are several components in the logistics management process. This includes procurement of material, material handling, packaging, transportation and so on. All these are dealt in this block. Unit 5 Procurement of Material and Inventory Control The major components of logistics management are procurement, material handling and transportation that enable control of movement and supply of goods. Procurement is the process of identifying and obtaining goods and services. The Unit provides a detailed analysis of the concept and components of procurement. A typical procurement process has certain steps which are analysed in the Unit. The material procured forms the inventory in the organisation. Inventory is the resource of any kind having economic value. The Unit focuses on the concepts of inventory control and management. The important inventory control techniques such as ABC Analysis, economic order quantity, just in time, materials requirements planning method, VED analysis are discussed in the Unit.Automation in procurement of material has several advantages which are analysed. Unit 6 Material Handling and Packaging Logistics management aims at making customers satisfied with quality services. Since the supply of several products and commodities form part of logistics cycle, material handling and packaging assumes importance. Material handling is concerned with movement of right material to the right place, in right time and in right condition. Packaging is also an important aspect of material handling that relates to proper protection of materials and products for movement and distribution. This Unit brings out the various dimensions and significance of material handling. The types and important equipment of material handling are discussed. Packaging aims at product identification, protection, promotion, information, and communication. The Unit analyses important aspects pertaining to packaging including its benefits, types, and kinds of packaging material. Unit 7 Transportation, Warehousing and Storage In the domain of logistics management, physical distribution of goods links manufacturers, wholesalers, and retailers into marketing channels in making the products available. There are different transportation modes that can be adopted by an organisation in the delivery of products to the dealers, warehouses, and customers. This Unit describes the five basic transportation modes- road, rail, air, water, and pipeline. It provides an overview of the issues relating to transportation. Warehousing is an important component of logistics management that performs various functions of procurement, sorting, material handling, inventory control and so on. The Unit discusses these aspects. Also, in transportation and warehousing, there is lot of documentation and the Unit orients the learners with the information relating to the various documents and bills required in transportation of goods from one place to another. Unit 8 Information Monitoring Logistics management requires a lot of information for monitoring various activities such as procurement, inventory, sales, transportation and so on. Logistics information improves logistics performance. Logistics information system (LIM) is related to the process of planning, implementing, and controlling procedures and monitoring for efficient and effective inventory control, transportation, and storage of goods. The Unit orients the learners with the principles and elements of Logistics Information System (LIS). Logistics information flow is important that deals with products, finance, and information about various phases of logistics cycle. The Unit discusses these aspects. The purpose of information system is to gather, categorise, store, and disseminate information needed to promote the growth of organisation. The Unit examines the components of LIM and LIS. Information processing is key to monitor logistics operations. The Unit elaborates on the role of information processing in monitoring of logistics management activities such as order processing, warehousing, inventory management, transportation etc. Unit 9 Logistics Information System Logistics information System (LIS) is implementation of solutions for a system of records and reports which may be paper-based or electronic. These analyse, validate and display data from all levels of supply chain for making logistics decisions and manage the supply chain.This Unit introduces learners to the concept of Logistics Information System.It has an important role in ensuring flow of information in all levels of organisation, better planning, and control of logistics activities, promoting customer satisfaction and so on. The Unit brings out the role and benefits of implementing LIS. It touches upon its requirements and components. Managing of logistics information is possible with use of various systems. There is discussion on technologies such as information network, electronic data interchange, enterprise resource planning, supply chain management software etc. There are certain technology applications such as bar codes, radio frequency identification tags, logistic labels. QR codes, FASTag, which are described in the Unit. Block III Logistics Management: Emerging Trends This block focuses on the emerging concepts, practices, and trends in the area of logistics management. Unit 10 Customer Satisfaction Customer satisfaction is a benchmark to assess the success of business organisation.Organisations strive to cater to specific needs of customers at least cost and maximise the returns with highest level of customer satisfaction. It is the degree to which customer expectations of a product or service are met. This Unit attempts to examine various aspects of customer satisfaction. The learners are introduced to the concept of customer focus. Customer satisfaction to be effective and efficient needs to comply with certain attributes such as availability of goods and services, flexibility, service reliability and so on which are discussed. The Unit gives an overview of various aspects of customer expectations such as reliability, responsiveness, access, credibility, courtesy etc. There are certain gaps that influence customer expectations which are examined. The Unit delves into the challenges in meeting customer satisfaction. A key aspect in an organisation is to use its performance capability to enhance customer success. The Unit examines these in detail. Unit 11 Green Logistics Logistics management activities impact the environment and in this context the concept of green logistics assumes importance. Green logistics is concerned with the systematic measurement, analysis, and minimising of the ecological impact of logistics. In this Unit, an attempt is made to give an overview of the concept of green logistics. Logistics activities such as transportation, packaging materials such as greenhouse gases, pollution, etc., impact the environment in several ways which are analysed. There are certain protocols to be adhered to in the implementation of green logistics strategies such as Environment Protection Act 1986, ISO14000, ISO 14001 etc which are discussed. In current times. several green logistics strategies are in practice such as green purchasing, green manufacturing, green distribution, reverse logistics etc. Any company that intends to go in for green logistics encounters certain challenges such as increased costs, lack of infrastructure and awareness and so on. The Unit attempts to bring out these challenges. Unit 12 Outsourcing Logistics Management: Issues Logistics outsourcing has assumed importance as companies/firms are deriving benefits through high quality logistics services provided by third/fourth party logistics companies. Logistics outsourcing is a business practice of hiring a party outside the company to provide all important services in the domain of supply management which earlier were performed in-house. The Unit discusses the benefits and risks involved in outsourcing. Contract lifecycle management is an important process. The Unit describes its various stages. There are important types of logistics outsourcing such as contract logistics, open-book contract, business process outsourcing, original equipment manufacturer which are dealt in the Unit. Outsourcing succeeds when it is well thought out and planned. The key issues involved in this activity are analysed. Unit 13 Effective Logistics Management: Challenges The logistics industry is confronting several challenges in present times being driven by technological innovations, changing customer expectations and adherence to stringent regulatory and environmental regulations. This is the last unit that provides a comprehensive overview of the challenges pertaining to logistics management. Some of them include, efficient transportation, customer management, business process planning, improving supply chain transparency, workforce management, technological developments, regulatory and environmental compliances. There is a discussion on these and the ways to handle the challenges are outlined. Contents Pages BLOCK 1 INTRODUCTION TO LOGISTICS MANAGEMENT Unit 1 Logistics : Concept, Principles and Forms 15 Unit 2 Logistics Management: Conceptual Framework, Scope 28 and Importance Unit 3 Logistics and Supply Chain Management- Inter-relationship 38 Unit 4 Logistics Management Cycle 48 BLOCK 2 LOGISTICS MANAGEMENT: COMPONENTS Unit 5 Procurement of Material and Inventory Control 63 Unit 6 Material Handling and Packaging 76 Unit 7 Transportation, Warehousing and Storage 89 Unit 8 Information Monitoring 101 Unit 9 Logistics Information System 113 BLOCK 3 LOGISTICS MANAGEMENT: EMERGING TRENDS Unit 10 Customer Satisfaction 125 Unit 11 Green Logistics 136 Unit 12 Outsourcing Logistics Management: Issues 149 Unit 13 Effective Logistics Management: Challenges 161 Suggested Readings 173 BLOCK 1 INTRODUCTION TO LOGISTICS MANAGEMENT Introduction to Logistics Management 14 Logistics : Concept, UNIT 1 LOGISTICS: CONCEPT, Principles and Forms PRINCIPLES AND FORMS* Structure 1.0 Objectives 1.1 Introduction 1.2 Concept of Logistics: An Overview 1.3 Logistics: Principles, Activities, Classification 1.4 Operating Objectives of Logistics 1.5 Logistics Forms 1.6 Conclusion 1.7 Glossary 1.8 References 1.9 Answers to Check Your Progress Exercises 1.0 OBJECTIVES After reading this Unit, you should be able to: Provide an overview of the concept of logistics; Discuss the principles,activities and classification of logistics; Elaborate the operating objectives of logistics; and Describe the various forms of logistics. 1.1 INTRODUCTION In any type of organisation, the activities pertaining to the production and delivery of products and services assume importance. Their design, acquisition, storage, movement, distribution, maintenance, and several related aspects must be taken care of and managed. This, being the first Unit of the Course on Logistics Management, we shall be introducing the concept of logistics, discuss its principles and forms. We shall be familiarising you with certain terms and concepts that are important in the overall framework of the Course on logistics management. In this course the terms ‘company’, ‘enterprise’ and ‘firm’ are used interchangeably. 1.2 CONCEPT OF LOGISTICS: AN OVERVIEW The term logistics is derived from the Greek term l´ogos, which denotes ‘order’, and from the French word loger, that implies art of war pertaining to movement and supply of armies; being the branch of military science concerned with the movement, supply and maintenance of troops. The origin of logistics is of a strictly military nature and this discipline gained significance because of the importance of the study of the methodologies employed to guarantee the * Contributed by Col. (Dr.) Rajive Kohli, Management Consultant, New Delhi 15 Introduction to Logistics appropriate supply of provisions, ammunition and fuel to the troops and, in Management general, to ensure the army the facility of moving and fighting in the most difficult conditions. In its all-inclusive sense, logistics covered those aspects of military operations that deal with: a) Design, development, acquisition, storage, movement, distribution, maintenance, evacuation, and disposition of materials; b) movement, evacuation, and hospitalisation of personnel; c) acquisition or construction, maintenance, operation, and disposition of facilities; and d) acquisition or furnishing of services. In business, logistics is the management of the flow of things between the point of origin and the point of consumption to meet the requirements of customers or corporations. The Babylonians were the first to create, around 2000 BC, a military corps specialised in the supply, storage, transport, and distribution of equipment for soldiers. Development of Logistics The industrial revolution caused a sea change in logistics as the advent of steam engine in 1765 made possible the mass production of goods. In 1801, there was a second important transformation in the form of assembly of products. The major problem of mass distribution of products was overcome with the second industrial revolution: with major innovations in transportation and communications. The beginning of the nineteenth century witnessed some of the great revolutions in production, with F.W. Taylor propagating meticulous division of work, and Ford creating the mobile production lines wherein instead of workers moving, the product came to the worker for production. It was only after the end of Second World War that logistics was extended beyond the military context to manufacturing companies to determine all the activities aimed at ensuring effective purchase, movement, and management of materials. Logistics development over the period was evolving when, around 1980, new concepts of logistics management assumed importance in the movement of materials involving every stage of the process including: a) Materials management, the timely movement of raw materials, parts, and supplies. b) Physical distribution, the movement of the firm’s finished products to the customers. The scenario by 2000, due to technological developments was of total integration. The goal of logistics is to coordinate all efforts of the organisation to maintain a cost-effective flow of goods. In a globalised world, there are multinationals which offer their products in widely distributed markets. Innovation being the watchword, the customers earlier, were used to buying whatever was available to them, but nowadays they want the right product, at the right time, at a reasonable price, at the chosen location, and with the desired quality. This is being accomplished with excellent operations and better logistics management. 16 The following factors could be considered to impact the development of logistics: Logistics : Concept, Principles and Forms a) Advances in computer technology b) Quantitative techniques c) Development of the systems approach d) Total cost analysis e) Recognition of important role of logistics Types of Logistics There are different types of logistics and we shall be discussing a few now. Business Logistics: It is the part of the supply chain process that plans, implements, and controls the efficient flow and storage of goods and services from the point of origin to point of use or consumption. The business logistics plans, help in implementation, and control the efficient, effective flow and storage of goods, services, and related information. This is designed to meet customer requirements. Military Logistics: It is the design and integration of all aspects of support for the operational capability of the military forces and their equipment to ensure readiness, reliability, and efficiency. It involves the transfer of personnel and material from one location to another, as well as the maintenance of the material essential for military to be able to support an ongoing deployment or respond effectively to emergent situations. Event Logistics: This relates to the network of activities, facilities and personnel required to organise, schedule and deploy the resources for any event to take place. Event logistics uses a network of activities, facilities, and personnel to organise, schedule, and plan for organising an event. It involves the deployment of resources, as well as the necessary post-event steps such as clean-up, disposal and so on. Service Logistics: It encompasses the acquisition, scheduling, and management of the facilities, assets, personnel, and material to support and sustain a service operation or business. Key Logistics Terms: Many logistics terms have special meanings as described below. Supplies, Commodities, Goods, Products and Stock: These encompass all the items that flow through a logistics system. The terms are used interchangeably in logistics management. Users, Clients and Customers: These are the people who receive supplies. The terms are used inter-changeably. User is a term familiar to those who collect information about “new” or continuing products. Client is a term often associated with receiver of the product or service. However, the people served are to be considered as customers like in any commercial business. Central Distribution Centre: It implies a warehouse that is the sole stocking point for the distribution system that it serves. Grocery manufacturers commonly have central (or national) distribution centres, stocked by various manufacturing points and serving various retailer distribution warehouses. 17 Introduction to Logistics Service Delivery Points: It connotes any facility where customers (users) receive Management supplies. Service delivery points (SDPs) are generally organisations or a facility being supplied with products. They are called SDPs, because all these locations directly serve the customers. Inventory: A term used to describe all the goods and materials held by an organisation for future sale or use. Pipeline: The entire chain of storage facilities and transportation links, through which supplies move from the manufacturer to the consumer, including port facilities, central warehouse, regional warehouses, district warehouses, all distribution points, and transport vehicles. In a logistics setting, the logistics system is often called a pipeline. This term was coined because a logistics system is in many ways like the pipeline that brings water into homes: a) The logistics system, like a water pipeline has tanks—that is, warehouses— for storing water—that is, products—until they are needed. b) Transportation links, like pipes, are also part of a pipeline. Unlike a water pipeline, which is usually continuous, a health logistics pipeline requires transportation to move supplies periodically from one warehouse to another. Lead Time: This is the time between the order of new stocks and when it is received and available for use. When logistics managers evaluate how well a logistics system is meeting the demands, they measure the lead time and try to reduce it. The goods should reach customers at the right time—in the shortest time possible. In calculating lead time, it is important to include the total time up to when the stock is available for use. Depending on the system, lead time can be few hours or several months. It depends on the speed of deliveries, availability of transport, and so on. Role and Function of Logistics in an Organisation The role of logistics is clearly much greater than just distribution of products. It ranges from the purchase of raw materials, inventory management, to production management, operations control (inventory, quality, distribution and transportation), demand management (forecasting) and long-term planning (facility location, project management).Logistics is also important in the service sector like the distribution of water and gas, postal services, urban solid waste collection, maintenance of roads and electricity networks and post-sales activities of manufacturing companies. Hence, it is also the discipline that studies the functional activities determining the flow of materials, along with its relative information, in any business, from their origin at the suppliers up to delivery of the finished products to the customers and to the post-sales service. The logistics concept includes: a) Customer satisfaction to include (i) suppliers, (ii) intermediate customers and (iii) final customers. b) Integrated efforts through (i) product, (ii) price, (iii) promotion and (iv) place or distribution. c) Company profits by way of (i) maximising long-term profitability; and (ii) lowest total costs given an acceptable level of customer service. 18 Systems Approach Logistics : Concept, Principles and Forms The concept of logistics is based on the systems approach. The flow of material from a supplier to a manufacturing plant and finally to the end customer is viewed as a single chain, ensuring efficiency and effectiveness in sequential activities to achieve the objective of customer satisfaction at a reduced cost. All the activities of material movement across the business process are interdependent and need close coordination to be managed as a system and not as functional divisions. These functional areas of logistics consist of: a) Information flow: This is needed to order, check, process, and coordinate. b) Warehousing: Material storage, load unitising and material handling, size selection and network planning, order picking and filling, and dispatch documentation. c) Inventory control: Material requirement planning and inventory level decisions for customer service objectives. d) Packaging: For handling and damage prevention, communication, and inter- modal transportation. e) Transportation: Route planning, mode selection and vehicle scheduling. The concept of logistics is based on a total systemic view of the multitude of functions in movement of materials and goods from sources of supply to users. It entails management to think in terms of managing the total system; rather than just one part of it. 1.3 LOGISTICS: PRINCIPLES, ACTIVITIES AND CLASSIFICATION Logistics management aims to facilitate the flow of material across the supply chain of an enterprise to cost effectively make available the right product at the right place at the right time. Logistics must achieve the two critical goals of customer satisfaction and making available products at least cost. This is possible only when all the logistics functions are working as a unified system to achieve the common goal. Principles of Logistics Initially logistics was considered a custodial activity with storekeepers being the custodians of stored supplies. This view has changed with logistics concerned with the efficient movement of materials to the customers. The central principles of logistics are given as the Seven Rights of Logistics. It encompasses movement of 1) The Right Materials/Products so that always the product/service required at the time must be made available. 2) In Right Quantity so that the correct amount is available, as smaller amounts result in the halting of production, while larger amounts result in building up stocks. 3) In Right Condition so that the right quality of the product/service be made available that the client requires. 19 Introduction to Logistics 4) At the Right Time ensuring the product/service be made available at the Management time required by the client. 5) To the Right Place so that the product/service be made available at the place where the client needs it. 6) At the Right Cost ensuring the product/service be made available at the cost accepted by the client. 7) To the Right Customers, Associates, Suppliers and Stockholders. These seven rights highlight the importance of moving and storing materials in an efficient, timely, and reliable manner. The seven rights also link logistics to the key strategic objectives of cost competitiveness, quality, flexibility, and delivery. The seven rights demonstrate that logistic activities provide the foundation for high levels of customer satisfaction. We shall be focusing on these seven rights in Unit 4 on Logistics Management Cycle. Key Logistics Activities The logistics of an organisation is the physical distribution of goods along with related activities that comprise following: a) Order processing: This encompasses activities for receiving, handling, filing, recording of orders and to ensure that they are accurate, reliable, and fast. The commercial team accepts the order from the customer and places the order to the warehouse. This is an important step in logistics activities because any lapse in this step (wrong entries of quantity, delivery address etc.,) can affect the whole logistics process. b) Procurement: Obtaining materials from outside suppliers, includes supply sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage, and handling. c) Material handling: Material handling is the movement of goods within the warehouse. It involves handling the material in such a way that the warehouse can process orders efficiently. It is important to properly arrange the material within the warehouse to facilitate easy movement and dispatch. Material handling systems are generally mechanised, semi-automated or automated systems. d) Warehousing: Warehousing is the storing of finished goods until they are sold. The manufacturing activity for large companies might be at one point, but the distribution could be across the world. The important point is that the warehouse should be nearby to the dealer or the distributors’ place and it should facilitate the easy delivery of goods. e) Inventory Control: Inventory that is stock, should be enough to meet customer requirements, and simultaneously its carrying costs should be lowest. Having correct inventory requires continuously monitoring the demand and procuring accordingly to be ready for supply without investing much in manufacturing. Inadequate inventory would lead to loss of orders, whereas excessive inventory would lead to useless investment. 20 f) Transportation: Transportation involves the physical delivery of goods Logistics : Concept, Principles and Forms from the organisation to the distributor or dealer and from the dealer to the end customer. It is one of the major logistics activities which consumes lot of revenue of the organisation. The better the warehousing and the inventory management of a company, the lower are its transportation costs. g) Packaging: Packaging the product is the responsibility of the logistics team because the product may reach in a damaged condition to the end customer and this becomes a huge cost to the company. There are two types of packaging (i) The package which the customer sees on the shelves of stores in markets that appears attractive and makes the customer buy the product. (ii) The transport packaging where the products are packed in bulk and transported safely with minimum breakage or spillage. h) Information. Logistics is basically an information-based activity of inventory movement across a supply chain. Therefore, the information system plays a vital role in delivering a superior service to the customers. Use of technology tools helps in information identification, access, storage, analysis, retrieval, and decision support. This enhances their competitiveness. Classification of Logistics Logistics may be classified into two types: a) Inbound or upstream logistics: This connotes the activities which are related to sourcing, acquiring, receiving, storing, and delivering the raw materials and parts to the product or service department. It is part and parcel of the operations, for a manufacturing firm. There is need for smooth and cost-effective inflow of materials and other inputs (that are needed in the manufacturing process) from suppliers to the plant. For proper management of inbound logistics, there is need for a continuous interface with suppliers or vendors. In simple terms, inbound logistics is a basic activity, which focuses on buying and scheduling the inflow of materials, tools, and final goods, from suppliers to the production unit, warehouse, or retail store. b) Outbound or downstream logistics. This involves the collection, storage and distribution of the final goods and related information flows, from the manufacturing unit to the end user or buyers. It covers all those activities (i.e. selecting, organising, transporting, etc.) which are involved in the outflow of merchandise from seller to the buyer. It covers the physical distribution management or supply chain management; is concerned with the flow of finished goods and other related information from the firm to the customer. For proper management of outbound logistics, there is need to maintain a continuous interface with transport operators and channels of distribution. 21 Introduction to Logistics Check Your Progress1 Management Note: 1) Use the space given below for your answers. 2) Check your answers with those given at the end of the Unit. 1) Explain the meaning of logistics management.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2) List the key logistics activities.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 3) What are the types of logistics?................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 1.4 OPERATING OBJECTIVES OF LOGISTICS The primary objective is to move the inventory effectively and efficiently to extend the desired level of customer service at the least cost. In terms of logistics management, each firm must simultaneously achieve at least six different operational objectives. These operational objectives, which are the primary determinants of logistical performance, include rapid response, minimum variance, minimum inventory, movement consolidation, quality, and life-cycle support. 1) Rapid Response: Rapid response is concerned with a firm’s ability to satisfy customer service requirements in a timely manner. Information technology has increased the capability to schedule the logistics operations to the desirable time and then accomplish rapid delivery of required inventory. The result is elimination of excessive inventories traditionally stocked in anticipation of customer requirements. 22 2) Minimum Variance: Variance is any unexpected event that disrupts system Logistics : Concept, Principles and Forms performance. Variance may result from any aspect of logistical operations. Delays in expected time of customer order , an unexpected disruption in manufacturing, goods arriving in a damaged condition to the customer’s location, or delivery to an incorrect location-all result in a time disruption in operations that must be resolved. Information technology in present times plays a key role in this area, to the extent that variances are minimised and logistical productivity is improved because of economical operations. Thus, the basic objective of overall logistical performance is to minimise variance. 3) Minimum Inventory: Inventory as an asset has capital costs associated with it. The objective is to reduce and manage inventory to the lowest possible level while simultaneously achieving desired operating objectives. 4) Movement Consolidation: One of the most significant logistical costs is transportation. Transportation cost is related to the type of product, size of shipment, and distance. Many logistical systems that focus on premium service depend on high-speed and small-shipment transportation. Premium transportation is typically of high cost. To reduce transportation costs, it is desirable to achieve movement consolidation. Generally, the larger the overall shipment and the longer the distance it is transported, the lower is the transportation cost per unit. 5) Quality Improvement: Maximising customer satisfaction is the key objective of any company. A fifth logistical objective is to seek continuous quality improvement. Total quality management (TQM) has become a major commitment throughout all facets of industry. Overall commitment to TQM is one of the major forces contributing to the logistical renaissance. If a product becomes defective or if service promises are not kept, very little value is added by the logistics. 6) Life-Cycle support: The final logistical design objective is life-cycle support. Few items are sold without some guarantee that the product will perform as advertised over a specified period. Product recall is a critical component resulting from increasingly rigid quality standards, product expiry date and responsibility for hazardous consequences. We come across cases where a company does a product recall. In India, there have been cases of automobile companies recalling cars to ensure certain quality specifications. Return logistics requirements also result from the increasing number of laws prohibiting disposal and encouraging recycling of beverage containers and packaging materials. 1.5 LOGISTICS FORMS Logistics can be split into five forms or types: procurement logistics, production logistics, sales logistics, recovery logistics, and recycling logistics. Each of these is explained below. 1) Procurement logistics: This entails procuring raw materials and parts. Procurement logistics is the flow of goods when the raw materials and parts necessary for manufacturing are procured from suppliers. 23 Introduction to Logistics 2) Production logistics: Production logistics includes materials management, Management product management and shipping. It is the flow of goods that includes the management of procured parts and materials, distribution inside a factory, product management, packaging, and shipping to warehouse. 3) Sales logistics: Sales logistics is for delivery of products from warehouse to wholesalers, retailers, and consumers. It typically transfers from delivery centres and logistics warehouses to distribution points such as wholesalers and retailers. Now direct delivery also makes up a large amount of this volume due to online shopping and e-commerce. Higher efficiency in transportation and delivery and shrinking inventory are indispensable for delivering the necessary goods to the people in the necessary quantities and at the necessary time. This also contributes to improving customer satisfaction. 4) Recovery/reverse logistics: Recovery or reverse logistics is important for recovering and recycling products, containers, and packaging. Recovery logistics is the flow that recovers and recycles products, containers, and packaging that have fulfilled their role. 5) Recycling logistics: Recycling logistics is concerned with recovering and recycling the recyclable products and containers and like recovery logistics. These involve recovering and recycling empty cans, plastic bottles, and old paper, containers, packaging material, old computers, and inkjet cartridges. Global companies have several logistics systems for selecting, procuring, and distributing supplies to clients. Often different products manage and distribute supplies for their own type which are called vertical logistics because they are managed by separate management units at the central level. A vertical system is a logistics system that supplies and manages products for only one type of product. Many companies have been moving away from having several vertical logistics systems toward having just one system which is integrated that distributes supplies for all products. Vertical and integrated systems each have their own advantages and disadvantages. Depending on the company requirements, and nature of operations it has to be adopted. Check Your Progress 2 Note: 1) Use the space gives below for your answers. 2) Check your answers with those gives at the end of the Unit. 1) List the operating objectives of logistics........................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 24 2) Explain the forms of logistics. Logistics : Concept, Principles and Forms................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 1.6 CONCLUSION In this Unit we have learnt that purpose of a logistics system is to supply the right goods, in right quantities, in the right condition, to the right place, at the right time, and at the right cost. From its largely military origins, logistics has accelerated into becoming one of the key business issues of the day, presenting formidable challenges for managers. Logistics is a cross-functional subject, drawing on contributions from marketing, finance, operations, and corporate strategy as part of a business process. Logistics extends beyond the boundaries of the organisation into the supply chain requiring coordination of the movement of materials and information between many business processes. This leads to the logistics management process that begins with raw material accumulation to the final stage of delivering goods to the destination. By adhering to customer needs and industry standards, logistics management facilitates process strategy, planning and implementation. Logistics management includes both physical distribution and physical supply. 1.7 GLOSSARY Business Logistics: It is the set of activities involved in the flow of materials and products through an organisation and the supply chain to the market. It specifically manages efficient, effective flow and storage of goods, services, and related information in a supply chain. Inventory Control: It is the process to ensure that appropriate amount of material or stock is maintained by an organisation to meet the customer demands. The objective of inventory control is to generate maximum profit with minimum costs of maintaining stock in hand. Load Unitising: It is an efficient means of packaging, arranging, and transporting products into an appropriate unit for easy handling by material handling equipment. 1.8 REFERENCES Ballou, R.H. (2005). Business Logistics/Supply Chain Management. (5th ed.). Pearson. Ghiani, G., Laporte, G. & Musmanno, R. (2013). Introduction to Logistics Systems Management. (2nd ed.). Chichester, West Sussex: A John Wiley & Sons, Ltd. 25 Introduction to Logistics Jayasimha, K.R. (Ed.) (2004). Logistics Management – An Introduction. Management Hyderabad, India: ICFAI University Press. Material Handling & Logistics. Retrieved from https://www.mhlnews.com/ Misra, V., Kahn, M.I. & Singh, U.K. (2010). Supply Chain Management Systems: Architecture, Design and Vision. Journal of Strategic Innovation and Sustainability. 6(4), 96-101. 1.9 ANSWERS TO CHECK YOUR PROGRESS EXERCISES Check Your Progress 1 1) Your answer should include the following points: Logistics management basically is concerned with movement, supply and maintenance of supplies or materialss in an organisation. It deals with flow of material across the supply chain of an enterprise to cost effectively make available the right product at the right place and right time. 2) Your answer should include the following points: Order Processing Procurement Material handling Warehousing Inventory Control Transportation 3) Your answer should include the following points: There are two types of logistics a) Inbound logistics b) Outbound logistics Inbound logistics consists of those activities that are concerned with sourcing, acquring, receiving, storing and delivering the raw materals and parts to the product or service department. Outbound logistics is concerned with collection, storage and distrbution from the unit to the end user or buyer. Check Your Progress 2 1) Your answer should include the following points: Rapid response Minimum variance Minimum inventory Movement consolidation 26 Quality improvement Logistics : Concept, Principles and Forms Life-cycle support 2) Your answer should include the following points: Procurement logistics that deals with procurement of raw materials and parts. Production logistics that includes materials management, product management and shipping. Sales logistics involve measures for delivery of products from warehouses to wholesalers, retailers, and consumers. Recovery logistics is concerned with recovering and recycling products and packaging. 27 Introduction to Logistics Management UNIT 2 LOGISTICS MANAGEMENT: CONCEPTUAL FRAMEWORK, SCOPE, AND IMPORTANCE* Structure 2.0 Objectives 2.1 Introduction 2.2 Logistics Management: Conceptual Framework 2.3 Logistics Management: Specific Concepts 2.4 Scope of Logistics Management 2.5 Importance of Logistics Management 2.6 Conclusion 2.7 Glossary 2.8 References 2.9 Answers to Check Your Progress Exercises 2.0 OBJECTIVES After reading this Unit, you should be able to: Explain the meaning of logistics management; Describe its conceptual framework; Examine the scope of logistics management; and Bring out its importance. 2.1 INTRODUCTION The term logistics includes multitude of functions in movement of materials and goods from sources of supply to the users. The management of logistics calls for effective planning, execution, controlling and coordinating several activities. Its scope is wide that involves processing of orders, maintenance of inventory, transportation, materials handling and packaging. This Unit acquaints the learners with the conceptual framework of logistics management, its scope and importance. It familiarises the learner with certain key concepts in the realm of logistics management. 2.2 LOGISTICS MANAGEMENT: CONCEPTUAL FRAMEWORK Logistics management is an integrating function which coordinates and optimises all logistics activities, as well as integrates them with other functions, including marketing, sales, manufacturing, finance, and information technology. As per the Council of Supply Chain Management Professionals, logistics management is that part of supply chain management which plans, implements, and controls 28 * Contributed by Col. (Dr.) Rajive Kohli, Management Consultant, New Delhi the efficient, effective, forward and reverse flow and storage of goods, services, Logistics Management: Conceptual Framework, and related information between the point of origin and the point of consumption Scope and Importance in order to meet customers’ requirements. Logistics management activities include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfilment, logistics network design, inventory management, supply/demand planning, and management of third-party logistics services providers. The third- party logistics providers(3PL) include freight forwarders, courier companies, and other companies which integrate and offer subcontracted logistics and transportation services. To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution i.e. strategic, operational, and tactical. Logistics management is a process of planning, executing, and controlling the efficient and effective flow and storage of goods and services, and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements. It is defined as a process of management which integrates the movement of products, services, data, and capital from the stage of raw materials to the consumer product. It is application of management principles to logistics operations for efficient and cost-effective movement of goods and personnel and the management of the activity of transporting goods to customers or to places where they are bought or sold. Logistics management includes the design and management of systems to control the flow of material, work-in-process, and finished inventory to support business unit strategy. 2.3 LOGISTICS MANAGEMENT: SPECIFIC CONCEPTS The actual work of logistics is supportive in nature. Logistical support is necessary for manufacturing and marketing operations. The concept of logistics is based on a total systemic view of the multitude of functions in movement of materials and goods from sources of supply to users. Accordingly, it compels management to think in terms of managing the total system; rather than just one part of it; to facilitate the management of the organisation in its continuous search for better solutions to be implemented for its long-term improvement. The concept of logistics management could be considered as ensuring cost effectiveness, and optimum use of raw materials and stock, better transportation, and warehouse facilities so that the products can be made available at any point of time without scarcity. Various logistics management concepts could be combined into the concept of total logistics management with excellence and continuous improvement for achieving a competitive advantage. Some of the specific concepts and assumptions for better logistics management are briefly discussed below. Lean Logistics Management Lean logistics management is a business management philosophy that considers the expenditure on resources utilised for the achievement of any goal other than the creation of value for the end customer. It is a process that recognises and eliminates wasteful activities from the supply chain. It highlights concepts such 29 Introduction to Logistics as value, flow, waste, and excellence/perfection. It attempts to define a well – Management designed supply chain that operates and delivers products to the end customer with minimum wastage. It aims at reduction of wastage of resources in the organisation. Agile Logistics Management This encompasses tools, techniques, and initiatives that enable an organisation to thrive under conditions of unpredictable change. Agile logistics management enables achieving rapid response to customer needs, along with the ability to quickly reconfigure operations to respond rapidly to unforeseen shifts in the marketplace. It may incorporate “mass customisation” concepts to satisfy unique customer requirements and includes the ability to react quickly to technical or environmental exigencies. Agile logistics management is concerned with doing things quickly, saving costs, being responsive to market demands, maintaining flexibility and high productivity. Whereas lean-based management concentrates on generating maximum output value by reducing waste, agile management focuses on increasing efficiency and flexibility to adjust to the customer needs as quickly as possible. The basic advantages of agile logistics management are working towards prompt and effective response to the customer needs in the changing market, ability to adjust and deliver the products according to the customer needs, produce and deliver new products while optimising costs, decreasing manufacturing costs, increasing customer satisfaction, higher competitiveness, and reduction of those processes which add no value. Resilient Logistics Management The resilient logistics management concept is a constantly developing branch in management studies. It is defined as the system’s ability to return to its initial state or a new or desired state after the elimination of unproductive or negative processes that influence the system. The resilience is strongly related to risk within the entire supply chain and the enterprise. The four key pillars of resilient logistics management are visibility, flexibility, collaboration, and control. Green Logistics Management Green logistics management concept is pro-ecological and directly stems from the deteriorating environment conditions reflected in lower supply of raw materials, excessive waste, and increased pollution levels. It is a natural consequence of the evolutionary change in manufacturing companies which replaced a reactive approach to environment management approach with a proactive one. Green logistics describes all attempts to measure and minimise the ecological impact of logistics activities of organisations. Its characteristics are: Reduce Re-use Rework 30 Refurbish Logistics Management: Conceptual Framework, Reclaim Scope and Importance Recycle Remanufacture. Green logistics management concept blends environment management and logistics management. This focuses on multiple approach to product design which takes into consideration issues of environmental risk management, occupational health and safety, rational materials use or waste reduction. It focuses on goods manufacturing and distribution that promotes sustainable development which takes social and environmental factors into cognisance. Sustainable logistics is a key element in the development of environmentally conscious supply chain design. For example, any organisation making efforts to minimise the emissions and energy consumption of transportation in moving its supplies by use of electric vehicles is adapting green logistics. We shall be discussing in detail about green logistics in Unit 11 of this Course. Total Logistics Management Total Quality Management is an approach in which managers constantly communicate with organisational stakeholders to emphasise the importance of continuous quality improvement, that forms the basis of the concept of total logistics management. a) Logistic quality guarantees customer satisfaction and continuous logistic quality improvement. b) The pursuit of logistic partnership is based on professionalism and trust. c) The safety and security assurance for people and goods and information flows. d) The pursuit of ‘one click’ activities implementation based on flow processes, automation and computerisation. e) Sustainable logistics development ensures an organisation’s impact on its environment, in an appropriate and effective manner. f) Logistics management based on product logistic efficiency is the foundation to secure effective and efficient goods and information flow. Check Your Progress1 Note: 1) Use the space given below for your answers. 2) Check your answers with those given at the end of the Unit. 1) Explain the meaning of logistics management...................................................................................................................................................................................................................................................................................................................................................................... 31 Introduction to Logistics 2) What do you understand by green logistics management? Management................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2.4 SCOPE OF LOGISTICS MANAGEMENT The scope of logistics management involves order processing, inventory control, transportation, warehousing, materials handling, and packaging, all integrated throughout a network of facilities. The goal is to support procurement, manufacturing, and customer service operational requirements. It aims internally to coordinate functional competency into an integrated operation focusing on serving customers (internal); and externally, to ensure operational synchronisation which is essential with customers (outside of the firm) as well as material and service suppliers to link internal and external operations as one integrated process. Logistics management is a supply chain management component that is used to meet customer demands through the planning, control and implementation of the effective movement and storage of related information, goods, and services from origin to destination. It helps companies reduce expenses and enhance customer service. The logistics management process begins with raw material accumulation to the final stage of delivering goods to the destination. By adhering to customer needs and industry standards, logistics management facilitates process strategy, planning and implementation. The scope of logistics management includes: Business Logistics: It is the systematic and coordinated set of activities to provide the physical movement and storage of goods, services, and related information from the point of origin of the vendor or the supply services through company facilities to the point of consumption (customer/market) and the associated activities (like packaging, order processing) in an efficient manner necessary to enable the organisation to contribute to the explicit goals of the company and meet customer requirements. Materials Management: Materials management is the planning, organisation and control of all aspects of inventory, embracing procurement, warehousing, work-in-progress, shipping, and distribution of finished goods. It is the inbound logistics from suppliers through the production process, the movement and management of materials and products from procurement through production. Physical Distribution: It is the movement and storage functions associated with finished goods from manufacturing plants to warehouses and to customers. Distribution relates to outbound logistics, from the end of the production line to the end user having activities associated with the movement of material, usually 32 finished goods or service parts, from the manufacturer to the customer. These Logistics Management: Conceptual Framework, involve the functions of transportation, warehousing, inventory control, material Scope and Importance handling, site and location analysis, packaging, and the communications network necessary for effective management. Supply Management: Supply management is the act of identifying, acquiring, and managing the resources and suppliers that are essential to the operations of an organisation. It includes the procuring of physical goods, information, services, and any other necessary resources that enable a company to continue its operations. The main goals are cost control, the efficient allocation of resources, risk management, and the effective gathering of information to be used in strategic business decisions. It is a systematic business process that goes further than procurement to include the coordination of pre-production logistics and inventory management. Decentralised Logistics Management Decentralised logistics management is based on the premise that a company needs to decentralise its operations to enable the organisation/company to respond to the local needs. Any company while dealing with different local specific cultures requires inputs from the dispersed/ local organisational units. The managers who deal with the local cultural variations daily normally know what works and what does not. The product moves further away from the key stakeholders at the central corporate office and closer to the end customer. While this can be accomplished through self-owned warehouse and logistics, a managed decentralised logistics network is far more suitable than its counterpart. An organisation should determine whether to centralise its logistics structure based on its strategic goals or not. However, the majority of organisations have adopted a centralised logistics structure. Centralisation can potentially decrease costs by reducing the needed warehouse space, consolidating operations, expanding channel activities, and standardising logistics processes. There is no “one-size-fits-all” logistics solution. The term supply chain refers to the many links that a product goes through on the way to a customer. The efficiency of that supply chain is a function of the amount of cost and effort to move the product, and how quickly the product needs to be moved. One of the main challenges in the supply chain is the last mile - the final leg from the distribution centre to the customer. This is one of the major factors in choosing between centralised and decentralised logistics. 2.5 IMPORTANCE OF LOGISTICS MANAGEMENT Logistics management is extremely important for any enterprise is to be successful. It involves careful control of the goods both leaving the business premises and entering them, thus keeping the organisation running smoothly as a whole. Logistics management helps organisations seeking to use logistics as the key to gain competitive advantage. Logistics management involves numerous elements, including: Choosing the most effective routes for transportation Discovering the most competent delivery method 33 Introduction to Logistics Using software and IT resources to proficiently handle related processes Management In logistics management, unwise decisions create multiple issues. For example, product deliveries that fail or are delayed lead to buyer dissatisfaction. The damage of goods due to careless transportation is another potential issue. Poor logistics planning gradually increases expenses, and issues may arise from the implementation of ineffective logistics software. Most of these problems occur due to improper decisions related to outsourcing, such as selecting the wrong vendor or carrying out delivery tasks without sufficient resources. Good logistics management helps organisations deliver better service to their customers. Effective management of company’s logistics helps in improving delivery and offers better customer service to all those who buy the products. While dealing directly with the customers to meet their demands, it is important to make sure that supplies or products are received on time and that products are sent to the customers as quickly as possible. Logistics management is important for the following reasons: 1) Cost Reduction and Profit Maximisation: The optimal way is to boost the revenue by improving logistics management. Logistics management results in cost reduction and profit maximisation, primarily due to: Improved material handling Safe, speedy, and economical transportation Optimum number and convenient location of warehouses etc. 2) Efficient Flow of Manufacturing Operations: Inbound logistics help in the efficient flow of manufacturing operations, due to on-time delivery of materials, proper utilisation of materials and semi-finished goods in the production process and so on. 3) Competitive Edge: Logistics provide, maintain, and sharpen the competitive edge of an enterprise by: Increasing sales through providing better customer service Arranging for rapid and reliable delivery Avoiding errors in order processing; and so on. 4) Effective Communication System: An efficient information system is a must for sound logistics management. As such, logistics management helps in developing effective communication system for continuous interface with suppliers and rapid response to customer enquiries. 5) Sound Inventory Management: Sound inventory management is a by- product of logistics management. A major problem of production management, financial management etc., is to ensure sound inventory management, which is solved by logistics management. 34 Check Your Progress 2 Logistics Management: Conceptual Framework, Note: 1) Use the space given below for your answers. Scope and Importance 2) Check your answers with those given at the end of the Unit. 1) Discuss the scope of logistics management.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2) Give reasons for increasing significance of logistics management.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2.6 CONCLUSION Logistics management is all about managing goods manufactured by the companies. It is the business process that starts with the flow of material from the suppliers’ manufacturing house, then to the customer through the distribution channel. Logistics management includes the planning, implementation and controlling the efficient and effective flow and storage of goods from the point of origin to the point of consumption. To resolve the conflicting issues, organisations should implement best logistic management practices. Organisation should focus on collaboration rather than competition. Good collaboration among transportation providers, buyers and vendors helps reduce expenses. An efficient and safe transportation provider is also vital to business success. Logistics management is incorporated within the supply chain system. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance, and information technology. 2.7 GLOSSARY Inbound Logistics: It refers to the sourcing, transport, storage and receiving of goods coming into the organisation. Inventory Management: It is concerned with all aspects of management of flow of goods from manufacturers to warehouses and from these facilities to 35 Introduction to Logistics point of sale. Management Outbound Logistics: It refers to warehousing, packaging, and transporting of goods going out of business. Sustainable Development: It is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable Logistics: It is a resource management process that combines sustainable development with a logistics system. Third-party Logistics Providers (3PLs): These are the outsourced transportation and logistics service providers. 2.8 REFERENCES Agarwal, A., Shankar, R. & Tiwari, M.K. (2006). Modeling the Metrics of Lean, Agile and Leagile Supply Chain: An ANP-based approach. European Journal of Operational Research. 173(1), 211-225. Agarwal, D.K. (2008). Logistics and Supply Chain Management. New Delhi, India: Macmillan. Bowersox, D.J. (2008). Logistics Management. New Delhi, India: Tata McGraw Hill. Bowersox, D.J. (1990). The Strategic Benefits of Logistics Alliances. Retrieved from https://hbr.org/1990/07/the-strategic-benefits-of-logistics-alliances Chritsopher, M. & Peck, H. (2002). Building the Resilient Supply Chain. International Journal of Logistics Management. 15(2), 1-13. Jayasimha, K.R. (Ed.) (2004). Logistics Management – An Introduction. Hyderabad, India: ICFAI University Press. Szymonik, A. (2012). Logistics and Supply Chain Management. Retrieved from https://www.researchgate.net/publication/297369572_Logistics_and_Supply_ Chain_Management 2.9 ANSWERS TO CHECK YOUR PROGRESS EXERCISES Check Your Progress 1 1) Your answer should include the following points: Logistics management is a process of planning,executing and controlling the efficient and effective flow and storage of goods and services and related information from point of origin to point of consumption. It involves efficient and cost effective management of goods and personnel and management of transportation aspects. 2) Your answer should include the following points: Green logistics management is pro-ecological. 36 It encompasses initiatives to measure and minimise the ecological impact Logistics Management: Conceptual Framework, of logistics activities of organsations. Scope and Importance It focuses on measures to reduce,reuse,rework,refurbish,reclaim,recycle and remanufacture. It blends environmernt management and logistics management. Check Your Progress 2 1) Your answer should include the following points: The scope of logistics management involves order processing, inventory, transportation, materials handling and packaging. It encompasses business logistics, distribution, materials management, quick response system, supply management. 2) Your answer should include the following points: Cost reduction and profit maximisation Efficient flow of manufacturing operations Competitve edge Effective communication system Sound inventory management 37 Introduction to Logistics Management UNIT 3 LOGISTICS AND SUPPLY CHAIN MANAGEMENT – INTER RELATIONSHIP* Structure 3.0 Objectives 3.1 Introduction 3.2 Supply Chain Management: Conceptual Framework 3.3 Distinction between Logistics and Supply Chain Management 3.4 Supply Chain Management: Activities and Processes 3.5 Application of Tools of Supply Chain Management : Areas 3.6 Supply Chain Management: Challenges 3.7 Conclusion 3.8 Glossary 3.9 References 3.10 Answers to Check Your Progress Exercises 3.0 OBJECTIVES After reading this Unit, you should be able to Provide a conceptual framework of supply chain management; Distinguish logistics from supply chain management; Discuss the processes of supply chain management and their inter relationship across the supply chain; Explain the areas for application of tools of supply chain management; and Examine the challenges in supply chain management. 3.1 INTRODUCTION Supply chain management (SCM) encompasses a series of interrelated activities from movement and storage of raw materials; work in progress inventory and of finished goods from point of origin to point of consumption. SCM has lot of activities relating to industrial engineering, system engineering, logistics and information technology.SCM is an umbrella concept that links together multiple processes. Logistics refers to movement, storage and flow of goods, services, and information within the overall supply chain. This unit familiarises you with important aspects of inter-relationship between SCM and logistics. 3.2 SUPPLY CHAIN MANAGEMENT: CONCEPTUAL FRAMEWORK A supply chain is a complex and dynamic supply and demand network with the sequence of organisations in their facilities, functions, and activities, which are 38 * Contributed by Col. (Dr.) Rajive Kohli, Management Consultant, New Delhi involved in production and delivery of a product or service. It comprises a network Logistics and Supply Chain Management- Inter of suppliers, distributors, distribution centres, retailers, etc. All have a common Relationship goal of transforming and delivering the final products to customers. Supply chain management (SCM) is an integrating function for linking major business functions and processes within and across companies into a unified, high-performing business model. It includes all logistics management activities, manufacturing operations, coordinating processes/ activities across marketing, sales, product design, finance, and information technology. SCM has evolved from an initial focus on improving relatively simple, but labour- intensive processes to the contemporary practice of engineering and managing of extraordinarily complex global networks. The term SCM was developed to express the

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