Academy of

Business
Professionals
 SESSION ON
LOGISTICS FUNDAMENTALS

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Unit 1: Fundamentals of Logistics And Supply Chain
Management
Session 1: Logistics Fundamentals
Session 2: Logistics and Information Technology
Session 3: Understanding the Supply Chain
Session 4: Supply Chain Drivers and Metrics
Learning Objective

• Synchronizing supply chain functions

• Exposure to different elements of
logistics system.
• Assist to understand the objectives of logistics management & its role in supply
chain.
• Understanding to know third party logistics.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Supply chain management can also
be described as integrating three of
the functions inside an organization:
purchasing, logistics, and operations.

Each of these functions is critical in

any company, and each of them has
its own metrics. But these functions
are interdependent (see Figure), so
making good decisions in any of
these areas requires coordination
with the other two.
— The purchasing, logistics, and operations teams often have conflicting goals without
realizing it. Managing these functions independently leads to poor overall
performance for your company. Supply chain managers need to make sure that the
objectives of these groups are aligned in order for the company to meet its top-level
goals.
— The simplest top-level goal for many supply chain decisions is return on
investment.
— Focusing on this one objective can often help everyone see the big picture and look
beyond the functional supply chain metrics such as capacity utilization or
transportation cost..
— Purchasing (or procurement) is the function that buys the materials and services that a
company uses to produce
its own products and services.
— The basic goal of the purchasing function is to get the stuff that the company needs at the
lowest cost possible;
the purchasing department is always looking for ways to get a better deal from suppliers.
— Some of the most common cost reduction strategies for a purchasing manager are:
o Negotiating with a supplier to reduce the supplier’s profit margin .
o Buying in larger quantities to get a volume discount
o Switching to a supplier that charges less for the same product
o Switching to a lower-quality product that’s less expensive
— On the surface, any of these four options looks like a simple, effective way to reduce
costs and therefore increase profitability. But each of these options can have negative
long-term effects, too. For example, driving a supplier’s profit margin too low could
make it hard for them to pay their bills — or even force them out of business.
While you might save money in the short term, you may have to end up spending even more
time and money to find a new supplier in the future.

In other words, it would actually increase your total cost. Many purchasing decisions can also
have direct effects on the costs for other functions within your company.

For example, sourcing lower-quality raw materials might lead to higher costs for quality
assurance. Buying in larger quantities might lead to an increase in inventory costs.

Your total costs include all of the investments and expenses that are required to deliver a
product or service to your customer.
—The term “logistics” originates from the
ancient Greek word “logos” meaning ratio,
word, calculation, reason, speech, oration,
and such the word logistics itself
originates from the military discipline.
—There were divisions in the military who
were responsible for the supply of
necessary arms, ammunition and rations
as and when they were needed, for
example when they had to move from
their own base to a forward position. In
that situation the logistics division would
provide all the necessary support to move
the arms, ammunitions, tents, foods etc.
In the ancient Greek, Roman and Inbound logistics refers to the products that are being
Byzantine empires, there were military shipped to your company by your suppliers.
officers with the title ‘Logistikas’ who were Outbound logistics refers to the products that you ship
responsible for financial, supply and to your customers.
distribution matters.
—Not surprisingly 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 defines logistics as “ The time related positioning of
resources.”
—Logistics covers everything related to moving and storing products.
—Logistics management activities typically include inbound and outbound transportation
management, warehousing, materials handling, order fulfilment, logistics network design,
inventory management, supply/demand planning, and management of third- party
logistics (3PL) service providers. To varying degrees, the logistics function also includes
sourcing and procurement, production planning and scheduling, packaging and
assembly, and customer service.
 Logistics Defined
• The Council of Supply Chain
Management Professionals
(CSCMP) in the United States
defines logistics management
as (2016):
• … that part of supply chain
management that 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
customers’ requirements. POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Logistics covers everything related to moving and storing products. This
function can go by different names, such as physical distribution, warehousing,
transportation, or traffic.

Inbound logistics refers to the products that are being shipped to your company by
your suppliers.

Outbound logistics refers to the products that you ship to your customers.
—Logistics adds value because it gets a product where a customer needs it when the
customer wants
it.
—Logistics costs money, too. Transporting products on ships, trucks, trains, and airplanes
has a price
tag.
—Also, whether a product is sitting on a truck or gathering dust in a distribution center, the
product is an
asset that ties up working capital and probably depreciates quickly.
—The goals of the logistics function are to move things faster, reduce
transportation costs, and decrease inventory.
—Following are some ways that a logistics department might try to achieve these goals:
o Consolidating many small shipments into one large shipment to lower shipping costs
o Breaking large shipments into smaller ones to increase velocity
o Switching from one mode of transportation to another, either to lower costs or increase
velocity
o Increasing or decreasing the number of distribution centers to increase velocity or
lower costs
o Outsourcing logistics services to a third-party logistics (3PL) company
 Contd…

— You can see an example of the conflicts that can occur between logistics and purchasing:
Logistics wants to decrease inventory, which may mean ordering in smaller quantities,
but purchasing wants to lower the price of the purchased materials, which may mean
buying in larger quantities.
— Unless purchasing and logistics coordinate their decision-making and align their goals with
what is best for the bottom line, the two functions often end up working against each other
and against the best interests of your company, your customers, and your suppliers.
—The third function that is key to supply chain management is operations.
—Operations is in charge of the processes that your company focuses on to create value.
Here are some examples:
o In a manufacturing company, operations manages the production processes.
o In a retailing company, operations focuses on managing stores.
o In an e-commerce company or a 3PL, the operations team may also be the logistics team.
— Operations managers usually focus on capacity utilization, which means asking “How much
can we do with the resources we have?”
— Resources can be human resources (people) or land and equipment (capital).
— The operations department is measured by how effectively and efficiently it uses available
capacity to produce the products and services that your customers buy.
 Contd…

— Some common goals for operations teams include

o Reducing the amount of capacity wasted due to changeovers and maintenance
o Reducing shutdowns for any reason, including those caused by running out of raw
materials
o Aligning production schedules and orders for raw materials with forecasts received from
customers
— Although increasing operations efficiency sounds like a great idea, sometimes it actually
creates supply chain problems and does more harm than good. Companies may invest in
increasing their capacity only to find out that their suppliers or logistics infrastructure can’t
support the higher production levels.
 Dabbawalas of Mumbai
Dabbawalas of Mumbai offer a reliable fool
proof logistics system of delivering lunch boxes
to over 200,000 office employee every day
without mix up of having the wrong tiffin going to
the wrong office or arriving late, irrespective of
conditions such as rains, strikes, and scorching
heat.
A team of around 5000 men and women, mostly
illiterate, operate in assigned areas in Mumbai,
each handling 25-30 dabbas, which is the
optimum lot size as more could create confusion
and affect promptness, which will lead to
customer dissatisfaction.
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 Dabbawalas of Mumbai
• The dabbas are collected from the houses and
put in tiffing racks at a network of 96 railway
stations all over Mumbai to load into the train for
further movement toward delivery points. They
use a colour code system on the dabbas to
identify the collection and delivery points.
• After the lunch hour, the system operates in
reverse direction, again displaying accuracy
with collection and quality of delivery closer to
Six Sigma.
• This system gives a much cheaper alternative to
office workers than having their food in
restaurants and food joints.
• With this logistics system, 400,000 transactions
are done daily with the precision of Six Sigma
accuracy.
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 Economic Impacts of Logistics

▪ Macrolevel economic impacts logistics is most

definitely an important component in any country’s
economy. (The Cost of the Business Logistics System
in Relation to a Country’s Gross Domestic Product)
▪ The economic impacts of logistics can affect individual
consumers such as you These impacts can be
illustrated through the concept of economic utility
o Economic Utility which is the value or usefulness
of a product in fulfilling customer needs or wants.
The four general types of economic utility are
possession, form, time, and place; logistics clearly
contributes to time and place utilities.
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 Economic Impacts of Logistics

− Possession Utility refers to the value or usefulness

that comes from a customer being able to take
possession of a product.
− Form Utility refers to a product’s being in a form that
(1) can be used by the customer and (2) is of value to the
customer.
− Place Utility , refers to having products available where
they are needed by customers; products are moved
from points of lesser value to points of greater value.
− Time Utility, which refers to having products available
when they are needed by customers.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

(1) Information Flow (2) Warehousing
- Order Registration
- Order Checking and
- Material Storage
- Load Unitizing and Material
Logistics Mix
Editing Handling
- Order Processing - Site Selection and Network
- Coordination Planning The functional areas of
- Order Picking and Filling
- Dispatch Documentation logistics, termed "Logistics
Mix" by Martin Christopher,
(3) Inventory Control (4) Packaging
- Material Requirement Planning - For Handling and Damage consist of: Information Flow,
- Inventory Level Decisions Prevention Warehousing , Inventory
for Customer Service - For Communication
objectives - For Inter Modal Transportation Control , Packaging and
Transportation.
(5) Transportation
- Route Planning
- Mode Selection
- Vehicle Scheduling

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN

MANAGEMENT
The objective of logistics

The objective of logistics is to facilitate the flow of material across the

supply chain of an enterprise so as to cost effectively make available the
right product at the right place at the right time.

Logistics has to achieve the two polemic goals of customer satisfaction and
least cost. This is possible only when all the logistics functions are working as
a unified system to achieve the common goal.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Marketing Channel
• The ownership channel covers movement of the title to the goods, and
the goods themselves might not be physically present or even exist.
• The negotiations channel is the one in which buy and sell agreements are
reached.
• The financing channel handles payments for goods
• The promotions channel is concerned with promoting a new or an existing
product, and it can be related to the financing channel because monetary
allowances are often part of the promotion effort.
• The most significant contribution that the logistics channel makes to the
overall channel process is the sorting function, which bridges “the
discrepancy between the assortment of goods and services generated by
the producer and the assortment demanded by the consumer.”
Moving and storing product throughout the channel

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 ▪ The sorting function has four steps, which
are important to understanding the concept
Sorting Functions of goods flowing through the logistics
channel:
o Sorting out is sorting a heterogeneous
supply of products into stocks that are
homogeneous.
o Accumulating is bringing together
similar stocks from different sources.
o Allocating is breaking a homogeneous
supply into smaller lots.
o Assorting is building up assortments
of goods for resale, usually to retail
customers.
Source: Dibb,S,Simkin, Pride, Ferrell (2001) marketing concepts & strategies 4th ed, USA; Houghton Mifflin
▪ These steps take place between the
manufacturer and the consumer, which
means that they are performed by the
wholesaler, the retailer, or specialist
intermediaries.
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Activities in the Logistical Channel

Customer service
Facility location decisions
Inventory management
Order management
Procurement
Transportation management
Demand forecasting
International logistics
Materials handling
Packaging
Reverse logistics
Warehousing management
Responsibilities of Logistics Managers

A specialist A generalist
oFreight rates oUnderstands functional
oWarehouse layouts
relationships
oInventory analysis
oRelates logistics to other firm
oProduction operations, suppliers, customers
oPurchasing
oControls large
oTransportation law
expenditures
Logistics Professionalism

Professional Organizations Dedicated to Advancing the Professional

Knowledge of their members:
▪ APICS – The Association for Operations Management (www.apics.org)
▪ American Society of Transportation and Logistics (AST&L) (www.astl.org)
▪ Council of Supply Chain Management Professionals (www.cscmp.org)
▪ Delta Nu Alpha (DNA) (www.deltanualpha.org)
▪ International Society of Logistics (SOLE) (www.sole.org)
▪ Supply Chain & Logistics Association Canada (SCL) (www.sclcanada.org)
▪ The Chartered Institute of Logistics and Transport in the UK – CILT (UK)
(www.ciltuk.org.uk)
▪ Warehousing Education and Research Council (WERC) (www.werc.org)
 Logistics Functions
▪ Logistics is a process of movement of goods
across the supply chain of a company.
However this process consists of various
functions that have to be properly managed to
bring effectiveness and efficiency to the supply
chain of the organization. Activities that are
considered to be logistics related include, but
are not limited to, the following:
≡ Order Management
≡ Inventory Management
≡ Warehousing Management
≡ Transportation Management
≡ Packing
≡ Information flow
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 Order Management

▪ Order management refers to management of the

activities that take place between the time a
customer places an order and the time it is
received by the customer. As such, order
management is a logistics activity with a high
degree of visibility to customers.
▪ The order processing activity consists of the following
steps:
o Order checking for any deviations in
agreed-upon or negotiated terms
o Prices, payment, and delivery terms
o Checking the availability of materials in stocks
o Production and material scheduling for shortage
o Acknowledging the order indicating deviations, if any

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 Inventory refers to stocks of goods that
are maintained for a variety of
Inventory Management purposes, such as for resale to others,
as well as to support manufacturing or
assembling processes.
When managing inventory, logisticians
need to simultaneously consider three
relevant costs—the cost of carrying
(holding) product, the cost of
ordering product, and the cost of
being out of stock.
Inventory management is to keep
enough inventory stocks to meet
customer requirements, and
simultaneously its carrying cost should
be the lowest. It is basically an
exercise of striking a balance between
the customer service for not losing
market opportunity and the cost to meet
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN the same.
MANAGEMENT
 ▪ Warehousing refers to places
where inventory can be stored for
Warehousing Management a particular period of time. In
other words, warehousing is the
storing of finished goods until they
are sold.
▪ Warehouse is the key decision
area in logistics. The major
decisions in warehousing are:
o Number of warehouses
o Size of the Warehouse
o Warehouse layout
o Design of the building
o Ownership of the warehouse
▪ Warehousing is an important
component of logistics as it is
directly linked to the ability of a
firm to deliver the desired level of
customer service.
 Transportation Management
▪ Transportation can be defined as the actual physical
movement of goods or people from one place to another,
whereas transportation management refers to the
management of transportation activities by a particular
organization.
▪ For movement of goods from the supplier to the buyer,
transportation is the most fundamental and important
component of logistics.
▪ When an order is placed, the transaction is not
complete till the goods are physically moved to the
customer's place.
▪ For low unit value products, the transportation cost
component is 20 percent of the product cost. In logistics
costs, its share varies from 65 to 70 percent in the case
of mass-consumed, very low unit-priced products.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 • Packaging can have both a marketing (consumer
packaging) and logistical (industrial packaging)
Packing dimension. Industrial (protective) packaging
refers to packaging that prepares a product for
storage and transit (e.g., boxes, crates).

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Information Flow

Logistics is basically an
information-based activity of
inventory movement across a
supply chain. Hence, an
information system plays a vital
role in delivering a superior service
to the customers.

Use of IT tools for information

identification, access, storage,
analysis, retrieval, and decision
support in logistics is helping
business firms to enhance their
competitiveness.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 Role of Logistics in the Supply
Chain
▪ It’s often useful to think about your supply chain as a
network. Networks are made up of nodes and links.
As Figure shows, every stop that a product makes
between raw materials and a customer is a node of
the network. A factory is a node; so is a warehouse, a
distribution center, and a retail store.
▪ Nodes are connected by links. Generally speaking,
links are forms of transportation, such as a ship, a
railroad, a truck, or a drone. Products move through a
supply chain, flowing through links and stopping at
nodes.
▪ Logistics basically connects the source of supply with
the sources of demand. It
bridges the gaps between market demand and the
capabilities of supply sources.
POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 Role of Logistics in the
Supply Chain
▪ However, when these gaps tend to be larger and the
risk of dilution of service level is high, an integrated
system is needed to make the operation seamless
for product and information flow. SCM is a process
of integration to bridge the gap between supply and
demand.
▪ SCM helps to close this gap by enhancing and then
aligning the capabilities through enablers such as
technology, collaboration and human resources
skills.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 ▪ A third-party logistics provider (abbreviated 3PL,
Third Party Logistics or TPL) is a firm that provides service to its
customers of outsourced (or "third party")
logistics services for part.
▪ Third party logistics providers typically specialize
in integrated operation, warehousing and
transportation services that can be scaled and
customized to customers needs based on market
conditions and the demands and delivery service
requirements for their products and materials.
▪ Often, these services go beyond logistics and
included value-added services related to the
production or procurement of goods, i.e.,
services that integrate parts of the supply chain.
Then the provider is called third-party supply
chain management provider (3PSCM) or supply
chain management service provider (SCMSP).

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 According to the Council of Supply Chain
Management Professionals, 3PL is defined as "a
firm that provides multiple logistics services for
Third Party Logistics use by customers. Preferably, these services are
integrated, or bundled together, by the provider.
(3PL) Among the services 3PLs provide are
transportation, warehousing, cross- docking,
inventory management, packaging, and freight
forwarding."

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 ▪ Standard 3PL Provider: This is the most basic form of a
3PL provider. They would perform activities such as pick
and pack, warehousing and distribution (business) the
most basic functions of logistics. For a majority of these
Types of 3PL Providers firms, the 3PL function is not their main activity.
▪ Service Developer: This type of 3PL provider will offer
their customers advanced value-added services such as:
tracking and tracing, cross-docking, specific packaging, or
providing a unique security system. A solid IT foundation
and a focus on economies of scale and scope will enable
this type of 3PL provider to perform these types of tasks.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

 ▪ The Customer Adapter: This type of 3PL provider comes
in at the request of the customer and essentially takes
over complete control of the company's logistics activities.
The 3PL provider improves the logistics dramatically, but
do not develop a new service. The customer base for this
Types of 3PL Providers type of 3PL provider is typically quite small.
▪ The Customer Developer: This is the highest level that a
3PL provider can attain with respect to its processes and
activities. This occurs when the 3PL provider integrates
itself with the customer and takes over their entire logistics
function. These providers will have few customers but will
perform extensive and detailed tasks for them.

POSTGRADUATE DIPLOMA IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Thank you!
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