Value Proposition canvas- Customer needs and pains
Logistics main
1. Elements of Logistics
Management
What is Logistics?
¶ Can you visualize the production
function of a business process?
¶ What is the most accessible of all
production functions you can
visualize?
¶ Now what activities make
production happen?
* Procurement
• Sourcing
• Moving or Transportation
• Handling
• Storage
03/16/12 1
2. Elements of Logistics
Management - continued
*Conversion
* Distribution
• Transportation
• Warehousing
03/16/12 2
3. Logistical Management
Making inputs and outputs available
when they are needed, where they are
needed and in the quantities they are
needed
* Inputs from market [domestic or
import] are needed for production
* Out puts of production process
[Industrial products, engineering,
chemical & pharmaceutical products
are needed in the market [domestic or
export]
* Battle fronts need troops
* Troops need supplies
*People need agricultural products
* Agriculture needs fertilizers
*03/16/12 needs food grains
PDS 3
4. Logistical Management
- continued
• Without logistics no value adding
process can run
• Logistics is a facilitator of trade &
business
• Age old practice
• Modern logistics is scientific
• Logistics is a planning function
• Genesis of logistics is in military
planning
• Origin of many OR techniques like
Value analysis, PERT, CPM etc.. is
the crucible of war
03/16/12 4
5. Logistical History of India
• India was a maritime power since
about 300 BC
• Goods Made in India, steel, textiles
etc.
• Trade and prosperity
• Gradual degeneration
Some logistical feats in history:
• Berlin Air Lift – A study in
logistics
• Indians in the Gulf countries - 1991
• Operation Overlord, II World
War-1945
• 1962 war with China
• 1776 American war of
Independence [4th July1776]
03/16/12 5
6. What causes bad logistics?
• Infrastructure: bad roads, inefficient
railways, poor communication lines,
congestion in ports
• Taxation: e.g. Octroi
• Information: Inadequate
information, bad communication
• Management: Bad management
decisions [carrier selection, out
sourcing etc.]
03/16/12 6
8. Importance of Logistics
Why should we learn logistics?
Why is logistics important for
management students?
• Logistics is the bed rock of trade
and business
• Leads to customer satisfaction,
D&F expectations of customers
• Integrates logistical activities
• Competitive edge in a commodities
market
• Logistics wins or loses wars
• Supports critical functions like
operations and marketing to be JUST
IN TIME by providing Interface with
marketing
03/16/12 8
9. Importance of Logistics
- continued
• Logistical costs are 5% to 35% of
sales depending on type of business,
geographical areas of operation etc.
• Crucial to survival and prosperity in
global business
• logistics experts are moving up in
corporate ladder
• leads to the concept of supply chain
management
• Indian market is changing- shift
from seller’s market to buyer’s market
• changing customer
• expanding business, global trade
• competition, internal & external
• concept of lean management
03/16/12 9
10. Operating Objectives Of
Logistics
1.Rapid response
• F- Objective: Ability to respond
rapidly to customer’s order
• Role of Information Technology
• Concept of SMED and Kanban
2. Minimum variance
• D-Objective as OTD
• Any event that disturbs the supply
chain is variance
• Problems in information flow,
traffic snarls, acts of god, wrong
dispatches, transit damage
• Traditional approach Vs costs
03/16/12 10
11. Operating Objectives Of Logistics
-continued
3. Minimum inventory
• Concept of Inventory Turns
• Increase these turns without
sacrificing customer satisfaction
• Single piece flow as practiced by
JIT companies
4. Movement consolidation
• Integrating interests of several
players in the supply chain.
• Planning several small shipments
together [of different types of
shipments]
03/16/12 11
12. Operating Objectives Of Logistics
-continued
5. Quality
• Quality of logistics performance -
complete fulfillment of order
6. Life cycle support [cradle to
cradle logistical support]
• After sales service
• Reverse logistics
# Rigid quality standards
# transit damage
# product expiration dating
# law against unscientific disposal
03/16/12 12
13. Operating Objectives Of Logistics
-continued
# law making recycling mandatory
# erroneous order processing by
supplier
03/16/12 13
14. Logistical Functions
INFORMATION
SYSTEMS
Internal &
External
Information flow
WARE
NETWORK HOUSING
DESIGN Storage,
Handling,
LOGISTICS Packing &
Distribution
FUNCTIONS
TRANSPORTATION INVENTORY
Water, Road, Rail, When to order?
Pipeline & Air How much to
order? Just In
Time
03/16/12 14
15. Logistical Functions
components of logistics or elements
of logistics
• Information management
* Role of technology, fast & accurate
information
* Real time logistics in competitive
business
* Notification to customer
* Role of information in logistical
forecasting & logistical operations,
order processing and order
management
* Erroneous information will result
into product recall and reshipment
03/16/12 15
16. Logistical Functions - continued
* Inventory control
* Neither stock-out nor stockpiling
* Inventory policies
* Inventory models
* Inventory systems
• Transportation
* the most visible of all elements
* High contributor to costs logistics
- Movement costs, Preservation costs,
Cost of idle asset, Administration
costs
* Transportation is accomplished in
three ways- Private carriage, contract
carriage, common carriage
03/16/12 16
17. Logistical Functions - continued
* Expectations from carrier-
minimum cost, speed of transport,
consistency in speed
• Warehousing
* Switching facility rather than a
storage facility
* Ownership can be private, public or
third party contract.
*Economic benefits - Consolidation,
Break bulk, Cross Dock, processing
postponement, stock piling[seasonal
storage]
* Service benefits - spot stocking,
Assortment, mixing, production
support, market presence
03/16/12 17
18. Logistical Functions - continued
• Material handling
* Receiving, moving, storing,
dispatching activities
* Impact on cost [capital as well as
running], Quality and safety
* One of the principles of material
handling is minimum movement
* Commonly used material handling
equipment- forklifts, EOT Cranes,
hoists, pulley blocks, trolleys,
railroad cars, conveyers, ropes, slings,
carousels, sortations, robotics
• Packaging
* Types of packaging- consumer
packaging and industrial packaging
03/16/12 18
19. Logistical Functions - continued
*Consumer packaging
°Attracts attention
° single most important factor in
purchasing decisions made at point
of sale
* Industrial packaging - makes
logistical activities of handling
storage moving easy
* Sales functions of packaging
° Display - attraction, easy
identification, communication of
recipe, hazard, special care
° Ease of opening
° Convenience - flexi tubes, sprays
° Dispensing - spouts, taps, spays,
tubes
03/16/12 19
21. Logistical Functions - continued
# Grouping goods into convenient
unit for distribution - mango boxes,
cola bottles, cotton bales, wire rope
coils
# Pilfer proofing - bisleri caps, cola
caps
# Handling - pallets, straps
• Net work design [Location
analysis] - to minimize overall
system cost of delivering value to the
customer
# Number of facilities - production
facilities, warehouses
# What is to be performed in these
facilities?
03/16/12 21
22. Logistical Functions - continued
# Their location - to minimize overall
system cost
# Who operates these facilities? -
outsourcing decisions
# Communication between these
facilities
- are some of the salient features of
net work design.
03/16/12 22
23. Some important concepts
# Logistics and supply chain
management Logistics and Supply Chain
Management by G.Raghuram, N.Rangaraj. Page
#15, The Management of Business Logistics by
Coyle, Bardi, Langlely Page # 31 ]
• Focus on costs and benefits in
physically moving the goods to
customers - post war1950s.
• Idea of total system cost
• Trade off situations between costs
of several activities
03/16/12 23
24. Some important concepts -
continued
• Selection of modes of transport
• 1960s - Emergence of Physical
distribution management
- integration of activities of outbound
logistics
- Electronic era, information as an
element of Physical distribution
management
• 1970 - some aspects of financial
subsystem integrated & focus on
activities of inbound logistics until
considered to be vendors’ concern
03/16/12 24
25. Some important concepts -
continued
• 1980s - Concept of Logistics as a
management function, internally
integrating all activities of inbound
and out bound logistics
- Focus on logistical operations,
application of TQM, TPM & JIT
• 1990 - Gradually concept is
encompassing entire value chain as
Supply Chain Management
• Henry Ford’s [early 1990s] idea of
control on supply chain
• No firm can be self sufficient
03/16/12 25
26. Some important concepts -
continued
• Scope - Source of raw materials to
end user - all upstream &
downstream organizations & linkages
• How is this created in business? -
external integration
• Concept of supply chain as a pipe
line
• Main objective - Supply chain
profitability by value creation
• Focus - end user
03/16/12 26
27. Some important concepts -
continued
• Origin - extension of scope of
logistics management
• Definition - Management of
upstream and down stream
relationships with suppliers and
customers to deliver superior
customer value at less cost to the
supply chain as a whole
• breaking the organizational barriers
to deliver value
03/16/12 27
28. Some important concepts -
continued
* Sharing of sales information in
real time
- reduces inventories by
reducing uncertainties
- compresses value
chain by slashing lead-times thereby
quickening cash flow
03/16/12 28
30. particulars Logistics Supply chain
management management
Scope Inbound logistics, All players in the
in process supply chain from
inventory, raw material source
outbound logistics to finished product
consumer, vendors,
their vendors,
supplier
organization
[shipper],
Warehouses,
service providers,
customers, their
customers
How this is created By internal By external
in business? integration of integration of roles
logistics functions of various players
handled by various in the supply chain.
management
functions within
organization
Main objective Logistics cost Supply chain
reduction by profitability by
integrating value creation.
resources across
the pipeline
03/16/12 30
31. focus L/M tries to take the SCM focuses on
product to the value creation in the
consumer at supply chain. Hence
minimum logistical this is customer
cost. Hence it is focused or demand
supply driven. driven.
definition Logistics is the Management of
process of upstream and down
strategically stream relationships
managing with suppliers and
procurement and customers to deliver
storage of material , superior customer
part and finished value at less cost to
inventory [and the supply chain as
related information a whole.
flow] through
organization and its
marketing
channels in such a
way that current
and future profits
are maximized
through cost
effective fulfillment
of order
Origin A very old concept As a logical
in military planning. extension of logistics
management
03/16/12 31
32. Some important concepts -
continued
*Business functions of logistics
management ……[physical distribution
management by K.K.Khanna – page # 13, The
Management of Business Logistics by Coyle,
Bardi, Langlely Page # 39]
• military origin, military functions &
post war march into business
• procuring, moving and storing of R/
M and industrial F/G
• making inputs available for value
addition to a conversion process
• facilitation of relevant
manufacturing and marketing
03/16/12 32
33. Some important concepts -
continued
- making finished goods available to
the customers in the market
• procuring, moving and storing
of agricultural products
• Food Corporation of India
• importance of logistics function in
commodities market
* Event logistics - The net work of
activities, facilities and personnel
required to organize, schedule and
deploy the resources for an event to
take place and to efficiently withdraw
after the event
03/16/12 33
34. Some important concepts -
continued
* Service logistics - the acquisition,
scheduling and management of the
facilities/assets, personnel and
materials to support and sustain a
service operation
* Military logistics - design and
integration of all aspects of support
for the operational capability of the
military forces [deployed or in
garrison] and their equipment to
ensure readiness, reliability and
efficiency
03/16/12 34
35. Some important concepts -
continued
*Logistical mission ………[Logistics &
SCM by Martin Christopher, Page # 13, L/M by
Bowersox Page #9]
• Achievement of business objectives
at minimum logistical cost
[delivering- QCD expectations of
customers at minimum logistical
costs, i.e. creating customer value at
minimum cost
• set of goals to be achieved at a
particular type of market responsive
to competition
03/16/12 35
36. Some important concepts -
continued
• mission focus Vs individual
function
• Mission of logistics is providing a
means by which customer satisfaction
is achieved
03/16/12 36
37. Some important concepts -
continued
*Inbound logistics
Procurement operations in
procurement cycle
• potential avenues for reducing
systems costs
• value of inventory is low
• trade off between cost of
maintaining inventory in transit and
low cost transport exists
• Delivery time, size of shipment,
mode of transport are different from
O/B logistics
03/16/12 37
38. Inbound logistics - continued
Order
Sourcing placement
& expediting
Supplier
Receiving Transportation
03/16/12 38
39. Some important concepts -
continued
*Outbound Logistics
• Value added goods are to be made
available in the market distributed
through the network of warehouses
and retailers’ shops
• Value of the inventory is very high
as during conversion value is added
• Delivery time, size of shipment,
mode of transport are different from
I/B logistics
03/16/12 39
40. Outbound Logistics - continued
Activities in distribution performance cycle
Order Order Customer
processing transmission order
Order Order Customer
selection transportation delivery
03/16/12 40
41. Some important concepts -
continued
*Total cost analysis
Conventional approach
• No information on the impact of
cost of an individual function on
the system
• Apportionment of Logistics costs
• Costs get submerged
• Competitive edge is lost by the
organization.
• Incremental cost to the system -
on account of changes to the system
like introduction of a warehouse
and the impact on the system
• Impact of decisions at various
levels on the system
03/16/12 41
42. Some important concepts -
continued
• Cost information is biased, cost
elements tend to get hidden out of
fear that they expose functional
weakness
• Costs in no man’s land are never
owned - like tube lights on passages,
cost of returned vehicle
• Cost cutting is fragmented so
doesn’t reduce system cost
• Focus is on input function. Hence
attempt is to reduce function cost in
isolation
• Customer dissatisfaction
* Total cost approach
• Modern approach to logistical
costing
03/16/12 42
43. Some important concepts -
continued
• Focus on reduction of cost of
output of the system
• Provides competitive edge to the
company
• Several trade off points in the
system, further areas of improvement
03/16/12 43
44. Some important concepts -
continued
*Mission based costing
[or budgeting] in logistics
• input focused costing
• output focused costing
• mission goals and costs are set
• functional inputs are worked out to
meet the system deliverables
Purchasing Sales Transportation
Production Marketing Etc Customer service
goals [QCD]
Mission At market type A
A 290
Customer service
Mission goals [QCD]
B At market type B
Mission Customer service
C goals [QCD]
At market type C
03/16/12 44
45. Mission based costing - continued
transportation
Ware housing
Customer service
Mission 15 5 5 C1 goals [QCD]
A =Rs. 25/- At market type A
Customer service
Mission C1 goals [QCD]
B 45 35 20 =Rs. 100/- At market type B
Customer service
Mission C1 goals [QCD]
C =Rs. 30/- At market type C
10 10 10
70 50 35 Rs.155/-
Functional Inputs to Logistical Management
Fig.8
03/16/12 45
47. Some important concepts -
continued
*Interface with marketing
• a common wall,surface or area with
another body, concept or function -
area of common interest or concern
• Four Ps of marketing and logistical
interface
• Price - marketing can re offer the
price to beat the competition with
superior logistical support
• Product & Packaging- size shape &
weight/volume ratio of the product
has major impact on logistical cost.
# Gillette story of floor displays
03/16/12 47
48. Some important concepts -
continued, Interface with
marketing
Promotion - promotional strategies of
marketing need to be decided by
working closely with logistics
# Push/Pull strategy
Place - whether to distribute through
wholesalers or through retailers is a
marketing decision with impact on
logistics
# wholesalers’ demand & retailers’
demand
Customer Service - another area of
interface between marketing &
logistics
03/16/12 48
49. Some important concepts -
continued
Interface with
operations
SHORT RUNS
LOGISTICS
SEASONAL
DEMAND
OPERATIONS
SUPPLY SIDE
INTERFACE
PACKAGING
03/16/12 49
50. Some important concepts -
continued
Interface with operations
* Short production runs
• Very strong logistical support is
needed to operate Just In Time
• Short runs lead to inventory
reduction
* Seasonal demand
• Inventory should be mutually
accepted
* Supply side interface
• Prevent shortages
* Packaging
• Protective packaging
• Third party alternatives
03/16/12 50
51. Some important concepts -
continued
Role of planning in logistics
management
• Role of planning is central to
logistics management
• Mission of logistics is to achieve
desired levels of service and quality at
lowest possible cost.
• Logistics makes one plan, that
replaces traditional concept of
planning in pockets
03/16/12 51
52. Some important concepts -
continued
8. Importance of 3Cs
“C” customers
Look for value
Value [benefit] at lowest Value
price
“C” company “C” competition
By effective By effective
utilization utilization of assets
of assets tries to Cost differentials tries to create and
create and offer offer value to
value to customers customers
SERVICE LEADER SERVICE & COST
HIGH LEADER
Whom
shall I
buy
from?
OK
S HAPPY COMPANY
E
R COST LEADER
CUSTOMER
V
I
C
E
LOW SAD OK
03/16/12 HIGH COST LOW 52
53. Some important concepts -
continued
*Integrated logistics
•Attributes of Logistics Department
# Scope is wide spread- functions of
logistics are spread across various
stages of value chain in the
organization
# Provides interface between
marketing and customers, marketing
and operations, operations and
supplier
# Provides competitive edge to
business in the current environment
# Handles flow of information,
materials & recovery cycle
# Tackles cost reduction
03/16/12 53
54. Some important concepts -
continued
• Logistical competency
• What is logistical competency?
• Definition: Logistical Competency is
the relative assessment of a firm’s
capability to provide competitively
superior customer service at the
lowest possible total cost.
• It is a strategy to provide a superior
service at a total cost below industry
average.
• Its aim is to view how logistics can
be exploited as a core competency so
that fits into a firm’s overall strategic
positioning
03/16/12 54
55. Some important concepts -
continued
Inventory flow
Customer Physical Manufacturing Suppliers
distribution support Procurement
Information flow
•How can this be achieved?
• By integrated performance of logistical
functions
# jigsaw puzzle
# What is the big picture?
• What are the parameters needed to
achieve this integrated performance?
# Information flow, Inventory flow,
organization, customers and suppliers
03/16/12 55
56. Some important concepts -
continued
• Concept of Integration in Logistics
Operation
• Internal & External Integration
• Internal Integration
# First Stage of Internal Integration -
Materials management & Physical
distribution Management
# Second Stage of Internal Integration
- Logistics Management
• [ External Integration - Supply
Chain Management]
# functions in coordinated fashion
# One operational command -
Performance in isolation loses sight of
overall picture.
03/16/12 56
57. Some important concepts -
continued
# Picture before you to solve the
jigsaw puzzle
# Links the enterprise with customers
and suppliers
# Information flowing into the
enterprise is converted into schedules
and plans & value added products
reach the customers
# Integrated logistics is interrelated
efforts of managing information flow
& inventory flow
03/16/12 57
58. Some important concepts -
continued
• Value added role of Logistics
# form utility, place and time utility
and possession utility add value to a
product
• Form Utility is given by Production
• How logistics also adds form utility -
processing postponement, mixing,
unpacking
• Place and Time Utility is given by
logistics functions
• Possession Utility: Marketing
creates Possession Utility by
promoting the product
• But logistics makes finally
possession by customer happen
03/16/12 58
59. Some important concepts -
continued
* Logistical Information System.
• Primary activities of LIS
• data flow from external sources
• processing and storage of
information within the firm
• communication to the decision
maker in the form of reports
• communication to customers and
suppliers and their feedback
03/16/12 59
