Transcript Logistics and SCM an over view

Logistics and SCM
an over view
B.V.L.Narayana
SPTM
RSC BRC
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Definitions
• TRANSPORTATION
– movement of goods and/or people from one
place to another (Wikipedia).
 Logistics is defined as that part of the supply
chain process that plans, implements, and
controls the efficient flow and storage of goods,
services, and related information from the point
of origin to the point of consumption in order to
meet customers’ requirements.
The Council of Logistics Management (1998).
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Definitions
 Supply chain management (SCM) is the
management of a network of
interconnected businesses involved in the
ultimate provision of product and service
packages required by end customers
(Wikipedia)
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Logistics vs SCM
 Four perspectives
– Traditional – SCM part of logistics
– Re-labeling –SCM= logistics
– Unionist = Logistics part of SCM
– Intersectionist = Logistics NU SCM
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Logistics vs SCM
 Stock & Lambert (2001) suggest ‘‘supply chain
management is the management of eight key
business processes:
– (1) customer relationship management,
–
–
–
–
–
–
(2) customer service management,
(3) demand management,
(4) order fulfillment,
(5)manufacturing flow management,
(6)procurement,
(7) product development and commercialization,
– (8) returns’’.
 These processes subsume or include much of
logistics,purchasing, marketing and operations
management.
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Logistics vs SCM
 The supply chain manager would be
involved in the negotiations,but not the
purchase order transmission.
 At the intersection, SCM coordinates cross functional efforts
across multiple firms. SCM is strategic,
not tactical.
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Evolution of logistics integration
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rd
3
player logistics
 A third-party logistics provider is a firm that
provides outsourced logistics services to
companies for part, or sometimes all of their
supply chain management function
– Four types
• Standard – do pick, pack, warehousing and distribution
• Service developer– also does tracking, tracing and cross
docking
• Customer adapter – takes control of logistics
• Customer developer– integrates with customer and runs
logistics
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4th player logistics
 A 4PL is an integrator that assembles the
resources, capabilities, and technology of its own
organization and other organizations to design,
supply chain solutions
 Is a non asset based 3PL
 Owns only computer systems and intellectual
capital and uses a 3PL to deliver service
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Logistics centre
 A Logistics Center
– hub of a specific area where
– all the activities relating to transport, logistics and
goods distribution –
– both for national and international transit –
– carried out, on a commercial basis, by various
operators.
– Common user facility, neutrally operated
 Principles involved are
– Territorial planning and infrastructure
rationalization
– Transportation quality –best solutions at lower
effective costs
– Inter-modality development
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Key reasons for satisfaction
 STRONG RELATIONSHIPS
– Working at operational level
– Executive support
 Strong contracts
– Description of services
– Performance monitoring
 Measurable and attained metrics
– Improvements in service levels
– Reduction in costs
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Extent of outsourcing of 3PL
As percentage of total logistics costs
Area
2008
2011-13
N.America
49
56
Europe
61
69
Latin
48
America
Asia Pacific 57
59
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Indian logistics industry
 Indian GDP– 1 trillion dollars
– GDP will grow at 5% over next ten years
 Logistics costs– 14% of GDP
– Will reduce to 10% of GDP in next ten years
– Value of industry– 140 billion dollars
 Transportation costs
– 40-45% of total logistics costs
– Industry size 56 – 63 billion dollars
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Why logistics?
 Strategic role in business
– Location in relation to markets
– Presence in markets
– Location of plant, sources of raw material
– Standards of customer service
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Why logistics?
 Factors enhancing Influence of logistics
– Increasing number of alternatives to meet cost
and service standards
• Containerization, ICT, Air services
– Threat of energy shortages
– Threat of material shortages.
– Wide range of swings in business cycles
• Emphasis on inventory management
– Governmental interventions in transport chains
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Link between sales volume and annual
inventory turnover ( haskett 1985)
Product line
Fast
moving
Cereal based food 64.8
Wire, cable, tubing 8.6
Small appliances
5.5
S. appliances parts 1.6
Grocery paper
21.3
Writing paper
21.9
Car window glass 4.7
Grinding
wheels
2.6
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chemicals
24.6
Moderately
moving
13.5
9.8
4.5
1.9
19.3
7.0
1.7
2.3
4.1
Slow
moving
8.8
6.4
1.6
1.4
8.9
5.4
0.5
0.7
7.0
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Differentiated service levels
(Haskett 1985)
Volume Sales No. of
as %
vol. as SKULs
%
Fast moving 20
80
16
In
stock
inv.
97%
Cycle
order
time
3
Moderately 30
moving
Slow
50
moving
Av. Service
level
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4
80%
5
5
1
60%
7
92.6
%
3.5
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Logistics process
Procurement
Forecasting
Raw material
inventory
control
Order
processing
Raw material
transportation
Finished product
TPT, Warehouse
to customer
Raw
material
storage
Finished product
inventory control
Transportation
from plant to
distribution
centre
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Production
planning
Production
material
control
Packaging
Plant storage
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Role of logistics in strategy
Redesigning order
processing policy
Locating a
new plant
Introducing a
new product
line
Setting customer
service standards
Redesigning
inventory
policy
Changing
geographic pricing
policies
Product
recombination
and production
planning
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Changing
market
territories
Establishing Long
term purchase
contracts
Mode of
transport
selection
Ware house
location
Changing
allocation to
carriers,
transporter etc
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Logistics Strategy audit
 Levels of service expectation
– Customers
– Competitors provide
 How service levels are achieved
– By competitors
 Number of outlets for product distribution
– Type and location
 Location and focus of plants –to strategy
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Logistics strategy audit
 Location of company on logistics life cycle
– One business
– All businesses
 Have we done in our logistics programme
– Postponement and speculation
– Standardization, consolidation, differentiation
 Match between strategy and level of costs and
service in line with customer expectations
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Logistics strategy audit
 Extent of channel vision employed
 Implications of technological trends
 Implications of regulatory trends
 Match between strategy and logistics
policy
 Extent of support by logistics policy to
overall strategy
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Logistics strategy audit
 Postponement and speculation
– Delay commitment of resources to avoid inventory
build up—JIT, finishing distribution centres
– Standardization of core products
• Modular production systems
– Consolidation of services
• achieve economies of scale in logistics
– Differentiate distribution
• Depending on order cycles
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Indian logistics industry
 Indian railways
–
–
–
–
–
Earns 45000 crores as freight
= 10 billion dollars
Gets 15-19% of market share in transportation
7% of logistics industry share
If share increased to 15 %- earnings jump to
• 21 billion dollars or 92000 crores
• May require some increase in transport capacity
• Will require skills
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References
 The state of logistics outsourcing for 2008
– 13th annual survey done by Capgemini and
Georgia institute of technology downloaded
from www.3plstudy.com
 Logistics cost and service 2008
– Council of supply chain management
professionals downloaded from
www.establishinc.com
 Wikipedia
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THANK YOU
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