Question 1: The logistics functions and various objectives of the logistics

1.1. Logistics Functions

Logistics is that part of the supply chain process that plans, implements and controls the
efficient, effective flow and storage of goods, services and related information from the
point of origin to the point of consumption in order to meet the customers’ requirements.

The process of logistics consists of various functions, which should be properly and
effectively coordinated for an organization to achieve an effectiveness and efficiency in the
supply chain.

These functions are the following:

a. Order processing:

The order processing function consists of the following steps:

 Order checking for any deviations in agreed or negotiated terms

 Prices, payment, and delivery terms
 Checking the availability of materials in stocks
 Production and material scheduling for shortages
 Acknowledging the order, indicating deviations if any.

Order processing is a routine operation, but requires a great deal of planning, training of
people involved, and investment in the system to bring about efficiency and accuracy.

b. Transportation

Transportation provides the movement of goods necessary in a supply chain. There are five
basic modes of transportation: railroads, motor carriers, air carriers, pipelines, and water
carriers, and modal combinations involving two or more modes, such as truck trailers on a
rail flatcar.

All transportation modes can be evaluated on six basic service criteria:

 Cost: Charges for transportation.
 Time: Speed of transit.

 Capability: What can be realistically carried with this mode.

 Dependability: Reliability of service regarding time, loss, and damage.

 Accessibility: Convenience of the mode’s routes (such as pipeline availability).

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  Frequency: Scheduling

c. Warehousing

Warehouses may be classified in one of two ways:

(1) Storage warehouses and (2) distribution centers.

In storage warehouses, products are intended to come to rest for some period of time, as
in the aging of products or in storing household goods.

Distribution centers, on the other hand, are designed to facilitate the timely movement of
goods and represent a very important part of a supply chain. They represent the second
most significant cost in a supply chain after transportation.

Distribution centers not only allow firms to hold their stock in decentralized locations but
are also used to facilitate sorting and consolidating products from different manufacturing
plants or suppliers.

Warehousing is a key decision area in logistics. The major decisions in warehousing are as
follows:

 Location of warehouse facilities

 Number of warehouses

 Size of the warehouse

 Warehouse layout

 Design of the building

 Ownership of the warehouse

Warehousing is an important component of logistics as it is directly linked to the ability of

the firm to deliver the desired level of customer service.

d. Materials handling

Materials handling which involves moving goods over short distances into, within, and
out of warehouses and manufacturing plants, is a key part of warehouse operations?
The two major problems with this activity are high labor costs and high rates of loss
and damage. Every time an item is handled, there is a chance for loss or damage.
Common materials handling equipment includes forklifts, cranes, and conveyors.
Today, materials handling in warehouses are automated by using computers and robots
to reduce the cost of holding, moving, and recording inventories
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e. Inventory management

Inventory management is one of the primary responsibilities of the supply chain manager.
The major problem is maintaining the delicate balance between too little and too much.
Too little inventory may result in poor service, stock outs, brand switching, and loss of
market share; too much leads to higher costs because of the money tied up in inventory and
the chance that it may become obsolete.

Reasons for Inventory: Traditionally, carrying inventory has been justified on several
grounds: (1) to offer a buffer against variations in supply and demand, often caused by
uncertainty in forecasting demand; (2) to provide better service for those customers who
wish to be served on demand; (3) to promote production efficiencies; (4) to provide a
hedge against price increases by suppliers; (5) to promote purchasing and transportation
discounts; and (6) to protect the firm from contingencies such as strikes and shortages.

However, companies today view inventory as something to be moved, not stored, and more
of a liability than an asset. The traditional justification for inventory has resulted in
excessive inventories that have proven costly to maintain.

f. Logistical packaging

Logistics packaging is what facilitates flow during manufacturing, shipping, handling and
storage. The functions of packaging are to provide protection, utility and communication.

g. Information

Logistics is a basically an information based activity of inventory movement across the

supply chain. The role of information system plays a vital role in delivering superior
customer service. The use of information technology for information identification, access,
storage, analysis, retrieval, and decision support in logistics is helping business firms to
enhance their competiveness.

1.2. Objectives Of Logistics

The overall objective of logistics management is customer oriented. The reduction of

transportation, warehousing and handling costs which in turn, will reduce the cost of
marketed or needed product.

Following are the primary objectives of the logistics management:

1) Inventory reduction: The prime objective of the logistics is to maintain the

inventory at the minimum level to reduce the inventory holding costs.
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 2) Reliable and consistent delivery performance

Time delivery is very important to the customer to keep up his production schedule. The
objective of the logistics should be consistency in delivery performance; this will help in
building customer confidence and contribute to creating long term relationships.

3) Freight economy

Freight constitutes a major cost element in logistical cost. This cost can be reduced by
adopting measures like freight consolidation, transport mode selection, route planning,
load unitizing, long distance shipments, etc.

4) Minimum production damage

Product damages result from the improper logistical packaging, frequent consignment
handling, absence of load unitizing, etc. The use of mechanized materials handling
equipment, load unitization and proper logistical packaging will reduce product damages.

5) Quick Response

It is related to the capability of the firm to extend service to the customer in the shortest
time frame. With the advanced technologies it is possible for the firm to respond to
customer requirements in terms of accuracy and time.

Question 2: Customer service phases in Logistics

Customer service is the measure of how logistics creates and place utility for a product. It is
a set of activities and programs designed and implemented by a business firm to make the
buying experience rewarding. These activities enhance the value of the product and
services of the customer get from the seller.

Good customer service builds loyalty amongst existing customers and attracts new
customers.

There are three main phases of customer service in Logistics namely:

 Pre-transaction phase
 Transaction phase
 Post-transaction phase

1. Pre-Transaction phase

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It is more related to policy enunciation for defining the service level and related activities
in qualitative and quantitative terms. It is a non-routine activity and gives guidelines to
operating people, regarding the dimensions and limitations on the customer service
activities of the firm. It is just the creation of service platform to service the customer so as
to build up credibility in the market and create a good image amongst the existing and the
prospective customer.

It comprises the followings:

 Creating service organization

 Setting service standards(Customer Service Standards)

 Structuring service components

 Building customer knowledge(customer education )

 Evolving systems design

 Awareness creation

 Accessibility

 Customer- interfacing systems and processes

 Inducements/incentives to bring potential buyer closer to actual buying

2. Transaction phase

This phase is associated with routine tasks performed in the logistics supply chain.

It comprises of the followings:

 Order fulfillments reliability

 Order convenience(User-friendly ordering process)

 Order acceptance with firm supply commitment

 Ongoing information on order execution/delivery status

 Proper dispatch/invoice/quality documentation

 Order postponement

 Product substitute

3. Post-Transaction phase
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This phase is related to customer satisfaction and building up of a long term relationship
with the customer. It comprises the followings:

 Order Status Information

 Product Receiving and Documentation

 Installation, Commissioning Trials , Performance Guarantees

 Customer Complaints/Claims/Returns

 Customer/User Education & Training

Question 3: Components of supply chain

Supply chain management (SCM) is a process used by companies to ensure that their
supply chain is efficient and cost-effective.

There are three main components of supply chain management. These are the
followings:

1. Procurement

Procurement refers to the purchasing or acquisition of raw materials from the

suppliers. It is one of the major cost drivers in the supply chain. Procurement cost is
influenced by the following factors:

 The way procurement decisions are made

 Procedures adopted in the procurement process
 Relationship with supplies.
 The firm credibility and the market intelligence.

The procurement cost can be better controlled through long term relationship with
suppliers as well as good materials requirement planning.

2. Processing

It deals with the transformation of materials into semi-finished and finished products
through the organization’s own production process. The company can control or reduce the
supply chain cost through manufacturing flexibility to rapidly respond to changing market
demands of product volumes and varieties.

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This is being achieved through a new manufacturing techniques of mass customization
based on the rationalization of component design to meet specific needs of the individual
customer.

3. Distribution

Distribution of products to customers and their “downstream” customers at all levels.

The major task of distribution is the management of demand. That is to make available the
right product, at the right place, at the right time, and at the right cost. Demand
management covers all activities involving anticipating the customer requirements of
products accurately and fulfills that requirement against customer service norms. The
requirement fulfillment is done through proper distribution network.

Question 4: The warehouse Functions

Warehousing as a service function in the supply chain of a company perform the following
functions:

 Material storage function

 Material Handling function
 Information Handling function

1. Material storage function

The main or primary function of the warehouse is to store materials until is delivered to
the customer or end user. The storage is designed to accommodate the following function:

Holding: It is the most primary function of the warehouse for finished products ready for
market delivery.

Consolidation: collecting the small shipments at one Centre into big shipment to ensure
potential cost savings.

Break bulk: The process of dividing the bulk shipment into small shipment to deliver to
end customer.

Cross docking: It is very similar to the break bulk activity , except that it involves main
suppliers.

Mixing: A common mixing point permits large volume shipments of ingredients to a single
location where they are assembled and dispatched to the customer in sizable lots in order
to economise on transportation costs.

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Postponement: It deals with keeping on hold the assembly of materials until the customer
places or modifies the order. It reduced the risk of finished goods inventory and space
blockage.

Packing: It is about the repacking of materials as per the ordered quantities of the
individual customer and it is done at the warehouse. The packs are rebelled and marked as
per packaging regulations or as per requirement of the customer.

2. Material handling function

Material Handling is the movement, storage, control and protection of materials, goods and
products throughout the process of manufacturing. Material handling involves the
movements of materials, manually or mechanically, in batches or one item at a time within
the plant. The overall objectives of materials handling is to reduce production cost.

It is dived into the following activities:

 Loading and unloading

 Material movement to and from the storage area
 Order filling: selection of the materials from various locations in the warehouse as
per the customer order.

3. Information handling function

It is related to keeping records regarding the situation/movement/ level of goods and

materials in the warehouse for offering an effective and efficient customer service.

Proper warehousing information system keeps the information regarding the following:

Goods inwards, Inspection and auditing, Goods outwards, Stock outs, Excess stocks,
Invoicing, Warehouse expenses, Transit damage and breakage, Consignment tracking.

A proper warehousing information system can considerably enhance the quality of

customer service to both internal and external customer of the organization leading to
customer satisfaction.

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 Question5: Different types of material handling equipments and
system.
Material-handling equipment is equipment that relate to the movement, storage,
control and protection of materials, goods and products throughout the process of
manufacturing, distribution, consumption and disposal. Material handling equipment is
the mechanical equipment involved in the complete system. The major criteria for
selection of the right system are: Unit moved per hour, and distance it is moved.

The material handling systems are classified as follows:

Manual

Mechanizes

Semiautomatic

Automatic

1. Manual system: It is the cheapest and the most common method of material
movement in the warehouse. The limitations of this system are low volumes, slow
speed, physical characteristics of the product and distance.
2. Mechanized system: This involves the use of different machines in materials
handling. It brings the speed and reliability in materials movement. Mechanization
enhances system productivity. The purpose of machine it to increase the abilities of
man beyond his own physical and mental capacities.

Following are the mechanized material handling equipments:

 Wheeled trolley
 Forklift truck
 Towlines
 Conveyors
 Carousels
 Overhead cranes
 Stacker cranes

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 3. Semi-automatic system

In the semiautomatic system mechanized handling equipment may be used but handling
requirements of a particular warehouse operation may be performed automatically. The
automation done is in parts.

The semiautomatic handling equipments are:

 Sorting device
 Robotics
 Automatic guided vehicle system(AGVS)

4.Automatic system

Automated materials systems are custom built and attract heavy investment. The human
factor is minimized substantially and restricted to programming and controls. The
advantage are speedy and accuracy, which enhance the productivity of the system.

The main disadvantages of the automated system are high investment, complexity in
development and absence of flexibility.

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