Unit 4 Logistics Management

Meaning: Logistics Management is the movement of things in between the point of origin and point of final
consumption. It is a term concerned with the formulation of plans, management, & implementation of
processes related to the movement and storage of goods. Logistics is planning, storing, managing, and shipping
goods from their point of origin to the end consumer. Logistics is the physical close of a sales transaction; to be
honest, no transactions mean any profits. Logistics is about getting the right product, to the right customer, in
the right quantity, in the right condition, at the right place, at the right time, and at the right cost
According to Paul Schönsleben: "Logistics Management deals with the efficient and effective management
of day-to-day activity in producing the company's finished goods and services"
Nature and Scope of Logistics Management
1. Network Design: Network Design is one of the prime functions performed by process of logistic
management. Logistic manager properly designs a network that denotes the number and location of
production plants, storage houses, equipment for handling of materials etc. These factors are key
determinants of efficiency of logistics and need to be decided with due attention.
2. Procurement: Logistics management monitors the procurement of required materials and equipment for
supporting manufacturing process of organization. It identifies supply sources, places order, manages
inbound transportation, collect, inspect and store materials. All required raw materials of right quality are
provided at right time at a minimum cost.
3. Material Handling: Logistics management involves proper handling of all materials within organization
like raw-materials, equipment’s, semi-finished and final goods. They need to be properly handled within
and outside the manufacturing plant, storage house and transportation terminal. Managers need to ensure
that there are no losses arising out of breakage, spoilage etc.
4. Order Processing: Processing of consumer order ensures that all order is timely processes and performs
various operations like receiving, handling and recoding of consumer orders. Logistics management process
focuses on reducing the time gap in between the order receipt and dispatch of consignment. It pays attention
on fast processing of order and any delay in execution of order is avoided.
5. Inventory Management: Logistics managers manage all the inventories of materials in right way. Proper
amount of inventory is maintained at every point of time to facilitation uninterrupted production and regular
supply of goods to consumers. Efforts are made to avoid any blockage of working capital in inventory.
Overstocking and under stocking of inventory is prevented and an optimum amount is always maintained.
6. Packaging: Packaging and labeling are very important in logistics management. Packaging involves
encasing products in proper packets for its safety and convenient handling. It makes product attractive and
facilitate its sales. Labeling is a process of giving identification marks to product and defines its packaging
and expiry date, ingredients, price, weight or size of product and instruction for proper handling.
7. Warehousing: It is a logistical operation which aims at creating time utility by safe storage of products
from the time in-between production point to consumption point. Logistic managers properly decide number
and location of all warehouses to be established by company for proper storage of its products.
8. Transportation: Transportation is a logistical activity which refers to movement of goods within and
outside the organization. It creates time utility by delivering goods at right time and in right order. Railways,
roadways, waterways, airways are major sources of transportation used. Logisticians choose a right source
of transportation by analyzing them in terms of their cost, speed, reliability, safety and no of its locations.
Objectives of Logistics Management
1. Increased efficiency: Logistics management aims at increasing the overall efficiency of organization. It
fastens all inbound and outbound logistics activities to accomplish the project within the stipulated time.
Best quality materials are acquired at lowest possible cost and utilize efficiently with minimum wastage.
Logistic managers monitor all operations and avoid any overheads which enhance the overall efficiency.
2. Reliable and consistent delivery performance: Process of logistics management focuses on providing on-
time delivery to customers for building their confidence level. Transport mode is selected through proper
planning and required materials are transported rapidly to production plant for timely completion of project.
Faster Delivery of goods at right place to consumer will enhance their satisfaction.
3. Minimum product damage: Products damage adds cost to logistical expenses and have adverse effect on
overall profitability. Logistic managers ensure that products are properly encased in suitable packages which
impart them safety, properly handled and use of load unitization. Proper monitoring of all product
movements by managers will minimize product damages.
4. Reduce transportation cost: Logistic management process focuses on reducing the freight charges which
bring down the logistical cost. Manager’s tries to lower the transportation expenses by choosing efficient
transportation source, planning of shortest route, freight consolidation and load unitizing.
5. Quick response: There should be a strong communication process which enables customers to easily give
their orders and report their issues. Companies by implementing latest technology in information processing
system will improve their decision making capability. It would make them flexible enough to fulfill their
consumer needs in great volumes in proper time.
6. Inventory reduction: Maintaining optimum inventory is must for smooth function of business. Logisticians
aims at reducing the inventory level by rapidly processing all orders as excess inventory level leads to
blockage of firm’s capital. Efforts are made to bring down the inventory level to minimum possible level by
making frequent supplies, purchasing materials and producing products in an adequate amount.
Different types of Logistics
1. Inbound Logistics: Inbound logistics comprises the transportation, storage, and receiving of goods into a
business. It is the movement of resources from suppliers to manufacturers. It is the first and most important
step in the logistics value chain, as it can impact the remaining processes.
2. Outbound Logistics: Outbound logistics involves transporting semi-finished/finished products to
customers from a warehouse center. It comprises various stages like warehousing, storage, distribution,
transportation, & last-mile delivery. Outbound logistics objective is better customer satisfaction.
3. Reverse Logistics: Reverse logistics is transporting products from the end-users back to the warehouse or
distribution center. It is associated with returns and recalls but is also used for recycling programs, asset
recovery, and disposal. Reverse logistics aims to recover the product’s value, ensure customer satisfaction
through a satisfactory returns experience, and reduce waste.
4. Green Logistics: Green logistics describes measuring and minimizing the environmental impact of supply
chain activities on the planet. It needs to be implemented without compromising on the quality of services
and customer satisfaction.
5. Third-party Logistics: Third-party logistics, or 3PL, is where a business outsources the management of
one or more components of procurement and fulfillment operations. The 3PL companies provide
transportation, warehousing, inventory management, terminal operations, customs, freight forwarding, and
reverse logistics. Most 3PL service providers partner with e-commerce merchants for fulfillment services.
6. Fourth-party Logistics: Fourth-party logistics, also known as 4PL, is where a business outsources its entire
supply chain management and logistics to one external service provider. They are often called Lead
Logistics providers and act as consulting companies for many supply chains.
7. Fifth-party Logistics: 5PL logistics, also known as a logistics aggregator, focuses not on an individual
supply chain but broader supply chains. It combines the needs of the 3PL and others into a single bulk
volume for getting better rates with different types of airlines and shipping companies.
8. Digital Logistics: Traditional methods of data gathering are manual and prone to human error. With the
help of technology, the logistics processes can be digitized, improving and speeding up the overall supply
chain processes. It comprises web-based enterprise logistics applications that allow the addition of various
systems to provide a central logistics information backbone that provides visibility across the supply chain.
Benefits of Effective Logistics Management
1. Increased Profits: Logistics management helps organizations reduce the expenses associated with the
transportation of goods. It helps improve the efficiency of the distribution channel.
2. Enhanced Customer Satisfaction: Logistics management in supply chain management plays a vital role in
controlling delivery time to the customer. It also ensures goods are delivered in optimal condition.
3. Improving Damage Rates: The process of logistics management involves order processing, picking,
packing, transporting and delivering goods to a customer’s location. With proper inventory management,
damage can be reduced through the cycle.
4. Reduced Warehousing Needs: With efficient logistics management, less warehouse space is needed. One
of the aims of logistics management is to ensure the outgoing orders are moved at the correct time, making
space for new stock. This reduces the total amount of goods held in inventory at any given time.
Problems with Logistics Management
1. Poor Distribution Management: Distribution management is the process of ensuring that goods are
delivered to the customer on time. It’s critical for businesses to prevent loss or theft by reducing the levels
of inventory in warehouses. It’s also critical to ensure customer satisfaction. When this aspect of logistics
suffers, it impacts the brand and the bottom line.
2. Inadequate Labor Resources: Labor resources play a major role in logistics management. Inadequate
labor resources could lead to loss of product from inventory due to worker errors and theft. Also, inadequate
labor resources could delay the delivery of goods due to bottlenecks in production.
3. Operational Inefficiencies: These could be caused by weak coordination between departments or a lack of
optimized production and inventory management. Also, poor operational efficiencies could cause product
loss or damage or cause delays in transportation. Both oversupply and undersupply can be damaging.
4. Inefficient Storage Facilities: Inefficient storage facilities could result in product damage or loss due to
theft, rodent or insect infestation or natural disasters. Warehouse management is important because it
ensures that storage facilities are safe and secure. Poor warehouse management could lead to product loss
due to theft, damage or cause a delay in transportation.
5. Poor Transportation Planning: Transportation planning is crucial for businesses that need timely delivery
of goods to customers. Poor planning leads to delays in shipment, loss of products or damage during transit.
This can also impact customer experience considerably.
6. Poor Handling of Returns: Reverse logistics involves handling defective and returned products. Improper
management of these goods may lead to product loss or damage. When consumers return a product, it may
be fit for resale, need renovation or for another use. If this stock isn’t utilized, it’ll lead to losses. In addition,
if the customer doesn’t receive their refunds or exchanged goods, they may lose faith in the brand.
7. Poor Quality Control: Quality control procedures are important for organizations to ensure the quality of
products supplied to customers is at the expected standard. Without this, there will be a higher rate of
rejection and return, leading to a loss of revenue.
Roles of Logistics in Supply Chain Management
1. Order Processing: The major role of logistics in the supply chain begins with order processing as the
company accepts the order from the customer. Effective logistics tends to manage the entire workflow that
starts from order placement to delivery. A well-managed logistics ecosystem ensures that the orders are
properly prepared, packaged, and delivered to the destination.
2. Warehouse Management: Managing & storing the inventory is a major process of warehouse management
system because it safeguards the goods which are to be distributed to the customers. It plays a huge role in
the supply chain as it is the centralized location that stores the entire inventory. Therefore, it is always wise
that warehouses should be near to the dealer or the distributors’ place for the efficient delivery of the goods.
Also, it is responsible for determining the special requirements like docking facilities, cold storage, etc.
3. Inventory Management: It determine and identify how much stock is needed to order at what time. As it is
important to maintain sufficient level inventories for fulfilling the customer demands. Effective inventory
management tends to determine and analyze if there is too much or too little stock in the warehouses. It will
help you to meet the customer demands through production and optimizing the inventory.
4. Transportation: The transporting of goods all through a company’s supply chain efficiently is the most
important role of logistics management. It involves automated routing & route optimization that very saves
cost and determines the success of supply chain management. Therefore, it involves the movement of goods
from one point to another by following the compliance and regulations in the logistics industry.
5. Packaging: During transport and handling, the products cannot breakage or spillage so good packaging is
necessary to prevent any kind of mishap. The logistics management is to ensure that the products are safely
transferred in large volumes from point A to B. Having the right packaging is majorly important for a well-
packaged product that can prevent your product from any kind of damage, deterioration, and tampering.
6. Demand Forecasting: Demand forecasting is an effective way to anticipate the requirement for products or
goods in the supply chain management process. The scheduling and planning of processes are important to
manage the uncontrollable conditions or circumstances of the market. Therefore, the use of modern
technology with advanced analytics and powerful databases can take your organization to the next leap.
7. Quick Response: One of the most important roles of logistics is to resolve the customer query in the
shortest time span. It enables the fleet owners to manage the supply chain for meeting consumer demands.
Therefore, it helps the organizations to operate reactively to each order without bottlenecks, delays, and
errors. A quick response strategy can lead to accuracy and fulfillment of customer orders. Responding to the
customers in real-time is the most constructive business practice.
8. Material Handling: It is necessary that logistics companies should store and protect the materials
throughout the process of manufacturing, warehousing, and distribution. Handling the materials efficiently
can ensure that the products or goods are reaching safely to the customers with ever-rising shipping costs.
Therefore, optimizing the logistics processes by improving the material handling and streamlining the
delivery times can improve the overall customer service.
9. Information & Control: Data-driven logistics operations are fundamental processes of SCM operations. It
is essential to monitor and manage the operations to make better decisions. However, getting insightful
information for operating a workflow can help businesses to achieve transparency in the entire supply chain.
Examples of Effective Types of Logistics Management
Myntra: With so much retail moving online, portals such as Myntra have experienced growth. How can you
convince customers to shop online when they’re used to buying all their clothes after trying them on in a trial
room? By providing a seamless return service, they ensure customers will be willing to take a chance as they
know they’ll have the opportunity to try it on. If, for any reason, they don’t like it, they can send it back for a
full refund, exchange it for a different size or get store credit. They achieve the physical return of products
through reverse logistics, for which they have an app and delivery partners who follow protocol for checking
the item before they accept the return.
Parle-G: The Indian biscuit brand Parle-G saw a massive uptick in demand during the pandemic lockdowns
due to its popularity and low price. It was included in government and NGO food aid. It was able to bounce
back and replenish stocks due to its tightly controlled logistics management. It has a very close relationship
with its vendors and distributors, which is how it maintains its consistent product at a budget price.
Auto Industry: A semiconductor shortage is crippling the global auto industry. Automakers have been hit
with worldwide computer sales up thanks to work and school from home being the norm during 2020 and
2021. With the supply chain still disrupted, corporations such as Ford and GM have got into chip manufacture
for the auto industry. Sometimes, logistics management isn’t enough, and the supply chain disruptions call for
other interventions.

BASIS LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT

Meaning The process of integrating the movement and The coordination and management of the supply
maintenance of goods in and out the chain activities are known as Supply Chain
organization is Logistics. Management.
Objective Customer Satisfaction Competitive Advantage
Evolution The concept of Logistics has been evolved Supply Chain Management is a modern concept.
earlier.
Organizations are Single Multiple
involved?
One in another Logistics Management is a fraction of Supply Supply Chain Management is the new version
Chain Management. of Logistics Management.

What is Third Party Logistics (3PL): Third party logistics or 3PL is a service that enables enterprises to
outsource or make use of third -party businesses to carry out tasks to completion in its supply chain.
 3PL providers are companies that offer comprehensive and even one-stop solutions for enterprise supply
chains in packaging, warehousing, transportation and order fulfillment.
 3PLs can identify and fill the gaps in your supply chain.
 Their expertise, best practices and technologies can integrate into your business processes to solve the most
complex challenges in logistics management and make your supply chain a more agile, responsive function
a necessity in today’s uncertain market environment.
Third-Party Logistics, often known as 3PL, is a service that allows organisations to outsource or utilize third-
party businesses to carry out operations in their supply chain from start to finish. Business supply chains
benefit from the services of Third-Party Logistics companies, which provide comprehensive and one-stop
solutions for distribution, warehousing, transportation, and order fulfillment.