MKTM508

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Lecture #15 March 13th, 2024

 Learning
Outcomes
After the session you will be able to:
• manage logistics and supply chain in context of
domestic and international markets
Consumption patterns depend on the ___________________
(a) product
(b) Cost
(c) demographics
(d) culture
NEWS
Key Differences between Logistics Management and Supply Chain
Management

1.Aim of Logistics is to provide customer satisfaction, and the Supply

chain aims to gain competitive advantage.
2.Logistics involve only one organization, while supply chain
management involves several organizations.
3.Supply Chain Management is a new concept as compared to logistics.
4.The integration of supply chain activities is known as supply chain
management, while the flow and storage of goods from one point to
another define logistics.
5.Logistics is only a part of Supply Chain Management.

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 Logistics

Functions: planning, procurement, transportation, supply and

maintenance
Processes: requirements determination, acquisition, distribution and
conservation
Business: science of planning, design and support of business operations
of procurement, purchasing, inventory, warehousing, distribution,
transportation, customer support, financial and human resources

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 Scope of Logistics
• Choice of markets
• Procurement
• Plant location and layout
• Inventory management
• Location and management of warehouses
• Choices of carriers, mode of transport
• Packaging decisions
• Relevant to all enterprises: manufacturing, Government,institutions,
service organisations
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 Components of Logistics Management

Logistics Activities
Input Output
Customer service
Demand forecasting
Distribution • Marketing
• Natural Communications Orientation
Resources Inventory control
(competitive
(land, facilities Materials handling
Order processing Advantage)
Equipment) • Time and
• HR Parts and service support
• Finance Plants and warehouse selection Place utility
Procurement • Efficient move
• Information
Packaging to customer
Return goods handling
Salvage and scrap disposal
Traffic and transportation
Warehouse and storage

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 Links and Flows

General material flow/ service flow

Information flow

Information flow

Customer’s Supplier’s
Customer Lead Firm Supplier
customer supplier

General cash flow

Outbound / Downstream logistics Inbound / Upstream logistics

Source: ICFAI
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 Logistics and Marketing

Interface on:
Product design and pricing

Customer service policies

Sales forecasts and order processing

Inventory policies and location of warehouses

Channels of distribution and despatch planning

Transportation to reach products to customers

Production wants larger production runs to minimise time spent on set up changes on the
machines. Marketing wants smaller runs of a variety of products.

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 Source: Michael Porter

S Company Infrastructure
U
P Organisation, people, methods
margin
P
Systems & technology
P
O
R Procurement
T
The Value Chain
Inbound Outbound Marketing Service
Operations
logistics logistics & sales

margin

Primary activities
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Logistics Strategy

Corporate strategy defines the business the company

wants to be in
The marketing strategy decides the products and
markets to be focused on
The distribution strategy decides how the company will
‘reach’ its customers/markets
The distribution strategy includes the physical
distribution and channel management

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Logistics Strategy Based On…

Markets – focus on meeting customer requirements even across

business units
Process – operation of an efficient and integrated logistics function
Channels – participate in the customer service delivery process

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 Logistics for Rural

A business challenge as ‘access’ is still limited

Some of the salient points on rural distribution:
Vast potential for business but collection and delivery points are too many
Producers of agricultural produce and the users of consumer products are dispersed
Transport is unviable – no return loads
Agri produce is seasonal, bulky, perishable and not of standard sizes
Intermediaries in various forms are a major element of cost

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Supply Chain Management

Business context:
Globalization of the market place
Advances in technology
Increasingly demanding, informed customer base
Purchase decisions on dimensions of quality, price and time
Innovative supply chain:
To meet customer driven challenges
To reduce costs
Improve service levels
Enhance speed to market

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Logistics and SCM

Logistics is more concerned with activities within the

company – procurement, production scheduling,
despatch planning, inventory, warehousing and
transportation.
Supply chain management extends the process of
planning procurement, production and despatches
beyond the company boundaries to its suppliers and
customers.

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Optimising the supply chain requires supplier and
customer involvement to integrate processes, policies,
systems, database and strategies between diverse
trading partners
Supply Chain Integration

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 Supply Chain Integration
Customer Analysis
Order Fulfillment
Purchasing/Supplier
Partnering

Integrated Inventory Management and

control
Storage & Supply Chain
Transportation Management

Demand & Lead

Manufacturing/ Time Management
Re-manufacturing/
Assembly
Materials
Management Lean22thinking…
 Information Technology in Supply Chain

Software to provide:
Solutions in supply chain optmization
Materials management systems
Material requirement planning solutions
Warehouse management solutions
Transportation management solutions

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Leading Vendors for SCM Solutions

SAP
Oracle
JDA software
Manhattan Associates
Epicor
IBM
Descartes Systems
Infor
Highjump software
GT Nexus

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 IT Systems for SCM

Supplier relationship management – processes for flow of materials

between the suppliers and the firm
Customer relationship management – to optimize revenue and profitability
by superior customer service
Electronic data interchange – exchange of business information through
standard interfaces between suppliers and the firm

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 IT Systems for SCM

Bar codes – popular and cost effective way of tracking items along the
supply chain. Improved further with QR Codes
Radio frequency identification(RFID) – tracking of items, people and
equipment in real time without need for ‘line-of-sight’
Data warehousing – collection of data from multiple sources and
converting into information for storage and use as required

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 Q R Codes

Machine readable code using black and white squares which store URLs or
any other information
Can be read by a camera in a smartphone
Compared to bar codes, QR codes can store more data and can be read faster
Uses: item identification, product tracking, time tracking, documentation
management

Inventory… 27
 Functions of Inventory

Inventory serves as a buffer between:

Supply and demand
Customer demand and finished goods
Material requirements for an operation and the output from the previous
operation
Parts and materials to begin an operation and the suppliers of these materials

The shock absorber of business !

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 Factors Which Drive Inventory

Target service level parameters

Lot sizing practices
Safety stock and safety time conventions
Volume discounts and purchase arrangements
Seasonal build up needs

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 Categories of Inventory

Anticipation – built in anticipation of future demand – peak season, strike,

promotion
Fluctuation (safety) – to cover random, unpredictable fluctuations in supply
and demand and lead time – to prevent disruption in operations, deliveries etc
Lot-size – to take advantage of quantity discounts, reduce shipping, set up
and clerical costs – also called cycle stock

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 Categories of Inventory

Transportation – pipeline or movement inventories – to cover the time needed

to move from one point to another – factory to distribution point for example
Hedge – for materials where prices are volatile
Maintenance, repair and operating supplies (MRO) – to support M and O –
spare parts, lubricants, consumables etc

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 Types of Inventory

Obvious….
Raw materials
Work-in-process
Finished goods – of primary concern to marketing
Maintenance, repair and operating (MRO) supplies In-transit,
pipeline

Performance measures…

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 Performance Measures

Inventory turns = Annual cost of goods sold /average inventory in value

Days of sales = inventory on hand / average daily sales

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 Types of Inventory Systems

Pure Inventory – when and how much to order. RM procurement. Simple

manufacturing operations
Production Inventory – finite production rates. Demand fluctuation.
Products compete for manufacturing capacity
Production – distribution Inventory – compete for production capacity.
Geographic placement of inventory for best service of demand

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 Types of Classification

ABC category – most common for all

HML - high, medium, low - similar
FSND – fast moving, slow moving, non-moving, dead – spare parts / FG
SDE – scarce, difficult, easy to obtain – procurement / Spares
GOLF – govt, ordinary, local, foreign source – procurement / Spares
VED – vital, essential, desirable – spare parts / FG
SOS – seasonal, off-seasonal - commodity

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Room No. 305, Block-14 Mittal School
of Business