1/13/2024

LOGISTICS & SUPPLY CHAIN MANAGEMENT Module 1

22MBA301
• Introduction to Logistics Management:
• Meaning of Logistics, Definition of Logistics, Objectives
of Logistics, Types of Logistics,
• Need for Logistics Management, Evolution of logistics
toward Supply chain Management,
By
• Logistics Industry in India. Logistical Activities, Logistics
Dr.Lakshminarayana Reddy.K Costs,
Dept. of MBA, VTU-CPGS • Expected cost of stock outs.
Muddenahalli • Logistical Informational Requirements.
Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI

Meaning of Logistics • Logistics Management: it is a process of planning,

• Logistics: integration of information, transportation, inventory, implementing & controlling the efficient, effective flow & storage
warehousing, material handling & packaging. of goods, services & related information from POP to POC for
• Logistics, or logistical planning, refers to the process that a business uses the purpose of confirming to customer requirements.
in order to coordinate its supply chain operations. • According to the CLM (Council of Logistics Management) “The
• It includes a wide variety of tasks and activities, such as managing how process of planning, implementing and controlling the efficient,
raw materials or inputs are acquired and transported to the business, how
effective flow and storage of goods, services and related
inventory and inputs are stored at the business’ facilities, and how
inventory is transported within the business and beyond. information from the point of origin to the point of consumption
• Logistics is the part of the supply chain involved in managing the forward for the purpose of conforming to customer requirements”.
and reverse flow and storage of goods, services, and related information • The purpose of efficient logistics management is to achieve
between the point of origin and the point of consumption to meet maximum competitiveness and profitability of the company, as
customers’ requirements. well as the entire network structure of supply chains, including
• Logistics can be thought of as the business function responsible for the end-user.
“getting the right item in the right quantity at the right time at the right place
for the right price in the rightDr.Lakshminarayana.K,
condition to VTUthe
CPGS,right customer.” Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI MUDDENAHALLI

Logistics of part of SCM-Introduction • Logistics is the part of the supply chain involved in managing the
• Logistics, or logistical planning, refers to the process that a business uses forward and reverse flow and storage of goods, services, and related
in order to coordinate its supply chain operations. information between the point of origin and the point of consumption
• It includes a wide variety of tasks and activities, such as managing how to meet customers’ requirements.
raw materials or inputs are acquired and transported to the business, how • Logistics can be thought of as the business function responsible for
inventory and inputs are stored at the business’ facilities, and how
“getting the right item in the right quantity at the right time at the right
inventory is transported within the business and beyond.
place for the right price in the right condition to the right customer.”
• Several parties are involved in the supply chain process, such as suppliers
and distributors. • The purpose of efficient logistics management is to achieve maximum
competitiveness and profitability of the company, as well as the entire
• Supply chain management with the help of logistics tools helps to ensure a
consistently high level of customer service with some reduction in the cost network structure of supply chains, including the end-user.
of extracting raw materials, storing, transporting, and selling • In this regard, the integration and introduction of innovations into the
goods/services to end-users. processes of supply chains, as well as into the processes of logistics,
• logistics and supply chain management are two inseparable concepts that should be aimed at increasing the overall productivity of all their
help not only reduce the company’s overall costs for the production of participants.
goods and/or services butDr.Lakshminarayana.K,
also improveVTU theCPGS,
overall impression of the level Dr.Lakshminarayana.K, VTU CPGS,
of service for your target audience.
MUDDENAHALLI MUDDENAHALLI

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Definition Objectives of Logistics

• Improve Supply Chain Efficiency
• “The aspect of military science dealing with the • Improves Customer service
• Inventory Management
procurement, maintenance, and transportation of military
• Fulfil customer requirements
material, facilities, and personnel”
• Mitigate product damage
• According to Robert A. Novack : • Reduce Operational Cost
• "Logistics is an activity involving the creation of time, place, • Quick Response
form and possession of utilities within and among firms and • Optimize delivery performance
individuals through strategic management with the goal of • Efficient Flow of Information
creating products/services that satisfy customer through • Quality Assurance
attainment of value”. • Competitive Advantage
• Customer Satisfaction
Dr.Lakshminarayana.K, VTU CPGS, • Reduce Carbon FootprintDr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI MUDDENAHALLI

**TYPES OF LOGISTICS Inbound logistics & outbound logistics

1. Inbound Logistics: Inbound logistics is the way materials and other goods are • Logistics activities include inbound logistics or outbound logistics.
brought into a company. This process includes the steps to order, receive, store, • Inbound logistics refers to the sourcing, expediting and receiving of goods,
transport and manage incoming supplies. Inbound logistics focuses on the supply that is coming to the business organization.
part of the supply-demand equation.
2. Outbound Logistics: Outbound logistics focuses on the demand side of the supply-
• Inbound logistics connotes the activities which are related to sourcing,
demand equation. The process involves storing and moving goods to the customer acquiring, storing and delivering the raw materials and parts to the product
or end user. The steps include order fulfillment, packing, shipping, delivery and or service department.
customer service related to delivery. • Inbound logistics is the fundamental activity, which focuses on buying and
3. Reverse Logistics: Reverse logistics is a type of supply chain management that scheduling the inflow of materials, tools and final goods, from suppliers to
moves goods from customers back to the sellers or manufacturers. Once a the production unit, warehouse or retail store.
customer receives a product, processes such as returns or recycling require • Outbound logistics is all about warehousing, packaging and transporting
reverse logistics.
of goods, going out of the organization.
4. Third Party Logistics (3PL Logistics): A 3PL (third-party logistics) provider offers
• Outbound logistics, as the name suggests, is the collection, storage and
outsourced logistics services, which encompass anything that involves
management of one or more facets of procurement and fulfillment activities. distribution of the final goods and related information flows, from the
manufacturing plant to the end user. It covers all those activities (i.e.
5. Fourth Party Logistics (4PL) : Fourth-party logistics, also known as 4PL, is an
operational model in which a business outsources its entire supply chain selecting, organizing, transporting, etc.) which are involved in the outflow of
Dr.Lakshminarayana.K, VTU CPGS,
1/13/2024
management and logistics to one external service provider. merchandise from seller to the buyer. MUDDENAHALLI

Key Differences between Inbound logistics &

outbound logistics Need/Importance for Logistics Management
BASIS FOR • Boost Business Profitability
INBOUND LOGISTICS OUTBOUND LOGISTICS
COMPARISON • Improve Customer Experience
Meaning The influx of raw material and The outward movement of
parts, from suppliers to the final goods, from the company • Reduce Operational Cost
manufacturing plant, is known to the end user, is known as
as inbound logistics. outbound logistics.
• Ensure Seamless Delivery
• Success of Supply Chain
Related to Material management and Customer service and
procurement channel of distribution • Improve Warehouse Management
Focuses on Deployment of resources and Movement of finished goods • Enhance Visibility
raw materials, within the or product from the business
manufacturing plant. to final customer. • Intelligent Route Planning
Interaction Between supplier and the firm Between firm and customers
• Risk Management
Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI • Scalability Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI

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Evolution of logistics toward • 1970 - Traditional procurement, physical distribution, materials

Supply chain Management management.
• 1980 - Logistics Management: Transportation.
• 1990 - SCM - materials management & Logistics Management.
• The evolution of supply chain management has been characterized
by increasing integration of separate tasks; a trend underlined in the
1960s as a critical area for future productivity improvements since the
system was highly fragmented.
• Although logistics tasks have remained relatively similar, they initially
consolidated into two distinct functions related to materials
management and physical distribution during the 1970s and 1980s.
• This process moved further in the 1990s as globalization incited
functional integration and the emergence of logistics in a true sense. All
the elements of the supply chain became part of a single management
perspective.
Dr.Lakshminarayana.K, VTU CPGS, Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI MUDDENAHALLI

Evolution Logistics industry in India

• The Indian logistics industry is growing, due to a flourishing e-
commerce market and technological advancement.
 The First: The Transportation Era (1950s)
 The Second: The Physical Distribution (1960s) • The logistics sector in India is predicted to account for 14.4% of the
GDP. The industry has progressed from a transportation and storage-
The Third: Physical Supply, Deregulation and Logistics (1970s)
focused activity to a specialized function that now encompasses end-


 The Fourth: Transportation, Deregulation, Physical Distribution and to-end product planning and management, value-added services for
Business Logistics (1980s) last-mile delivery, predictive planning, and analytics, among other
 The Fifth: Business Logistics (1990s) things.
 The Sixth: Logistics and Supply Chain Management (2000s) • One of the key drivers of this expansion is projected to be the rise of
 The Seventh: Supply Chain Digitalization (2010’s) India's logistics industry, which employs 22 million people and serves
as the backbone for various businesses.
• The logistics sector in India was valued at US$ 250 billion in 2021,
with the market predicted to increase to an astounding US$ 380 billion
Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI
by 2025, at a healthy 10%-12% year-on-year
Dr.Lakshminarayana.K,
MUDDENAHALLI
VTU CPGS, growth rate.

• Moreover, the government is planning to reduce the logistics and supply

chain cost in India from 13-14% to 10% of the GDP as per industry
Logistics Activities
standards. In the year 2022, the size of the Indian logistics market was • 1. Customers service
around 274 billion U.S. dollar. • 2. Demand forecasting
• It was estimated that this market would grow to 563 billion dollars in 2030, • 3. Distribution communication
at a compound annual growth rate 9.4 percent. • 4. Inventory control
• The logistics business is highly fragmented and has over 1,000 active • 5. Material handling
participants, including major local players, worldwide industry leaders, the
• 6. Order processing
express division of the government postal service, and rising start-ups that
focus on e-commerce delivery. • 7. Part and service support
• The industry includes transportation, warehousing, and value-added • 8. Plant and warehouse side selection
services like packaging, labelling, and inventory management. With the • 9. Procurement
advent of technology-driven solutions such as transportation management • 10. Packaging
systems (TMS) and warehouse management systems, India's logistics • 11. Return goods handling
industry has witnessed tremendous development in recent years (WMS).
• 12. Salvage and scrap disposal
• These solutions have assisted logistics firms in increasing operational
• 13. Traffic and transportation
efficiency, lowering costs,Dr.Lakshminarayana.K,
and improvingVTUcustomer
CPGS, service. Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI • 14. Warehousing and storageMUDDENAHALLI

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Logistical costs
• Logistical costs are all expenses related to the logistics of a given
Costs
company. That is, they relate to the expenses of packages, transport and
storage. However, the lack of planning in decision-making often results in • Inventory Management Cost
excessive costs.
• These are an important factors affecting the competitiveness of both firms
• Warehousing Cost
& nations. • Distribution Costs
• Firms can enhance their market competitiveness by reducing their logistical
costs, thus lowering the total Cost of goods & services.
• Transportation costs
• Some costs may have both fixed & variable components. • Ordering costs
• Logistics cost may be explained as all the costs incurred by an organization • Loss & Damages, etc,…..
in moving a product.
• It would include the cost of moving raw materials from the supplier, storing
them in a warehouse for release at an appropriate time, moving the
finished products to the customer, and all activities associated with these
Dr.Lakshminarayana.K, VTU CPGS, Dr.Lakshminarayana.K, VTU CPGS,
activities. MUDDENAHALLI MUDDENAHALLI

EXPECTED COST OF STOCKOUTS

• Stockouts can have a severe effect on companies, • Stockout costs are both direct and indirect
especially those dealing with just-in-time inventory. expenses incurred by a business when it runs out of
• Direct stockout costs are expenses that are related to the loss of stock. Left unaddressed, these costs can have a
sales due to stockout. These costs include lost sales revenue, significant impact on a company's margins,
reduced profit margins, and increased supply chain and shipping revenue, and profitability.
costs to rush order.
• Direct stockout costs are expenses that are related
• A principle benefit of inventory availability and hence, of customer
service is to reduce incidents of stock outs. Once, cost of stock out to the loss of sales due to stockout. These costs
is calculated, it is easy to arrive of “expected stock out costs”. In include lost sales revenue, reduced profit margins,
simple words a situation in which an item is out of stock. and increased supply chain and shipping costs to
• We can analyze alternative customer service levels directly by rush orders.
comparing expected cost of stock outs with the revenue enhancing
benefits of customer service.
Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI

Effects of stock out How to minimize Stock outs

• A stock out occurs when desired quantities of finished • 1. Optimize inventory management
goods are not available when and where a customer
• 2. Use data analytics and forecasting tools
needs them. In that situation, one of these events may
occur: • 3. Establish relationships with multiple suppliers
(1) Customer waits until the product is available. • 4. Develop a backup plan
(2) The customer backorders the product. • 5. Invest in AI-Powered Analytics
(3) The seller loses a sale.
(4) The seller loses a customer
Dr.Lakshminarayana.K, VTU CPGS,
MUDDENAHALLI

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Logistical Informational
Why is logistical information important?
Requirements.
• Some of the important roles of information systems  Logistics Information System (LIS) is
under logistics are very useful. implementation of solutions for a system of records
• It ensures the transformation of logistics functional and reports which may be paper based or
operations into a process with the goal of pursuing electronic.
customer satisfaction at the lowest cost.  This is a specialized area in logistics that can
• It facilitates planning and control of logistics handle location, work management, and data
activities related to order fulfillment. management in organizations.

Dr.Lakshminarayana.K, VTU CPGS, Dr.Lakshminarayana.K, VTU CPGS,

MUDDENAHALLI MUDDENAHALLI

LOGISTICS INFORMATION SYSTEM:

REQUIREMENTS AND COMPONENTS

• There are three types of information systems that serve

different organizational levels. These are:
 Operational level systems,
 Management-level systems, and
 Strategic level systems. Thank You
• Converting logistics data to information, representing it in a
manner useful for decision making and interfacing the
information with decision-assisting methods are at the core
of LIS.

Dr.Lakshminarayana.K, VTU CPGS, Dr.Lakshminarayana.K, VTU CPGS,

MUDDENAHALLI MUDDENAHALLI