Introduction to Logistics

Management UNIT 2 LOGISTICS MANAGEMENT:

CONCEPTUAL FRAMEWORK,
SCOPE, AND IMPORTANCE*
Structure
2.0 Objectives
2.1 Introduction
2.2 Logistics Management: Conceptual Framework
2.3 Logistics Management: Specific Concepts
2.4 Scope of Logistics Management
2.5 Importance of Logistics Management
2.6 Conclusion
2.7 Glossary
2.8 References
2.9 Answers to Check Your Progress Exercises

2.0 OBJECTIVES
After reading this Unit, you should be able to:
Explain the meaning of logistics management;
Describe its conceptual framework;
Examine the scope of logistics management; and
Bring out its importance.

2.1 INTRODUCTION
The term logistics includes multitude of functions in movement of materials and
goods from sources of supply to the users. The management of logistics calls for
effective planning, execution, controlling and coordinating several activities. Its
scope is wide that involves processing of orders, maintenance of inventory,
transportation, materials handling and packaging. This Unit acquaints the learners
with the conceptual framework of logistics management, its scope and importance.
It familiarises the learner with certain key concepts in the realm of logistics
management.

2.2 LOGISTICS MANAGEMENT: CONCEPTUAL

FRAMEWORK
Logistics management is an integrating function which coordinates and optimises
all logistics activities, as well as integrates them with other functions, including
marketing, sales, manufacturing, finance, and information technology. As per
the Council of Supply Chain Management Professionals, logistics management
is that part of supply chain management which plans, implements, and controls

28 * Contributed by Col. (Dr.) Rajive Kohli, Management Consultant, New Delhi

the efficient, effective, forward and reverse flow and storage of goods, services, Logistics Management:
Conceptual Framework,
and related information between the point of origin and the point of consumption Scope and Importance
in order to meet customers’ requirements.

Logistics management activities include inbound and outbound transportation

management, fleet management, warehousing, materials handling, order
fulfilment, logistics network design, inventory management, supply/demand
planning, and management of third-party logistics services providers. The third-
party logistics providers(3PL) include freight forwarders, courier companies,
and other companies which integrate and offer subcontracted logistics and
transportation services. To varying degrees, the logistics function also includes
sourcing and procurement, production planning and scheduling, packaging and
assembly, and customer service. It is involved in all levels of planning and
execution i.e. strategic, operational, and tactical.

Logistics management is a process of planning, executing, and controlling the

efficient and effective flow and storage of goods and services, and related
information from the point of origin to point of consumption for the purpose of
conforming to customer requirements. It is defined as a process of management
which integrates the movement of products, services, data, and capital from the
stage of raw materials to the consumer product. It is application of management
principles to logistics operations for efficient and cost-effective movement of
goods and personnel and the management of the activity of transporting goods
to customers or to places where they are bought or sold. Logistics management
includes the design and management of systems to control the flow of material,
work-in-process, and finished inventory to support business unit strategy.

2.3 LOGISTICS MANAGEMENT: SPECIFIC

CONCEPTS
The actual work of logistics is supportive in nature. Logistical support is necessary
for manufacturing and marketing operations. The concept of logistics is based
on a total systemic view of the multitude of functions in movement of materials
and goods from sources of supply to users. Accordingly, it compels management
to think in terms of managing the total system; rather than just one part of it; to
facilitate the management of the organisation in its continuous search for better
solutions to be implemented for its long-term improvement. The concept of
logistics management could be considered as ensuring cost effectiveness, and
optimum use of raw materials and stock, better transportation, and warehouse
facilities so that the products can be made available at any point of time without
scarcity. Various logistics management concepts could be combined into the
concept of total logistics management with excellence and continuous
improvement for achieving a competitive advantage. Some of the specific
concepts and assumptions for better logistics management are briefly discussed
below.

Lean Logistics Management

Lean logistics management is a business management philosophy that considers
the expenditure on resources utilised for the achievement of any goal other than
the creation of value for the end customer. It is a process that recognises and
eliminates wasteful activities from the supply chain. It highlights concepts such
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Introduction to Logistics as value, flow, waste, and excellence/perfection. It attempts to define a well –
Management
designed supply chain that operates and delivers products to the end customer
with minimum wastage. It aims at reduction of wastage of resources in the
organisation.

Agile Logistics Management

This encompasses tools, techniques, and initiatives that enable an organisation
to thrive under conditions of unpredictable change. Agile logistics management
enables achieving rapid response to customer needs, along with the ability to
quickly reconfigure operations to respond rapidly to unforeseen shifts in the
marketplace. It may incorporate “mass customisation” concepts to satisfy unique
customer requirements and includes the ability to react quickly to technical or
environmental exigencies.

Agile logistics management is concerned with doing things quickly, saving costs,
being responsive to market demands, maintaining flexibility and high productivity.

Whereas lean-based management concentrates on generating maximum output

value by reducing waste, agile management focuses on increasing efficiency
and flexibility to adjust to the customer needs as quickly as possible.

The basic advantages of agile logistics management are working towards prompt
and effective response to the customer needs in the changing market, ability to
adjust and deliver the products according to the customer needs, produce and
deliver new products while optimising costs, decreasing manufacturing costs,
increasing customer satisfaction, higher competitiveness, and reduction of those
processes which add no value.

Resilient Logistics Management

The resilient logistics management concept is a constantly developing branch in
management studies. It is defined as the system’s ability to return to its initial
state or a new or desired state after the elimination of unproductive or negative
processes that influence the system. The resilience is strongly related to risk
within the entire supply chain and the enterprise.

The four key pillars of resilient logistics management are visibility, flexibility,
collaboration, and control.

Green Logistics Management

Green logistics management concept is pro-ecological and directly stems from
the deteriorating environment conditions reflected in lower supply of raw
materials, excessive waste, and increased pollution levels. It is a natural
consequence of the evolutionary change in manufacturing companies which
replaced a reactive approach to environment management approach with a
proactive one.

Green logistics describes all attempts to measure and minimise the ecological
impact of logistics activities of organisations. Its characteristics are:
Reduce
Re-use
Rework
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 Refurbish Logistics Management:
Conceptual Framework,
Reclaim Scope and Importance

Recycle
Remanufacture.
Green logistics management concept blends environment management and
logistics management. This focuses on multiple approach to product design which
takes into consideration issues of environmental risk management, occupational
health and safety, rational materials use or waste reduction. It focuses on goods
manufacturing and distribution that promotes sustainable development which
takes social and environmental factors into cognisance. Sustainable logistics is a
key element in the development of environmentally conscious supply chain
design.

For example, any organisation making efforts to minimise the emissions and
energy consumption of transportation in moving its supplies by use of electric
vehicles is adapting green logistics.

We shall be discussing in detail about green logistics in Unit 11 of this Course.

Total Logistics Management

Total Quality Management is an approach in which managers constantly
communicate with organisational stakeholders to emphasise the importance of
continuous quality improvement, that forms the basis of the concept of total
logistics management.

a) Logistic quality guarantees customer satisfaction and continuous logistic

quality improvement.
b) The pursuit of logistic partnership is based on professionalism and trust.
c) The safety and security assurance for people and goods and information
flows.
d) The pursuit of ‘one click’ activities implementation based on flow processes,
automation and computerisation.

e) Sustainable logistics development ensures an organisation’s impact on its

environment, in an appropriate and effective manner.

f) Logistics management based on product logistic efficiency is the foundation

to secure effective and efficient goods and information flow.
Check Your Progress1
Note: 1) Use the space given below for your answers.
2) Check your answers with those given at the end of the Unit.
1) Explain the meaning of logistics management.
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Introduction to Logistics 2) What do you understand by green logistics management?
Management
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2.4 SCOPE OF LOGISTICS MANAGEMENT

The scope of logistics management involves order processing, inventory control,
transportation, warehousing, materials handling, and packaging, all integrated
throughout a network of facilities. The goal is to support procurement,
manufacturing, and customer service operational requirements. It aims internally
to coordinate functional competency into an integrated operation focusing on
serving customers (internal); and externally, to ensure operational synchronisation
which is essential with customers (outside of the firm) as well as material and
service suppliers to link internal and external operations as one integrated process.

Logistics management is a supply chain management component that is used to

meet customer demands through the planning, control and implementation of
the effective movement and storage of related information, goods, and services
from origin to destination. It helps companies reduce expenses and enhance
customer service. The logistics management process begins with raw material
accumulation to the final stage of delivering goods to the destination. By adhering
to customer needs and industry standards, logistics management facilitates process
strategy, planning and implementation. The scope of logistics management
includes:

Business Logistics: It is the systematic and coordinated set of activities to provide

the physical movement and storage of goods, services, and related information
from the point of origin of the vendor or the supply services
through company facilities
to the point of consumption (customer/market)
and the associated activities (like packaging, order processing)
in an efficient manner necessary to enable the organisation to contribute to
the explicit goals of the company and meet customer requirements.
Materials Management: Materials management is the planning, organisation
and control of all aspects of inventory, embracing procurement, warehousing,
work-in-progress, shipping, and distribution of finished goods. It is the inbound
logistics from suppliers through the production process, the movement and
management of materials and products from procurement through production.

Physical Distribution: It is the movement and storage functions associated with

finished goods from manufacturing plants to warehouses and to customers.
Distribution relates to outbound logistics, from the end of the production line
to the end user having activities associated with the movement of material, usually
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finished goods or service parts, from the manufacturer to the customer. These Logistics Management:
Conceptual Framework,
involve the functions of transportation, warehousing, inventory control, material Scope and Importance
handling, site and location analysis, packaging, and the communications network
necessary for effective management.

Supply Management: Supply management is the act of identifying, acquiring,

and managing the resources and suppliers that are essential to the operations of
an organisation. It includes the procuring of physical goods, information, services,
and any other necessary resources that enable a company to continue its
operations. The main goals are cost control, the efficient allocation of resources,
risk management, and the effective gathering of information to be used in strategic
business decisions. It is a systematic business process that goes further than
procurement to include the coordination of pre-production logistics and inventory
management.

Decentralised Logistics Management

Decentralised logistics management is based on the premise that a company
needs to decentralise its operations to enable the organisation/company to respond
to the local needs. Any company while dealing with different local specific cultures
requires inputs from the dispersed/ local organisational units. The managers
who deal with the local cultural variations daily normally know what works and
what does not. The product moves further away from the key stakeholders at the
central corporate office and closer to the end customer. While this can be
accomplished through self-owned warehouse and logistics, a managed
decentralised logistics network is far more suitable than its counterpart.

An organisation should determine whether to centralise its logistics structure

based on its strategic goals or not. However, the majority of organisations have
adopted a centralised logistics structure. Centralisation can potentially decrease
costs by reducing the needed warehouse space, consolidating operations,
expanding channel activities, and standardising logistics processes.

There is no “one-size-fits-all” logistics solution. The term supply chain refers to

the many links that a product goes through on the way to a customer. The efficiency
of that supply chain is a function of the amount of cost and effort to move the
product, and how quickly the product needs to be moved. One of the main
challenges in the supply chain is the last mile - the final leg from the distribution
centre to the customer. This is one of the major factors in choosing between
centralised and decentralised logistics.

2.5 IMPORTANCE OF LOGISTICS

MANAGEMENT
Logistics management is extremely important for any enterprise is to be
successful. It involves careful control of the goods both leaving the business
premises and entering them, thus keeping the organisation running smoothly as
a whole. Logistics management helps organisations seeking to use logistics as
the key to gain competitive advantage. Logistics management involves numerous
elements, including:
Choosing the most effective routes for transportation
Discovering the most competent delivery method 33
Introduction to Logistics Using software and IT resources to proficiently handle related processes
Management
In logistics management, unwise decisions create multiple issues. For example,
product deliveries that fail or are delayed lead to buyer dissatisfaction. The
damage of goods due to careless transportation is another potential issue. Poor
logistics planning gradually increases expenses, and issues may arise from the
implementation of ineffective logistics software. Most of these problems occur
due to improper decisions related to outsourcing, such as selecting the wrong
vendor or carrying out delivery tasks without sufficient resources.

Good logistics management helps organisations deliver better service to their

customers. Effective management of company’s logistics helps in improving
delivery and offers better customer service to all those who buy the products.
While dealing directly with the customers to meet their demands, it is important
to make sure that supplies or products are received on time and that products are
sent to the customers as quickly as possible.

Logistics management is important for the following reasons:

1) Cost Reduction and Profit Maximisation: The optimal way is to boost

the revenue by improving logistics management. Logistics management
results in cost reduction and profit maximisation, primarily due to:
Improved material handling
Safe, speedy, and economical transportation
Optimum number and convenient location of warehouses etc.
2) Efficient Flow of Manufacturing Operations: Inbound logistics help in
the efficient flow of manufacturing operations, due to on-time delivery of
materials, proper utilisation of materials and semi-finished goods in the
production process and so on.

3) Competitive Edge: Logistics provide, maintain, and sharpen the competitive

edge of an enterprise by:
Increasing sales through providing better customer service
Arranging for rapid and reliable delivery
Avoiding errors in order processing; and so on.
4) Effective Communication System: An efficient information system is a
must for sound logistics management. As such, logistics management helps
in developing effective communication system for continuous interface with
suppliers and rapid response to customer enquiries.

5) Sound Inventory Management: Sound inventory management is a by-

product of logistics management. A major problem of production
management, financial management etc., is to ensure sound inventory
management, which is solved by logistics management.

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Check Your Progress 2 Logistics Management:
Conceptual Framework,
Note: 1) Use the space given below for your answers. Scope and Importance

2) Check your answers with those given at the end of the Unit.
1) Discuss the scope of logistics management.
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2) Give reasons for increasing significance of logistics management.

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2.6 CONCLUSION
Logistics management is all about managing goods manufactured by the
companies. It is the business process that starts with the flow of material from
the suppliers’ manufacturing house, then to the customer through the distribution
channel. Logistics management includes the planning, implementation and
controlling the efficient and effective flow and storage of goods from the point
of origin to the point of consumption. To resolve the conflicting issues,
organisations should implement best logistic management practices. Organisation
should focus on collaboration rather than competition. Good collaboration among
transportation providers, buyers and vendors helps reduce expenses. An efficient
and safe transportation provider is also vital to business success. Logistics
management is incorporated within the supply chain system.

Supply Chain Management is an integrating function with primary responsibility

for linking major business functions and business processes within and across
companies into a cohesive and high-performing business model. It includes all
the logistics management activities noted above, as well as manufacturing
operations, and it drives coordination of processes and activities with and across
marketing, sales, product design, finance, and information technology.

2.7 GLOSSARY
Inbound Logistics: It refers to the sourcing, transport, storage and receiving of
goods coming into the organisation.
Inventory Management: It is concerned with all aspects of management of
flow of goods from manufacturers to warehouses and from these facilities to
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Introduction to Logistics point of sale.
Management
Outbound Logistics: It refers to warehousing, packaging, and transporting of
goods going out of business.
Sustainable Development: It is development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.
Sustainable Logistics: It is a resource management process that combines
sustainable development with a logistics system.
Third-party Logistics Providers (3PLs): These are the outsourced transportation
and logistics service providers.

2.8 REFERENCES
Agarwal, A., Shankar, R. & Tiwari, M.K. (2006). Modeling the Metrics of Lean,
Agile and Leagile Supply Chain: An ANP-based approach. European Journal of
Operational Research. 173(1), 211-225.
Agarwal, D.K. (2008). Logistics and Supply Chain Management. New Delhi,
India: Macmillan.
Bowersox, D.J. (2008). Logistics Management. New Delhi, India: Tata McGraw
Hill.
Bowersox, D.J. (1990). The Strategic Benefits of Logistics Alliances. Retrieved
from https://hbr.org/1990/07/the-strategic-benefits-of-logistics-alliances
Chritsopher, M. & Peck, H. (2002). Building the Resilient Supply Chain.
International Journal of Logistics Management. 15(2), 1-13.
Jayasimha, K.R. (Ed.) (2004). Logistics Management – An Introduction.
Hyderabad, India: ICFAI University Press.
Szymonik, A. (2012). Logistics and Supply Chain Management. Retrieved from
https://www.researchgate.net/publication/297369572_Logistics_and_Supply_
Chain_Management

2.9 ANSWERS TO CHECK YOUR PROGRESS

EXERCISES
Check Your Progress 1
1) Your answer should include the following points:
Logistics management is a process of planning,executing and controlling
the efficient and effective flow and storage of goods and services and
related information from point of origin to point of consumption.

It involves efficient and cost effective management of goods and

personnel and management of transportation aspects.
2) Your answer should include the following points:
Green logistics management is pro-ecological.

36
 It encompasses initiatives to measure and minimise the ecological impact Logistics Management:
Conceptual Framework,
of logistics activities of organsations. Scope and Importance

It focuses on measures to reduce,reuse,rework,refurbish,reclaim,recycle

and remanufacture.
It blends environmernt management and logistics management.
Check Your Progress 2
1) Your answer should include the following points:
The scope of logistics management involves order processing, inventory,
transportation, materials handling and packaging.

It encompasses business logistics, distribution, materials management,

quick response system, supply management.
2) Your answer should include the following points:
Cost reduction and profit maximisation
Efficient flow of manufacturing operations
Competitve edge
Effective communication system
Sound inventory management

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