Principles of Logistics Management

Definition of Logistics :
• Logistics is the process of planning and executing the efficient
transportation and storage of goods from the point of origin to
the point of consumption.
• The goal of logistics is to meet customer requirements in a
timely, cost-effective manner.
• It refers to the detailed organization and implementation of a
complex operation. It involves planning, coordination, and
management of resources to achieve a specific goal.
 Key Components:

• Transportation: Movement of goods or personnel from one location

to another.
• Warehousing: Storage and management of inventory or goods.
• Inventory Management: Control and monitoring of stock levels.
• Procurement: Acquiring necessary materials or services.
• Distribution: Delivery of goods to the final destination.
 Importance of Logistics

• Efficiency: Streamlines operations from procurement to distribution.

• Cost Reduction: Minimizes transportation, inventory, and storage costs.
• Customer Satisfaction: Ensures timely delivery and accurate order
fulfillment.
• Supply Chain Integration: Connects suppliers, manufacturers, distributors,
and retailers efficiently.
• Risk Management: Prepares for and mitigates disruptions effectively.
• competitors.
 Importance of Logistics
• Market Expansion: Facilitates entry into new markets by optimizing
distribution networks.
• Inventory Optimization: Balances stock levels to minimize holding
costs and stockouts.
• Environmental Impact: Reduces carbon footprint through sustainable
logistics practices.
• Regulatory Compliance: Ensures adherence to transportation and
safety regulations.
• Competitive Advantage: Enables faster response to market changes
and outperforms competitors.
 Scope of Logistics

• Transportation Management
• Inventory Control
• Warehousing and Storage
• Order Processing
• Packaging and Material Handling
• Supply Chain Integration
• Reverse Logistics
• Information Systems and Technology
 Importance of Logistics in SCM
• Efficient Resource Utilization:
Logistics optimizes the use of resources such as transportation, storage, and inventory,
reducing costs and improving efficiency.
• Customer Satisfaction:
Timely and accurate delivery of goods through effective logistics enhances customer
satisfaction and loyalty.
• Inventory Management:
Logistics plays a crucial role in managing inventory levels, ensuring adequate stock
while minimizing holding costs and stockouts.
• Strategic Advantage:
Superior logistics capabilities provide a competitive edge by enabling faster time-to-
market, better product availability, and superior service levels.
 Importance of Logistics in SCM
• Risk Management:
Effective logistics strategies include contingency planning to mitigate disruptions and
ensure continuity in the supply chain.
• Market Responsiveness:
Agile logistics operations enable businesses to respond quickly to changing market
demands and customer needs.
• Enhanced Collaboration:
Logistics fosters collaboration among suppliers, manufacturers, distributors, and
retailers, improving overall supply chain coordination.
• Cost Efficiency:
Optimized logistics processes lead to cost savings in transportation, warehousing, and
inventory management, contributing to higher profitability.
 Transportation mode – Selection criteria
1. Cost: Consider total transportation costs including freight rates, handling fees, and fuel expenses.
2. Speed: Evaluate transit times and delivery speed to meet customer expectations.
3. Reliability: Assess the consistency of transportation services in terms of schedules and delivery
performance.
4. Capacity: Ensure the selected mode can handle the volume of goods to be transported efficiently.
5. Flexibility: Ability to adapt to changes in demand, routes, or delivery schedules.
6. Accessibility: Consider accessibility to specific regions or destinations, including last-mile
delivery capabilities.
7. Environmental Impact: Evaluate the carbon footprint and sustainability of each transportation
mode.
8. Safety and Security: Prioritize modes with a strong track record in safety and security measures
for goods in transit.
 Inventory Management Techniques – ABC
Analysis
• ABC Analysis is a technique used to categorize inventory items into
three categories based on their importance and value.
• Categories :
A – High Value Items
B – Moderate Value Items
C- Low Value Items
• Provides better control and focus on high-value items.
• Helps in maintaining appropriate stock levels for each category.
• based on cost or sales contribution.
Inventory Management Techniques - EOQ
• Economic order quantity (EOQ) is the ideal quantity of units a
company should purchase to meet demand while minimizing
inventory costs such as holding costs, shortage costs, and
order costs.
• Objective is to balance inventory holding costs and ordering costs to
achieve cost efficiency.
• Benefits of EOQ:
• Reduces total inventory costs.
• Balances ordering and holding costs.
• Optimizes inventory turnover.
 Warehousing

• Warehousing refers to the process of storing goods that are

to be distributed or sold later. It includes the management
of space, inventory, and logistics within a storage facility.
• It serves as a central location for storing products and
materials, allowing for efficient distribution and
accessibility.
• Warehousing provides a buffer for supply chain operations,
accommodating fluctuations in supply and demand.
 Functions of Warehousing
• Storage: • Inventory Management:
• Safe and Secure Storage: • Stock Tracking: Continuous
Warehouses provide safe and monitoring of inventory levels to
secure spaces to store goods, ensure optimal stock availability.
protecting them from theft, • Inventory Control: Managing
damage, and environmental stock levels to prevent
factors. overstocking and stockouts,
• Organized Space: Efficiently ensuring the right products are
organized storage areas to available at the right time.
maximize space utilization and
facilitate easy retrieval of goods.
 Functions of Warehousing
• Order Fulfillment: • Receiving:
• Picking and Packing: Selecting • Acceptance of Goods: Checking
items from storage and packing incoming shipments for accuracy
them for shipment. and quality.
• Shipping: Coordinating logistics • Unloading and Inspecting:
to ensure timely delivery of Unloading goods from transport
orders to customers. vehicles and inspecting them for
any damage or discrepancies.
 Functions of Warehousing
• Returns Management: • Quality Control:
• Processing Returns: Handling • Inspection and Testing: Ensuring
returned items efficiently, products meet quality standards
including inspection, sorting, before they are shipped to
and restocking or disposal. customers.
• Customer Service: Providing • Compliance: Adhering to
support and solutions for industry regulations and
returned or defective products. standards for storage and
handling of goods.
 Types of Warehouses

Private Public Climate Distribution

Controlled Centres

Bonded Automate Cross-Dock Cooperative

d
 Packaging
• Packaging refers to the technology and practice of
enclosing or protecting products for distribution,
storage, sale, and use.
• Packaging contains, protects, preserves, transports,
informs, and sells. In many countries it is fully
integrated into government, business, institutional,
industrial, and for personal use.
• Key Functions:
Protection
Containment
Marketing
Communication
Compliance
Importance of Packaging
• Product Protection
• Preservation
• Consumer Information
• Marketing and
Branding
• Convenience
• Sustainability
• Compliance and Safety
• Cost Efficiency
 Material Handling
• Material handling involves the movement, protection, storage, and
control of materials and products throughout manufacturing,
warehousing, distribution, consumption, and disposal.
• Key Components-
Movement
Storage
Control
Protection
Types of Material Handling Equipment

• Conveyors:
• Systems for moving goods along a path.
• Cranes:
• Devices for lifting and transporting heavy loads.
• Forklifts:
• Vehicles for moving and lifting pallets.
• Automated Systems:
• Robotics and automated guided vehicles (AGVs).
 Sustainable Practices In Logistics

Sustainable practices involve actions and strategies designed to meet current

needs without compromising the ability of future generations to meet theirs.

• Efficient Transportation
• Eco-Friendly Packaging
• Warehouse Management
• Reverse Logistics
• Sustainable Sourcing
• Carbon Footprint Reduction
• Technology Integration
• Employee Training
Order Fulfilment – Process Flow

Order
Shipping Delivery
Placement

Order Return
Packing
Processing Management

Inventory Customer
Picking
Management Service
Order Fulfilment – Customer Expectation

• Accuracy
• Speed
• Communication
• Transparency
• Condition
• Flexibility
• Customer
Service
• Personalization
• Convenience
 Role of logistics in enhancing customer
satisfaction and competitiveness
• Timely Delivery
• Reliability
• Cost Efficiency
• Flexibility
• Inventory Management
• Improved Communication
• Quality Control
• Enhanced Customer Service
• Competitive Advantage
 Logistics Planning and Strategy
• Logistics planning and strategy involve the systematic coordination
and management of all activities involved in the movement and
storage of goods from origin to consumption. Effective logistics
planning ensures timely delivery, cost efficiency, and customer
satisfaction.

• Three Levels of Logistics Planning:

1.Strategic Planning
2.Tactical Planning
3.Operational Planning
 Strategic Planning in Logistics
• Strategic planning involves long-term, high-level decisions that set the direction
for logistics operations. It focuses on overall goals, resource allocation, and long-
term performance.

• Key Components:
• Network Design: Determining the optimal number and location of warehouses and
distribution centers.
• Supplier Selection: Establishing partnerships with reliable suppliers.
• Technology Integration: Implementing advanced technologies for better tracking
and management.
 Tactical Planning in Logistics
• Tactical planning translates strategic plans into specific actions and short- to
medium-term goals. It involves resource management, inventory control,
and transportation planning.

• Key Components:
• Inventory Management: Optimizing stock levels to meet demand without
overstocking.
• Transportation Planning: Selecting the most cost-effective and efficient
transportation modes.
• Capacity Planning: Ensuring that facilities and resources can meet demand
fluctuations.
 Operational Planning in Logistics
• Operational planning focuses on day-to-day logistics activities and
processes. It involves scheduling, order fulfillment, and real-time
management of logistics operations.

• Key Components:
• Order Processing: Efficient handling of customer orders from receipt to
delivery.
• Scheduling: Daily and weekly scheduling of transportation and warehousing
activities.
• Quality Control: Ensuring that logistics operations meet quality standards.
 KPIs in logistics

On-Time Shipping
Order
Delivery Cost per
Accuracy
(OTD) Order

Warehouse Inventory
Efficiency Turnover
 KPIs in logistics

Freight Cost
Lead Time Return Rate
per Unit

Customer
Fill Rate
Satisfaction
 Logistics Network Design

• Logistics network design is the process of planning and structuring the supply chain
network to ensure efficient and cost-effective flow of goods from suppliers to
customers. It involves determining the optimal number, locations, and capacities of
facilities such as warehouses, distribution centers, and manufacturing plants.

• Key Objectives:
• Cost Efficiency: Minimize overall logistics costs including transportation, warehousing,
and inventory.
• Service Level: Ensure timely delivery and high service levels to meet customer
expectations.
• Flexibility and Scalability: Design a network that can adapt to changes in demand and
supply conditions.
• Sustainability: Incorporate environmentally friendly practices in the network design.
Key Considerations in Logistics -Network Design

• Facility Location: Selecting the optimal locations for facilities is crucial for
minimizing costs and meeting service requirements. Factors influencing
facility location decisions include:

• Proximity to Markets: Locating facilities near key customer bases to reduce

delivery times.
• Transportation Infrastructure: Access to major highways, ports, and airports
for efficient transportation.
• Labor Availability: Availability and cost of skilled labor in the area.
• Cost Factors: Land, construction, and operational costs at potential sites.
 Key Considerations in Logistics - Network
Optimization
• Network Optimization: Network optimization involves using
analytical models and tools to determine the most efficient and cost-
effective configuration of the logistics network. Techniques include:

• Linear Programming: Mathematical modeling to optimize costs and

resource allocation.
• Simulation Models: Testing different network configurations to
evaluate performance under various scenarios.
• Heuristic Methods: Rule-based approaches to find near-optimal
solutions quickly.
 Balanced Score Card Approach

• The Balanced Scorecard (BSC) is a strategic management tool used to track and
manage an organization’s performance against its strategic goals. Developed by
Robert Kaplan and David Norton, it provides a comprehensive framework that
goes beyond traditional financial metrics to include non-financial perspectives.
• Key Perspectives:
1.Financial Perspective: Measures reflecting financial performance such as
revenue, profit, and return on investment.
2.Customer Perspective: Metrics focusing on customer satisfaction, retention, and
market share.
3.Internal Business Processes Perspective: Indicators of the efficiency and
effectiveness of internal processes that create value.
4.Learning and Growth Perspective: Metrics related to organizational culture,
employee development, and innovation.
 Implementing the Balanced Scorecard Approach

• Steps to Implementation:
1.Define Vision and Strategy: Clearly articulate the organization’s
vision and strategic objectives.
• Develop Key Performance Indicators (KPIs): Identify specific,
measurable indicators for each BSC perspective
• Align Organizational Activities: Ensure that departmental and
individual goals are aligned with the strategic objectives.
• Monitor and Review Performance: Regularly track performance
against the KPIs and make adjustments as necessary.
Benefits of Balanced Scorecard Approach

• Provides a balanced view of organizational

performance.
• Aligns day-to-day work with long-term strategy.
• Enhances strategic communication and focus across the
organization.
 Types of Time Waste
• 1.Waiting: Delays due to waiting for resources, approvals, or information.
• 2. Overproduction: Producing more than needed, leading to excess inventory and
wasted effort.
• 3. Rework: Correcting mistakes or defects, resulting in redundant work.
• 4. Excessive Motion: Unnecessary movement of people, materials, or equipment.
• 5. Overprocessing: Performing more work or higher quality than required.
• 6. Inventory: Holding excess inventory, which ties up resources and space.
• 7. Transportation: Unnecessary movement of materials or products.
• 8. Underutilization of Talent: Failing to leverage employees' skills and abilities
effectively.
 Impact of time waste on logistics efficiency
and cost

• Increased Operational Costs

• Reduced Productivity
• Lower Customer
Satisfaction
• Excess Inventory Costs
• Inefficient Use of Resources
• Higher Transportation Costs
• Environmental Impact
• Competitive Disadvantage
Techniques for Time Waste Reduction
• 1. Process Mapping:
• Identify and visualize all steps in a process.
• Highlight inefficiencies and areas for improvement.
• 2. Lean Principles:
• Implement Lean methodologies to streamline processes.
• Focus on eliminating non-value-added activities.
• 3. Automation:
• Use technology to automate repetitive tasks.
• Reduce manual effort and errors.
Techniques for Time Waste Reduction
• 4. Just-In-Time (JIT):
• Produce and deliver goods as needed.
• Minimize inventory levels and reduce waiting times.
• 5. Employee Training:
• Train staff on efficient workflows and best practices.
• Empower employees to identify and eliminate waste.
• 6. Standardization:
• Develop standard operating procedures (SOPs).
• Ensure consistency and reduce variability in processes.
 Techniques for Time Waste Reduction
• 7. Continuous Improvement (Kaizen):
• Foster a culture of ongoing improvement.
• Encourage regular reviews and incremental changes.
• 8. Time Management:
• Prioritize tasks and set clear deadlines.
• Use tools and techniques to manage time effectively.
• 9. Collaboration Tools:
• Implement tools to enhance communication and coordination.
• Reduce delays caused by miscommunication and information gaps.
 Measuring the effectiveness of time waste
control
• Monitoring and evaluating time waste control techniques is essential to
ensure their effectiveness and continuous improvement.
• Key Metrics:
1. Cycle Time: Measure the total time taken from the start to the end of a
process.
2. Lead Time: Calculate the time taken from order placement to delivery.
3. Downtime: Track the duration of periods when processes are halted or
delayed.
4. Throughput: Measure the amount of work completed in a given period.
5. On-Time Delivery Rate: Calculate the percentage of orders delivered on
or before the promised date.
6. Inventory Turnover: Evaluate the rate at which inventory is used or sold
 Lean Logistics

• Lean Logistics focuses on minimizing waste and maximizing efficiency in

logistics and supply chain processes.

• Objectives:
• Reduce Costs
• Improve Customer Service
• Increase Flexibility
• Enhance Quality
 Core Principles of Lean Logistics
• Value: Identify what adds value to the customer and eliminate non-value-adding
activities.

• Value Stream: Map the entire logistics process to identify waste and optimize
each step.

• Flow: Create a seamless flow of materials and information to prevent delays.

• Pull: Implement a pull system to ensure production and transportation are driven
by actual demand.

• Perfection: Strive for continuous improvement in all logistics processes to achieve

perfection
Logistics Strategy Triangle

LOCATION
TRANSPORTATIO
N
INVENTORY
 Inventory
• The goods and materials that a business holds for the ultimate goal of resale, production, or
utilization.

• Key Considerations:

• Inventory levels must be optimized to meet customer demand without incurring excessive costs.

• Balancing carrying costs (e.g., storage, insurance, obsolescence) against stockout costs (e.g., lost
sales, production delays).

• Inventory management techniques like Just-in-Time (JIT), Economic Order Quantity (EOQ), and
safety stock calculation.
 Transportation

• The movement of goods from one location to another using various modes like road, rail, air,
or sea.

• Key Considerations:

• Selecting the appropriate mode of transportation based on cost, speed, reliability, and
capacity.

• Managing transportation costs and ensuring timely delivery.

• Considering environmental impact and regulations related to transportation.

 Location

• The physical placement of facilities such as warehouses, distribution centers, and production plants.

• Key Considerations:

• Strategic placement to minimize transportation costs and time while maximizing service levels.

• Proximity to suppliers, customers, and transportation hubs.

• Evaluating factors like land cost, labor availability, and local regulations.
Importance of balancing Logistical drivers for
effective logistics management

• Cost Efficiency (Minimizing Total Costs)

• Service Levels (Meeting Customer Demand)
• Flexibility and Responsiveness (Adapting to Changes)
• Risk Management (Mitigating Risks)
• Competitive Advantage
• Sustainability
Key Considerations for Balancing Logistical
Drivers

• Data-Driven Decision Making

• Integrated Supply Chain Planning

• Technology and Automation

• Continuous Improvement