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INTRODUCTION
 INTRODUCTION

 What is LOGISTICS?

Logistics is about moving materials, information and funds from one

business to another or from a business to the consumer. It is a vital part of
the business economic system and is a major global economic activity. In
fact 10-15 per cent of product costs are logistics related. Worldwide,
logistics constitutes about $2 trillion a year. For any country, the logistics
cost is estimated between 9 and 20 per cent of its GDP.

Logistics is the management of the flow of goods, information and

other resources, including energy and people, between the point of origin
and the point of consumption in order to meet the requirements of
consumers (frequently, and originally). Logistics involve the integration of
information, transportation, inventory, warehousing, material-handling, and
packaging

Every company dreams of achieving the seven R's - delivering the

right product in the right quantity and the right condition, at the right place,
at the right time, for the right customer at the right cost. Effective logistics
management alone can make this possible.

Logistics is one of the oldest and also the newest activities of business
management. It involves combining diverse functions and service providers
who may be culturally and objectively different.
 In the past, quality of products and services was the key
differentiating factor for companies operating in the same market. In due
course, quality and low cost became the winning combination.

Today, responsiveness to the customers' needs is the determining

factor. An enterprise that caters instantly to the needs of the customer is the
winner. Integrated logistics can serve as a potent tool for success in today's
competitive business environment.

Logistics is an organized process of managing the flow of

merchandise from the source of supply - the vendor, wholesaler or
distributor - through internal processing functions like warehousing and
transportation, until the merchandise is sold and delivered to the end
customer.

Logistics management aims to reduce inventory-holding costs and

improve profits, while enhancing customer satisfaction.

Anything can be ordered online, but receiving a tangible product is

impossible. The difference between e-business success and failure lies in a
company's ability to manage the logistics.

A recent US study found that logistics costs account for almost 10% of
the gross domestic product. The process itself covers a diverse number of
functional areas. Involved in logistics are transportation and traffic, as well
as shipping and receiving. It also covers storage and import/export
operations.
The concept of logistics can be applied to specific areas of business.
Acquisition logistics, for example, covers everything involved in acquiring
logistics support equipment and personnel for a new weapons system for
the military. This includes identifying, designing, defining, developing,
producing, delivering and installing the new weapons system.

Another area is Integrated Logistics Support (ILS). This is a

management function that provides funding, planning and controls to assure
that the system meets the expected requirements. ILS is also expected to
make sure the price of the goods is reasonable and the product is of the
required quality.

Many businesses that deal with supply of goods or services have their
own logistics department. For example, a company supplying photocopying
paper around the world will have a logistics team. The manager will oversee
or delegate to his staff the process from the point of origin. The team will
deal with the acquisition of paper from the paper supplier all the way to the
customer who requests the paper. The supplier and buyer may be located in
different countries.

It is the logistics team who must make sure that products can be obtained
at a reasonable price. They then have to make sure the product is shipped on
time and will arrive when expected. The logistics team also has to deal with
importing and exporting contracts, and possibly also with the customs
department. The process at times can be a lengthy one, but once in place
should run smoothly.
 History of Logistics

The Greeks defined logistics as "the science of correct reasoning by

means of mathematics". The first modern use of the term was in the military
to identify the process of planning and coordinating the movement of army
and weapon support systems. Good logistics brings out the ability to move
faster and accurately to the battlefront. “If one applies the same to the
business organisation, it is one's ability to reach the product to the consumer
at the right time, right place, right quantity and at the lowest cost.” On
similar lines, supply chain management will mean the network of
organisations involved in the process by which goods are moved from
producer to consumer and the counter flow of information, to manage the
supply chain as a single entity.

A prominent application of logistics was in World War II where

weapon movements were coordinated to ensure success. A recent instance of
massive logistics initiatives is in the Gulf war. With increasing competition
in the market place, managements started focusing on customer services in
the early 1950s in developed markets such as Europe and the U.S. In late
1960s some of the logistics concepts were tested. Following the oil crisis of
the 1970s and the concept of just in time in manufacturing customer-
servicing standards were given more importance and new integrated logistics
models and solutions were born. The emergence of organized distribution
system by department stores and super fast courier service organisations
gave a boost to logistics concepts and strategies. Today all businesses are
looking for seamless transaction systems to co-ordinate their information
and material requirements along the value chain.
At the micro level any manufacturing and marketing company spends 5 - 35
per cent of sales on logistics. The major cost components are
transportation, warehousing and inventory carrying cost. Improvements in
logistics get reflected in a reduction in inventory levels, shorter delivery
schedules, and improved servicing standards with significant savings in total
costs.

 Logistics Management

Logistics management is that part of the supply chain which plans,

implements and controls the efficient, effective forward and reverse flow
and storage of goods, services and related information between the point
of origin and the point of consumption in order to meet customers'
requirements. A professional working in the field of logistics
management is called a logistician.

 Logistics Management Software

Software is used for logistics automation which helps the supply chain
industry in automating the work flow as well as management of the
system. There is very few generalized software available in the new
market in the said topology. This is because there is no rule to generalize
the system as well as work flow even though the practice is more or less
the same. Most of the commercial companies do use one or the other
custom solution.
 GENESIS OF MODERN LOGISTICS

Several Modern Management concepts are born or refined in the crucible of

II World War. You may remember several OR techniques like Value
Analysis & PERT/CPM have their origin in the II World War. Resources
come under pressure in a war, like no other time and one is expected to
deliver results in spite of all odds. These trying situations forced the military
planners to evolve solutions to their problems. After the war these concepts
traveled to business where resource crunch is usual. In business there is no
enemy, but there are competitors who pose threat to the organizations
survival.
Field Marshall Rommel’s words that ‘………before they are fought, battles
are won or lost by quartermasters’ speak about the importance of logistics.
There are several examples where battles are lost due to long & ineffective
supply lines.
Logistics received great importance in military planning and subsequently
became a very important management function in the course of last 40 years.
Logistical management includes the design and administration of systems to
control the flow of material, work in process and finished inventory to
support business unit strategy
  IMPORTANCE OF LOGISTICS

Logistics is the bed rock of trade and business.

• Without selling and or buying there can be no trade and business. Buying
and or selling takes place only when goods are physically moved into and or
away from the market.
•Take away logistical support trade and business will collapse
1. Leads to customer satisfaction through superior customer service.
Organizational objectives of P[Productivity],Q [Quality],C [Cost],D [Delivery],E
[Employee Morale],F [Flexibility],S [Safety],H [Health],E [Environment] are set to meet
customer expectations of Q,C,D.
Q, C, S, H, E are parts of must be quality that a customer expects. Logistics addresses D,
F objectives which lead to customer satisfaction through superior customer service
2. Integrates logistical activities
In conventional management environment, various activities of logistics work in isolation
under different management functions. Each pocket trying to sub optimize its objectives
at the cost of overall organizational objectives. Purchasing trying to purchase at minimum
price at the cost of what is needed by operations. Operations produce large quantities at
minimum production cost ignoring demand leading to doom inventory. Logistics function
of management brings all such functions under one umbrella pulling down inter
departmental barriers.
 Business logistics

Logistics as a business concept evolved only in the 1950s. This was mainly
due to the increasing complexity of supplying one's business with materials
and shipping out products in an increasingly globalized supply chain, calling
for experts in the field who are called Supply Chain Logisticians. This can
be defined as having the right item in the right quantity at the right time at
the right place for the right price and is the science of process and
incorporates all industry sectors. The goal of logistics work is to manage the
fruition of project life cycles, supply chains and resultant efficiencies.

In business, logistics may have either internal focus (inbound logistics), or

external focus (outbound logistics) covering the flow and storage of
materials from point of origin to point of consumption . The main functions
of a qualified logistician include inventory management, purchasing,
transportation, warehousing, consultation and the organizing and planning of
these activities. Logisticians combine a professional knowledge of each of
these functions so that there is a coordination of resources in an
organization. There are two fundamentally different forms of logistics. One
optimizes a steady flow of material through a network of transport links and
storage nodes. The other coordinates a sequence of resources to carry out
some project.
 Production logistics

The term is used for describing logistic processes within an industry. The
purpose of production logistics is to ensure that each machine and
workstation is being fed with the right product in the right quantity and
quality at the right point in time.

The issue is not the transportation itself, but to streamline and control the
flow through the value adding processes and eliminates non-value adding
ones. Production logistics can be applied in existing as well as new plants.
Manufacturing in an existing plant is a constantly changing process.
Machines are exchanged and new ones added, which gives the opportunity
to improve the production logistics system accordingly. Production logistics
provides the means to achieve customer response and capital efficiency.

Production logistics is getting more and more important with the decreasing
batch sizes. In many industries (e.g. mobile phone) batch size one is the
short term aim. This way even a single customer demand can be fulfilled in
an efficient way. Track and tracing, which is an essential part of production
logistics - due to product safety and product reliability issues - is also
gaining importance especially in the automotive and the medical industry.
 Logistics Management Process

Michael Porter in his famous book "Competitive Advantage'' has

spoken of the value chain approach and emphasized logistics as one of the
most important tools for competitive advantage.

The various processes and elements that are part of logistics as a discipline
are:

Inbound logistics: Purchasing, Inbound transportation, Inventory

Management.

Manufacturing: Production planning systems, Machine scheduling

system.

Outbound logistics: Order booking process, Distribution management,

outbound transportation, and Warehouse management systems.

As customers started demanding improved servicing standards, fast cycle

time has become the key factor for business success, whether it is custom
made tailoring service in Hong Kong or development of a new car in
Detroit.

Before delving deep into logistics, a look at the current business scene will
be great help.
 Scenario of Logistics in India

At present, companies specialising in logistics operations in India use

traditional technologies and cater to stand alone services like transportation,
warehousing, clearing and forwarding. There is tremendous scope to
upgrade the technology, integrate the entire supply chain, improve
productivity levels and bring down operating costs. Any technology that can
improve productivity in transportation operations will be a great boom to the
economy both directly and indirectly with opportunities for 10-12 per cent
reduction in costs. Besides the savings on downstream users of transport will
be much higher and the cost multiplier effect on the economy will be
reduced to that extent.

Given the emerging business and technological trends there are

possibilities for adoption of innovative logistics solutions specifically
designed for India. In addition, there is a requirement for an integrated
strategy towards developing logistics and its related IT infrastructure and
also enhancing its industry base.

In recognition of the growing need for technology-enabled solutions

in logistics in India and abroad, many companies such as eLogistics are
taking shape. In fact, there are a dozen multinational logistics companies
such as Exel, Bax Global and Menlo which have started operations in India
during the last few years.

Today logistics management in India has become complex with about ten
million related outlets to cater to the needs of 1000 million people.
 The logistics market in India is estimated to be Rs. 260,000 crores and
constitutes 13 per cent of the GDP. It is much higher than for the U.S. but
lower when compared to countries like China and Korea.

A reduction in logistics costs by one percentage point will mean a

saving of $4.8 billion or Rs. 21,600 crores annually.

Besides significant benefits can be reaped through the multiplier

effect of better logistics on all economic sectors.

 About Customer Service

According to LaLonde and Zinszer have researched various ways that

customer service can be viewed: 1) as an activity, 2) in terms of performance
levels, and 3) as a philosophy of management. Viewing customer service in
terms of performance levels has relevancy providing it can accurately
measured. The notion of customer service as a philosophy of management
exemplifies the importance of customer-focused marketing. All three
dimensions are important to understand what is involved in successful
customer service.

A broad definition of customer service should embody elements from

all three perspectives. LaLonde and his associates offer the following
definition:

“Customer services are a process for providing significant value-added

benefits to the supply chain in cost-effective way.” This definition illustrates
the trend to think of customer service as a process-focused orientation that
includes supply chain management concepts.
It is clear that excellent customer service performance seems to add value
for all members of the supply chain. Thus, a customer service program must
identify and prioritize all activities important to accomplish operating
objectives. A customer service program also needs to incorporate measures
for evaluating performance. Performance needs to be measured in terms of
goal attainment and relevancy. The critical question in planning a customer
service strategy remains, does the cost associated with achieving the
specified service goals represent a sound investment and, if so, for what
customers? Finally, it is possible to offer key customers something more
than high-levels basic service. Extra service beyond the basics is typically
referred to as value- added. Value-added services, by definition, are unique
to specific customers and represent extensions over and above a firm’s basic
service program.

The three fundamental dimensions of customer service were: -

Availability.
Performance.
Reliability.

 About Logistics & Customer Service

Logistics contributes to an organization’s success by providing
customers with timely and accurate product delivery. The key question is
who is the customer? For logistics, the customer is any delivery destination.
Typical destination range from consumers’ homes to retail and wholesale
businesses to the receiving docks of a firm’s manufacturing plants and
warehouses. In some cases the customer is a different organization or
individual who is taking ownership of the product or service being delivered
 In many other situations the customer is different facility of the same
firm or a business partner at some other location in the supply chain.
Regardless of the motivation and delivery purpose, the customer being
serviced is the focal point and driving force in establishing logistical
performance requirements. It is important to fully understand customer
service deliverables when establishing logistical strategies.
Whereas logistics is not capability that contributes to overall success,
it is fundamental to servicing customers. In a typical marketing situation, the
desired customer service performance changes over time. To plan marketing
strategy in a dynamic will serve to illustrate how logistical customer service
requirement related to a specific product/segment situation will change over
time. The product life cycle structure offers a useful framework for viewing
the dynamics associated with customer service requirements planning.
In terms of overall logistical performance, the basic customer service
platform or program should be the level of support provided to all
customers.