Role of Logistics

Evolution of Logistics
The evolution of logistics can be
divided into three stages:
Stage 1: In the 1960s and 1970s, the
concept of logistics was confined to
the physical distribution of goods or
outbound logistics.
Stage 2: In the 1980s, the concept of
integrated logistics management was
developed.

Evolution of Logistics
(contd)
Stage 3: From the late 1980s
onwards, organizations started
thinking beyond the efficiency of
their own logistics operations and
expanded the concept of logistics to
include all the firms involved
suppliers and sub-suppliers on the
one hand and customers on the
other.

Planning Physical Distribution

Given below are the five steps in the planning
process:
Step 1: Identifying customers needs and
expectations from the products and services.
Step 2: Determining the cost at which the
company can fulfill the customers expectations.
Step 3: Examining the entire distribution
system to identify the locations where the
goods can be made available at a reasonable
cost.

Planning Physical Distribution

(Contd)
Step 4: Assessing competitors
quality of service vis--vis the cost.
Step 5: Evaluating the physical
distribution system, keeping in mind
the change in technology in the
areas of production, promotion, and
distribution.

Benefits of an Efficient Logistics

System

Increased Operational Efficiency

Channelization of Resources
Improved Customer Service
Inventory Control

Logistics Process
The various steps involved in setting up an
effective logistics system are:
Planning: This is the first step towards an
effective logistics system.
Implementing: Is a group process, where
different agencies and people located in
different geographical locations have to
coordinate their activities with each other.
Controlling: To ensure the timely and safe
delivery of goods at the most economical
cost.

Fig. 9.1 Supply Chainfrom raw

material supplier to end
customer
Oxford University Press 2013. All

Critical Elements of a Logistics

System
Nature of the product
Location of the manufacturing plant
Availability of infrastructure such as
roads, ports, airports, material handling
system, etc.
Availability of different modes of
transportation
Dealer/ distributor network
Government policies

Transport System
Air Transport: Air transport is resorted to
only in case of absolute necessity or urgency.
Reasons for infrequent use:
cost of air freighting
lack of connectivity
Biggest advantage:
Speed

Ocean Transport:
Features
More than 95 per cent of international trade
is conducted by sea routes.
Coastal shipping is also used for
transporting cargo from one port within the
country to another.
Sea routes are used for carrying bulk
commodities
Goods with high volume and low value are
suited for ocean transport.

Ocean Transport (contd)

Advantages
The ability of a ship to carry a very large
volume of cargo
The costs arising from loss and damage from
sea transport is low as compared to other
modes of transport
Disadvantages
The relatively higher percentage of losses to
high value cargo.
High cost of packaging of sea cargo

Rail Transport
Rail transport is basically suitable for carrying raw
materials, bulk commodities such as coal, grains, petroleum
products, etc.
Disadvantages:
Railway freights are not always the cheapest.
The cargo has to be delivered to and collected from railway
stations, requiring an additional road transport facility.
Additional material handling is required during
transportation by railways.
Various formalities and approvals are needed to get a
railway siding, which is not always easy and is time
consuming as also tiring for an enterprise.

Road Transport
Semi-finished and finished products of
medium and small sizes and weights are
ideally suited for transportation by trucks.
Advantages
door-to-door services
trucks can be hired on exclusive contract
by shippers for their dedicated service.
reasonably fast and dependable service
for small consignments

Inland Waterways

The commercial utility of

transportation by inland waterways
in India is limited.
The average speed of water service,
which is 6 to 10 km per hour, is
among the lowest.
The river ports are not as well
equipped in terms of material
handling equipment and other
infrastructure as seaports.