V Importance of logistics:

‡ Unless products delivered as required-

customers will not hesitate to switch suppliers
V Satisfactory profit levels for suppliers-
satisfying service level to customer
V Logistical marketing activities;
Transportation
Inventory availability
Warehousing
Materials handling
Order processing
m jInvolves the planning, implementing
and controlling the physical flows of
materials and final goods from point of
origin to points of use to meet customer
requirements at a profit.µ
m Philip Kotler

m It involves materials management,

distribution systems and IT systems
interlinked with one another
V Impacts customer costs and operations
V Poor service leads to:
Customers carry larger safety stock
Develop secondary source of supply
Utilize an entirely different source for smooth running
and cost ²effective operation.
V jLogistics j originated in military
V The word logistics has originated from the
greek word Logistikos and the latin word
logisticus meaning the science of
calculating and computing.
V In ancient time it was more in connection
with the art of moving armies and supplies
of food and armaments to the war front.
V The usage of this word can be traced back
to the 17th century, when it was probably
used in the first time by the French army .
V In the US , the army officially used the word
logistics after the world war II. Today logistics
has acquired a wider meaning and is used in
business for the movement of raw material from
suppliers to mfg and finally the finished goods to
the consumer.
V Webster·s dictionary:
j..the aspect of military science dealing with the
procurement, maintenance and transportation of military
material, facilities and personnel.µ
V World war II led to the development of
distribution systems by armed forces-quite
remarkable for their time
V Äefers to jinterrelation & management of
all activities involved in making products
and raw materials available for
manufacturing and in providing finished
products to customers Ô
 Ô


Ô they are desired.µ
1. Physical Supply
2. Physical Distribution
V Both have to be equally managed.
V Gka Materials management
V Involves all activities necessaryto make
production inputs available to the
manufacturing process.
V Production inputs????
Äaw materials
Component parts
Supplies
V Failure to provide timely inputs will result in
great loss of time and money.
V Äesponsibility of Production and Purchasing
Dept.
V Involves those tasks necessary to deliver
the completed product to the customers
or channel intermediaries.
V Marketing hence focuses on logistical
activities involved in physical distribution
as it interacts with the customer·s
physical supply system.
V Should promptly meet customer·s
delivery requirements.
V Key elements:
‡ Transportation
‡ Inventory management
‡ Customer service
‡ Order processing
V Supporting activities:
‡ Warehousing
‡ Materials handling
‡ Protective packaging
‡ Production scheduling
‡ Information maintenance
V Logistics covers the following functional
areas, termed as ¶Logistics Mix· by
Martin Christopher.

1.  
 



V Collection and storage
V Data analysis
2ë

º Space determination
º Warehouse configuration
º Stock layout and planning

3. 

 



V Stock level policies
V Short term sales forecasting
V Product mix by location
V Stocking location
Α




V Design for handling
V Design for storage
V Design for protection

ÿë


V Mode & carrier selection
V Carrier route planning
V Vehicle scheduling
ðë  
: This includes
movement of raw materials and
components for processing from the
supplier to manufacturer.
ë 
 
: This includes storage
and movement of raw material and
components within the manufacturing
premises.
Ñë


V This includes warehousing ,
transportation, and inventory
management of finished goods.
ðë




V Through the financial accounting perspective,
inventory is an asset and does not cause any
appreciable disadvantage, even when stocked
in excess.
V Traditionally, firms carry excess inventory for
the purpose of extending excellent customer
service.
V Efficient and reliable logistics will help
eliminate costs of maintaining excess inventory
and excellent customer service even without
excess inventory.
ë








 






V Timely delivery is crucial to the
customer to keep up his production
schedule
V This will help in building customer
confidence and contribute to creating
long term relationships.
Ñë 


  Freight is the major
cost element in logistical cost. This can
be reduced by adopting measures like
freight consolidation ,transport mode
selection, route planning, long distance
shipments etc.
Α  

 

V Product damage adds to the logistics
cost.
V The reason for product damages are
improper logistical packaging, frequent
consignment handling, etc.
ÿë!


V This aspect is related to the capability of
the firm to respond to the customer in the
shortest time frame.
V The usage of latest technologies in
information processing and
communication will enhance the
capabilities in terms of accuracy and
time.
V Faster decision making results
V Industrial
marketers can use logistics to
create competitive advantage.
‡ Installing automatic inventory control systems
(IT)
‡ Efficient distribution system-substantial savings
which can be passed on to customers
‡ If mfgr·s delivery service is inconsistent-
Middlemen forced to carry high inventory levels
or face stockouts leading to loss of customers.