Logistics and SCM an over view

1. Logistics and SCMan over view B.V.L.Narayana SPTM RSC BRC

2. Definitions • TRANSPORTATION • movement of goods and/or people from one place to another (Wikipedia). • Logistics is defined as that part of the supply chain process that plans, implements, and controls the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements. The Council of Logistics Management (1998).

3. Definitions • Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Wikipedia)

4. Logistics vs SCM • Four perspectives • Traditional – SCM part of logistics • Re-labeling –SCM= logistics • Unionist = Logistics part of SCM • Intersectionist = Logistics NU SCM

5. Logistics vs SCM • Stock & Lambert (2001) suggest ‘‘supply chain management is the management of eight key business processes: • (1) customer relationship management, • (2) customer service management, • (3) demand management, • (4) order fulfillment, • (5)manufacturing flow management, • (6)procurement, • (7) product development and commercialization, • (8) returns’’. • These processes subsume or include much of logistics,purchasing, marketing and operations management.

6. Logistics vs SCM • The supply chain manager would be involved in the negotiations,but not the purchase order transmission. • At the intersection, SCM co-ordinates cross functional efforts across multiple firms. SCM is strategic, not tactical.

8. Evolution of logistics integration

10. 3rd player logistics • A third-party logistics provider is a firm that provides outsourced logistics services to companies for part, or sometimes all of their supply chain management function • Four types • Standard – do pick, pack, warehousing and distribution • Service developer– also does tracking, tracing and cross docking • Customer adapter – takes control of logistics • Customer developer– integrates with customer and runs logistics

11. 4th player logistics • A 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, supply chain solutions • Is a non asset based 3PL • Owns only computer systems and intellectual capital and uses a 3PL to deliver service

12. Logistics centre • A Logistics Center • hub of a specific area where • all the activities relating to transport, logistics and goods distribution – • both for national and international transit – • carried out, on a commercial basis, by various operators. • Common user facility, neutrally operated • Principles involved are • Territorial planning and infrastructure rationalization • Transportation quality –best solutions at lower effective costs • Inter-modality development

18. Key reasons for satisfaction • STRONG RELATIONSHIPS • Working at operational level • Executive support • Strong contracts • Description of services • Performance monitoring • Measurable and attained metrics • Improvements in service levels • Reduction in costs

28. Extent of outsourcing of 3PL As percentage of total logistics costs

30. Indian logistics industry • Indian GDP– 1 trillion dollars • GDP will grow at 5% over next ten years • Logistics costs– 14% of GDP • Will reduce to 10% of GDP in next ten years • Value of industry– 140 billion dollars • Transportation costs • 40-45% of total logistics costs • Industry size 56 – 63 billion dollars

31. Why logistics? • Strategic role in business • Location in relation to markets • Presence in markets • Location of plant, sources of raw material • Standards of customer service

32. Why logistics? • Factors enhancing Influence of logistics • Increasing number of alternatives to meet cost and service standards • Containerization, ICT, Air services • Threat of energy shortages • Threat of material shortages. • Wide range of swings in business cycles • Emphasis on inventory management • Governmental interventions in transport chains

33. Link between sales volume and annual inventory turnover ( haskett 1985)

34. Differentiated service levels (Haskett 1985)

35. Logistics process

36. Role of logistics in strategy

37. Logistics Strategy audit • Levels of service expectation • Customers • Competitors provide • How service levels are achieved • By competitors • Number of outlets for product distribution • Type and location • Location and focus of plants –to strategy

38. Logistics strategy audit • Location of company on logistics life cycle • One business • All businesses • Have we done in our logistics programme • Postponement and speculation • Standardization, consolidation, differentiation • Match between strategy and level of costs and service in line with customer expectations

39. Logistics strategy audit • Extent of channel vision employed • Implications of technological trends • Implications of regulatory trends • Match between strategy and logistics policy • Extent of support by logistics policy to overall strategy

40. Logistics strategy audit • Postponement and speculation • Delay commitment of resources to avoid inventory build up—JIT, finishing distribution centres • Standardization of core products • Modular production systems • Consolidation of services • achieve economies of scale in logistics • Differentiate distribution • Depending on order cycles

41. Indian logistics industry • Indian railways • Earns 45000 crores as freight • = 10 billion dollars • Gets 15-19% of market share in transportation • 7% of logistics industry share • If share increased to 15 %- earnings jump to • 21 billion dollars or 92000 crores • May require some increase in transport capacity • Will require skills

43. References • The state of logistics outsourcing for 2008 • 13th annual survey done by Capgemini and Georgia institute of technology downloaded from www.3plstudy.com • Logistics cost and service 2008 • Council of supply chain management professionals downloaded from www.establishinc.com • Wikipedia

44. THANK YOU