Integrated Logistics Management


Presentation Description

The presentation introduces the concept of integrated logistics management and discusses the various flows to enable to integrated logistics management system. These flow include both the inventory flow as well as the information flow and finally tries to identify the barriers to integrated logistics management. The presentation further explains an effective mechanism of overcoming these barriers through outsourcing. While discussing the integrated logistics management and outsourcing at the same time, it explains the concept of 3PL and 4PL or the Third Party Logistics and the Fourth Party Logistics solutions. The above presentation is suited for MBA, PGDM and BBA level students of business management for their class-lectures, class-notes and class discussions. It is also suited for understanding the basic concepts of integrated logistics management for all students of supply chain management and business management.


Presentation Transcript

Integrated Logistics Management & Rise of 3PL & 4PL:

Integrated Logistics Management & Rise of 3PL & 4PL Presented by: Anupam Kumar Reader School of Management Sciences, Varanasi Email: 1 © Copyright Anupam Kumar, 2013

Logistical Integration:

Logistical Integration Customers Suppliers Physical Distribution Manufacturing Support Procurement Information flow Inventory flow 2 © Copyright Anupam Kumar, 2013

Integrated Logistics:

Integrated Logistics Integrated logistics is defined as: The process of anticipating customer needs and wants, Acquiring the capital, materials, people, technologies and information necessary to meet those needs, Optimizing the goods or service Producing a network to fulfill customer requests and Utilizing the network to fulfill customer requirements in a timely manner. Customers Suppliers Physical Distribution Manufacturing Support Procurement Information flow Inventory flow 3 © Copyright Anupam Kumar, 2013

Integrated Logistics Management (ILM):

Integrated Logistics Management (ILM) It is to integrate the following logistical operations. Inventory flow Moving inventory when and where needed. Physical distribution Movement of finished goods to a customer. Manufacturing support Managing work-in-progress inventory Procurement Purchasing and arranging inbound movement of materials. Information flow To integrate the 3 operating areas of physical distribution, manufacturing support and procurement. 4 © Copyright Anupam Kumar, 2013

Role of Information in ILM:

Role of Information in ILM Integrated logistics management (ILM) is effected through the proper flow of information. The key concerns of information flow are: Getting the right information Keeping the information accurate Communicating the information effectively. Logistical information flow can broadly be divided into the following two types. Planning and coordinating flows Operational flows 5 © Copyright Anupam Kumar, 2013

Logistical Information Flows:

Logistical Information Flows Planning & Coordination Flow: Strategic Objectives Capacity Constraints Logistical Requirements Inventory Deployment Manufacturing Requirements Procurement Requirements Forecasting Operational Flows includes: Order Management Order Processing Distribution Operations Inventory Management Transportation Procurement 6 © Copyright Anupam Kumar, 2013

Barriers to Logistics Integration:

Barriers to Logistics Integration Organizational Structure Organizations are typically structured to divide authority & responsibility according to functional work. Measurement Systems Measurement systems may not be aligned as per the changed organizational needs, thus there may be little integration. Inventory Ownership Incorrectly located / obsolete inventory poses a big barrier to ILM Information Technology Traditional information storage capabilities have been a barrier to ILM Knowledge Transfer Capability The limited capability to transfer experiences and knowledge from one employee to another or from one functional area to another. 7 © Copyright Anupam Kumar, 2013

The barriers to Integrated Logistics Management are overcome through…:

The barriers to Integrated Logistics Management are overcome through… OUTSOURCING! 8 © Copyright Anupam Kumar, 2013

Concept of Outsourcing:

Concept of Outsourcing Outsourcing refers to delegation or assignment of certain non-core activities by a corporate enterprise to outside agencies or firms with the objective to be performed in superior manner than internally. A general trend in competitive strategy is emerging that supports the outsourcing of all non-critical activities to achieve significant cost leverage. 9 © Copyright Anupam Kumar, 2013

Issues in Outsourcing:

Issues in Outsourcing Benefits Cost Reduction Reduction of cost especially in non-core activities. Maximization of Returns Resources are freed for critical areas thus maximizing returns. Information Technology Facilities Cost Control Non-core activities by experts increase cost controls. Barriers Loss of Control Loss of Customer Focus Organization may be further alienated from its market & customer. Lack of Clarity Lack of Cost Control Selection Inefficiency Loss of Confidentiality of Sensitive Data. 10 © Copyright Anupam Kumar, 2013

Outsourcing: Strategic Dimensions:

Outsourcing: Strategic Dimensions While choosing outsourcing (third party logistics) partners, the following 3 aspects must be considered Finding core competency It refers to doing what the firm is best at and leaving all other non-value-added activities to more suited players Outsourcing activity portfolio It refers to a careful analysis and classification of various activities based on their nature (primary or secondary) and strategic (Core or non – core) characteristics. Evaluating competency of potential partner It refers to the evaluation of potential partners very carefully, comprehensively and strategically. 11 © Copyright Anupam Kumar, 2013

Outsourcing Activity Portfolio:

Outsourcing Activity Portfolio Nature of Activity Primary Secondary Strategic Characteristics of Activity Core Primary Core Secondary Core Non Core Primary Non Core Secondary Non Core 12 © Copyright Anupam Kumar, 2013

Concept of 3PL:

Concept of 3PL Firms outsource logistics to 3PL with the following objectives: To gain competitive advantage, To utilize the expertise of the partner firms to do the job more effectively, To access the better processes and resources to handle operations available with the partner firms; and To enjoy the logistics costs savings. 13 © Copyright Anupam Kumar, 2013

Third Party Logistics:

Third Party Logistics Third Party Logistics (TPL or 3PL) provider is one who is responsible to “integrate, coordinate and manage functions for the smooth handling of sourcing , output and production”. TPL describes businesses that provide one or many of a variety of logistics related services. 14 © Copyright Anupam Kumar, 2013

Third Party Logistics:

Third Party Logistics 15 © Copyright Anupam Kumar, 2013

Third Party Logistics:

Third Party Logistics Third Party Logistics companies offer a wide range of services including: Inbound freight, Freight consolidation, Warehousing, Distribution, Order fulfillment and Outbound freight. 16 © Copyright Anupam Kumar, 2013

Types of Third Party Logistics Providers:

Types of Third Party Logistics Providers Third Party Logistics organizations can broadly be divided into 3 types: Asset based TPL companies These use their own trucks, warehouses and personnel to operate their businesses. Management based TPL companies These provide the technological and managerial functions to operate the logistics function of their clients, but they do not own their own assets. Integrated Service Providers These may be asset based or management based and they supplement the services with whatever services are needed by their clients. 17 © Copyright Anupam Kumar, 2013

Fourth Party Logistics:

Fourth Party Logistics Fourth Party Logistics is an arrangement in which an organization outsources its logistics functions to two or more specialist organizations (third party logistics firms) and appoints yet another specialist organization to coordinate the activities of the outsourced partners. 18 © Copyright Anupam Kumar, 2013

Fourth Party Logistics:

Fourth Party Logistics 4PL firms are normally supply chain integrators. They act as: Single point interface between clients and service providers. Manage performance of 3PL firms to achieve continuous improvements. Actively benchmark against global best practices. Maintains leading edge logistics technology & processes. Encourages continuous to radical innovations Facilitates client growth and long term performance. 19 © Copyright Anupam Kumar, 2013


Bibliography Websites: For images and clip-arts: Books: Agrawal, D.K., (2010) “Supply Chain Management: Strategy, Cases and Best Practices”, New Delhi: Macmillan Publishers. Ballou, R.H. and Srivastava, S.K., (2007) Fifth Edition, New Delhi: Dorling Kindersley (I) Pvt. Ltd. Bhatt, K.S., (2008), “Logistics Management”, Second Edition, New Delhi: Himalaya Publishing House Ismail, R., (2008), “Logistics Management”, New Delhi: Excel Books Kachru, U., (2009), “Exploring the Supply Chain: Theory and Practice”, New Delhi: Excel Books Raghuram, G. and Rangaraj (Eds.), (2000) N., “Logistics and Supply Chain Management: Cases and Concepts”, Chennai: Macmillan Publishers, 2010 reprint. Sople, V.V., (2012), “Supply Chain Management”, New Delhi: Dorling Kindersley (I) Pvt. Ltd. 20 © Copyright Anupam Kumar, 2013

For further details / comments…:

For further details / comments… Contact: - Anupam Kumar School of Management Sciences, Varanasi. Email: 21 © Copyright Anupam Kumar, 2013

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