LOGISTICS MANAGEMENT

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By: antoniocferreira (1 month(s) ago)

Very good! Excellent material! Is it possilble I get a copy? my email is prof@acferreira.pro.br Tks.

By: kannanbhu (2 month(s) ago)

Excellent compilation. You have done a great job. Congrats to you! Could you please send the ppt copy to kannanbhu@gmail.com

By: JASON6 (2 month(s) ago)

gud ppt!! pls send me dis ppt to my mail also jasonmathew18@gmail.com

By: lumantacorazon (3 month(s) ago)

can I have your bibliography? as an author, please... I need it in my Logistics Management Subject , thanks.

By: prateeksharma22 (3 month(s) ago)

Hi Nikki, Awesome presentation. Kindly send me a copy of this presentation on psharma@psbedi.com Thanks, Prateek Sharma

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LOGISTICS MANAGEMENT:

LOGISTICS MANAGEMENT

WHAT IS THIS LOGISTICS ALL ABOUT?:

WHAT IS THIS LOGISTICS ALL ABOUT?

Slide 3:

SUPPLIER 2 SUPPLIER 3 FINAL CONSUMER CUSTOMER 2 CUSTOMER 1 MATERIALS DISTRIBUTION PRODUCTION SUPPLY CHAIN MANAGEMENT SUPPLIER 1

Slide 4:

MATERIALS PRODUCTION DISTRIBUTION IMMEDIATE SUPPLIER IMMEDIATE CUSTOMER SCOPE OF LOGISTICS MANAGEMENT

Slide 5:

MATERIALS PRODUCTION DISTRIBUTION IMMEDIATE SUPPLIER IMMEDIATE CUSTOMER LOGISTICS MANAGEMENT FLOW CHART IN - PLANT LOGISTICS OUT – BOUND LOGISTICS IN - BOUND LOGISTICS FLOW OF INPUTS & OUTPUTS FLOW OF OUTPUTS FLOW OF INPUTS

CUSTOMER’S NEEDS :

CUSTOMER’S NEEDS WHAT HE WANTS? (PRODUCTS & PRICE) WHEN HE WANTS? (TIME) WHERE HE WANTS? (PLACE) WHY HE WANTS? (PURPOSE / FREQUENCY) HOW HE WANTS? (CONVENIENCE) EVERY CUSTOMER REQUIRES BEST PRODUCT (QUALITY) AT LOWEST PRICE (COST) FASTEST DELIVERY (TIME)

Slide 7:

7 RIGHTS’ OF LOGISTICS MANAGEMENT CUSTOMER RIGHT SERVICE RIGHT PLACE RIGHT QUANTITY RIGHT RELATIONS RIGHT TIME RIGHT PRICE RIGHT QUALITY

ORGANISATION’S NEEDS :

ORGANISATION’S NEEDS HOW MUCH MONEY AN ORGNISATION WANTS TO MAKE OVER A PERIOD ? ( LONG TERM PROFITABILITY ) HOW LONG AN ORGANISATION WANTS TO REMAIN IN THE BUSINESS & WHAT ARE ITS OBJECTIVES? (ORGANISATION’S VISION)

Slide 9:

3 C’S IN LOGISTICS MANAGEMENT 1. COMPANY 3. COMPETITORS 2. CUSTOMER

DEFINITION:

DEFINITION BY COUNCIL OF LOGISTICS MANAGEMENT, USA “LOGISTICS MANAGEMENT IS THE PROCESS OF PLANNING, IMPLEMENTING & CONTROLLING, THE FLOW & STORAGE OF GOODS, SERVICES & RELATED INFORMATION IN THE MOST EFFICIENT & EFFECTIVE WAY, FROM THE POINT OF ORIGIN TO THE POINT OF CONSUMPTION, AS PER THE CUSTOMER’S REQUIREMENTS AT THE LOWEST POSSIBLE COST ’’

OPERATING OBJECTIVES :

OPERATING OBJECTIVES RAPID & COMPLETE RESPONSE TO CUSTOMER’S REQUIREMENTS REDUCTION IN LOGISTICS OPERATIONS COSTS CONTINUOUS IMPROVEMENT IN QUALITY OF SERVICES OFFERED LIFE-CYCLE SUPPORT

NEED FOR LOGISTICS :

NEED FOR LOGISTICS LOGISTICS SUPPORTS MARKETING ACTIVITIES IT BRINGS ALL ITEMS FOR SALE TOGETHER AT ONE PLACE IT PROVIDES A WIDE MIX OF PRODUCTS IT MAKES PRODUCTS AVAILABLE WHEN THEY ARE REQUIRED “TODAY, SALES ARE DETERMINED BY WHAT IS IN STOCKS & NOT BY WHAT PRODUCTS ARE PRODUCED & OFFERED BY AN ORGNISATION.”

Slide 13:

2. IT ADDS VALUE BY CREATING TIME & PLACE UTILITY FORM UTILITY ( RIGHT PRODUCT) : PRODUCTION DEPT. POSSESSION UTILITY ( RIGHT COMMUNICATION & PRICE) : MARKETING DEPT. TIME UTILITY ( RIGHT TIME) : WHEN IT IS REQUIRED PLACE UTILITY ( RIGHT PLACE) : WHERE IT IS REQUIRED WITHOUT OFFERING BOTH TIME & PLACE UTILITIES TO A CUSTOMER, HIS TOTAL REQUIREMENTS CANNOT BE FULFILLED.

COMPETITIVE PRESSURES :

COMPETITIVE PRESSURES GLOBAL LOGISTICS COST CONTROL INFORMATION TECHNOLOGY SHIFTING OF CHANNEL POWER FROM SELLERS TO BUYERS PROFIT LEVERAGE ( IMPACT OF LOGISTICS ON COST SAVINGS & GENERATING PROFITABILITY)

INTEGRATED SYSTEM APPROACH:

INTEGRATED SYSTEM APPROACH LOGISTICS , IN ITSELF, IS A SYSTEM. IT IS A NETWORK OF VARIOUS RELATED ACTIVITIES ALL THE ACTIVITIES NEED TO BE UNDERSTOOD IN TERMS OF HOW THEY AFFECT & ARE GETTING AFFECTED BY OTHER ACTIVITIES WITH WHICH THEY INTERACT THE OUTCOME OF SERIES OF ACTIVITIES IS GREATER THAN ITS INDIVIDUAL PARTS

LOGISTICS PERFORMANCE CYCLE:

PHYSICAL DISTRIBUTION PERFORMANCE CYCLE MANUFACTURING SUPPORT PERFORMANCE CYCLE PROCUREMENT SUPPORT PERFORMANCE CYCLE LOGISTICS PERFORMANCE CYCLE

Slide 17:

MATERIALS PRODUCTION DISTRIBUTION IMMEDIATE SUPPLIER IMMEDIATE CUSTOMER LOGISTICS PERFORMANCE CYCLE Materials Performance Cycle Production Performance Cycle Distribution Performance Cycle

BARRIERS TO INTEGRATED APPROACH :

BARRIERS TO INTEGRATED APPROACH ORGANIZATION STRUCTURE PERFORMANCE MEASUREMENT SYSTEM INVENTORY OWNERSHIP LACK OF ACCOUNTABILITY UNAWARE OF BUSINESS ENVIRONMENT

TOTAL COST CONCEPT :

TOTAL COST CONCEPT MAJOR LOGISTICS COSTS # CUSTOMER SERVICE COST ( COST OF A LOST SALES ) V / S # INVENTORY CARRYING COST # PROCUREMENT COST # TRANSPORTATION COST # WAREHOUSING COST # PACKAGING COST # ORDER PROCESSING COST # COMMUNICATION COST # INSURANCE COST ALL THE LOGISTICS DECISIONS ARE BASED ON TRADE- OFF BETWEEN COSTS & BENEFITS

Slide 20:

PROCUREMENT COST WAREHOUSING COST ORDER PROCESSING COST PACKAGING COST INVENTORY COST INFORMATION COST TRANSPORT COST INSURANCE COST CUSTOMER SERVICE COST TOTAL LOGISTICS COSTS

MAJOR LOGISTICS ACTIVITIES (FUNCTIONS):

MAJOR LOGISTICS ACTIVITIES (FUNCTIONS) 1. CUSTOMER SERVICE 2. DEMAND FORECASTING 3. ORDER PROCESSING 4. WAREHOUSING 5, TRANSPORTATION 6. MATERIAL HANDLING 7. INVENTORY MANAGEMENT 8. PACKAGING 9. SUPPLY MANAGEMENT 10. REVERSE LOGISTICS 11. PARTS & SERVICE SUPPORT 12. LOGISTICS COMMUNICATION

CUSTOMER SERVICE:

CUSTOMER SERVICE

CUSTOMER SERVICE VS CUSTOMER SATISFACTION:

CUSTOMER SERVICE VS CUSTOMER SATISFACTION CUSTOMER SERVICE IS A MEASURE OF PERFORMANCE OF THE LOGISTICS SYSTEM IN PROVIDING TIME & PLACE UTILITIES FOR PRODUCT OR SERVICE TO A CUSTOMER CUSTOMER SATISFACTION REPRESENTS THE CUSTOMER’S OVERALL ASSESSMENT OF ALL ELEMENTS OF MARKETING MIX LIKE PRODUCT, PRICE, PROMOTION, DISTRIBUTION ETC. CUSTOMER SATISFACTION COVERS CUSTOMER SERVICE

DEFINITION :

DEFINITION THE CUSTOMER SERVICE IS THE PROCESS OF PROVIDING SIGNIFICANT VALUE- ADDED BENEFITS, IN TERMS OF EFFICIENCY & EFFECTIVENESS, TO THE CUSTOMER IN A MOST COST EFFECTIVE WAY. IN LOGISTICS CUSTOMER IS DEFINED AS ANY DELIVERY DESTINATION.

OBJECTIVES OF CUSTOMER SERVICE :

OBJECTIVES OF CUSTOMER SERVICE AN EDGE OVER COMPETITORS MAINTAINING CUSTOMER LOYALTY MAINTAINING LEVEL OF SATISFACTION (GETTING & KEEPING CUSTOMERS) RETAINED CUSTOMERS ARE MORE PROFITABLE THAN THE NEW CUSTOMERS RECEIVING REPEAT ORDERS FROM CUSTOMERS “CUSTOMER CREATE SALES” & MOST SUCCESSFUL ORGNS. ARE THOSE THAT WIN THE MOST CUSTOMERS & KEEP THEM OVER A LONGER TIME

SCOPE OF CUSTOMER SERVICE :

SCOPE OF CUSTOMER SERVICE WHAT PRODUCTS CUSTOMER WANTS & AT WHAT PRICE? WHEN HE WANTS IT? (TIME) WHERE HE WANTS IT? (PLACE) HOW HE WANTS IT? (CONVENIENCE / PACKAGING) WHY HE WANTS IT? (PURPOSE / USE)

:

ELEMENTS OF CUSTOMER SERVICE

1.PRE-TRANSACTION ELEMENTS :

1.PRE-TRANSACTION ELEMENTS WRITTEN STATEMENT OF CUSTOMER SERVICE POLICY CUSTOMERS PROVIDED WITH A WRITTEN STATEMENT STATING WHAT ORGANISATION CAN OFFER SYSTEM FLEXIBILITY IN CASE OF UNFORESEEN EVENTS SERVICES EXTENDED TO HELP CUSTOMERS IN DETERMINING THEIR NEEDS & OFFERING SOLUTIONS ESTABLISHING ORGANIZATION STRUCTURE TO FACILITATE INTERNAL & EXTERNAL COMMUNICATION OF POLICIES, PERFORMANCE AND CORRECTIVE ACTIONS, IF NEEDED

2. TRANSACTION ELEMENTS:

2. TRANSACTION ELEMENTS PRODUCT AVAILABILITY CORRECT ORDER STATUS INFORMATION CONSISTENCY IN ORDER CYCLE SPECIAL HANDLING / SHIPPING ARRANGEMENTS IN CASE OF URGENCY CONVENIENCE OF PLACEMENT OF ORDERS OFFERING SUBSTITUTE PRODUCTS THE TRANSACTION ELEMENTS OF CUSTOMER SERVICE OFTEN RECEIVE MOST ATTENTION AS THEY ARE IMMEDIATE & APPARENT

3.POST-TRANSACTION ELEMENTS :

3.POST-TRANSACTION ELEMENTS INSTALLATION / WARRANTEE / REPAIRS / SERVICE PARTS AVAILABILITY PRODUCT TRACING FOR WITHDRAWAL ON ITS OWN IN CASE OF SOME QUALITY PROBLEMS IN SUPPLIED PRODUCTS ATTENDING CUSTOMER COMPLAINTS / CLAIMS / ACCEPTING RETURNED GOODS FROM CUSTOMER (REVERSE LOGISTICS) PRODUCT LOANING DURING SERVICE/ REPAIRS TO AVOID INCONVENIENCE TO CUSTOMER

ESTABLISHING CUSTOMER SERVICE STRATEGY:

ESTABLISHING CUSTOMER SERVICE STRATEGY COMPETITIVE BENCHMARKING PERFECT ORDER CONCEPT (ON TIME, IN FULL & ERROR FREE DOCUMENTATION) OBSERVING CUSTOMER REACTIONS TO STOCK OUTS COST REVENUE TRADE OFF ABC ANALYSIS ( FEW CUSTOMERS & PRODUCTS ARE MORE BENEFICIAL TO THE FIRM THAN OTHERS) CREATING CUSTOMER RELATIONSHIP (CRM )

CUSTOMER SERVICE AUDIT:

CUSTOMER SERVICE AUDIT IT IS THE PROCESS OF DETERMINING WHAT CUSTOMER NEED IN TERMS OF SERVICE LEVEL & DELIVERING UPON THOSE NEEDS IN A MOST COST- EFFECTIVE AND EFFICIENT MANNER IDENTIFYING ELEMENTS INFLUENCING CUSTOMER’S BUYING DECISIONS DETERMINING CUSTOMER’S PERCEPTION OF THE SERVICES OFFERED BY THE ORGANISATION VIS-À-VIS COMPETITORS TOTAL LOGISTICS COSTS CAN BE VIEWED AS THE FIRM’S EXPENDITURE ON CUSTOMER SERVICE. “ IT IS VERY EXPENSIVE TO WIN CUSTOMERS ”

PROBLEMS IN PROVIDING EFFECTIVE CUSTOMER SERVICE :

PROBLEMS IN PROVIDING EFFECTIVE CUSTOMER SERVICE FAILURE OF MANAGEMENT TO TARGET SPECIFIC MARKET UNREALISTIC COMMITMENT TO CUSTOMERS IN TERMS OF QUALITY OF PRODUCTS & DELIVERY TIME COMPETITIVE ENVIRONMENT & PERCEIVED TRADITIONAL PRACTICES (NOT RESPONDING TO CHANGED SCENARIO) LACK OF RESEARCH ON CUSTOMER’S REQUIREMENTS

Slide 35:

I AM NOT HERE TO ROB THE BANK, ALL I WANT TO SAY THAT I DONT WANT ANY CREDIT CARD OR LOAN FROM YOUR BANK PLEASE.. PLEASE STOP CALLING ME………… OVERDOSE OF “ CUSTOMER SERVICE.” ???

ACTIONS FOR IMPROVEMENT IN CUSTOMER SERVICE LEVELS :

ACTIONS FOR IMPROVEMENT IN CUSTOMER SERVICE LEVELS RESEARCH ON CUSTOMER NEEDS (PROFITABLE FOR LONG TERM BUSINESS DEVELOPMENT) SETTING REALISTIC SERVICE LEVELS STANDARDS (TRADE OFF BETWEEN REVENUES & EXPENSES) MAKING USE OF LATEST TECHNOLOGY MEASURING & EVALUATING THE PERFORMANCE OF EACH OF THE LOGISTICAL ACTIVITIES MORE TIME TO BE SPENT IN THE MARKETS & WITH THE CUSTOMERS BY TOP OFFICIALS / DECISION MAKERS

DEMAND FORECASTING:

DEMAND FORECASTING

WHAT IS DEMAND FORECASTING ? :

WHAT IS DEMAND FORECASTING ? DEMAND FORECAST IS A PROJECTION OR PREDICTION MADE ON THE BASIS OF RELEVANT LOGICAL ASSUMPTIONS OF THE VOLUMES LIKELY TO BE PRODUCED, TRANSPORTED & SOLD. THROUGH THE FORECAST,THE ORGANISATION ESTABLISHES COMMON VOLUME GOALS TO GUIDE THE ENTIRE LOGISTICS SYSTEM. THESE GOALS IDENTIFY THE “ WHAT/ WHERE / WHEN “ OF PRODUCT SALES. THE OBJECTIVE IS TO ASSIMILATE INFORMATION,ANALYSE IT & DEVELOP A FORECAST WITH DESIRED ACCURACY IN A TIMELY MANNER

WHY DEMAND FORECASTING IS REQUIRED? :

WHY DEMAND FORECASTING IS REQUIRED? MEETING CUSTOMER’S NEEDS ON TIME MANAGING FASTER TRANSPORTATION OF GOODS REDUCING STOCK-OUTS FACILITATING PRODUCTION PLANNING BETTER SCOPE FOR NEGOTIATING WITH SUPPLIERS OF INPUTS MANAGING WITH OPTIMUM INVENTORY LEVELS OF FINISHED GOODS & INPUTS REDUCING PRODUCT OBSOLESCENCE FACILITATING OVERALL BUSINESS PLANNING

FORECAST COMPONENTS :

FORECAST COMPONENTS FORECASTING IS BOTH TIME & DATA INTENSIVE FORECASTED QUANTITY ( F ) = ( B X S X T X C X P ) + I B: BASE LEVEL DEMAND ( IT IS AN AVERAGE OVER AN EXTENDED TIME) S : SEASONAL FACTOR ( SEASONAL COMPONENT IS MOVEMENT IN THE DEMAND PATTERN OVER A SPECIFIC PERIOD OF TIME.) T : TRENDS IN MARKET ( IT IS A LONG RANGE GENERAL MOVEMENT IN PERIODIC SALES OVER AN EXTENDED PERIOD OF TIME ) Contd..

Slide 41:

C : CYCLIC BUSINESS PROCESS (IT IS CHARACTERIZED BY SWING IN THE DEMAND PATTERN LASTING MORE THAN A YEAR) P : PROMOTIONAL FACTORS ( IT CHARACTERIZES DEMAND SWINGS INITIATED BY FIRM’S MARKETING ACTIVITIES SUCH AS ADVERTISING, SALES PROMOTION ETC) I : IRREGULAR QUANTITY ( IT INCLUDES UNPREDICTABLE QUANTITY THAT DO NOT FIT WITHIN THE OTHER CATEGORIES BECAUSE OF ITS RANDOM NATURE- THIS COMPONENT IS IMPOSSIBLE TO PREDICT.)

FORECAST APPROACHES :

FORECAST APPROACHES TOP- DOWN APPROACH IT DEVELOPS A NATIONAL LEVEL FORECAST & SPREADS THE VOLUME ACROSS LOCATION ON THE BASIS OF PAST SALES PATTERN IT IS A CENTRALIZED APPROACH APPROPRIATE FOR STABLE DEMAND SITUATIONS OR WHEN DEMAND LEVELS ARE CHANGING UNIFORMLY THROUGHOUT THE MARKET

TOP- DOWN APPROACH (BASED ON HISTORICAL DATA):

TOP- DOWN APPROACH (BASED ON HISTORICAL DATA) PLANT DISTRIBUTION CENTER (10000 UNITS) FIELD DISTR. CENTER ( 4 ) 1000 Units FIELD DISTR. CENTER ( 3 ) 2000 Units FIELD DISTR. CENTER ( 2 ) 3000 Units FIELD DISTR. CENTER ( 1 ) 4000 Units

B) BOTTOM-UP APPROACH IT IS A DECENTRALISED APPROACH AS FOR EACH DISTRIBUTION CENTRE FORECAST IS DEVELOPED INDEPENDENTLY. IT CAN MORE ACCURATELY TRACK & CONSIDER DEMAND FLUCTUATIONS WITH SPECIFIC MARKETS IT REQUIRES MORE DETAILED RECORD KEEPING MORE DIFFICULT TO INCORPORATE SYSTEMATIC DEMAND FACTORS SUCH AS IMPACT OF MAJOR PROMOTION:

B) BOTTOM-UP APPROACH IT IS A DECENTRALISED APPROACH AS FOR EACH DISTRIBUTION CENTRE FORECAST IS DEVELOPED INDEPENDENTLY. IT CAN MORE ACCURATELY TRACK & CONSIDER DEMAND FLUCTUATIONS WITH SPECIFIC MARKETS IT REQUIRES MORE DETAILED RECORD KEEPING MORE DIFFICULT TO INCORPORATE SYSTEMATIC DEMAND FACTORS SUCH AS IMPACT OF MAJOR PROMOTION

BOTTOM-UP APPROACH (BASED ON CENTERWISE FORECAST):

BOTTOM-UP APPROACH (BASED ON CENTERWISE FORECAST) PLANT DISTRIBUTION CENTER ( 10000 UNITS) FIELD DISTR. CENTER ( 4 ) 1000 Units FIELD DISTR. CENTER ( 3 ) 2000 Units FIELD DISTR. CENTER ( 2 ) 3000 Units FIELD DISTR. CENTER ( 1 ) 4000 Units

FORECASTING PROCESS :

FORECASTING PROCESS CREATING FORECAST DATABASE DEVELOPING INTEGRATED FORECAST SYSTEMS UNDERSTANDING USER’S NEEDS ( WHAT ? / WHEN ? ) PROCEDURES TO INTEGRATE : a) FORECASTING TECHNIQUES b) FORECAST SUPPORT SYSTEM c) FORECAST ADMINISTRATION

FORECASTING TECHNIQUES :

FORECASTING TECHNIQUES IT IS A MATHEMATICAL / STATISTICAL COMPUTATION USED TO TRANSLATE MATHEMATICAL PARAMETERS, INCLUDING HISTORY, IN TO A FORECASTED QUANTITY A) QUALITATIVE TECHNIQUE QUALITATIVE FORECASTS ARE DEVELOPED USING SURVEYS RELY HEAVILY ON SPECIAL SKILLS, KNOWLEDGE & EXPERIENCE HIGHER COSTS OF COLLECTING & ANALYZING DATA TIME CONSUMING LITTLE HISTORICAL DATA & MORE MANAGERIAL JUDGEMENT

B) TIME SERIES TECHNIQUE IT IS USED TO IDENTIFY VARIATIONS DUE TO SEASONABILITY / CYCLIC PATTERNS / TRENDS & GROWTH RATE ON THOSE TRENDS STATISTICAL METHOD USING HISTORICAL DATA & TRENDS ASSUMES FUTURE WILL BE SIMILAR TO PAST REASONABLY CORRECT OVER SHORT SPAN OF TIME NOT SENSITIVE TO “TURNING POINTS” (CHANGE IN CUSTOMER BEHAVIOUR) :

B) TIME SERIES TECHNIQUE IT IS USED TO IDENTIFY VARIATIONS DUE TO SEASONABILITY / CYCLIC PATTERNS / TRENDS & GROWTH RATE ON THOSE TRENDS STATISTICAL METHOD USING HISTORICAL DATA & TRENDS ASSUMES FUTURE WILL BE SIMILAR TO PAST REASONABLY CORRECT OVER SHORT SPAN OF TIME NOT SENSITIVE TO “TURNING POINTS” (CHANGE IN CUSTOMER BEHAVIOUR)

Slide 49:

1 ) MOVING AVERAGE METHOD AVERAGE OF MOST RECENT PERIOD DATA 2 ) EXPONENTIAL / EXTENDED SMOOTHING (ON TRENDS & SEASONS) ESTIMATE OF FUTURE BASED ON THE WEIGHTED AVERAGE OF PREVIOUS DEMAND & FORECAST LEVELS NEW FORECAST IS A FUNCTION OF OLD FORECAST CHANGED BY SOME FRACTION OF DIFFERENTIAL BETWEEN OLD FORECAST & ACTUAL PERFORMANCE

Slide 50:

C ) CAUSAL TECHNIQUE A CO- RELATION ASSUMES THAT THE FORECASTED SALES ARE PRECEDED BY SOME LEADING INDEPENDENT FACTORS. SALES IS BASED ON CAUSE - EFFECT RELATIONSHIP (DEMAND FOR COFFEE & WEATHER) IF THE GOOD RELATIONSHIP CAN BE IDENTIFIED,THE INFORMATION CAN BE USED TO EFFECTIVELY PREDICT REQUIREMENTS.

CRITERIA FOR SELECTION OF TECHNIQUE :

CRITERIA FOR SELECTION OF TECHNIQUE DESIRED ACCURACY FOR DECISION MAKING FORECASTING TIME HORIZON PURPOSE OF FORECASTING AVAILABILITY OF DATA TYPES OF THE DATA PATTERN EXPERIENCE OF THE FORECASTER “SELECTION OF A TECHNIQUE IS MORE OF AN ART THAN SCIENCE”

FORECASTING ERRORS :

FORECASTING ERRORS FORECAST ACCURACY REFERS TO THE DIFFERENCE BETWEEN CORRESPONDING FORECAST & ACTUAL PERFORMANCE DURING THE PERIOD UNDER REVIEW FORECAST ERROR IS ( ACTUAL + OR - FORECASTED DEMAND) FORECAST ERROR CAN BE CALCULATED FOR INDIVIDUAL LOCATION OR GROUP OF LOCATIONS OR NATIONALLY. ESTABLISHING APPROPRIATE FORECAST FEEDBACK LOOPS SO THAT THE PROCESS CAN BE IMPROVED

FORECAST SUPPORT SYSTEM :

FORECAST SUPPORT SYSTEM IT IS VERY IMPORTANT THAT AN EFFECTIVE FORECASTING PROCESS INCLUDE A SUPPORT SYSTEM TO FACILITATE THE MAINTENANCE, UPDATING & MANIPULATION OF PAST DATA BASE & FORECAST STEPS IN FORECASTING PROCESS : GATHER & ANALYSE DATA DEVELOP THE FORECAST COMMUNICATE THE FORECAST TO THE RELEVANT PERSONNEL & PLANNING SYSTEM

FORECAST ADMINISTRATION :

FORECAST ADMINISTRATION IT INCLUDES THE ORGANISATIONAL, PROCEDURAL, PERSONNEL AND MOTIVATIONAL ASPECTS OF FORECASTING FUNCTION & ITS INTEGRATION INTO FIRM’S OTHER FUNCTIONS IT CONCERNS WITH INDIVIDUAL ROLES & RESPONSIBILITIES WHO IS RESPONSIBLE FOR DEVELOPING FORECAST ? HOW THE FORECAST ACCURACY & PERFORMANCE MEASURED ? HOW DOES FORECAST PERFORMANCE AFFECT PERFORMANCE EVALUATION OF AN INDIVIDUAL ?

ORDER PROCESSING:

ORDER PROCESSING

Slide 56:

ORDER PROCESSING ACTIVITY IS A “ NERVE CENTER ” OF INTEGRATED LOGISTICS MANAGEMENT SYSTEM IT IS A STARTING POINT OF ALL THE LOGISTICS ACTIVITIES THE SPEED AND QUALITY OF INFORMATION FLOW HAVE DIRECT IMPACT ON THE COST & EFFICIENCY OF THE ENTIRE OPERATION FLOW

LOGISTICS INFORMATION FLOW:

LOGISTICS INFORMATION FLOW Supplier Materials Dept. Production Dept. Distribution Dept. Customer INFORMATION INFORMATION ORDER PROCESSING SYSTEM LINKS CUSTOMERS, ORGANISATION & SUPPLIERS THROUGH EFFICIENT INFORMATION SYSTEM

TOTAL ORDER CYCLE : CUSTOMER’S PERSPECTIVE:

TOTAL ORDER CYCLE : CUSTOMER’S PERSPECTIVE 1 CUSTOMER PLACES ORDER 2 ORDER RECD. BY SUPPLIER 3 ORDER IS PROCESSED 4 ORDER IS PICKED AND PACKED 5 ORDER SHIPPED TO CUSTOMER 6 ORDER DELIVERED TO CUSTOMER

TOTAL ORDER CYCLE TIME ( 1 – 6 ) :

TOTAL ORDER CYCLE TIME ( 1 – 6 ) ORDER PREPARATION & TRANSMISSION TO SUPPLIER ORDER RECEIVED BY SUPPLIER & ENTERED IN TO SYSTEM STOCK CHECKING / CREDIT CHECKING PRODUCT PICKING & PACKING & SHIPPING TRANSIT TIME CUSTOMER ACCEPTING PRODUCT & ACKNOWLEDGEMENT

IMPORTENCE OF COMMUNICATION IN ORDER PROCESSING:

IMPORTENCE OF COMMUNICATION IN ORDER PROCESSING ORDER PROCESSING & INFORMATION SYSTEM IS THE FOUNDATION OF AN EFFICIENT LOGISTICS MANAGEMENT SYSTEM, WHICH FACILITATE QUICK RESPONSE TO THE CUSTOMERS NEEDS, THROUGH : SHORTER LEAD TIME INCREASE IN BUSINESS / CUSTOMERS / GOODWILL AT THE MARKET PLACE LOWER TRANSPORTATION COST LOWER INVENTORY COST ENABLES OVERALL PRODUCTION / PROCUREMENT PLANNING

ADVANCED ORDER PROCESSING SYSTEM :

ADVANCED ORDER PROCESSING SYSTEM NO COMPONENT OF LOGISTICS FUNCTION HAS BENEFITED MORE FROM COMPUTER & INFORMATION TECHNOLOGY THAN ORDER ENTRY / PROCESSING & EXECUTION SOME ADVANCED SYSTEMS ARE SO SOPHISTICATED THAT THE ORDERS ARE AUTOMATICALLY GENERATED WHEN THE STOCK REACHES THE PRE-FIXED RE-ORDER POINT THE SYSTEM ENABLES FIRM TO MAINTAIN CONTACT WITH EXISTING SMALL AS WELL AS LARGE & PROFITABLE CUSTOMERS EFFICIENTLY EXPLORES NEW LOCAL / GLOBAL MARKET OPPORTUNITIES

HELP OF ELECTRONIC DATA INTERCHANGE (EDI) :

HELP OF ELECTRONIC DATA INTERCHANGE (EDI) ELECTRONIC DATA INTERCHANGE (EDI) IS THE PROCESS OF TRANSFERRING STANDARD BUSINESS INFORMATION / DOCUMENTS ELECTRONICALLY FROM ONE COMPUTER TO ANOTHER WITHIN AND BETWEEN ORGANIZATIONS THROUGH NETWORK SYSTEM THE KEY POINTS THE TRANSFER OF INFORMATION FROM COMPUTER TO COMPUTER THE TRANSMISSION IS OF STANDARD BUSINESS DOCUMENTS EDI STANDARDS REQUIREMENT OF COMPUTER LANGUAGE COMPATIBILITY USERS MUST HAVE A COMMON COMMUNICATION STANDARDS USERS MUST SHARE THE COMMON LANGUAGE

ADVANTAGES OF EDI :

ADVANTAGES OF EDI 1. GREATER ACCURACY 2. LOWER COST 3. FASTER SPEED 4. HIGHER VISIBILITY 5. EASY ACCESIBILITY / AVAILABILITY 6. CORRECT UNDERSTANDING OF CUSTOMER NEEDS 7. HIGHER PRODUCTIVITY

WAREHOUSING:

WAREHOUSING

WHAT IS A WAREHOUSE ?:

WHAT IS A WAREHOUSE ? DEFINITION WAREHOUSE IS A LOCATION PROVIDED WITH ADEQUATE FACILITIES, WHERE BULK SHIPMENTS ARE RECEIVED FROM PRODUCTION CENTERS, WHICH ARE THEN BROKEN DOWN IN TO A PARTICULAR ORDER SIZE FOR SHIPPING TO THE CUSTOMERS AS PER THEIR REQUIREMENTS WAREHOUSING IS AN INTEGRAL PART OF ANY LOGISTICS SYSTEM

WAREHOUSE VS DISTRIBUTION CENTER :

WAREHOUSE VS DISTRIBUTION CENTER WAREHOUSE BELONGS TO AN ORGANISATION DISTRIBUTION CENTER IS A SEPARATE ENTITY WAREHOUSE STORES ALL PRODUCTS DISTRIBUTION CENTER KEEPS MINIMUM INVENTORY OF HIGH DEMAND ITEMS WAREHOUSE HANDLES PRODUCTS IN 4 STAGES OF RECEIVE, STORE, PICK & SHIP DISTRIBUTION CENTER IN 2 STAGES OF RECEIVES & SHIP WAREHOUSE PERFORM MINIMUM VALUE ADDED ACTIVITIES DISTRIBUTION CENTER PERFORMS HIGH PERCENTAGE OF VALUE ADDED ACTIVITIES WAREHOUSE FOCUSES ON REDUCING OPERATING COSTS DISTRIBUTION CENTER FOCUSES ON MAXIMIZING THE PROFIT

Slide 67:

PLANT A (X) PLANT B (Y) PLANT C (Z) WAREHOUSE (X+Y+Z) CUSTOMER 3 (X,Y) CUSTOMER 2 (Y,Z) CUSTOMER 1 ( X,Y,Z) 1. PRODUCT MIXING USES OF WAREHOUSES PLANTS A / B / C ARE FOCUSSED FACTORIES

Slide 68:

PLANT A (X) PLANT B (X) PLANT C(X) WAREHOUSE ( X ) CUSTOMER 3 (X) CUSTOMER 2 (X) CUSTOMER 1 (X) 2. CONSOLIDATION

Slide 69:

PLANT A (X) WAREHOUSE (X) CUSTOMER 3 (X) CUSTOMER 2 (X) CUSTOMER 1(X) 3. BREAK BULK

NEED FOR WAREHOUSING :

NEED FOR WAREHOUSING TO FULFILL EXPECTED CUSTOMER SERVICE LEVEL TO ACHIEVE TRANSPORTATION ECONOMIES BY MOVING HIGHER VOLUMES OF FINISHED GOODS TO ACHIEVE ECONOMIES OF SCALE IN PRODUCTION BY ACCOMMODATING ADDITIONAL QUANTITIES PRODUCED TO MAINTAIN STEADY SOURCE OF SUPPLIES BY BALANCING SUPPLY OF & DEMAND FOR PRODUCTS TO MEET CHANGING MARKET CONDITIONS TO PROVIDE MIXED-PRODUCTS OPTION TO CUSTOMERS TO PROVIDE TEMPORARY STORAGE OF MATERIALS TO BE DISPOSED-OFF / SALVAGED (REVERSE LOGISTICS)

A) CONVENTIONAL APPROACH PRODUCE TO STOCK :

A) CONVENTIONAL APPROACH PRODUCE TO STOCK PUSH CONCEPT PROTECTION AGAINST FLUCTUATIONS IN LEAD TIME & DEMAND FROM CUSTOMERS PROTECTION AGAINST DELAYS & UNCERTAINTY IN TRANSPORTATION OF PRODUCTS TO PROVIDE ADJUSTMENT BETWEEN THE TIME REQUIRED FOR PRODUCTION & DEMAND / USE OF THE PRODUCT TO SERVE AS A RESERVOIR OF GOODS

B) MODERN APPROACH: PRODUCE TO SELL :

B) MODERN APPROACH: PRODUCE TO SELL PULL CONCEPT WAREHOUSE ADDS TO THE COST OF DISTRIBUTION IN-TRANSIT ( TEMPORARY) STORAGE OF PRODUCTS FOR ONWARD DESPATCH THROUGHOUT THE SUPPLY CHAIN SYSTEM WAREHOUSE SHOULD SERVE BASICALLY AS A PRODUCT MIXING / CONSOLIDATION / BREAK BULK CENTER PRODUCTS RECEIVED FROM PRODUCTION ARE SENT TO THE CUSTOMERS, AT SHORTEST POSSIBLE TIME THE PRODUCTS ENTER THE WAREHOUSE ONLY WHEN THEY ARE NOT REQUIRED FOR IMMEDIATE SHIPMENT

MAIN FUNCTIONS OF WAREHOUSING:

MAIN FUNCTIONS OF WAREHOUSING RECEIVING FINISHED GOODS FROM PRODUCTION CENTERS PERFORMING QUALITY & QUANTITY CHECKS STORING / STACKING THE GOODS AT SPECIFIC LOCATIONS PICKING, CHECKING AND PACKING THE PRODUCT FOR EXECUTING CUSTOMER’S ORDERS 5. SHIPPING THE GOODS BY SELECTED MODE OF TRANSPORT 6. GENERATING RELEVANT DOCUMENTS 7. INFORMATION TRANSFER TO MANAGEMENT

ADDITIONAL VALUE ADDED SERVICES:

ADDITIONAL VALUE ADDED SERVICES PACKAGING: CUSTOMISED PACKAGING CHANGING PACKAGE CHARACTERISTICS (BREAK- BULK PACKS) TO COMPLETE PRODUCTION ACTIVITIES ( RE-ASSEMBLING / FINISHING / POLISHING) 4. ACCLIMATISING / MATUARING THE PRODUCTS 5. TO MAINTAIN MARKET CONFIDENTIALITY (RE-LABELING / RE-CODING) 6. MEETING LABELING / MARKING REQUIREMENTS OF FOREIGN MARKETS 7. PROVIDING SECONDARY (TRANSPORT) PACKAGING

WAREHOUSING DECISIONS:

WAREHOUSING DECISIONS

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1. OWNERSHIP : PRIVATE / PUBLIC OR CONTRACT ? 2. LOCATION : WHERE ? 3. WHAT SIZE : BIG OR SMALL ? 4. LAYOUT : HOW TO DESIGN ? 5. NUMBERS : HOW MANY ?

1.OWNERSHIP TYPES OF WAREHOUSES:

1.OWNERSHIP TYPES OF WAREHOUSES

A) PRIVATE WAREHOUSES :

A) PRIVATE WAREHOUSES THESE ARE THE WAREHOUSES OWNED BY THE COMPANY FOR THEIR EXCLUSIVE USE FOR STORING THE GOODS MANUFACTURED / TRADED BY THEM FOR ONWARD SELLING IN THE MARKET COST INVOLVED FIXED CAPITAL EXPENSES IN BUILDING, LAND ETC COST OF MATERIAL HANDLING EQUIPMENT COST OF MANPOWER / OFFICE & OTHER FACILITIES MAINTENANCE / REPAIR / INSURANCE PREMIUM COSTS

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ADVANTAGES BETTER CONTROL OVER STORAGE & MOVEMENT OF GOODS LESS CHANCE OF ERRORS IN HANDLING THE GOODS CUSTOMISED DESIGNING AND FLEXIBILITY IN OPERATIONS COST EFFECTIVE & ECONOMIC ON LONGER SPAN OF TIME GIVES CUSTOMER SENSE OF PERMANENCE & CONTINUITY DISADVANTAGES LACK OF GEOGRAPHICAL FLEXIBILITY REQUIRES STABLE DEMAND & HIGH PRODUCT THROUGHPUT INITIAL LARGE FINANCIAL REQUIREMENTS PERMANENT LIABILITY

B) PUBLIC WAREHOUSES :

B) PUBLIC WAREHOUSES THESE ARE THE WAREHOUSES HIRED FROM OTHER AGENCIES (GOVERNMENT OR PRIVATE PARTIES) FOR STORING THE GOODS FOR A SPECIFIC PERIOD OF TIME BY PAYING THE AGREED RENT COSTS INVOLVED RENT OF THE SPACE HIRED PAYMENT TOWARDS USE OF OTHER FACILITIES

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ADVANTAGES NOT MUCH INITIAL CAPITAL REQUIRED GENERALLY STRATEGICALLY LOCATED NEAR PORTS / MARKET PLACE 3. FIXED PERIODIC OPERATING COST 4. ADJUSTMENT FOR SEASONALITY POSSIBLE 5. GREATER FLEXIBILITY IN LOCATION CHANGE OVER 6. NO PERMANENT LIABILITY DISADVANTAGES LACK OF FLEXIBILITY IN OPERATIONS UNSUITABLE FOR SPECIALIZED SERVICES

C) CONTRACT WAREHOUSES :

C) CONTRACT WAREHOUSES IT IS A SPECIALISED FORM OF PUBLIC WAREHOUSE MANAGED BY THIRD PARTY LOGISTICS ORGANIZATION FOR PROVIDING TOTAL WAREHOUSING SERVICES BY PAYING THE AGREED CHARGES ADVANTAGES SUITABLE FOR MEETING SEASONAL REQUIREMENT EXTENSIVE GEOGRAPHIC COVERAGE AVAILABILITY OF EXPERT MANPOWER & DEDICATED RESOURCES NO PERMANENT LIABILITY DISADVANTAGES LESS CONTROL ON OPERATIONS IMPERSONAL CUSTOMER SERVICE PERFORMANCE OF ORGANIZATION DIRECTLY DEPENDS ON PERFORMANCE OF 3RD PARTY

2. LOCATION OF WAREHOUSE :

2. LOCATION OF WAREHOUSE LOCATION OF A WAREHOUSE HAS CONSIDERABLE INFLUENCE ON CUSTOMER SERVICE LEVEL BY PROVIDING EDGE OVER COMPETITORS REDUCTION IN COST OF DISTRIBUTION

CONSIDERATIONS FOR SELECTING A WAREHOUSE LOCATION :

CONSIDERATIONS FOR SELECTING A WAREHOUSE LOCATION MARKET ORIENTED (CLOSER TO MARKET / CUSTOMERS) PRODUCTION ORIENTED (CLOSER TO PLANT) COST OF THE WAREHOUSE ORDER CYCLE TIME DESIRED CUSTOMER SERVICE LEVEL NATURE OF THE PRODUCTS (SEASONAL / PERISHABLE) MARKET SERVICE AREA & COST OF DISTRIBUTION AVAILABILITY OF TRANSPORT FACILITIES & COST THEREOF Contd..

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9. LOCATION OF COMPETITOR’S WAREHOUSES 10. AVAILABILITY OF BASIC INFRASTRUCTURE FACILITIES LABOUR SUPPLY SITUATION & WAGE STRUCTURE GOVERNMENT RULES & REGULATIONS ON ENVIRONMENT, TAXES, LEVIES ETC 13. POTENTIAL FOR FURTHER EXPANSION OF WAREHOUSE 14. RE-SALE VALUE IN FUTURE 15. FLEXIBILITY OF CHANGE IN THE FACILITIES IN FUTURE 16. GEOGRAPHICAL HAZARDS LIKE FLOODS, EARTHQUAKES ETC.

3. AREA OF WAREHOUSE :

3. AREA OF WAREHOUSE AREA OF A WAREHOUSE HAS CONSIDERABLE INFLUENCE ON CUSTOMER SERVICE LEVEL BY PROVIDING INVENTORY SUPPORT FOR MEETING CUSTOMER REQUIREMENTS ON TIME 2. REDUCTION IN THE COST OF LOST SALES

FACTORS DETERMINING AREA OF WAREHOUSE :

FACTORS DETERMINING AREA OF WAREHOUSE NUMBER / NATURE OF ACTIVITIES TO BE PERFORMED IN THE WAREHOUSE 2. DESIRED CUSTOMER SERVICE LEVEL 3. SIZE / POPULATION OF MARKET TO BE SERVED NUMBERS AND VOLUME OF PRODUCTS TO BE HANDLED FLUCTUATION IN DEMAND NATURE OF THE PRODUCTS TO BE STORED AND THEIR STORAGE REQUIREMENTS Contd…

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7. MATERIAL HANDLING SYSTEM ( MANUAL / MECHANISED ) TO BE USED 8. FUTURE BUSINESS PLANS ( EXPANSION / DIVERSIFICATION ) 9. PRODUCTION LEAD TIME 10. ORGANISATION’S INVENTORY POLICY 11. STOCK LAYOUT ARRANGEMENTS & PROVISION OF AISLE & GANGWAYS REQUIRED FOR MOVEMENT OF GOODS 12. TOTAL AREA REQUIREMENT FOR OFFICE,CANTEEN, PARKING & OTHER AMENITIES

4. LAYOUT OF WAREHOUSE :

4. LAYOUT OF WAREHOUSE SYSTEMETIC LAYOUT OF A WAREHOUSE HAS CONSIDERABLE INFLUENCE ON CUSTOMER SERVICE LEVEL BY PROVIDING 1. REDUCTION IN ORDER PROCESSING CYCLE TIME THROUGH EFFICIENT PICKING / PACKING & SHIPPING OF THE PRODUCTS 2. REDUCTION IN THE COST OF PRODUCT DAMAGES / OBSOLESCENCE

FACTORS DETERMINING WAREHOUSE LAYOUT (DESIGN) :

FACTORS DETERMINING WAREHOUSE LAYOUT (DESIGN) NUMBER / NATURE OF ACTIVITIES TO BE PERFORMED NATURE & STORAGE REQUIREMENT OF PRODUCTS TO BE STORED DEMAND FOR THE PRODUCT (FREQUENCY OF MOVEMENT) TOTAL SPACE AVAILABILITY STORAGE & HANDLING EQUIPMENT TO BE USED WAREHOUSE OPERATING METHODS & PROCEDURES GOVERNMENT / STATUTORY REQUIREMENTS REQUIREMENT OF SAFETY & SECURITY OF PEOPLE & PRODUCTS.

TYPES OF STORAGE SYSTEMS:

TYPES OF STORAGE SYSTEMS 1. DEDICATED STORAGE SYSTEM ( FIXED SLOT LOCATION ) THE PRODUCTS ARE STORED IN A SPECIFIC EARMARKED LOCATION LESS TIME FOR PICKING / PACKING / SHIPPING PRODUCTS 2. RANDOMIZED STORAGE (VARIABLE SLOT LOCATION) IT PLACES PRODUCTS AT THE CLOSEST AVAILABLE SLOTS THE PRODUCTS ARE RETRIEVED ON FIFO BASIS THIS APPROACH MAXIMIZE SPACE UTILIZATION IT EMPLOYEES “ASRS” WHICH MINIMIZES LABOUR & HANDLING COST

ADVANTAGES OF PROPER WAREHOUSING LAYOUT :

ADVANTAGES OF PROPER WAREHOUSING LAYOUT HIGH PRODUCTIVITY REDUCED ORDER PROCESSING CYCLE TIME IMPROVEMENT IN CUSTOMER SERVICE LEVEL REDUCED COST OF OPERATIONS PROVIDE BETTER WORKING CONDITIONS BETTER WAREHOUSE CAPACITY UTILIZATION BETTER PROTECTION / PRESERVATION OF THE PRODUCTS REDUCED DAMAGES / WASTEGES OF THE PRODUCTS ADDS FLEXIBILITY IN WAREHOUSING OPERATIONS.

WAREHOUSING STORAGE PRINCIPLES:

WAREHOUSING STORAGE PRINCIPLES COMPATIBILITY OF THE PRODUCTS COMPLIMENTARILITY OF THE PRODUCTS (STORING FUNCTIONALLY RELATED PRODUCTS TOGETHER) 3. PHYSICAL SIMILARITY OF THE PRODUCTS REQUIRING SAME TYPE OF PROTECTION & PRESERVATION 4. POPULARITY ( FREQUENCY OF MOVEMENT) 5. USAGE REQUIREMENTS (KEEPING WORKING STOCKS & BUFFER STOCKS SEPARATELY) 6. PRODUCTS FOR REVERSE LOGISTICS KEPT SEPARATELY

5. NUMBER OF WAREHOUSES :

5. NUMBER OF WAREHOUSES DECISION ON NUMBER OF WAREHOUSES HAS CONSIDERABLE INFLUENCE ON CUSTOMER SERVICE LEVEL BY PROVIDING INVENTORY SUPPORT FOR MEETING CUSTOMERS NEEDS OF PRODUCTS ON DESIRED TIME & AT THE PLACE.

FACTORS DETERMINING NUMBER OF WAREHOUSES:

FACTORS DETERMINING NUMBER OF WAREHOUSES DESIRED LEVEL OF CUSTOMER SERVICE NUMBER OF CUSTOMERS, THEIR LOCATIONS & BUYING HABITS 3. TOTAL OPERATING COST OF THE WAREHOUSE 4. SIZE OF THE MARKET 5. NATURE OF THE PRODUCTS 6. INTENSITY OF COMPETITION 7. CURRENT & POTENTIAL DEMAND.

LOGISTICS COSTS RELATED TO NUMBER OF WAREHOUSES:

LOGISTICS COSTS RELATED TO NUMBER OF WAREHOUSES

EFFECT OF NUMBER OF WAREHOUSES ON TOTAL LOGISTICS COST :

EFFECT OF NUMBER OF WAREHOUSES ON TOTAL LOGISTICS COST AS THE NUMBER OF WAREHOUSES INCREASES : CUSTOMER SERVICE LEVEL INCREASES & COST OF LOST SALES DECREASES BUT INVENTORY & INVENTORY CARRYING COST INCREASES WAREHOUSING COST INCREASES TRANSPORTATION COST INITIALLY DECREASES BUT LATER ON INCREASES

SQUARE ROOT LAW (SRL) :

SQUARE ROOT LAW (SRL) X2 = X1 ( N2 / N1) N1: NUMBER OF EXISTING STOCK POINTS N2: NUMBER OF FUTURE STOCK POINT X1: TOTAL INVENTORY IN EXISTING STOCK POINTS X2: TOTAL INVENTORY IN FUTURE STOCK POINTS ASSUMPTIONS INVENTORY TRANSFER BETWEEN STOCK POINTS IS NOT A COMMON PRACTICE LEAD TIME FOR SUPPLY OF GOODS IS CONSTANT CUSTOMER SERVICE LEVEL IS CONSTANT DEMAND FOR THE PRODUCTS IS ALSO CONSTANT

WAREHOUSE SECURITY :

WAREHOUSE SECURITY PROTECTION FROM THEFT & PILFERAGES FIRE, FLOOD OR ANY NATURAL CALAMITY RIOTS & CIVIL COMMOTION INSECTS, RODENTS ETC CLIMATIC FACTORS SUCH AS RAINS, HEAT, COLD, MOISTURE PREVENTIVE MEASURES SECURITY FROM EXTERNAL ELEMENTS BY CONSTRUCTING HIGHER WALLS, FENCING, CHECK POSTS PROVIDING WATCH & WARD SYSTEM INSTALLING FIRE FIGHTING EQUIPMENT & TRAINING TO WORKMEN ON FIRE FIGHTING CONSTRUCTING WAREHOUSE ABOVE LAND LEVEL CARRYING OUT PERPETUAL PEST CONTROL

COSTS OF WAREHOUSING:

COSTS OF WAREHOUSING COST OF HIRING OR CONSTRUCTING WAREHOUSES TOTAL INVENTORY CARRYING COST ( STORAGE / INSURANCE / OBSOLESCENCE / PRODUCT LOSS OR DAMAGE / SAFETY COST) WAREHOUSING OPERATING COST (ADMINISTRATION / MANPOWER / EQUIPMENT COST ) TRANSPORTATION COST ( FROM PLANTS -- WAREHOUSE -- WAREHOUSE) 5. COST OF LOST SALES.

FACTORS AFFECTING WAREHOUSING COSTS :

FACTORS AFFECTING WAREHOUSING COSTS SALES THROUGHPUT (VOLUME) TO BE HANDLED NUMBER OF PRODUCTS TO BE STORED SIZE / WEIGHT / NATURE OF INDIVIDUAL PRODUCT ORGANISATION’S INVENTORY POLICY SPACE UTILIZATION OF WAREHOUSE STORAGE & STACKING METHODS MATERIAL HANDLING TECHNIQUES & METHODS.

WAREHOUSE PERFORMANCE MEASUREMENT :

WAREHOUSE PERFORMANCE MEASUREMENT A) INTERNAL PERFORMANCE MEASUREMENT COST INCURRED TO ACHIEVE SPECIFIC OBJECTIVES CUSTOMER SERVICE PERFORMANCE IN TERMS OF ORDER FILLING, STOCK-OUTS, SHIPPING ERRORS, ON-TIME DELIVERY 3. SPACE UTILIZATION 4. ASSET MANAGEMENT: INVENTORY TURNOVER B) EXTERNALPERFORMANCE MEASUREMENT CUSTOMER PERCEPTION ON CUSTOMER SERVICE ATTAINED COMPARING WITH BEST INDUSTRY PRACTICES (BENCHMARKING)

REASONS FOR WAREHOUSING INEFFICIENCIES :

REASONS FOR WAREHOUSING INEFFICIENCIES WRONG DEMAND FORECASTING POOR UTILIZATION OF SPACE USE OF REDUNDANT HANDLING SYSTEMS / METHODS EXCESSIVE MAINTENANCE COSTS 5. HAPHAZARD WAY OF WORKING 6. LACK OF NECESSARY INFRA STRUCTURE FACILITIES 7. LACK OF TRAINED MANPOWER 8. ABSENCE OF COORDINATION BETWEEN RELATED FUNCTIONS.

IMPROVING WAREHOUSE PERFORMANCE :

IMPROVING WAREHOUSE PERFORMANCE IMPROVING FORECASTING EFFICIENCY USE OF NEW TECHNOLOGY / AUTOMATED MATERIAL HANDLING EQUIPMENT / COMMUNICATION DEVICES / “ASRS” ETC 3. REDUCTION IN UNNECESSARY PRODUCT HANDLING 4. IMPROVING / STANDARDIZING PRODUCT PACKAGING 5. PERPETUAL MONITORING & INVENTORY COUNTING 6. INCREASING SIZE OF THE UNITS TO BE HANDLED Contd..

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7. CONSTANTLY SEEKING ROUND TRIP OPPORTUNITIES 8. IMPROVING CUBE UTILIZATION OF WAREHOUSE 9. SMOOTHING OUT VARIANCE IN PRODUCT FLOW IN / OUT OF WAREHOUSE 10. EMPLOYEE TRAINING, MANAGEMENT DEVELOPMENT PROGRAMS, PERFORMANCE INCENTIVE SYSTEM & AWARD RECOGNITION 11. INSTALLING & IMPLEMENTING EDI FOR HANDLING VARIOUS WAREHOUSING FUNCTIONS.

TRANSPORTATION:

TRANSPORTATION

NEED FOR TRANSPORTATION :

NEED FOR TRANSPORTATION TRANSPORTATION IS ONE OF THE MOST IMPORTANT LOGISTICS ACTIVITIES IN MEETING CUSTOMER REQUIREMENTS IN OFFERING THE PRODUCTS ON TIME & AT PLACE WHERE THEY ARE REQUIRED IT IS ALSO THE COSTLIEST LOGISTICS ACTIVITY IT ACCOUNTS FOR SIGNIFICANT PORTION OF THE PRODUCT SELLING PRICE IN MAJOR PROJECTS, THE COST OF TRANSPORTATION ACCOUNTS FOR 25% - 30% OF TOTAL CAPITAL COST DELAYS IN GETTING INPUTS / PLANT & MACHINERY ON TIME, NOT ONLY DELAYS THE PROJECT IMPLEMENTATION BUT ALSO INCREASES IN THE COST OF PROJECT

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WAREHOUSES CONSUMERS DEALERS DISTRIBUTORS PLANTS STORES SUPPLIERS TRANSPORTATION : LINKS TO INTEGRATED LOGISTICAL ACTIVITIES IN-BOUND OUTBOUND

MAJOR TRANSPORTATION FUNCTIONS :

MAJOR TRANSPORTATION FUNCTIONS PRODUCT MOVEMENT ( FROM POINTS OF ORIGIN TO POINTS OF CONSUMPTION) 2. IN-TRANSIT PRODUCT STORAGE

PRINCIPLES OF TRANSPORT OPERATIONS :

PRINCIPLES OF TRANSPORT OPERATIONS A) ECONOMIES OF SCALE TRANSPORT COST PER UNIT TRANSPORTED DECREASES WHEN THE VOLUME / WEIGHT OF THE SHIPMENT INCREASES B) ECONOMIES OF DISTANCE THE TRANSPORT COST PER UNIT OF DISTANCE DECREASES AS THE DISTANCE COVERED INCREASES THESE ARE THE IMPORTANT CONSIDERATIONS FOR SELECTING ALTERNATE TRANSPORT STRATEGIES THE OBJECTIVE IS TO MAXIMISE THE SIZE OF THE LOAD SHIPPED & THE DISTANCE THAT IS MOVED WHILE MEETING CUSTOMER SERVICE EXPECTATIONS

PARTICIPANTS IN TRANSPORTATION DECISIONS :

PARTICIPANTS IN TRANSPORTATION DECISIONS SHIPPER / CONSIGNOR WHO SENDS THE PRODUCTS 2. CONSIGNEE / CUSTOMER WHO RECEIVES THE PRODUCTS 3. CARRIER / TRANSPORTER WHO HANDLES THE PRODUCT MOVEMENTS GOVERNMENT AGENCIES WHO REGULATES THE ACTIVITIES

MODES OF TRANSPORTATION:

MODES OF TRANSPORTATION

1..ROAD TRANSPORT :

1..ROAD TRANSPORT TRANSPORTATION BY ROADS ( PRIMARY MODE ) IN INDIA ACCOUNTS FOR 50- 60 % OF TOTAL TRANSPORT MOVEMENT BY VOLUME PROBLEMS FACED BY ROAD TRANSPORT PATHETIC ROAD CONDITIONS SHORTAGE OF QUALITY FUELS (ADULTERATION PROBLEM) MORE WAITING PERIOD (WASTAGE OF TIME AT OCTROI CHECK POST IN DOING FORMALITIES) TRANS-SHIPMENTS ON ACCOUNT OF MOVEMENT RULES AND RESTRICTIONS Contd..

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5. REQUIREMENT OF VARIOUS PERMITS FROM DIFFERENT AUTHORITIES 6. TRADE IS IN THE HANDS OF SMALL & UN-ORGANISED TRANSPORTERS 7. MOST OF THE ACTIVITIES ARE OPERATED MANUALLY 8. NON-AVAILABILITY OF PROFESSIONAL PEOPLE 9. LESS IMPORTANCE GIVEN TO THIS ACTIVITY BY BUSINESS ORGANIZATION

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ADVANTAGES THROUGH MOVEMENT : POINT TO POINT DELIVERY FLEXIBILITY IN OPERATIONS : DIRECT ACCESS TO SHIPPERS & FINAL CUSTOMERS AT ANY TIME 3 BROAD GEOGRAPHICAL COVERAGE 4. HANDLING OF DIFFERENT TYPES OF PRODUCTS POSSIBLE 5. FAST TURN AROUND OF VEHICLES (MOVE-STOP-MOVE)

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DISADVANTAGES 1. DELAYS IN TRANSIT TIME DUE TO ROAD CONDITIONS & CLIMATIC HAZARDS 2. UNSUITABLE FOR VERY HEAVY & LARGE SIZE / VOLUME LOADS 3. UNSUITABLE FOR VERY LONG DISTANCE PARTICULARLY OUTSIDE COUNTRY’S BORDERS (EXPORT- IMPORT CONSIGNMENTS) 4. MORE RISKS OF ACCIDENTS & DAMAGES TO THE GOODS 5 GOVT.’S WEIGHT / VOLUME RESTRICTIONS & LEGAL LIMITS ON OPERATING AREAS

FLEET PERFORMANCE :

FLEET PERFORMANCE A) FLEET UTILIZATION CONTINUOUSLY RUNNING THE VEHICLES AND MOVING THE GOODS WHICH REDUCES IDLE TIME & OPERATING COST B) CAPACITY UTILISATION EFFECTIVE USE OF AVAILABLE VEHICLE / EQUIPMENT AND MANPOWER CAPACITIES

IMPROVING FLEET PERFORMANCE :

IMPROVING FLEET PERFORMANCE REDUCING WAITING PERIOD CARRYING ONLY ECONOMIC LOADS / CONSOLIDATION OF CARGO 3. SPREADING DELIVERIES THROUGHOUT THE DAY MINIMISATION OF OPERATING DELAYS IN LOADING / STORING / STACKING / UNLOADING / DOCUMENTATION 5. MAXIMISATION OF RETURNED TRIP LOADS

LOAD PLANNING :

LOAD PLANNING DEFINATION LOAD PLANNING IS THE PROCESS OF MEETING CUSTOMER’S REQUIREMENT BY PLANNING & PROVIDING VEHICLES / EQUIPMENT & MANPOWER AND DETERMINING THE TRANSPORT ROUTES & SCHEDULES ACCORDINGLY FACTORS TO BE CONSIDERED FOR LOAD PLANNING AVAILABILITY OF VEHICLES & MANPOWER CUSTOMERS REQUIREMENT IN TERMS OF TIME & PLACE FACTORS LIKE ROAD CONDITION, CLIMATE, LEGAL & STATUTORY REQUIREMENTS 4. METHODS TO BE ADOPTED FOR ROUTING & SCHEDULING

LOAD PLANNING METHODS :

LOAD PLANNING METHODS A) FIXED ROUTE SYSTEM THE VEHICLE HAS FIXED / REGULAR DELIVERY ROUTE FOR EACH DAY / WEEK / MONTH FOR DISTRIBUTION OF PRODUCTS FOR MEETING CUSTOMER NEEDS B) VARIABLE ROUTE SYSTEM IT IS A PLANNING OF THE VEHICLE ROUTES ACCORDING TO CUSTOMERS ORDER PATTERN / PRIORITIES IN TERMS OF DESIRED DELIVERY TIME

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C) COST SAVING METHOD (CLARKE & WRIGHT METHOD) A TWO POINT DELIVERY: 1ST ALTERNATIVE a X OA  AO = a + a OB  BO = b + b OA + OB = 2a + 2b O B b 2ND ALTERNATIVE OA  AB  BO = a + b + X DISTANCE SAVING = 1- 2 = (2a + 2b) - ( a + b + X) = a +b - X THE SAME FORMULA CAN BE USED FOR MULTI-POINT DELIVERIES & DISTANCE & COST SAVED BY CHOOSING MOST ECONOMIC ROUTES CAN BE FOUND OUT

2..RAIL TRANSPORT :

2..RAIL TRANSPORT THIS MODE OF TRANSPORT CARRIES APPROX. 25 - 30% OF TOTAL FREIGHT TRAFFIC IN TERMS OF VOLUME RAILWAYS HAVE INTRODUCED MANY SCHEMES LIKE FREIGHT FORWARDERS SCHEME (FFS), DOOR- TO- DOOR DELIVERY ETC FOR SPEEDY & LOW COST SERVICES. IT MAINLY CARRIES ESSENTIAL COMMODITIES MAINLY IN BULK LIKE OILS, MILK,FOOD GRAINS,STEEL ITEMS,DEFENCE REQUIREMENTS ETC.

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ADVANTAGES 1. COMPARATIVELY CHEAPEST & FASTEST MODE FOR BULK CARGO OVER LONG DISTANCE 2. DOOR DELIVERIES FOR CERTAIN COMMODITIES 3. FASTER CLAIMS SETTLEMENT 4. COMPARATIVELY SECURE MODE OF TRANSPORT DISADVANTAGES 1. MOVES ONLY ON SPECIFIC ROUTES 2. NOT IDEAL FOR VERY SMALL PARCELS 3. SECONDARY TRANSPORT NEEDED FOR DELIVERY AT FINAL DESTINATION

3...AIR TRANSPORT :

3...AIR TRANSPORT IT IS THE FASTEST MODE AVAILABLE TO DATE FOR MOVEMENT OF GOODS FROM ONE PLACE TO ANOTHER IT IS COMPARATIVELY COSTLIEST MODE , IT HELPS IN ACHIEVING HIGHER LEVEL OF CUSTOMER SERVICE BY EFFECTING FASTEST DELIVERY SAVES MANY OTHER LOGISTICAL OPERATING COSTS SUCH AS ADDITIONAL PACKAGING,INSURANCE, INVENTORY CARRYING COST ETC. THIS MODE ENABLES ORGANISATIONS TO HAVE AN EDGE OVER COMPETITORS

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ADVANTAGES MEETS REQUIREMENTS OF NATIONAL / INTERNATIONAL BUSINESS MEETS SEASONAL DEMAND / EMERGENCIES AT FASTEST RATE IDEAL FOR TRANSPORTING PERISHABLE GOODS / HIGH VALUE ITEMS REQUIRE MINIMUM HANDLING & CHANCES OF LESS DAMAGES / LOSSES LOW INSURANCE PREMIUM DUE TO LESS TRANSIT RISKS DISADVANTAGES COMPARATIVELY COSTLY MODE OF TRANSPORT REQUIRES SECONDARY TRANSPORT MODE CERTAIN CATEGORIES OF ITEMS ARE NOT ALLOWED REQUIRE SPECIFIC INFRA STRUCTURE FACILITIES LIMITATION ON SHIPPING SPACE (IDEAL ONLY FOR SMALL VOLUME SHIPMENTS & PACKAGED COMMODITIES

4..SEA TRANSPORT:

4..SEA TRANSPORT THIS MODE IS MAINLY USED FOR SHIPPING EXPORT & IMPORT CARGO. 80 % OF TOTAL EXPORTS BY VOLUME IS CATERED BY THIS MODE MAINLY ON ACCOUNT OF LARGE CAPACITY & LOWER FREIGHT RATES COMPARED TO AIR FREIGHT IN SPITE OF HUGE COASTAL LINE THE COUNTRY HAS, THIS OLDEST MODE OF TRANSPORT HAS REMAINED IN ITS INFANCY FOR TRANSPORTING COMMERCIAL GOODS WITHIN THE COUNTRY NOT MUCH EFFORTS HAVE BEEN PUT EITHER BY THE GOVERNMENT OR THE INDUSTRY HOUSES TO EXPLORE THIS MODE FOR TRANSPORTING THE COMMERCIAL GOODS EXCEPT FOR VERY FEW SELECTED TYPE OF COMMODITIES LIKE IRON ORE,COAL,AGRO PRODUCTS ETC

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ADVANTAGES MEETS REQUIREMENT OF INTERNATIONAL BUSINESS COMPARATIVELY LOWER TRANSPORT RATES AVAILABILITY OF LARGE SHIPPING SPACE FLEXIBILITY IN HANDLING VARIETY OF PRODUCTS (SMALL TO BULK) 5. WIDE GEOGRAPHICAL COVERAGE DISADVANTAGES REQUIRE SPECIFIC INFRA STRUCTURE FACILITIES REQUIRE SUPPORT FROM SECONDARY TRANSPORT FOR DELIVERY TO FINAL CUSTOMER

5..PIPELINE MOVEMENT:

5..PIPELINE MOVEMENT THIS MODE IS MOST COST EFFECTIVE FOR TRANSPORTING LIQUIDS & GASES IT IS COMPARATIVELY CHEAPEST MODE OF TRANSPORT IT COST BARELY RS.1.30 PER KM. TO MOVE EVERY TONNE OF OIL PRODUCTS BY PIPELINE WHILE RAIL TRANSPORT COST RS.2.20 PER TONNE PER KM & BY ROAD IT COSTS RS.3.00 PER TONNE PER KM. OVER THE NEXT 6 YEARS,OUR COUNTRY WILL BE ADDING 1,70,000 KM OF PIPELINE INFRA STRUCTURE NETWORK TO CATER TO INCREASING OUTPUT OF OIL & NATURAL GAS ( INDIA-IRAN VIA PAKISTAN PIPELINE FOR TRANSPORTING CRUDE )

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ADVANTAGES RELIABLE & CONTINUOUS MODE FOR MOVEMENT OF LIQUID PRODUCTS & GASES 2. ALL SEASONS, ALL WHETHER MODE OF TRANSPORT 3. LOWER OPERATING & MAINTENANCE COST 4. UNDER GROUND, HENCE NO ADDITIONAL SPACE REQUIRED 5. CAN REACH TO REMOTEST & DISTANT PLACES 6. TRANSIT LOSSES ARE MINIMUM 7. CHEAPEST MODE FOR LARGE QUANTITIES OVER LONG DISTANCE

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DISADVANTAGES IDEAL ONLY FOR CONTINUOUS OPERATIONS OF SPECIFIC TYPES OF PRODUCTS (GAS , LIQUIDS) 2. INITIAL CAPITAL REQUIREMENT IS VERY HEAVY. 3. MOVEMENT RESTRICTED BY FIXED ROUTES 4. CONTINUOUS VIGILANCE IS REQUIRED FOR SAFETY PURPOSE

6..ROPEWAY TRANSPORT :

6..ROPEWAY TRANSPORT THIS MODE OF TRANSPORT IS IDEAL FOR TRANSPORTING THE GOODS TO HILLY & REMOTE PLACES WERE ROADS ARE NOT AVAILABLE ( MOVEMENT FROM MINES TO CEMENT, COAL PLANTS ) ADVANTAGES TRANSPORTS BULK MATERIAL OVER SHORT DISTANCE LOWER CAPITAL COSTS IDEAL ONLY FOR HILLY AREAS DISADVANTAGES LIMITED SCOPE OF OPERATIONS SLOWEST MODE OF TRANSPORT

INTER-MODAL TRANSPORTATION :

INTER-MODAL TRANSPORTATION A) PIGGYBACK (TOFC/ COFC ) IN PIGGYBACK SERVICE, A MOTOR CARRIER TRAILER OR A CONTAINER IS PLACED ON A RAIL FLATCAR & TRANSPORTED FROM ONE TERMINAL TO ANOTHER B) FISHY-BACK THERE ARE TWO TYPES 1) TRAIN-SHIP & 2) CONTAINER-SHIP THEY UTILIZE WATERWAYS FOR TRANSPORTING CARGO. C) BIRDY-BACK IT IS A COMBINATION OF AIR & TRUCK MOVEMENT

INTER-MODAL DISTRIBUTION SYSTEM:

INTER-MODAL DISTRIBUTION SYSTEM 1. LAND BRIDGES IT IS A SERVICE IN WHICH FOREIGN CARGO CROSSES A COUNTRY ENROUTE TO ANOTHER COUNTRY 2. MINI-LAND BRIDGES MINI-LAND BRIDGE IS A SPECIAL CASE OF LAND BRIDGE WHERE FOREIGN CARGO ORIGINATES OR TERMINATES AT A POINT WITHIN THE SAME COUNTRY 3. MICRO BRIDGE IT IS A RELATIVELY NEW SERVICE BEING PROVIDED BY PORTS ON DOOR TO DOOR RATHER THAN PORT TO PORT BASIS

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AIR AIR INTER-MODAL DISTRIBUTION SYSTEM ROAD AIR AIR ROAD ROAD MICRO BRIDGE MINI-LAND BRIDGE LAND BRIDGE

SELECTING MODE OF TRANSPORT:

SELECTING MODE OF TRANSPORT

CRITERIA FOR SELECTING MODE OF TRANSPORT :

CRITERIA FOR SELECTING MODE OF TRANSPORT NATURE OF THE GOODS TO BE TRANSPORTED DEPENDABILITY : CONSISTENCY IN PROVIDING SERVICES & SECURITY OF GOODS 3 SPEED OF DELIVERY (TRANSIT TIME ) 4. COST OF HIRING THE MODE OF TRANSPORT 5. AVAILABILITY OF SERVICES AT ANY DESIRED LOCATION 6. CAPABILITY OF HANDLING VARIETY OF PRODUCTS Contd…

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7. LOSS & DAMAGE PERFORMANCE 8. ABILITY TO PROVIDE DOOR TO DOOR DELIVERY 9. CONTINUITY OF SCHEDULED MOVEMENT 10.GOVERNMENT RULES & REGULATIONS.

TRANSPORTATION COSTS:

TRANSPORTATION COSTS

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PACKAGING COST INV.CARRYING COST WAREHOUSING COST TRASPORT COST SPEED OF TRANSPORT TOTAL COST COST OF LOST SALES TRANSPORTATION & OTHER LOGISTICAL COSTS

FACTORS INFLUENCING TRANSPORTATION COSTS :

FACTORS INFLUENCING TRANSPORTATION COSTS 1. THE SELECTED MODE OF TRANSPORTATION 2. DISTANCE TO BE TRAVELLED 3. THE DESIRED TRANSIT TIME 4. PRODUCT RELATED FACTORS DENSITY OF PRODUCTS (WEIGHT / VOLUME RATIO) STOWABILITY (UTILISATION OF VEHICLE SPACE ) METHOD OF HANDLING RISKS & LIABILITY ( HIGH VALUE PRODUCTS)

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5. MARKET RELATED FACTORS DEGREE OF INTER-MODE / INTRA- MODE COMPETITION LOCATION OF MARKET : LOCAL OR INTERNATIONAL GOVERNMENT REGULATIONS ON MODE OF TRANSPORT SEASONAL DEMAND & SUPPLY OF VEHICLES POSSIBILITY OF GETTING RETURN-TRIPS (BACK- HAULING)

FACTORS DETERMINING FREIGHT RATE STRUCTURE :

FACTORS DETERMINING FREIGHT RATE STRUCTURE FIXED COST OF VEHICLES VARIABLE OPERATING COSTS ( FUEL, TYRES, MAINTENANCE, MANPOWER) 3. DESIRED PROFITS 4. VEHICLE UTILIZATION 5. NATURE OF PRODUCT 6. GOVERNMENT POLICY 7. DEMAND & SUPPLY OF VEHICLES

SELECTION OF A CARRIER:

SELECTION OF A CARRIER

CLASSIFICATION OF CARRIERS :

CLASSIFICATION OF CARRIERS COMMON CARRIER SERVICES AVAILABLE TO ALL 2. CONTRACT CARRIER SERVICES OFFERED ONLY TO CONTRACTED PARTIES 3. PRIVATE CARRIER OWNED BY INDIVIDUAL COMPNIES FOR THEIR EXCLUSIVE USE 4. EXEMPT CARRIER EXEMPTED FROM PAYMENT OF CERTAIN LEVIES FOR CARRYING GOODS FOR PUBLIC DISTRIBUTION ONLY 5. GOVERNMENT CARRIER OWNED,MAINTAINED & MANAGED BY THE GOVERNMENT AUTHORITIES ONLY

CONSIDERATION FOR SELECTION OF A CARRIER :

CONSIDERATION FOR SELECTION OF A CARRIER TRANSPORTATION COST ( FREIGHT RATES) EXPECTED SERVICE PERFORMANCE TRANSIT TIME RELIABILITY : CONSISTENCY IN SERVICE CAPACITY : ABILITY TO PROVIDE TRANSPORT FACILITIES WAREHOUSING FACILITIES QUALITY & SKILLS OF OPERATING PERSONNEL MARKET REPUTATION Contd …

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HANDLING METHODS & EQUIPMENT AVAILABLE ON-TIME PICK-UP & DELIVERY RECORDS CUSTOMER’S SATISFACTION / FEEDBACK DETENTION / DAMAGE / LOSS RECORDS RELEVENT BUSINESS EXPERIENCE PROMPTNESS IN CLAIMS HANDLING RESPONSIVENESS TO THE CHANGING MARKET NEEDS OVERALL CONSISTENCY IN SERVICES OVER LONGER PERIOD.

TRANSPORT PRODUCTIVITY :

TRANSPORT PRODUCTIVITY ALL THE CONCERNED PARTIES AIM AT IMPROVEMENT IN TRANSPORT PRODUCTIVITY AS IT IS VERY VITAL FOR SUCCESS OF LOGISTICS SYSTEM & BETTER UTILIZATION OF NATIONAL RESOURCES AREAS FOR IMPROVEMENT IN PRODUCTIVITY TRANSPORTATION SYSTEMS, METHODS OF OPERATIONS & PROCEDURES 2. INFRA-STRUCTURE FACILITIES 3. OPTIMUM UTILIZATION OF AVAILABLE RESOURCES 4. ENVIRONMENTAL CONSIDERATIONS.

SOLUTIONS : IMPROVING TRANSPORT PRODUCTIVITY:

SOLUTIONS : IMPROVING TRANSPORT PRODUCTIVITY CONSOLIDATION OF INBOUND & OUTBOUND CARGO (CROSS DOCKING) 2. BACK-HAUL USE OF FLEET 3. ROUTING & SCHEDULING SYSTEM 4. CARGO TRACING / TRACKING SYSTEM 5. IMPLEMENTING HEALTH, SAFETY & ENVIRONMENT SYSTEM 6. ACCOUNTABILITY: INCENTIVES / PENALTIES ON PERFORMANCE 7. ESTABLISHMENT OF TRANSPORT DATABASE.

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STORES CROSS DOCKING MFG.PLANTS SUPPLIERS TRANSPORT CARRIER CUSTOMERS WAREHOUSE F F F F E E E F F INPUTS E :EMPTY OUTPUTS

CROSS DOCKING : VEHICLE MOVEMENT CYCLE :

CROSS DOCKING : VEHICLE MOVEMENT CYCLE VEHICLES CALLS ON THE SUPPLIER 2. INPUTS ARE PICKED / BROUGHT & EMPTIED AT STORES INPUTS REQUIRED FOR PLANT ARE FILLED IN THE SAME VEHICLE & SENT TO PLANTS FINISHED PRODUCTS FROM THE PLANT ARE PICKED BY THE SAME VEHICLE & BROUGHT TO A WAREHOUSE FINISHED PRODUCTS NOT REQUIRED FOR IMMEDIATE DELIVERY ARE OFF- LOADED & ADDITIONAL QUANTITIES ARE PICKED & SENT TO CUSTOMERS 6. DELIVERIES ARE MADE TO THE CUSTOMERS THE EMPTY VEHICLE GOES BACK TO THE SUPPLIER IN THE SAME VICINITY FOR PICKING UP INPUTS TO BE DELIVERED TO THE COMPANY

INVENTORY MANAGEMENT (FINISHED GOODS):

INVENTORY MANAGEMENT ( FINISHED GOODS )

INVENTORY CONCEPTS :

INVENTORY CONCEPTS INVENTORY IS A LARGE & COSTLY INVESTMENT. BETTER MANAGEMENT OF INVENTORIES IMPROVES ORGANISATION’S CASH FLOW & RETURN ON INVESTMENT. INVENTORY REPRESENTS LARGEST SINGLE INVESTMENT IN ASSETS ( 20% OF THE TOTAL ASSETS OF MANUFACTURER & MORE THAN 50% OF TOTAL ASSETS OF WHOLESALERS & RETAILERS)

OBJECTIVES OF INVENTORY MANAGEMENT:

OBJECTIVES OF INVENTORY MANAGEMENT MEETING DESIRED LEVEL OF CUSTOMER SERVICE REDUCING TOTAL OPERATING COST OF LOGISTIC ACTIVITIES THROUGH IMPROVED INVENTORY CONTROL 3. TO INCREASE ORGANISATION’S PROFITABILITY

NEED FOR INVENTORY HOLDING :

NEED FOR INVENTORY HOLDING ACHIEVE ECONOMIES OF SCALE IN PURCHASING, TRANSPORTATION & MANUFACTURING 2. ACHIEVE SPECIALISATION IN MANUFACTURING 3. STRIKE BALANCE BETWEEN SUPPLY & DEMAND 4. BUILDING SEASONAL INVENTORIES 5. PROVIDE PROTECTION FROM UNCERTAINTIES ARISING OUT OF FLUCTUATIONS IN DEMAND & ORDER PROCESSING CYCLE 6. ACT AS A BUFFER BETWEEN CRITICAL INTERFACES IN THE CHANNEL OF DISTRIBUTION 7. OFFER HIGHER CUSTOMER SERVICE LEVEL.

TYPES OF INVENTORIES :

TYPES OF INVENTORIES A) CYCLE STOCK B) IN-TRANSIT INVENTORIES C) SAFETY OR BUFFER STOCK D) SPECULATIVE STOCK E) SEASONAL STOCK F) DEAD STOCK BALANCED INVENTORY A BALANCED INVENTORY IS ONE THAT CONTAINS ITEMS(SKU) IN PROPORTION TO THEIR EXPECTED INDIVIDUAL DEMAND

SYMPTOMS OF POOR INVENTORY MANAGEMENT :

SYMPTOMS OF POOR INVENTORY MANAGEMENT 1. INCREASING NUMBER OF PENDING ORDERS (NON AVAILABILITY OF PRODUCTS) 2. HIGH CUSTOMER TURN OVER RATE (CHANGE IN LOYALTY) 3. INCREASE IN NUMBER OF ORDERS CANCELLED (DELAYS IN DELIVERY) 4. PERIODIC LACK OF SUFFICIENT STORAGE SPACE (WRONG DEMAND FORECASTING) 5. IMBALANCE IN TURNOVER OF INVENTORY ITEMS BETWEEN DISTRIBUTION CENTERS (PUSH SYSTEM RESULTS) 6. DETERIORATING RELATIONSHIP WITH INTERMEDIARIES (LOW LEVEL OF RESPONSE) 7. LARGE QUANTITIES OF OBSOLETE / DEAD PRODUCTS (WRONG DEMAND FORECASTING)

HOW TO IMPROVE INVENTORY PERFORMANCE :

HOW TO IMPROVE INVENTORY PERFORMANCE ABC ANALYSIS OF INVENTORIES POSSESSING APPROPRIATE NUMBERS OF WAREHOUSES ORDER PROCESSING CYCLE TIME ANALYSIS DELIVERY TIME ANALYSIS ( TRANSPORTATION TIME) ELIMINATION OF LOW TURNOVER ITEMS & OBSOLETE ITEMS ANALYSIS OF PACK SIZE & DISCOUNTS STRUCTURES EXAMINATION OF PROCEDURES FOR RETURNED GOODS Contd …

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8. INSTALLATION OF FORMAL RE-ORDER REVIEW SYSTEM 9. ENCOURAGEMENT FOR PRODUCT SUBSTITUTION 10. MEASUREMENTS OF FILL RATE BY SKUS 11. DEVELOPMENT OF FORMAL SALES PLAN & DEMAND FORECAST 12. SHARING INFORMATION ON INVENTORIES 13. RE-ENGINEERING INVENTORY MANAGEMENT PRACTICES

WHAT IS FILL RATE ? :

WHAT IS FILL RATE ? IT IS A MEASURE OF CUSTOMER SERVICE PERFORMANCE OF INVENTORY IT MEASURES THE IMPACT OF STOCK OUT ON PROFITABILITY OVER TIME IT IS OFTEN PRESENTED IN TERMS OF % OF UNITS AVAILABLE WHEN REQUESTED BY THE CUSTOMERS IT CAN ALSO BE USED TO DIFFERENTIATE THE LEVEL OF SERVICE TO BE OFFERED ON SPECIFIC PRODUCTS LOW INVENTORY LEVEL CAN REDUCE FILL RATE AFFECTING CUSTOMER SERVICE WHICH RESULT INTO LOST SALES STOCK-OUT FREQUENCY & FILL RATE ARE INVERSELY RELATED THROUGH ORDER QUANTITY

INVENTORY MANAGEMENT UNDER CONDITIONS OF CERTAINTY:

INVENTORY MANAGEMENT UNDER CONDITIONS OF CERTAINTY ECONOMIC ORDER QUANTITY (EOQ) THE EOQ IS A CONCEPT WHICH DETERMINES ECONOMIC OR OPTIMAL ORDER QUANTITY PER ORDER INDENTED BY THE WAREHOUSE ON THE BASIS OF ANNUAL ORDER PROCESSING COST & ANNUAL INVENTORY CARRYING COST. AT THIS LEVEL OF QUANTITY PER ORDER, ANNUAL ORDER PROCESSING COST (AOPC) + ANNUAL INVENTORY CARRYING COST (AICC) IS MINIMUM. IN OTHER WORDS : AOPC = AICC

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Number Of Orders Placed Per Year E.O.Q. Total Cost Order Processing Cost Inventory Carrying Cost Cost

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COMPONENTS OF ORDER PROCESSING COST COST OF PROCESSING OF THE INVENTORY TRANSFER COST OF HANDLING THE PRODUCT (IF IN STOCK) COST OF SETTING UP PRODUCTION TO PRODUCE IT TRANSPORTATION COST FOR RECEIVING AT FIELD LOCATION COST OF DOCUMENTATION B) COMPONENTS OF INVENTORY CARRYING COST CAPITAL COST ON INVENTORY INVESTMENT INVENTORY SERVICE COST (TAXES & INSURANCE) STORAGE SPACE COSTS INVENTORY RISK COSTS : COST OF OBSOLESCENCE

MATHEMATICAL PRESENTATION :

MATHEMATICAL PRESENTATION WHEN INCREMENTAL ORDER PROCESSING COST IS EQUAL TO INCREMENTAL INVENTORY CARRYING COST, THE ECONOMIC ORDER QUANTITY EXISTS. EOQ = V 2 PD / CV WHERE P: ORDER PROCESSING COST PER ORDER (RUPEES) D: ANNUAL DEMAND (NOS. OF UNITS) C: ANNUAL INVENTORY CARRYING COST ( ANNUAL %) V: VALUE OF ONE UNIT OF INVENTORY (PRODUCT PRICE IN RUPEES)

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ASSUMPTION (FOR EOQ) CONSTANT & KNOWN RATE OF DEMAND CONSTANT & KNOWN ORDER PROCESING CYCLE TIME SELLING PRICE REMAINS CONSTANT & INDEPENDENT OF ORDER QUANTITY OR ORDER PROCESSING CYCLE TIME TRANSPORTATION COST REMAINS CONSTANT THE SATISFACTION OF ALL DEMAND ( NO PENDING ORDERS ) NO INVENTORY IN TRANSIT THE ITEM HAVING INDEPENDENT DEMAND NO CONSTAINTS ON FINANCIAL AVAILABILITY

INVENTORY MANAGEMENT UNDER CONDITIONS OF UNCERTAINTY:

INVENTORY MANAGEMENT UNDER CONDITIONS OF UNCERTAINTY

MRP SYSTEMS:

MRP SYSTEMS MRP HAS BEEN USED TO SIGNIFY INVENTORY CONTROL SYSTEMS CALLED MATERIALS REQUIREMENTS PLANNING (MRP I ) B) MANUFACTURING RESOURCES PLANNING (MRP II) INTRODUCED FIRST, MRP I DEVELOPED INTO MRP II WITH ADDITION OF MANUFACTURING, FINANCIAL & HUMAN RESOURCES ASPECTS.

MATERIALS REQUIREMENTS PLANNING (MRP I ) :

MATERIALS REQUIREMENTS PLANNING (MRP I ) EOQ ASSUMES CONSTANT DEMAND FOR A PRODUCT OVER A PERIOD OF TIME & HENCE FAILED TO ENCOUNTER WITH SITUATIONS WITH ERRATIC DEMAND PATTERN FOR INPUTS SALES PLAN >> PRODUCTION PLAN >> INPUT REQUIREMENT REQUIREMENT OF INPUTS DEPENDS ON DEMAND FOR FINISHED GOODS IT IS A SIMPLE SYSTEM OF ARITHMETICALLY CALCULATING REQUIREMENTS OF INPUTS AT DIFFERENT POINT OF TIME BASED ON PLANS / SCHEDULES FOR PRODUCTION OF FINISHED GOODS THE SYSTEM WORKS ONLY WHEN THERE IS A DERIVED DEMAND (DEPENDENT DEMAND ) AND NOT DIRECT DEMAND FOR INPUTS

MRP I SYSTEM:

MRP I SYSTEM IT CONSIST OF A COMPUTER SYSTEM A MANUFACTURING INFORMATION SYSTEM, BASED ON INVENTORY REQUIREMENT, PRODUCTION PLANNING & SCHEDULING OF ALL INPUTS FOR PRODUCTION (3) A CONCEPT & PHILOSOPHY OF MANAGEMENT MRP I IS A COMPUTER- BASED PRODUCTION & INVENTORY CONTROL SYSTEM THAT ATTEMPTS TO MINIMIZE INVENTORIES WHILE MAINTAINING ADEQUATE MATERIALS FOR THE CONTINUOUS PRODUCTION PROCESS.

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S/F Goods X Input C Input D S/F Goods Y Input A Input B F/GOOD R S/F Goods Z S/F Goods P Input C INPUTS FROM SUPPLIERS WAREHOUSE Input B LEVELS 2 3 4 5 1

HOW MRP I WORKS ?:

HOW MRP I WORKS ? REQUIREMENT FOR EVERY INPUT PER DAY / WEEK / MONTH BASED ON PLANNED PRODUCTION PROGRAM IS WORKED OUT THE SCHEDULES OF INPUT RECEIPTS (BASED ON EARLIER MRP) ARE DETERMINED STOCK IN HAND / STOCK IN PIPELINE ARE CONSIDERED PLANNED ORDER SCHEDULES ARE MADE & ORDERS PLACED WITH SUPPLIERS ACCORDINGLY THE USE OF THOUSAND OF INPUTS COMING IN FROM VARIOUS SOURCES & AT DIFFERENT TIMES, HAS MADE IT ESSENTIAL TO USE COMPUTERIZED SYSTEM FOR WORKING OF MRP I SYSTEM

PRE-REQUISITE FOR MRP I:

PRE-REQUISITE FOR MRP I THE SYSTEM IS CAPABLE OF DETERMINING REQUIREMENTS OF ONLY DEPENDENT INPUTS, AS IT CAN BE DERIVED FROM MASTER PRODUCTION SCHEDULES OF FINISHED GOODS 2. THE ACCURATE LEAD TIME DATA IS ESSENTIAL THE SCHEDULE FOR DELIVERY OF FINISHED GOODS SHOULD BE MADE AVAILABLE TO DERIVE EXACT INPUT REQUIREMENTS, IN TERMS OF QUANTITY & TIME. THE SYSTEM SHOULD BE RESPONSIVE & FLEXIBLE TO THE CHANGES IN ORDER QUANTITIES & INVENTORY POSITION OF FINISHED GOODS AT VARIOUS POINT OF TIME 5. IT REQUIRES EFFICIENT INFORMATION FEEDBACK SYSTEM CONSTANT UPDATING OF THE FORECASTED DEMAND AND ACTUAL PERFORMANCE IS ESSENTIAL …

MANUFACTURING RESOURCES PLANNING ( MRP II ) :

MANUFACTURING RESOURCES PLANNING ( MRP II ) MRP I TECHNIQUE CANNOT BE FULLY EFFECTIVE IN ACHIEVING THE BUSINESS OBJECTIVES UNLESS IT TAKES INTO ACCOUNT ALL THE RESOURCES OF MANUFACTURING ORGANIZATIONS MRP II INCLUDES THE ENTIRE SET OF ACTIVITIES INVOLVED IN THE PLANNING AND CONTROL OF PRODUCTION OPERATIONS IT’S AN INTEGRATED MANUFACTURING MANAGEMENT SYSTEM MRP II AIMS AT ENTIRE MANUFACTURING FUNCTIONS RATHER THAN JUST WORKING OUT REQUIREMETS & SCHEDULES OF INPUTS ONLY.

PRE-REQUISITES FOR MRPII:

PRE-REQUISITES FOR MRPII BUSINESS PLANS FINANCIAL PLANS AVAILABLE HUMAN RESOURCES AVAILABLE PRODUCTION CAPACITIES LOGISTICAL ASPECTS LIKE STORAGE, TRANSPORTATION ETC. IT INTEGRATES WITH THE AID OF SUITABLE SOFTWARE PACKAGES ALL THE SOURCES AVAILABLE WITH THE ORGANISATION & COMES OUT WITH A DETAILED MANUFACTURING PROGRAM & RESOURCE REQUIREMENTS

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ADVANTAGES OF MRP SYSTEM 1. IMPROVEMENT IN OVERALL BUSINESS PERFORMANCE 2. REDUCTION IN OVERALL LOGISTICAL OPERATING COSTS 3. LESS RISK OF INPUT OBSOLESCENCE 4. MORE RESPONSIVE TO CHANGE IN THE MARKET CONDITIONS 5. IMPROVED CUSTOMER SERVICE LEVEL BY PROVIDING QUICK & CONSISTENT RESPONSE IN TERMS OF DELIVERY TIME 6. OFFERS OPPORTUNITY FOR BETTER BUSINESS PLANNING AVAILABILITY OF EFFICIENT INFORMATION & SUCCESS OF MRP SYSTEM GO HAND IN HAND

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DIS-ADVANTAGES OF MRP SYSTEM 1. PRODUCT MANUFACTURING / PURCHASING COST INCREASES AS INVENTORIES ARE REQUIRED TO BE MADE AVAILABLE MORE FREQUENTLY. HIGHER TRANSPORTATION COSTS DUE TO LOSS OF ECONOMIES OF SCALE IN TRANSPORTATION MORE CHANCES OF PRODUCTION DISTURBENCES DUE TO UNFORESEEN INPUT DELIVERY PROBLEMS 4. REQUIREMENT OF SAFETY STOCKS GOES UP FOR MAITAINING DESIRED CUSTOMER SERVICE LEVEL

DISTRIBUTION REQUIREMENTS / RESOURCES PLANNING ( DRP SYSTEM ) :

DISTRIBUTION REQUIREMENTS / RESOURCES PLANNING ( DRP SYSTEM ) DRP IS A DYNAMIC MODEL THAT LOOKS AT A TIME-PHASED PLAN OF EVENTS THAT AFFECT INVENTORY. DISTRIBUTION REQUIREMENT PLANNING (DRP I ) APPLIES TIME-PHASED LOGIC TO REPLENISH INVENTORIES IN MULTI- LOCATIONAL WAREHOUSING SYSTEMS 2 DISTRIBUTION RESOURCE PLANNING (DRP II) IS AN EXTENSION OF DRP I DRP II EXTENDS DRP I TO INCLUDE THE PLANNING OF IMPORTANT RESOURCES IN A DISTRIBUTION SYSTEM SUCH AS WAREHOUSING / MANPOWER / TRANSPORTATION / FINANCIAL RESOURCES

OBJECTIVES OF DRP SYSTEMS:

OBJECTIVES OF DRP SYSTEMS TO PREDICT FUTURE REQUIREMENTS FOR FINISHED PRODUCTS TO SELECT TRANSPORTATION MODES / CARRIERS / SHIPMENT SIZES TO REDUCE OPERATING COSTS TO DETERMINE SCHEDULES OF RECEIVING / PACKING / SHIPPING ACTIVITIES 4. TO DEVELOP A MASTER PRODUCTION SCHEDULE FOR EACH STOCK KEEPING UNIT (SKU ) THE ACCURATE FORECASTING SYSTEM IS ESSENTIAL FOR SUCCESSFUL IMPLEMETATION OF DRP SYSTEMS

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CUSTOMERS Dist.Center E Dist.Center B Dist.Center A Dist.Center C Dist.Center D Regional Warehouse 1 Dist.Center F Regional Warehouse 2 WAREHOUSE

HOW DRP WORKS :

HOW DRP WORKS STEPS IN IMPLEMENTATION OF DRP II PROJECTING DEMAND FOR FINISHED PRODUCTS (BASED ON FORECASTING BY MAKING ALLOWANCE FOR LIKELY INCREASES OR DECREASES THEREIN) 2. CHECKING ‘ON HAND’ STOCK POSITION 3. CHECKING “IN TRANSIT” STOCK POSITION (PIPELINE STOCK) 4. DETERMINING TOTAL STOCK AVAILABLE (STOCK IN HAND + IN PIPELINE) DETERMINING THE ORDER CYCLE TIME FOR THE PRODUCT TO ARRIVE & WORKING OUT DEMAND DURING THAT PERIOD Contd..

6. SUBTRACTING ORDER CYCLE TIME DEMAND FROM THE SUM OF THE TOTAL STOCK AVAILABLE ( 4 – 5) 7. PROVIDING FOR SAFETY STOCK THAT WOULD BE DEDUCTED FROM ABOVE. THIS WOULD GIVE THE ‘NET AVAILABLE STOCK” 8. SUBTRACTING NET AVAILABLE STOCK FROM PROJECTED DEMAND WORKED OUT (ABOVE NO.1) 9. YOU NOW GET QUANTITY TO BE PRODUCED ,SUBJECT TO FURTHER ROUNDING OFF ON SIZE OF A MINIMUM ORDER QUANTITY THE “ FIGURE” ARRIVED ( 9 ) FROM THE ABOVE IS THE TRUE NEED OF THE DISTRIBUTION NETWORK:

6. SUBTRACTING ORDER CYCLE TIME DEMAND FROM THE SUM OF THE TOTAL STOCK AVAILABLE ( 4 – 5) 7. PROVIDING FOR SAFETY STOCK THAT WOULD BE DEDUCTED FROM ABOVE. THIS WOULD GIVE THE ‘ NET AVAILABLE STOCK ” 8. SUBTRACTING NET AVAILABLE STOCK FROM PROJECTED DEMAND WORKED OUT (ABOVE NO.1) 9. YOU NOW GET QUANTITY TO BE PRODUCED ,SUBJECT TO FURTHER ROUNDING OFF ON SIZE OF A MINIMUM ORDER QUANTITY THE “ FIGURE” ARRIVED ( 9 ) FROM THE ABOVE IS THE TRUE NEED OF THE DISTRIBUTION NETWORK

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ADVANTAGESOF DRP SYSTEM 1. DECISION MAKER CAN FORESEE THE NEEDS OF EACH DISTRIBUTION CENTER & BE ABLE TO MEET THEIR NEEDS 2. THE SYSTEM RESPONSES QUICKLY TO THE CHANGE IN DEMAND (+ OR - ) AND RE- PLANS REQUIREMENTS OF EACH PRODUCT OVER & OVER 3. IT ENABLES TO RESCHEDULE SHIPMENTS OF INPUTS AS PER THE CHANGED REQUIREMENTS FOR FINISHED GOODS 4. THE SYSTEM PICKS UP AND REPORTS EVERY CHANGE IN DISTRIBUTION NETWORK BY DISPLAYING THE POSITION ON WHAT IS HAPPENING 5. IT IMPROVES FILL RATE & HENCE CUSTOMER SERVICE LEVEL 6. IT PROVIDES BASE FOR FUTURE FORECASTING & PLANNING

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DIS-ADVANTAGES OF DRP SYSTEM PRODUCT DISTRIBUTION / MANUFACTURING COSTS INCREASES AS INVENTORIES ARE REQUIRED TO BE MADE AVAILABLE MORE FREQUENTLY IN RESPONSE TO CHANGE IN DEMAND PATTERN INCREASE IN TRANSPORTATION COSTS DUE TO LOSS OF ECONOMIES OF SCALE IN TRANSPORTATION CHANCES OF STOCK OUT DUE TO UNFORESEEN PRODUCTION / DISTRIBUTION PROBLEMS REQUIREMENT OF SAFETY STOCKS GOES UP FOR MAITAINING DESIRED CUSTOMER SERVICE LEVEL PARTICULARLY UNDER COMPETITIVE SCENARIO.

JUST IN TIME :

JUST IN TIME WHAT IS JUST IN TIME (JIT)? JUST IN TIME IS APPLIED TO : PRODUCE AND DELIVER FINISHED GOODS JUST IN TIME TO BE SOLD MAKE SUB-ASSEMBLIES JUST IN TIME TO BE ASSEMBLED IN TO FINISHED GOODS, FABRICATE/ PURCHASE PARTS JUST IN TIME TO GO INTO SUB- ASSEMBLIES PROCURE RAW MATERIALS JUST IN TIME TO BE TRANSFORMED INTO FABRICATED PARTS. JIT IS A MEANS OF SOLVING PROBLEMS THOSE COME IN A WAY OF BUILDING AN EFFICIENT ORGANISATION

JIT IN FACT IS A COMPLETE BUSINESS PHILOSOPHY & PROCESS OF PLANNING,IMPLEMENTING AND CONTROLLING ALLTHE BUSINESS ACTIVITIES TO ELIMINATE WASTE OF TIME ,MONEY & RESOURCES JIT AIMS AT REDUCTION (IF NOT ELIMINATION) OF ALL NON-VALUE ADDED ACTIVITIES THEREBY ENABLING THE FIRM TO FOCUS MORE ON VALUE ADDED OPERATIONS & ACTIVITIES IT IS NOT RESTRICTED TO MANUFACTURING ACTIVITIES ALONE BUT CAN BE SUCCESSFULLY APPLIED TO OFFICE SYSTEMS AS WELL IN SERVICE ORGANIATIONS IT CONTRIBUTES IN ENHANCING THE EFFICIENCY & PROFITABILITY OF ALL TYPES OF BUSINESS VENTURES :

JIT IN FACT IS A COMPLETE BUSINESS PHILOSOPHY & PROCESS OF PLANNING,IMPLEMENTING AND CONTROLLING ALLTHE BUSINESS ACTIVITIES TO ELIMINATE WASTE OF TIME ,MONEY & RESOURCES JIT AIMS AT REDUCTION (IF NOT ELIMINATION) OF ALL NON-VALUE ADDED ACTIVITIES THEREBY ENABLING THE FIRM TO FOCUS MORE ON VALUE ADDED OPERATIONS & ACTIVITIES IT IS NOT RESTRICTED TO MANUFACTURING ACTIVITIES ALONE BUT CAN BE SUCCESSFULLY APPLIED TO OFFICE SYSTEMS AS WELL IN SERVICE ORGANIATIONS IT CONTRIBUTES IN ENHANCING THE EFFICIENCY & PROFITABILITY OF ALL TYPES OF BUSINESS VENTURES

QUALITY AT SOURCE JIT SUCCESS MAINLY DEPENDS ON THE HIGH QUALITY OF INCOMING MATERIALS JIT UNDERLINES THE CONCEPT OF “QUALITY AT SOURCE” WHICH ELIMINATES WASTES AT ALL STAGES OF OPERATIONS THROUGH “ DO IT RIGHT AT THE FIRST TIME” CONCEPT, JIT HELPS TO ELIMINATE WASTE OF TIME & MONEY BY ELIMINATING INSPECTION OF INCOMING INPUTS & PACKING AND RETURNING OF DEFECTIVE MATERIALS BACK TO SUPPLIER FOR RECTIFICATION / REPLACEMENT. :

QUALITY AT SOURCE JIT SUCCESS MAINLY DEPENDS ON THE HIGH QUALITY OF INCOMING MATERIALS JIT UNDERLINES THE CONCEPT OF “QUALITY AT SOURCE” WHICH ELIMINATES WASTES AT ALL STAGES OF OPERATIONS THROUGH “ DO IT RIGHT AT THE FIRST TIME” CONCEPT , JIT HELPS TO ELIMINATE WASTE OF TIME & MONEY BY ELIMINATING INSPECTION OF INCOMING INPUTS & PACKING AND RETURNING OF DEFECTIVE MATERIALS BACK TO SUPPLIER FOR RECTIFICATION / REPLACEMENT.

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ADVANTAGES OF JIT TO THE USER REDUCTION IN MANUFACTURING LEAD TIME DEFECT FREE PRODUCTION LOWER INVENTORY INVESTMENT. GREATER CONFORMANCE TO DELIVERY COMMITMENTS. LESSER COST OF PRODUCTION INCREASE IN PRODUCTIVITY FASTER RESPONSE TO MARKET NEEDS. IMPROVED MORALE OF THE WORK FORCE.

MATERIALS HANDLING SYSTEM:

MATERIALS HANDLING SYSTEM

IMPORTANCE OF MATERIALS HANDLING SYSTEM :

IMPORTANCE OF MATERIALS HANDLING SYSTEM MATERIALS HANDING SYSTEM DECIDES THE SPEED OF MOVEMENT OF GOODS & SERVICES WITHIN ORGANISATION & BETWEEN THE ORGANISATION & ITS CUSTOMERS / SUPPLIERS IT DETERMINES THE COMPANY’S RESPONSE LEVEL TO INTERNAL & EXTERNAL CUSTOMER’S REQUIREMENTS 15 – 20% OF THE MANUFACTURING COST OF A PRODUCT IS SPENT ON MATERIAL HANDLING ACTIVITIES IF THIS SYSTEM IS NOT PROPERLY DESIGNED & IMPLEMENTED, IT INCREASES THE COST OF PROCUREMENT, PRODUCTION & DISTRIBUTION.

OBJECTIVES:

OBJECTIVES TO ACHIEVE EFFICIENCY IN MOVEMENT OF PRODUCTS IN & OUT OF STORES / WAREHOUSE 2. TO ENSURE AVAILABILITY OF PRODUCTS WHEN (TIME) & WHERE ( PLACE) THEY ARE REQUIRED FOR PICKING, PACKING & SHIPPING ACTIVITIES EFFECTIVE UTILIZATION OF AVAILABLE SPACE, EQUIPMENT & MANPOWER OF AN ORGANISATION.

SCOPE OF MATERIAL HANDLING SYSTEM :

SCOPE OF MATERIAL HANDLING SYSTEM 1. RECEIPT & UNLOADING OF INCOMING INPUTS / OUTPUTS FROM TRANSPORT VEHICLES 2 MOVING THE UNLOADED PRODUCTS TO ASSIGNED STORAGE / WAREHOUSE SPACE 3. PICKING & PACKING OF THE PRODUCTS FOR ONWARD DESPATCH TO PRODUCTION / WAREHOUSE CENTERS 4. LOADING THE PRODUCTS TO DESIGNATED TRANSPORT VEHICLES TO THE CUSTOMERS ACTIVITIES PERFORMED DURING MATERIALS HANDLING LOADING / UNLOADING/ MOVING / STACKING/ WEIGHING / COUNTING / SAMPLING / INSPECTING / DOCUMENTION / GENERATING RELATED INFORMATION

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FLOW CHART MATERIALS MOVEMENT Receipts Customers Transporter Manufacturing Plant Stores Dept . Warehouse.

PRINCIPLES OF MATERIALS HANDLING :

PRINCIPLES OF MATERIALS HANDLING PLANNING : ALL THE MATERIALS HANDLING SHOULD BE AS A RESULT OF A DELIBERATE PLAN STANDARDISATION : MATERIAL HANDLING METHODS, EQUIPMENT,CONTROLS & SOFTWARE SHOULD BE STANDARDIZED WITHOUT SACRIFICING NEEDED FLEXIBILITY 3. WORK PRINCIPLE : AVOIDING UNNECESSARY MOVEMENT 4. ERGONOMIC PRINCIPLE : HUMAN CAPACITIES & LIMITATIONS MUST BE RECOGNIZED FOR SAFE & EFFECTIVE OPERATIONS 5. UNIT LOAD PRINCIPLE : THE LOAD SHOULD BE OF UNIFORM SIZE 6. SPACE UTILIZATION : EFFICIENT & EFFECTIVE USE OF AVAILABLE SPACE Contd…

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7. SYSTEMS : THE MATERIAL MOVEMENT & STORAGE ACTIVITIES SHOULD BE FULLY INTEGRATED ( MATERIAL FLOW SHOULD KEEP PACE WITH NEEDS) 8. AUTOMATION : OPERATIONS SHOULD BE MECHANIZED / AUTOMATED WHERE EVER FEASIBLE TO IMPROVE OVERALL OPERATIONAL EFFICIENCY 9. ENVIRONMENT : THE ENVIRONMENTAL IMPACT AND ENERGY CONSUMPTION SHOULD BE CONSIDERED. 10. LIFE CYCLE COST : ECONOMIC FEASIBILITY OF MATERIAL HANDLING EQUIPMENT & SYSTEM OVER AN ENTIRE LIFE CYCLE 11. PREVENTIVE & SCHEDULE MAINTENANCE : IT IS ABSOLUTELY NECESSARY TO REGULARLY MAINTAIN ALL MATERIAL HANDLING EQUIPMENT

SYSTEMS OF MATERIALS HANDLING:

SYSTEMS OF MATERIALS HANDLING MANUAL SYSTEM WHEN THE VOLUMES / WEIGHTS TO BE HANDLED ARE LOW & DISTANCE TO BE TRAVELED IS LESS, THAN THE MANUAL SYSTEM FOR MOVEMENT & STORAGE OF THE PRODUCTS IS THE BEST & CHEAPEST OPTION FOR MATERIAL HANDLING. EQUIPMENT REQUIRED : MANUAL TROLLEYS / RACKS, SHELVES, DRAWERS, LOCKERS ETC

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WHEELED TRLOOEY FLAT WHEELED TROLEY MANUALLY OPERATED EQUIPMENT

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MECHANICAL SYSTEM : WHEN THE VOLUMES / WEIGHTS TO BE HANDLED ARE HEAVY & DISTANCE TO BE TRAVELED IS MORE , THAN THE MOVEMENT OF THE PRODUCTS WITH THE HELP OF MECHANICAL EQUIPMENT IS THE SAFEST OPTION FOR MATERIAL HANDLING. THE SYSTEM INCLUDES WIDE VARIETY OF HANDLING EQUIPMENT. FORKLIFT TRUCKS: THIS EQUIPMENT REPRESENTS PERHAPS THE GREATEST SINGLE INNOVATION IN MATERIAL HANDLING IN POST WAR ERA. IT HAS LARGELY RESPONSIBLE FOR INTRODUCTION OF PALLETS OR UNIT LOAD.IT CAN MOVE LOADS BOTH HORIZONTALLY & VERTICALLY. CRANES : THEY ARE EITHER FLOOR MOUNTED OR OVERHEAD MOUNTED DRAG DEVICES CONVEYORS: THEY EXCEL AT STRAIGHTFORWARD TRANSPORTATION BECAUSE THEY ELIMINATE RE-HANDLING BEFORE & AFTER EACH FUNCTION .

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MECHANICALLY OPERATED EQUIPMENT WOODEN PALLETS MOBILE CRANES FORK LIFT TRUCK

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AUTOMATED SYSTEM WHEN THE VOLUMES / WEIGHTS TO BE HANDLED ARE VERY HEAVY & DISTANCE TO BE TRAVELED IS MORE AS WELL AS THE WAREHOUSE SPACE AVAILABLE IS VERY LIMITED, THAN THE MOVEMENT OF THE PRODUCTS WITH THE HELP OF AUTOMATED SYSTEM IS THE BEST & EFFICIENT OPTION FOR MATERIAL HANDLING. A) AUTOMATED GUIDED VEHICLE SYSTEM IT DOES NOT REQUIRE AN OPERATOR IT AUTOMATICALLY ROTATES & POSITIONS ITSELF AT DESTINATION WITHOUT OPERATOR’S GUIDANCE. B) ROBOTICS IT IS A HUMAN LIKE MACHINE THAT CAN BE PROGRAMMED BY MICRO PROCESSOR TO PERFORM ONE OR SERIES OF ACTIVITIES C) AUTOMATED STORAGE & RETRIEVAL SYSTEM (ASRS) AMONGST THE MOST IMPORTANT STORAGE & ORDER PICKING EQUIPT. ARE AUTOMATED STORAGE & RETRIEVAL SYSTEM, IT PROVIDES REDUCED LABOUR COST & FLOOR SPACE, WHILE INCREASING INVENTORY ACCURACY.

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A) ADVANTAGES OF ASRS REDUCTION IN LABOUR COST / MATERIAL HANDLING COST INCREASE IN PRODUCTIVITY (OUTPUT / INPUT RATIO) CONSISTENCY IN SERVICES OFFERED INCREASES ACCURACY & SPEED OF SERVICES B) DISADVANTAGES HEAVY INITIAL CAPITAL COST DOWNTIME OF EQUIPMENT MAY CAUSE INTERRUPTIONS LACK OF FLEXIBILITY TO RESPOND TO CHANGING NEEDS PERPETUAL MAINTENANCE COST USERS TRAINING REQUIRED

SELECTION OF MATERIALS HANDLING SYSTEM :

SELECTION OF MATERIALS HANDLING SYSTEM FACTORS TO BE CONSIDERED : TYPE OF MATERIALS TO BE HANDLED TYPE OF MOVEMENT: VERTICAL / HORIZONTAL / MIXED VOLUME TO BE MOVED LENGTH OF THE MOVEMENT: DISTANCE TO BE COVERED FREQUENCY OF THE MOVEMENT TIME REQUIREMENT FOR THE MOVEMENT COST OF THE EQUIPMENT REQUIRED COMPATIBILITY OF EQUIPMENT WITH PRESENT M.H. METHODS

SELECTION OF MATERIAL HANDLING EQUIPMENT :

SELECTION OF MATERIAL HANDLING EQUIPMENT MAIN OBJECTIVES REDUCTION IN HANDLING COST REDUCTION IN PRODUCTION TIME BETTER UTILIZATION OF THE AVAILABLE SPACE REDUCTION IN PRODUCT DAMAGES / LOSSES REDUCTION IN LABOUR COST BETTER UTILIZATION OF EXISTING EQUIPMENT IMPROVEMENT IN MATERIALS MANAGEMENT SYSTEM

COST OF MATERIALS HANDLING SYSTEM:

COST OF MATERIALS HANDLING SYSTEM A) DIRECT COST: TRANSPORTATION COST MANPOWER COST EQUIPMENT COST (CAPITAL & MAINTENANCE COST) B) INDIRECT COST (HIDDEN COST) COST OF LOST SALES LOSSES / DAMAGES TO INPUTS & FINISHED GOODS DELAYS IN TRANSPORTATION DETERIORATION IN QUALITY / QUANTITY OF PRODUCTS WASTE OF MAN-HOURS / LOSS OF PRODUCTION TIME

CONCLUSION :

CONCLUSION THE SELECTION OF PROPER SYSTEM & MATERIALS HANDLING EQUIPMENT AND THEIR LAYOUT / LOCATION WILL RESULT IN: IMPROVEMENT IN CUSTOMER SERVICE LEVEL THROUGH QUICK RESPONSE IN MEETING THE REQUIREMENTS 2. REDUCTION IN THE OVERALL COST OF OPERATIONS 3. EFFICIENCY IN PROCUREMENT / PRODUCTION / DISTRIBUTION OPERATIONS 4. INCREASE IN PROFITABILITY OF AN ORGANIZATION

PACKAGING MANAGEMENT:

PACKAGING MANAGEMENT

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PACKAGING IS AN IMPORTANT ASPECT OF LOGISTICS MANAGEMENT INTEGRATED PACKAGING & LOGISTICS ACTIVITIES HELP ORGANISATION TO OPTIMISE OPERATIONAL EFFICIENCY, IMPROVE CUSTOMER SATISFACTION, MINIMISE OPERATIONAL COST & REDUCE NATIONAL WASTE OF RESOURCES TWO BASIC FUNCTIONS 1. MARKETING INFORMATION ABOUT PRODUCT & PRODUCT PRESENTTION THROUGH THE USE OF COLOUR / DESIGN / SHAPE ETC. 2. LOGISTICS PROTECTION & PRESERVATION OF THE CONTENTS (QUALITY & QUANTITY) FROM OUTSIDE ENVIRONMENTS, TILL IT REACHES TO THE FINAL COSUMER.

PACKAGING OBJECTIVES :

PACKAGING OBJECTIVES TO INCREASE CUSTOMER SERVICE LEVEL TO ACHIEVE REDUCTION IN OVERALL PRODUCT DISTRIBUTION COSTS 3. TO FACILITATE EFFICIENT HANDLING / STORING / TRANSPORTATION ACTIVITIES

MAJOR PACKAGING FUNCTIONS:

MAJOR PACKAGING FUNCTIONS 1. CONTAINMENT PRODUCTS MUST BE CONTAINED BEFORE THEY ARE MOVED FROM ONE PLACE TO ANOTHER 2. PROTECTION/ PRESERVATION FROM DAMAGES / LOSSES DURING HANDLING / STORING / TRANSPORTATION 3. APPORTIONMENT TO REDUCE THE OUTPUT FROM THE BULK TO SMALL SIZE REQUIRED BY THE CONSUMER 4. UNITISATION TO PERMIT PACKAGE TO BE CONSOLIDATED IN TO LARGER SECONDARY PACKAGE. 5. CONVENIENCE IT OFFERS CUSTOMER CONVENIENCE IN HANDLING / USING THE PRODUCT 6. COMMUNICATION IT PROVIDES EASY IDENTIFICATION & DIRECTION TO HANDLE / USE

CLASSIFICATION OF PACKAGING:

CLASSIFICATION OF PACKAGING EVERY PRODUCT IS UNIQUE FROM THE PACKAGING & LOGISTICAL POINTS OF VIEW & THEREFORE THE PACKAGE DEVELOPMENT PROCESS SHOULD BE TREATED AS AN INTEGRAL PART OF PRODUCT DEVELOPMENT THE BROAD CLASSIFICATION 1. FMCG PACKAGING 2. INDUSTRIALSPECIALITIES PACKAGING 3. BULK PACKAGING 4. HIGH VALUE LOW VOLUME SPECIALITIES PACKAGING 5. WHITE GOODS / SIMILAR TYPES PACKAGING 6. PERISHABLE PRODUCT PACKAGING

NEED FOR DEVELOPING A GOOD PACKAGE:

NEED FOR DEVELOPING A GOOD PACKAGE PRODUCT IDENTIFICATION / TRACKING / TRACING OPTIMUM UTILISATION OF SPACE OF WAREHOUSE / VEHICLES EASE OF HANDLING MECHANISM TO ENSURE PRODUCT SAFETY IN WAREHOUSING / TRANSPORTATION 4. COST REDUCTION THROUGH PACKAGE STANDARDISATION 5. PRODUCT PROTECTION / PRESERVATION 6. PROTECTION TO PEOPLE / PROPERTY / ENVIRONMENT 7. REUSABILITY / DISPOSABILITY OF THE PACKAGE 8. SATISFYING PROVISIONS OF GOVERNMENT / STATUTORY LAWS

BENEFITS OF GOOD PACKAGING :

BENEFITS OF GOOD PACKAGING PACKAGING ENHANCES CUSTOMER SERVICE LEVEL LIGHTER PACKAGING SAVES TRANSPORTATION COSTS CAREFUL PACKAGE PLANNING HELPS OPTIMUM UTILISATION OF WAREHOUSING / TRANSPORTATION SPACE 4. REDUCE DAMAGES & LOSSES OF THE PRODUCTS & HENCE REDUCES INSURANCE COSTS 5. REDUCES REQUIREMENT OF SPECIAL HANDLING 6. ENVIRONMENT FRIENDLY PACKS SAVES DISPOSAL COSTS & IMPROVES COMPANY IMAGE 7. RE-USABILITY OF PACKS SAVES PROCUREMENT COSTS.

TOTAL PACKAGING COSTS:

TOTAL PACKAGING COSTS PROCUREMENT COST OF PACKAGES (PRIMARY / SECONDARY / TERTIARY ) 2. COST OF HANDLING / STORAGE / TRANSPORTATION 3. COST OF DAMAGES / BREAKAGES OF PRODUCTS PACKAGING & LOGISTICS COSTS TRADE-OFF INCREASE IN : PACKAGING COSTS REDUCTION IN : TRANSPORTATION COST INVENTORY CARRYING COST REVERSE LOGISTICS COST COST OF LOST SALES

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REVERSE LOGISTICS COST INV.CARRYING COST TRANSPORTATION COST PACKAGING COST QUALITY OF PACKAGING TOTAL COST COST OF LOST SALES TRADE-OFF : PACKAGING & OTHER LOGISTICAL COSTS

PACKAGING MATERIALS :

PACKAGING MATERIALS TRADITIONAL CORRUGATED BOXES / WOODEN BOXES / CRATES / BAGS / CANS / PAILS / DRUMS / BARRELS / CARBOYS ETC. EMERGING TRENDS FILM BASED PACKAGING : FIBER BOARD BOXES / SHRINK WRAPS / STRETCH WRAPS RETURNABLE CONTAINERS / RE-USABLE PACKAGING BULK PLASTIC BAGS ( ISO TANKS ) PLASTIC PALLETS / CRATES / CONTAINERS REFRIGERATED PALLETS (FOR PERISHABLE GOODS) PILFER-PROOF / USE & THROW PACKS / TETRA PACKS

REVERSE LOGISTICS:

REVERSE LOGISTICS

IN A COMPETITIVE ENVIRONMENT, THE PHILOSOPHY OF ACCEPTING PRODUCT RETURNS AS AN EDGE OVER COMPETITORS HAS RESULTED IN HUGE CHALLENGES TO LOGISTICS MANAGEMENT TODAY, LOGISTICAL SUPPORT MEANS GOING BEYOND ‘FORWARD LOGISTICS’ TO INCLUDE PRODUCT RECALL, PRODUCT - DISPOSAL AND PRODUCT RECYCLING ETC. THE LOGISTICS OBJECTIVES INCLUDE REVERSE MATERIALS FLOW SYSTEM TO EXTEND LIFE CYCLE SUPPORT TO THE PRODUCT REVERSE LOGISTICAL COMPETENCY IS THE RESULT OF WORLDWIDE ATTENTION TOWARDS ENVIRONMENTAL & ECOLOGICAL PROBLEMS :

IN A COMPETITIVE ENVIRONMENT, THE PHILOSOPHY OF ACCEPTING PRODUCT RETURNS AS AN EDGE OVER COMPETITORS HAS RESULTED IN HUGE CHALLENGES TO LOGISTICS MANAGEMENT TODAY, LOGISTICAL SUPPORT MEANS GOING BEYOND ‘FORWARD LOGISTICS’ TO INCLUDE PRODUCT RECALL, PRODUCT - DISPOSAL AND PRODUCT RECYCLING ETC. THE LOGISTICS OBJECTIVES INCLUDE REVERSE MATERIALS FLOW SYSTEM TO EXTEND LIFE CYCLE SUPPORT TO THE PRODUCT REVERSE LOGISTICAL COMPETENCY IS THE RESULT OF WORLDWIDE ATTENTION TOWARDS ENVIRONMENTAL & ECOLOGICAL PROBLEMS

REVERSE LOGISTICS A COMPETITIVE TOOL :

REVERSE LOGISTICS A COMPETITIVE TOOL TO REMAIN COMPETITIVE AND DIFFERENTIATED, THE ORGANISATION ACROSS THE WORLD ARE SHOWING SPEED AND RELIABILITY IN SERVICE OFFERINGS SUCH AS REPLACING DEFECTIVE GOODS REPAIRING OF USED PRODUCTS REFURBISHING THE RETURNED PRODUCTS CALLING BACK SUB-STANDARD OR HARMFUL GOODS DISPOSING-OFF PRODUCT WASTE THESE SERVICES ADD TO THE COMPETITIVENESS OF AN ORGN. OPERATING IN A REGULATORY ENVIRONMENT & CREATE CUSTOMER VALUE BY PROVIDING A CLEAN ENVIRONMENT THROUGH REVERSE LOGISTICS SERVICES WITHOUT ANY EXTRA COST TO THE CUSTOMER.

DEFINITION :

DEFINITION REVERSE LOGISTICS MAY BE DEFINED AS A PROCESS OF MOVING GOODS FROM THEIR PLACE OF USE, BACK TO THEIR PLACE OF MANUFACTURE FOR RE-PROCESSING, RE-FILLING, REPAIRS OR RECYCLING / WASTE DISPOSAL. IT IS A PLANNED PROCESS OF MOVEMENT OF GOODS IN REVERSE DIRECTION IN AN EFFECTIVE AND COST EFFICIENT MANNER, THROUGH AN ORGANISED NETWORK. IT IS AN INTEGRATED SYSTEM IN AN ORGANISATION’S SUPPLY CHAIN MANAGEMENT REVERSE LOGISTICS REFERS TO THE SKILLS OF LOGISTICS MANAGEMENT TO REDUCE, MANAGE & DISPOSE-OFF WASTE ARISING FROM PRODUCTS & INPUTS

REASONS FOR REVERSE LOGISTICS :

REASONS FOR REVERSE LOGISTICS RETURN OF GOODS FROM CUSTOMER FOR NON PERFORMANCE SHORT TERM RENTAL RETURNS RETURNS SENT TO MANUFACTURER FOR REPAIRS / RE-FILLING REUSABLE CONTAINERS / PACKAGES RETURN OF INPUTS NOT USED BY MANUFACTURER / GOODS NOT SOLD BY DISTRIBUTORS EXCHANGE OF NEW PRODUCT FOR THE OLD ONES GOODS SENT FOR UP- GRADATION / MODIFICATION RECYCLING OF PRODUCT

SCOPE OF REVERSE LOGISTICS :

SCOPE OF REVERSE LOGISTICS REVERSE LOGISTICS, THOUGH CONSIDERED AS A DRAIN ON COMPANY PROFITS, IN TODAY’S COMPETITIVE MARKETS, MORE AND MORE MANUFACTURING FIRMS ARE PLANNING OF INCORPORATING THE REVERSE LOGISTICS SYSTEM IN THEIR SUPPLY CHAIN PROCESS FOR FOLLOWING REASONS: GROWING CONCERN FOR ENVIRONMENT POLLUTION GOVEMNMENT REGULATIONS ON PRODUCT RECYCLING AND WASTE DISPOSAL GROWING CONSUMERISM STIFF COMPETITION THE REVERSE LOGISTICS NETWORK CAN BE USED FOR VARIOUS PURPOSES SUCH AS REFILLING, REPAIRS, RE- FURBISHING, RE- MANUFACTURING ETC. DEPENDING ON THE NATURE OF THE PRODUCT, UNIT VALUE, SALES VOLUME AND DISTRIBUTION CHANNELS.

1. REPAIRS AND REFURBISHING :

1. REPAIRS AND REFURBISHING REPAIR IS A REGULAR FEATURE IN SERVICE BASED PRODUCTS UNDER A WARRANTY PERIOD AND ALMOST ALL CONSUMER DURABLES NEED REPAIRS ON A REGULAR BASIS. REFURBISHING IS DONE TO GOODS RETURNED BY DAMAGE, DEFECTS OR BELOW PAR PERFORMANCE DURING THE WARRANTY PERIOD. MANUFACTURER ESTABLISH THE REVERSE LOGISTICS SYSTEM, NOT ONLY FOR OFFERING FREE SERVICE DURING THE WARRANTY PERIOD BUT ALSO FOR EXTENDING THE SERVICES BEYOND THE WARRANTY PERIOD ON A CHARGEABLE BASIS. THE SYSTEM OPERATES THROUGH THE COMPANY’S SERVICE CENTERS WHERE REPAIR AND REFURBISHING TAKES PLACE. COLLECTION OF DEFECTIVE PRODUCTS IS DONE, THROUGH THE DEALERS’ NETWORK. THESE COLLECTED PRODUCTS ARE SENT TO THE NEAREST SERVICE CENTRE FOR OVERHAUL, REPAIRS OR REFURBISHING.

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STORES PRODUCTION WAREHOUSE SUPPLIERS RETURNS REVERSE LOGISTICS FLOW CUSTOMERS DISPOSAL REPAIRS

2. RE-FILLING :

2. RE-FILLING REVERSE LOGISTICS IS INTEGRATED TO THEIR CHAIN BECAUSE OF THE REUSABLE NATURE OF PACKAGES SUCH AS GLASS BOTTLES, TIN / PLASTIC CONTAINERS & METAL CYLINDERS ETC. IN CASE OF SOFT DRINKS, THE DELIVERY VAN DELIVERS FILLED BOTTLES TO RETAILERS (A, B, C ) ENROUTÈ AND COLLECTS THE SAME NUMBER OF EMPTY BOTTLES FROM THEM FOR DELIVERY TO THE FACTORY. NO EXTRA TRANSPORTATION COSTS ARE INVOLVED IN THE PROCESS AS THE SAME DELIVERY VAN ORIGINATES AND TERMINATES ITS JOURNEY AT THE FACTORY WHERE THESE REUSABLE BOTTLES ARE REFILLED FOR RE-DELIVERY TO CUSTOMERS. THE ARRANGEMENT IS DONE THROUGH A HUB AND SPOKE DISTRIBUTION SYSTEM.

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BOTTLING PLANT DISTRIBUTION AREA (A) DISTRIBUTION AREA (C) DISTRIBUTION AREA (B) A3 A2 A1 B3 B4 C1 C2 C3 B1 B2 REVERSE GOODS FLOW FOR REFILLING

3. PRODUCTS RECALL :

3. PRODUCTS RECALL THIS IS AN EMERGENCY SITUATION WHEREIN THE PRODUCTS DISTRIBUTED IN THE MARKET ARE CALLED BACK TO THE FACTORY BECAUSE OF ANY OF THE FOLLOWING REASONS: PRODUCT NOT GIVING THE GUARANTEED PERFORMANCE QUALITY COMPLAINTS FROM MANY CUSTOMERS DEFECTIVE PRODUCTS CAUSING HARM TO HUMAN LIFE PRODUCTS BEYOND EXPIRY DATE PRODUCTS WITH DEFECTIVE DESIGN INCOMPLETE PRODUCT VIOLATION OF GOVERNMENT REGULATIONS ETHICAL CONSIDERATIONS SAVE THE COMPANY IMAGE PRODUCT RECALL PUTS A HUGE FINANCIAL BURDEN ON THE COMPANY BUT IN THE COMPETITIVE SCENARIO THE COMPANIES CONSIDER “RE-CALL” AS AN OPPORTUNITY TO INCREASE CUSTOMER SATISFACTION.

4. RECYCLING AND WASTE DISPOSAL :

4. RECYCLING AND WASTE DISPOSAL LEFTOVER MATERIALS, USED PRODUCTS AND WRAPPER / PACKAGES WASTES ARE CAUSING ENVIRONMENTAL POLLUTION & CREATING PROBLEMS FOR DISPOSAL. IN MANY COUNTRIES,GOVERNMENTS ARE DEVISING REGULATIONS TO MAKE MANUFACTURERS RESPONSIBLE FOR MINIMISING WASTE BY WAY OF RECYCLING PRODUCTS. RECYCLING PROCESS COLLECTING WASTE MATERIAL & DELIVERING THEM TO ENTITY RESPONSIBLE FOR RECYCLING PROCESSING RECYCLABLES TO CREATE SECONDARY INPUTS USING SECONDARY MATERIALS FOR MANUFACTURING NEW PRODUCTS RETURNING THE PRODUCTS TO THE MANUFACTURER FOR RECOVERING THE INPUTS FOR RE-USE

5. RE-MANUTACTURING :

5. RE-MANUTACTURING MANUFACTURERS IN DEVELOPED COUNTRIES ARE PUTTING IN PRACTICE A NEW CONCEPT OF RE-MANUFACTURING. DURING THE USAGE OF THE PRODUCT IT UNDERGOES WEAR & TEAR. WORN OUT PARTS ARE REPLACED WITH NEW ONES AND THE PERFORMANCE OF THE PRODUCT IS UPGRADED TO THE LEVEL OF A NEW ONE. SIMILARLY, EQUIPMENT SOLD CAN BE CHECKED AFTER USE TO THE REMANUFACTURING PROCESS AND BE BROUGHT BACK TO THE REMANUFACTURING UNIT. THE INVESTMENT IN REMANUFACTURING & RELATED REVERSE LOGISTICS SUPPLY CHAIN CAN BE JUSTIFIED ON THE BASIS OF ECONOMIES OF SCALE.

SYSTEM DESIGN CONSIDERATIONS (DRIVERS IN REVERSE LOGISTICS) :

SYSTEM DESIGN CONSIDERATIONS (DRIVERS IN REVERSE LOGISTICS) THE SUCCESS OF REVERSE LOGISTICS SYSTEM IN ACHIEVING THE DESIRED OBJECTIVES DEPENDS ON THE EFFICIENCY AND EFFECTIVENESS OF FOLLOWING SUB-SYSTEMS 1. PRODUCT LOCATION THE FIRST STEP IN THE CALL BACK PROCESS IS TO IDENTIFY THE PRODUCT LOCATION IN THE PHYSICAL DISTRIBUTION SYSTEM OF THE FIRM. PRODUCT LOCATION BECOMES MORE DIFFICULT AFTER IT IS SOLD AND HANDED OVER TO THE CUSTOMER. IT IS A BIT EASIER IN THE CASE OF INDUSTRIAL OR HIGH VALUE PRODUCTS DUE TO THE LIMITED NUMBER OF CUSTOMERS & PERSONAL INTERACTION WITH THE CLIENTS DUE TO DIRECT SELLING.

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2. PRODUCT COLLECTION SYSTEM ONCE THE PRODUCT LOCATION IS IDENTIFIED, THE COLLECTION MECHANISM GETS INTO OPERATION. THIS CAN BE DONE EITHER THROUGH COMPANY’S FIELD FORCE, CHANNEL MEMBERS OR THIRD PARTY. HOWEVER, PROPER INSTRUCTIONS HAVE TO BE GIVEN TO MOTIVATE THE CUSTOMER FOR RETURNING THE PRODUCTS. 3. RECYCLING / DISPOSAL CENTRES THESE MAY BE THE COMPANY’S PLANT/ WAREHOUSES OR SOME FIXED LOCATION IN THE REVERSE LOGISTICS NETWORK. THE CALLED BACK PRODUCTS ARE INSPECTED BEFORE THEY ARE FURTHER PROCESSED FOR FURTHER REPAIRS, REFURBISHING, REMANUFACTURING OR WASTE DISPOSAL. INVESTMENTS IN FACILITIES FOR THESE ACTIVITIES DEPEND ON THE OBJECTIVES OF THE SYSTEM, COST IMPLICATION, COMPLEXITY OF THE OPERATIONS & EXPECTED GAINS.

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4. DOCUMENTATION SYSTEM TRACING THE PRODUCT LOCATION BECOMES EASIER IF PROPER DOCUMENTATION IS MAINTAINED AT EACH CHANNEL LEVEL. HOWEVER, AT THE TIME OF HANDING OVER THE PRODUCT TO THE CUSTOMER, THE DETAILED INFORMATION IF COLLECTED THROUGH PROPER DOCUMENTATION, CAN FORM A GOOD DATABASE THAT CAN BE USED IN CASE OF PRODUCT CALL BACKS .

COST IMPLICATIONS:

COST IMPLICATIONS THE REVERSE LOGISTICS SYSTEM IS A COST CENTRE. HOWEVER, THESE COSTS ARE INCURRED FOR ACHIEVING COMPANY’S CERTAIN OBJECTIVES AND CAN BE ATTRIBUTED TO THE FOLLOWING ACTIVITIES PRODUCT LOCATION (INVESTMENT & OPERATING COSTS) TRANSPORTATION PRODUCT COLLECTION (CUSTOMERS > RETAILERS > PLANT) DISPOSAL (PLANT > SUPPLIERS / DISPOSAL) REFILLING, REPAIRS, REFURBISHING, REMANUFACTURING, RECYCLLING 6. DOCUMENTATION (FOR PRODUCT TRACKING AND TRACING DURING ENTRY, EXIT AND FLOW IN THE SYSTEM) Contd.

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DUE TO COST IMPLICATIONS, THE ORGANISATIONS PREFER TO INTEGRATE REVERSE LOGISTICS INTO THEIR FORWARD LOGISTICS SYSTEM WITH A FEW MODIFICATIONS. THE SAME NETWORK COMPONENTS ARE GEARED-UP TO CATER FLOW OF PRODUCTS WITH THE SAME EFFICIENCY & EFFECTIVENESS. THE INVESTMENT / OPERATING COST INVOLVED IN MOULDING THE EXISTING ‘FORWARD’ FLOW SYSTEM TO ‘REVERSE’ FLOW SYSTEM WILL BE LESS THAN SETTING UP NEW & SEPARATE SYSTEM.

BARRIERS TO GOOD REVERSE LOGISTICS:

BARRIERS TO GOOD REVERSE LOGISTICS LEGAL ISSUES UNDER INDIAN REGULATIONS EXCISE PAID GOODS ONCE SOLD BY THE MANUFACTURER CANNOT BE BROUGHT BACK TO THE PLANT WITHOUT PROPER DOCUMENTATION AND DECLARATION TO EXCISE AUTHORITIES. THIS IS A VERY CUMBERSOME & TIME CONSUMING PROCESS AND NON-COMPLIANCE MAY MEAN THAT THE MANUFACTURER WILL HAVE TO FACE LEGAL ACTION. MANY ORGANIZATIONS TERM REVERSE GOODS AS ‘ JUNK’ AND THEY DON’T WANT TO WASTE THEIR RESOURCES ON THESE ‘JUNKS’ 3. THE GOODS ARE CONSIDERED UNWORTHY OF ANY INVESTMENT

LOGISTICS INFORMATION SYSTEM:

LOGISTICS INFORMATION SYSTEM

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INFORMATION IS BASIC NECESSITY FOR DECISION MAKING & HENCE ESSENCE OF MANAGEMENT FUNCTIONS TIMELY & ACCURATE INFORMATION IS NOW MORE CRITICAL FOR EFFECTIVE INTEGRATED MANAGEMENT SYSTEM IN INFORMATION SYSTEM, INFORMATION IS COLLECTED, STORED, RETRIEVED & TRANSMITTED, AS & WHEN REQUIRED TRANSMISSION OF INFORMATION INVOLVES ITS MOVEMENT TO & FROM VARIOUS FUNCTIONAL CENTERS MANAGEMENT INFORMATION SYSTEM (MIS) INFORMATION SYSTEM, WHICH ENABLES MANAGEMENT TO TAKE DECISION, IS CALLED M.I.S. INFORMATION SYSTEM SHOULD BE BASED ONLY ON INFORMATION COLLECTED FROM THE PRIMARY / SECONDARY SOURCES IT SHOULD NOT BE DISTORTED OR BIASED.

LOGISTICS INFORMATION SYSTEM (L.I.S.) :

LOGISTICS INFORMATION SYSTEM (L.I.S.) LOGISTICS INFORMATION SYSTEM (LIS) IS A PART OF M.I.S. IT DEALS WITH INFORMATION ON ORDER RECEIPT / ORDER STATUS, PRODUCT AVAILABILITY, DELIVERY SCHEDULE WHICH ARE NECESSARY ELEMENTS OF TOTAL CUSTOMER SERVICE IT INCREASES FLEXIBILITY WITH REGARD TO HOW, WHERE & WHEN THE RESOURCES CAN BE UTILIZED FOR COMPETITIVE ADVANTAGE. IT CO-ORDINATES FUNCTIONS OF : MOVEMENT CONTROL (TRANSPORTATION / WAREHOUSING ETC.) SUPPLY - DEMAND CO-ORDINATION PROCESSING OF PURCHASE ORDERS / SALE ORDERS FOLLOW UP WITH SUPPLIERS / OTHER DEPTS. FOR EXECUTION OF ORDERS

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FLOW OF LOGISTICS INFORMATION / PRODUCTS MATERIALS DEPT. SUPPLIERS FLOW OF PRODUCTS DISTRIBUTION DEPT. PRODUCTION DEPT. CUSTOMERS FLOW OF INFORMATION

OBJECTIVES OF LOGISTICS INFORMATION SYSTEM :

OBJECTIVES OF LOGISTICS INFORMATION SYSTEM OBTAINING CORRECT AND PROMPT INFORMATION MAINTAINING AND CONSTANTLY UPDATING THE RELEVENT INFORMATION COMMUNICATING THE INFORMATION EFFICIENTLY (ACCURATELY & SPEEDILY) TO ALL THE CONCERNED FUNCTIONS AS & WHEN REQUIRED, FOR DECISION MAKING.

ELEMENTS OF L.I.S. :

ELEMENTS OF L.I.S. INFORMATION SOURES : a) TWO BASIC SOURCES: INTERNAL DEPARTMENTS & EXTERNAL SUPPLIERS / CUSTOMERS B) THEY SHOULD BE RELIABLE & AUTHENTICATED INFORMATION COLLECTION SYSTEM : a) STATUTORY OR AS & WHEN REQUIRED b) COLLECTED MANUALLY OR ELECTRONICALLY (E.D.I.) STORAGE : DATA COLLECTION IN THE FORM & MANNER CONVENIENT FOR STORAGE & SUBSEQUENT USE RETRIEVABLITY : a) DATA PROCESSING WITH THE HELP OF PROPER SYSTEM b) MAKING IT AVAILABLE IN THE DESIRED FORM & ON TIME TRANSMISSION : THROUGH REPORTS: PRESENTED IN THE PRESCRIBED FORMATS DESIRED BY THE END USER.

ACTIVITIES COVERED BY INTERNAL L.I.S. :

ACTIVITIES COVERED BY INTERNAL L.I.S . RECEIVING, ANALYSING, PROCESSING & STORING OF RELATED INFORMATION WITHIN AN ORGANISATION RETRIEVAL & COMMUNICATION OF DATA TO DECISION MAKERS / USER AS & WHEN REQUIRED COMMUNICATION OF INFORMATION TO EXTERNAL SOURCES ( SUPPLIERS / CUSTOMERS / SERVICE PROVIDERS)

ACTIVITIES COVERED BY EXTERNAL L.I.S. :

ACTIVITIES COVERED BY EXTERNAL L.I.S. RECEIPT OF INFORMATION (FEEDBACK) FROM THE EXTERNAL SOURCES INFORMATION ON FUTURE BUSINESS SCENARIO OF MARKET / CUSTOMERS / SUPPLIERS IT REQUIRES CO-OPERATION FROM CUSTOMERS / SUPPLIERS THE INFORMATION ON FOLLOWING ASPECTS ARE USEFUL FOR ADVANCE PLANNING / OPERATIONS / CONTROL ACTIVITIES ORDER PATTERN OF CUSTOMERS EXISTING OPERATION SYSTEMS OF CUSTOMER / SUPPLIER RE-ORDER POINT OF CUSTOMER / SUPPLIER’S INVENTORY POLICY ORDERING PROCEDURES

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LOGISTICS INFORMATION SYSTEM OPERATING LEVEL Order Registration Order Processing Inventory Planning Warehousing /Transportation TACTICAL LEVEL Inventory Management Facility Planning Vehicle Routing / Scheduling 4. Outsourcing 5. Channel Integration 6. Customising CONTROL LEVEL Customer Service Productivity Performance Cost Control Asset Utilisation STRATEGIC LEVEL 1.Capability & Capacity- Planning 2. Alliances / Partnerships INFORMATION FUNCTIONALITY

INFORMATION FUNCTIONALITY :

INFORMATION FUNCTIONALITY LOGISTICS INFORMATION SYSTEM IS AN IMPORTANT LINK BETWEEN VARIOUS LOGISTICAL ACTIVITIES AT FOUR DIFFERENT LEVELS OF ANY ORGANISATION 1. TRANSACTION / OPERATING LEVEL ORDER REGISTRATION (RECEIVING /SCRUTINISING/ACKNOWLEDGING) ORDER PROCESSING (INVENTORY ALLOCATION / REPLENISHMENT ) INVENTORY PLANNING ( FORECASTING / PROCUREMENT PLANNING) WAREHOUSING & DISTRIBUTION ( ASSIGNING STORAGE SPACE / MATERIAL HANDLING / PICKING / PACKING ACTIVITIES) PROCUREMENT ( PLANNING REQTS./ PLACING ORDERS/ RECEIVING / INSPECTING & ISSUING INPUTS TO PRODUCTION OPERATIONS) TRANSPORTATION & DELIVERY ( PLAN / EXECUTE & MANAGE ACTIVITIES RELATED TO MOVEMENT OF GOODS ACROSS THE SUPPLY CHAIN)

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2. TACTICAL LEVEL / MANAGEMENT CONTROL LEVEL FACILITY PLANNING ( CREATION OF NEW FACILITIES OR EXPANSION OF THE EXISTING ONE) VEHICLE ROUTING & THEIR SCHEDULING ( WIDER DISTRIBUTION COVERAGE & BETTER UTILISATION OF VEHICLES TO REDUCE PER UNIT TRANSPORTATION COST) INVENTORY MANAGEMENT ( PLANNING & IMPLENTING OF INVENTORY IN LINE WITH DESIRED CUSTOER SERVICE LEVEL) CHANNEL INTEGRATION ( CLOSE CO-ORDINATION BETWEEN CHANNEL MEMBERS’ REQUIREMENTS FOR HIGHER FILL RATE) OUTSOURCING ( COST-BENEFIT ANALYSIS OF EXISTING & PROPOSED OUTSOURCED OPERATIONS FOR DECISION MAKING) CUSTOMISING ( UNDERSTANDING & FULFILLING THE NEEDS OF SPECIFIC CUSTOMERS / MARKETS)

:

3. DECISION ANALYSIS / CONTROL LEVEL ASSET MANAGEMENT ( EVALUATING PARTICULAR ASSET INVESTMENT AGAINST THEIR RETURNS & PAYBACK PERIOD) CUSTOMER SERVICE ( EVALUATION OF CURRENT LEVEL OF CUSTOMER SERVICE & FOR TAKING NECESSARY CORRECTIVE ACTIONS FOR ITS IMPROVEMENT) COST CONTROL ( GENERATING COST DETAILS TO CONTROL ANY DEVIATIONS FROM PLANNED STANDARDS) PRODUCTIVITY PERFORMANCE ( GENERATING REPORTS / RATIOS, ON PRODUCTIVITY LEVEL OF ALL THE ASSETS/ LABOUR)

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4. STRATEGIC LEVEL CAPACITY & CAPABILITY PLANNING ( LOGISTICS OBJECTIVES SHOULD BE IN LINE WITH THE OVERALL BUSINESS OBJECTIVES OF THE COMPANY. IT REQUIRES INVESTMENT DECISIONS BASED ON ANALYSIS & EVALUATION OF PROBABILITIES & PAY-OFFS OF THE VARIOUS AVAILABLE OPTIONS) ALLIANCES & PARTNERSHIPS (PROVIDING BASE FOR EVALUATING THE BENEFITS OF ALLIANCES & PARTNERSHIPS IN TERMS OF COST REDUCTION, CUSTOMER SERVICE SPEED & REVENUE GENERATION)

PRINCIPLES OF LOGISTICS INFORMATION SYSTEM:

PRINCIPLES OF LOGISTICS INFORMATION SYSTEM L.I.S. MUST INCORPORATE FOLLOWING PRINCIPLES TO MEET MANAGEMENT’S INFORMATION NEEDS AND PROVIDE SUPPORT TO ORGANIZATIONAL PLANNING & OPERATIONAL ACTIVITIES AVAILABILITY OF ALL THE RELEVENT INFORMATION (QUANTITY) ACCURACY OF INFORMATION IS MOST IMPORTANT (QUALITY) INFORMATION SHOULD BE AVAILABLE PROMPTLY (TIME) INFORMATION ON ALL THE EXCEPTIONAL CASES SHOULD BE ALSO BE AVAILABLE 5. INFORMATION SHOULD BE AVAILABLE IN AN APPROPRIATE FORMAT AS PER THE USERS’ NEED / PURPOSE

DESIGNING OF LOGISTICS INFORMATION SYSTEM:

DESIGNING OF LOGISTICS INFORMATION SYSTEM WHO WANTS & WHAT INFORMATION FOR MAKING DECISIONS ? RELEVANCE & ESSENTIALITY / DESIRABILITY OF INFORMATION REQUIREMENT OF SYSTEM / CONTROLS FOR SMOOTH FLOW & STORAGE OF INFORMATION 4. COST OF COLLECTION / PROCESSING OF INFORMATION 5. FREQUENCY OF INFORMATION REQUIREMENT (WHEN / HOW FAST / HOW MANY TIMES INFORMATION IS REQUIRED?) 6. PURPOSE OF INFORMATION ( ROUTINE OR EXCEPTIONAL BASIS)

ADVANTAGES OF INFORMATION TECHNOLOGY :

ADVANTAGES OF INFORMATION TECHNOLOGY EFFICIENT INFORMATION STORAGE & RETRIEVAL ABILITY AVAILABILITY OF INFORMATION AS & WHEN REQUIRED INFORMATION AVAILABLE IN THE FORMAT DESIRED BY THE DECISION MAKER FACILITATE DECISION-MAKING / MONITORING & CONTROLLING THE ACTIVITIES PROVIDES FLEXIBILITY IN DECISION MAKING IN CASE OF CHANGED CIRCUMSTANCES

LOGISTICAL COSTING:

LOGISTICAL COSTING

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INTRODUCTION ONE OF THE MAIN OBJECTIVES OF LOGISTICS MANAGEMENT IS TO REDUCE OVERALL OPERATING COST OF LOGISTICAL ACTIVITIES THE COST OF LOGISTICAL ACTIVITIES ACCOUNT FOR 55% - 60% OF TOTAL COST OF MANUFACTURING & DISTRIBUTION OPERATIONS OF AN ORGANISATION AS LOGISTICS IS AN INTEGRATED ACTIVITY, THE REDUCTION IN COST OF ONE OR MORE AREAS WILL NOT ACHIEVE DESIRED RESULT OF REDUCTION IN TOTAL LOGISTICS OPERATING COST THE TOTAL COST APPROACH IS THEREFORE ABSOLUTELY NECESSARY FOR CONTROLLING THE OPERATING COSTS RATHER THAN TAKING ISOLATED VIEW OF AN INDIVIDUAL ACTIVITY COST

CONVENTIONAL COST APPROACH:

CONVENTIONAL COST APPROACH THE TWO MAIN FINANACIAL REPORTS OF BUSINES ENTERPRISE ARE THE BALANCE SHEET & P & L ACCOUNT. THE BALANCE SHEET REFLECTS THE FINANCIL POSITION OF A FIRM AT SPECIFIC POINT OF TIME THE P & L STATEMENT REFLECTS THE REVENUES & COSTS ASSOCIATED WITH SPCIFIC OPERATIONS OVER A SPECIFIED PERIOD OF TIME. IT’S MAIN PURPOSE IS TO DETERMINE THE FINANCIAL SUCCESS OF OPERATIONS LOGISTICAL FUNCTIONS ARE INTEGRAL PART OF BOTH STATEMENTS, UNFORTUNATELY THESE CONVENTIONAL METHODS OF ACCOUNTING DO NOT FULLY SATISFY LOGISTICAL COSTING REQUIREMENTS

THE CONVENTIONAL FINANCIAL REPORTS ARE BASED ON AVERAGE COST APPORTIONMENT RATHER THAN ON DIRECT ASSIGNMENT OF THE COSTS AT THE TIME OF OCCURANCE OF A TRANSACTION THIS APPROACH APPORTIONS ALL OVERHEADS TO EACH PRODUCT ON SOME ARBITRARY BASIS. AS A RESULT,COMPANIES USE MANAGEMENT CONTROLS THAT FOCUS ON WRONG TARGETS (DIRECT LABOUR / MATERIAL COSTS) THEY IGNORE MORE EFFECTIVE WAYS TO COMPETE AT THE MARKET PLACE LIKE PRODUCT QUALITY / LEAD TIMES / ON-TIME DELIVERY & EFFICIENT DEPLOYMENT OF SCARCE CAPITAL AVAILABILITY. THIS APPROACH DOES NOT HIGHLIGHT TRUE COST OF PRODUCTS, IE.HOW TO REDUCE EXPENSES MOST EFFECTIVELY OR HOW TO ALLOCATE RESOURCES TO THE MOST PROFITBLE BUSINESS SEGMENTS THEREFORE SEVERAL MODIFICATIONS TO CONVENTIONAL ACCOUNTING ARE REQUIRED TO TRACK LOGISTICAL ACTIVITY-BASED COSTS.:

THE CONVENTIONAL FINANCIAL REPORTS ARE BASED ON AVERAGE COST APPORTIONMENT RATHER THAN ON DIRECT ASSIGNMENT OF THE COSTS AT THE TIME OF OCCURANCE OF A TRANSACTION THIS APPROACH APPORTIONS ALL OVERHEADS TO EACH PRODUCT ON SOME ARBITRARY BASIS . AS A RESULT,COMPANIES USE MANAGEMENT CONTROLS THAT FOCUS ON WRONG TARGETS (DIRECT LABOUR / MATERIAL COSTS) THEY IGNORE MORE EFFECTIVE WAYS TO COMPETE AT THE MARKET PLACE LIKE PRODUCT QUALITY / LEAD TIMES / ON-TIME DELIVERY & EFFICIENT DEPLOYMENT OF SCARCE CAPITAL AVAILABILITY. THIS APPROACH DOES NOT HIGHLIGHT TRUE COST OF PRODUCTS, IE.HOW TO REDUCE EXPENSES MOST EFFECTIVELY OR HOW TO ALLOCATE RESOURCES TO THE MOST PROFITBLE BUSINESS SEGMENTS THEREFORE SEVERAL MODIFICATIONS TO CONVENTIONAL ACCOUNTING ARE REQUIRED TO TRACK LOGISTICAL ACTIVITY-BASED COSTS.

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SUPERVISION COSTS ADMINISTRATIVE SUPPORT COSTS FACILITIES COSTS UTILITIES COSTS TOTAL OVERHEADS PRODUCT D PRODUCT C PRODUCT B PRODUCT A TYPICAL FULL COSTING / TRADITIONAL OVERHEAD ALLOCATION

LIMITATIONS OF CURRENT FINANCIAL REPORTS :

LIMITATIONS OF CURRENT FINANCIAL REPORTS IT IS DESIGNED TO REPORT AGGREGATE EFFECTS IT PROVIDES HISTORICAL RECORDS OF FIRM’S OPERATIONS IT RECORDS COSTS IN AGGREGATED “NATURAL ACCOUNTS”. (BASED ON ITEMS OF EXPENSES RATHER THAN ACTIVITIES) & FAILS TO ASSIGN OPERATIONS RESPONSIBILITY IT CONSIDERS ONLY STANDARD COSTS TO CONTROL COSTS THESE REPORTS DO NOT SHOW A SEGMENT CONTRIBUTION TO THE PROFITABILITYBUT INCLUDE FIXED COST, JOINT SERVICE COSTS & CORPORATE OVERHEAD COSTS. IT MAINLY FOCUSES ON DIFFERENCE BETWEEN ACTUAL & STANDARD COSTS FOR CONTROL PURPOSE

LOGISTICS ACTIVITY COSTS :

LOGISTICS ACTIVITY COSTS 1. INVENTORY COST 2. WAREHOUSING COST 3. PROCUREMENT COST 4. DISTRIBUTION CHANNEL COST 5. COMMUNICATION & INFORMATION PROCESSING COST 6. TRANSPORTATION COST 7. MATERIAL HANDLING COST 8. PACKAGING COST 9. CUSTOMER SERVICE COST (COST OF LOST SALES)

ACTIVITY BASED COSTING ( ABC ) :

ACTIVITY BASED COSTING ( ABC ) ACTIVITY BASED COSTING SYSTEM IS BASED ON THE CONCEPT OF “BUSINESS ACTIVITIES ARE MADE UP OF SERIES OF PROCESSES THAT CONSUMES COSTS” ABC FOCUSES ON KEY PROCESSES IN EACH INTEGRATED LOGISTICS ACTIVITY IT ENABLES THE DECISION MAKER TO UNDERSTAND THE ACTUAL COST ASSOCIATED WITH EACH & EVERY LOGISTICAL ACTIVITY, THE ORGANISATION CAN USE RESULT OF THIS SYSTEM TO WEIGH THE POSSIBLE ALTERNATIVES TO IMPROVE DECISION MAKING & BECOME MORE EFFICIENT & COMPETITIVE AT MARKET PLACE THE COST AREAS IGNORED BY TRADITIONAL COSTING SYSTEM BECOMES MORE VISIBLE IN THIS COSTING SYSTEM ACTIVITY-BASED SYSTEM EXAMINES THE DEMANDS MADE BY A PARTICULAR PRODUCT (OR A CUSTOMER) ON INDIRECT RESOURCES

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SUPERVISION COSTS ADMINISTRATIVE SUPPORT COSTS FACILITIES COSTS UTILITIES COSTS PRODUCT D PRODUCT C PRODUCT B PRODUCT A ACTIVITY BASED COSTING PACKING / SHIPPING ACTIVITIES PRODUCTION ACTIVITIES DISTRIBUTION ACTIVITIES RECEIVING ACTIVITIES

PROBLEMS IN IMPLEMENTATION OF ACTIVITY BASED COSTING :

PROBLEMS IN IMPLEMENTATION OF ACTIVITY BASED COSTING THE LACK OF ADEQUATE & ACTIVITY- WISE DETAILED COST DATA HAS PREVENTED LOGISTICS MANAGEMENT FROM ACHIEVING ITS OBJECTIVE OF MAXIMISING PROFITABILITY BY BEST UTILISATION OF AVAILABLE ALTERNATIVE RESOURCES ACCURATE ACTIVITY-WISE COST DATA IS ESSENTIAL FOR SUCCESSFUL IMPLEMENTATION OF INTEGRATED LOGISTICS MANAGEMENT CONCEPT USING TOTAL COST ANALYSIS UNDERSTANDING OF CORRECT COST TRADE-OFF AMONGST VARIOUS LOGISTICS COMPONENTS IS ESSENTIAL FOR SELECTING THE BEST AVAILABLE ALTRNATIVE FOR DECISION MAKING. INABILITY TO MEASURE & MANAGE COSTS LEADS TO MISSED OPPORTUNITIES & EXPENSIVE MISTAKES IN BUSINESS DECISIONS.

STEPS FOR IMPLEMENTING TOTAL COST APPROACH :

STEPS FOR IMPLEMENTING TOTAL COST APPROACH MAINTAINING SEPARATE ACCOUNT OF ACTIVITY WISE COST DEVELOPING ACTIVITY-WISE PROFIT CENTERS FOR ACCOUNTING & ANALYZING COST OF EACH LOGISTICS ACTIVITY 3. ANALYZING CHANGES IN PERFORMANCE LEVEL EACH ACTIVITY VIS A VIS COST INVOLVED IN PERFORMING THAT ACTIVITY. 4. ACTIVE INVOLVEMENT OF TOP EXECUTIVES IS ABSOLUTELY NECESSARY FOR THIS SYSTEM TO WORK IN PRACTICE

MISSION COSTING :

MISSION COSTING INTRODUCTION “THE MISSION OF LOGISTICS MANAGEMENT IS TO PLAN AND CO-ORDINATE ALL THE LOGISTICS ACTIVITIES NECESSARY TO ACHIEVE DESIRED LEVEL OF SERVICE & QUALITY AT LOWEST POSSIBLE COSTS” THE BASIC PURPOSE OF LOGISTICS COST ANALYSIS IS TO PROVIDE DECISION MAKER A RELIABLE INFORMATION ON COST & BENEFITS OF EACH & EVERY LOGISTICAL ACTIVITY FOR BETTER ALLOCATION OF AVAILABLE RESOURCES

WHAT IS MISSION COSTING? :

WHAT IS MISSION COSTING? AN EFFECTIVE LOGISTICAL COSTING SYSTEM MUST SEEK TO DETERMINE THE TOTAL SYSTEM ( ALL THE ACTIVITIES) COST OF MEETING DESIRED LOGISTICS OBJECTIVES OR MISSION (OUTPUT OF THE SYSTEM) & THE COST OF VARIOUS INPUTS INVOLVED IN MEETING THOSE OUTPUTS UNDER MISSION COSTING, A FUNCTIONAL BUDGET IS DETERMINED BY THE DEMANDS OF THE MISSION IT SERVES

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W/HOUSING ACTIVITY 200 300 250 MISSION A 50 150 100 ACTIVITY-WISE COSTS 100 50 50 MISSION C 200 100 80 20 MISSION B TRANSPORT ACTIVITY TOTAL MISSION COST INVENTORY ACTIVITY MISSION COSTING 170 280 700

BASIC PRINCIPLES OF MISSION COSTING :

BASIC PRINCIPLES OF MISSION COSTING THE SYSTEM SHOULD BE CAPABLE OF IDENTIFYING THE COST OF EACH ACTIVITY INVOLVED IN PROVIDING THE CUSTOMER SERVICE AT THE MARKET PLACE IT SHOULD BE CAPABLE OF SHOWING SEPARATE COST & REVENUE ANALYSIS BY CUSTOMER TYPE / MARKET SEGMENT OR DISTRIBUTION CHANNEL TO IMPLEMENT THESE PRINCIPLES IT IS NECESSARY TO DEFINE THE DESIRED OUTPUTS OF LOGISTICS SYSTEM IN TERMS OF REVENUES / PROFITABILITY / TANGIBLE BENEFITS AND IDENTIFY THE COSTS ASSOCIATED WITH THOSE OUTPUTS.

FOUR STAGES OF MISSION COSTING:

FOUR STAGES OF MISSION COSTING DEFINING CUSTOMER SERVICE SEGMENT (IDENTIFYING SERVICE NEEDS OF EACH CUSTOMER) 2. IDENTIFYING THE FACTORS THOSE PRODUCE VARIATIONS IN THE COST OF SERVICES (DETERMINING SERVICE ELEMENTS WHICH WILL DIRECTLY / INDIRECTLY MAKE IMPACT UPON THE COST OF SERVICE) 3. IDENTIFYING SPECIFIC RESOURCES USED FOR SUPPORTING CUSTOMER SEGMENTS 4. ATTRIBUTE ACTIVITY COST BY CUSTOMER TYPE OR SEGMENT USING PRINCIPLE OF AVOIDABILITY

CONCLUSIONS :

CONCLUSIONS THE REAL IMPACT OF LOGISTICS COST ON PROFIT IS MUCH HIGHER THAN MANAGEMENT USUALLY PERCEIVE. THEY DO NOT TAKE IN TO ACCOUNT THE REAL COST OF LOST SALES (PRESENT & FUTURE), MANY COSTS ARE IN THE GRAY AREAS DUE TO OVERLAPPING OF CERTAIN ACTIVITIES PERFORMED BY MANY DEPARTMENTS OF AN ORGANISATION ONLY INTEGRATED APPROACH TAKES INTO ACCOUNT ALL THE ACTIVITIES & THEIR RESPECTIVE COSTS RESPONSIBLE TO ACHIEVE CORPORATE OBJECTIVE THEREFORE THE INFORMATION ON VARIOUS COSTS SHOULD BE AVAILABLE & EXAMINED THOROUGHLY FOR PROPER DECISION- MAKING UNFORTUNATELY SEPARATE INFORMATION ON COST OF INDIVIDUAL ACTIVITIES ARE NOT MAINTAINED UNDER PRESENT ACCOUNTING / FINANCIAL SYSTEMS. Contd.

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THE COST DATA ALSO NOT MADE AVAILABLE & ACCESSABLE TO ALL THE FUNCTIONAL HEADS UNDER PRETEXT OF CORPORATE “SECRECY” UNDER THE PRESENT P/L ACCOUNT,BIG CHUNKS OF COSTS ARE SHOWN UNDER THE HEADINGS OF ADMINISTRATIVE COSTS / MISCELLANEOUS COSTS WITHOUT ANY PROPER IDENTIFICATION OF ACTUAL ITEMS OF COSTS

LOGISTICS ORGANISATION :

LOGISTICS ORGANISATION

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INTRODUCTION UNDER THE PRESENT COMPETITIVE BUSINESS SCENARIO, A LOGISTICS ORGANISATION MUST BE ABLE TO IMPLEMENT THE PLANS, PROGRAMS & STRATEGIES TO DELIVER DESIRED LEVEL OF CUSTOMER SERVICE IN TERMS OF QUALITY, COST & SPEED. LOGISTICS MANAGEMENT IS A SYSTEM IN WHICH VARIOUS RELATED ACTIVITIES ARE PERFORMED WITH PURPOSE OF MANAGING EFFICIENTLY THE FLOW OF GOODS / SERVICS / INFORMATION THROUGHOUT THE ENTIRE LOGISTICS CHANNELS IT IS AN INTEGRATED ACTIVITY NETWORK OF VARIOUS FUNCTIONS HAVING COMMON OBJECTIVES. THEREFORE, LOGISTICS SYSTEM & THE PEOPLE THOSE WHO ARE RESPONSIBLE TO PERFORM VARIOUS LOGISTICAL ACTIVITIES HAVE TO PLAY IMPORTENT ROLE IN ACHIEVING THE ORGANISATION’S OBJECTIVES / GOALS.

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CONVENTIONAL LOGISTICS MANAGEMENT ORGANISATION VP MARKETING RESPONSIBLITIES Manufacturing Purchasing Transport Stores Sales Warehousing Channels Of Distribution Product After Sales Service Information Systems Budgeting Inventory control VP PRODUCTION C.E.O. VP FINANCE

PROBLEMS OF CONVENTIONAL ORGANIZATION:

PROBLEMS OF CONVENTIONAL ORGANIZATION FUNCTIONAL BOUNDARIES HINDER PROCESS MANAGEMENT DIFFERENT OBJECTIVES OF DIFFERENT FUNCTIONS THE ENTIRE PROCESS IS FRAGMENTED INTO VARIOUS FUNCTIONAL AREAS WHICH NOT ONLY REDUCES EFFICIENCY OF AN ORGANISATION BUT ALSO LEADS TO LOSS OF EFFECTIVENESS IN COMPETITIVE SCENARIO THE TIME TAKEN FOR EXECUTING ACTIVITIES IS EXTENDED DUE TO NON-VALUE ADDED PROCEDURES / DOCUMENTATION IT PRESENTS MANY FACES TO THE CUSTOMERS. NO ONE IN THE ORGANISATION IS EXCLUSIVELY EMPOWERED OR ACCONTABLE TO MANAGE CUSTOMER REQUIREMENTS THROUGH OUT THE PROCESS.

STRATEGIES FOR CREATING LOGISTICS ORGANISATION :

STRATEGIES FOR CREATING LOGISTICS ORGANISATION LOGISTICS ORGANISATION MUST ADAPT ITSELF TO MEET NEW BUSINESS NEEDS / CHALLENGES UNDERSTANDING OF THE FACTORS THAT MAKES ORGNISATION EFFICIENT & EFFECTIVE ACQUIRING KNOWLEDGE ON HOW THESE FACTORS ARE INTER-RELATED CREATING A LOGISTICAL ORGANISATION TO MEET OVERALL COMPANY’S OBJECTIVE OF MAKING PROFITS

EVOLUTION OF LOGISTICS ORGANISATION:

EVOLUTION OF LOGISTICS ORGANISATION

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STAGE 1 STRUCTURE FINANCE MARKETING Consumer Service Order Processing Demand F/casting Warehousing Outbound Traffic Purchase Policies Communication Inventory Policies Capital Budgeting Scrap Disposal Inventory Control Purchasing Material Handling Packaging Inbound Traffic Production- Planning Personnel Mngt. Legal Matters Data Processing PRODUCTION MANAGEMENT SERVICES LOGISTICS ACTIVITIES ARE FRAGMENTED THERE IS NO INTEGRATED LOGISTICS DEPARTMENT THE LOGISTICAL ACTIVITIES ARE ASSIGNED TO INDIVIDUAL FUNCTIONS

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STAGE 2 STRUCTURE FINANCE MARKETING Consumer Service Order Processing Demand F/casting Purchase Policies Communication Inventory Policies Capital Budgeting Scrap Disposal Inventory Control Purchasing Material Handling Inbound Traffic Production- Planning Personnel Mngt. Legal Matters Data Processing PRODUCTION MANAGEMENT SERVICES DISTRIBUTION WAREHOUSING OUTBOUND TRAFFIC PACKAGING DISTR.PLANNING IT STARTED RECOGNISING PHYSICAL DISTRIBUTION FUNCTION AS AN INTEGRATED ACTIVITY.

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STAGE 3 STRUCTURE FINANCE MARKETING Demand F/casting Purchase Policies Communication Inventory Policies Capital Budgeting Scrap Disposal Purchasing Material Handling Production- Planning Personnel Mngt. Legal Matters Data Processing PRODUCTION MANAGEMENT SERVICES DISTRIBUTION WAREHOUSING OUTBOUND TRAFFIC PACKAGING DISTR.PLANNING CONSUMER SERVICE ORDER PROCESSING INBOUND TRAFFIC INVENTORY CONTROL DISTRIBUTION TAKES OVER ORDER PROCESSING / CUSTOMER SERVICE / INVENTORY CONTROL / IN-BOUND TRANSPORT ACTIVITIES DISTRIBUTION MANAGER BECOMES LOGISTICS MANAGER

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STAGE 4 STRUCTURE FINANCE MARKETING NIL Purchase Policies Inventory Policies Scrap Disposal Production- Planning Personnel Mngt. Legal Matters Data Processing PRODUCTION MANAGEMENT SERVICES LOGISTICS WAREHOUSING PACKAGING DISTR.PLANNING CONSUMER SERVICE ORDER PROCESSING INBOUND / OUTBOUND TRAFFIC INVENTORY CONTROL Demand F/casting Communication Capital Budgeting Purchasing /Material Handling INTEGRATED LOGISTICS BECOMES SEPARATE FUNCTIONAL AREA

LOGISTICS CO-ORDINATION:

LOGISTICS CO-ORDINATION STRATEGIC VERSUS OPERATIONAL STRUCTURE STRATEGIC REFERS TO THE LEVEL AT WHICH LOGISTICS ACTIVITIES ARE POSITIOED IN THE FIRM. STRATEGICALLY IT IS IMPORTANT TO DETERMINE THE POSITION OF LOGISTICS IN THE CORPORATE HIERARCHY RELATIVE TO OTHER ACTIVITIES SUCH AS MARKETING, MANUFACTURIG ETC. EQUALLY IMPORTANT IS THE OPERATIONAL STRUCTURE OF THE VARIOUS LOGISTICAL ACTIVITIES – WAREHOUSING,TRANSPORTATION ETC. - UNDER SENIOR LOGISTICS EXECUTIVE

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2. CENTRALISED VERSUS DE-CENTRALISED STRUCTURE CENTRALISED ORGANISATION REFERS TO THE SYSTEM IN WHICH LOGISTICS ACTIVITIES ARE ADMINISTRED AT ONE CENTRAL LOCATION. CENTRALLY MANAGED ACTIVITIES SUCH AS ORDER PROCESSING, TRANSPORTATION,INVENTORY CONTROL ETC. CAN RESULT IN SIGNIFICANT COST SAVINGS DUE TO ECONOMIES OF SCALE IN DE-CENTRALISED ORGANISATION ,THE LOGISTICS ACTIVITIES ARE CARRIED OUT SIMULTANEOUSLY AT VARIOUS LOCATIONS & WHICH CAN BE EFFECTIVE TO SOME FIRMS ( SERVICE ) IN ACHIEVING HIGHER LEVEL OF CUSTOMER SERVICE.

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3. LINE VERSUS STAFF FUNCTIONS THE LOGISTICS ACTIVITIES CAN BE LINE, STAFF OR COBINATION OF BOTH IN A LINE ACTIVITY , THE EMPLOYEES ARE PERFORMING VARIOUS TASKS & ON ITS COMPLETION ,REPORT TO ONE INDIVIDUEL WHO IS RESPONSIBLE & ACCOUTABLE FOR DOING THE ASSIGNED JOB. HERE LOGISTICS RESPONSIBILITIES ARE OPERATIONAL ( THEY DEAL WITH MANAGEMENT OF DAY TO DAY ACTIVITIES) IN THE STAFF ORGANISATION , THE LINE ACTIVITIES MAY BE HOUSED UNDER LOGISTICS IN-CHARGE BUT VARIOUS STAFF ACTIVITIES ASSIST & CO-ORDINATE THE LINE FUNCTIONS. HERE LOGISTICS FINDS ITSELF PRIMARILY IN AN ADVISORY ROLE

HOW TO DEVELOP AN OPTIMAL LOGISTICS ORGANISATION:

HOW TO DEVELOP AN OPTIMAL LOGISTICS ORGANISATION DEFINE CORPORATE OBJECTIVES DEVELOP AN INTEGRATED LOGISTICS ORGANIZATION STRUCTURE THERE SHOULD BE TOTAL CLARITY IN FUNCTIONAL AUTHORITIES / RESPONSIBILITIES / ACCOUNTABILITIES THE ORGANISATION SHOULD BE FLEXIBLE & CAPABLE OF ADAPTING TO THE CHANGES IN THE BUSINESS SCENARIO THE LOGISTICAL FUNCTIONS SHOULD BE WELL CONNECTED WITH OTHER SUPPORT FUNCTIONS THE ORGANISATIONAL STRUCTURE SHOULD CONSIDER CAPACITY & CAPABILITY OF AVAILABLE HUMAN RESOURCES

COMPONENTS OF OPTIMAL LOGISTICS ORGANISATION :

COMPONENTS OF OPTIMAL LOGISTICS ORGANISATION ORGANIZATIONAL CHARACTERISTICS STRUCTURE AND TECHNOLOGY ARE THE MAIN COMPONENTS OF AN ORGANIZATIONAL CHARACTERISTICS THE STRUCTURE REFERS TO THE RELATIONSHIPS THAT EXIST BETWEEN VARIOUS FUNCTIONAL AREAS THE RELATIONSHIPS ARE OFTEN REPRESENTED BY AN ORGANIZATION CHART TECHNOLOGY REFERS TO THE MECHANISMS USED BY THE ORGANIZATION NOT ONLY TO TRANSFORM INPUTS INTO FINISHED OUTPUTS BUT FOR PERFORMING OTHER OPERATIONAL TASKS ( CONVENTIONAL OR PRAGMATIC/ PROGRESSIVE)

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B) ENVIRONMENTAL CHARACTERISTICS THE EFFECTIVENESS OF AN ORGANIZATION IS INFLUENCED BY INTERNAL & EXTERNAL FACTORS INTERNAL FACTORS : CORPORATE CULTURE EXTERNAL FACTORS : POLITICAL, LEGAL, ECONOMIC, CULTURAL, SOCIAL & COMPETITIVE ENVIRONMENTS C) EMPLOYEE CHARACTERISTICS EVERY EMPLOYEES POSSESSES DIFFERENT OUTLOOKS / GOALS / NEEDS AND ABILITIES. INDIVIDUAL DIFFERENCES CAN HAVE A DIRECT IMPACT ON COMPANY’S EFFECTIVENESS 1. ORGANIZATIONAL ATTACHMENT (LOYALTY / INTEGRITY) 2. INDIVIDUAL JOB PERFORMANCE Contd.

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D) MANAGERIAL POLICIES AND PRACTICES POLICIES AT THE MACRO & MICRO LEVEL DETERMINE THE OVERALL GOAL STRUCTURE OF AN ORGANISATION MACRO AND MICRO POLICIES AFFECT THE PROCEDURES & PRACTICES OF AN ORGANIZATION.

RE-ENGINEERING :

RE-ENGINEERING IT IS THE PROCESS OF CREATING THE ENTIRE NEW ORGANIZATION & SYSTEMS FOR MEETING CHANGED BUSINESS SCENARIO RATHER THAN MAKING MINOR CHANGES IT AIMS TOWARDS INTEGRATING LOGISTICS FUNCTIONS. THE CO-ORDINATION OF VARIOUS LOGISTICS ACTIVITIES IS CRUCIAL FOR EFFICIENT WORKING OF AN ORGANIZATION BY AVOIDING DUPLICATION OF EFFORTS & INEFFICIENCY IN THE TRADITIONAL ORGANISATIONAL APPROACH. EFFICIENT LOGISTICS ORGANISATION CAN PROVIDE BETTER VALUE TO CUSTOMERS THROUGH MEETING THEIR REQUIREMENTS OF “BETTER PRODUCTS, FASTER DELIVERY & CHEAPER PRICE”

EXTENDED ENTERPRISE :

EXTENDED ENTERPRISE NEED FOR INTEGRATION GREATER EMPHASIS ON INTEGRATION WITHIN ORGANISATION & ALSO WITH UP- STREAM (SUPPLIER) & DOWN-STREAM (CUSTOMER) THE AIM IS TO CREATE SEAMLESS PROCESSES SO THAT PRODUCTS / SERVICES CREATED & OFFERED TO MARKET ARE OF BETTER QUALITY, DELIVERED AT FASTER SPEED & SOLD AT CHEAPER PRICE THIS CAN BE ACHIEVED THROUGH SUPPLY / DEMAND BASE RELATIONSHIP SUPPLIER DEVELOPMENT PROGRAM SUPPLIER’S INVOLVEMENT IN THE DESIGN OF THE PRODUCTS CUSTOMER RELATIONSHIP MANAGEMENT ( CRM) INTEGRATED INFORMATION SYSTEM

IMPROVING LOGISTICS ORGANISATIONAL EFFECTIVENESS :

IMPROVING LOGISTICS ORGANISATIONAL EFFECTIVENESS 1. STRATEGIC GOAL SETTING ESTABLISHING WELL DEFINED ORGANISATION & EMPLOYEE’S GOALS 2. ACQUIRING RESOURCE ACQUISITION & UTILISATION OF HUMAN, FINANCIAL & TECHNICAL RESOURCES 3. PERFORMANCE ENVIRONMENT PROPER ORGANIZATIONAL CLIMATE TO MOTIVATE EMPLOYEES TO ACHIEVE LOGISTICS FUNCTIONAL EFFECTIVENESS 4. COMMUNICATION PROCESS EFFECTIVE TRANSMISSION OF COMMUNICATION THROUGHOUT THE ORGANIZATION ON LOGISTICSPOLICIES & PROCEDURES Contd.

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5. QUALITY OF LEADERSHIP & DECISION MAKING EXPERTISE CAPABILITY OF TOP OFFICIAL TO MAKE THOUGHTFUL, LOGICAL & CONSISTENT DECISIONS 6. ORGANISATIONAL ADAPTATION & INNOVATION ADAPTABILITY & INNOVATIVENESS OF LOGISTICS FUNCTION TO RESPOND TO THE CHANGEDBUSINESS SCENARIO 7. CUSTOMER ORDER MANAGEMENT PROCESS ELIMINATING NON-VALUE ADDED ACTIVITIES & TO LOOK FOR OPPORTUNITIES TO COMBINE & REDUCE VARIOUS STEPS IN THE PROCESSES TO IMPROVE CONSISTENCY & RELIABILITY OF THE DELIVERED SERVICE, 8. FORMING CROSS FUNCTIONAL TEAMS TO TAKE RESPONSIBILITY FOR MANAGEMENT OF ORDERS

RESPONSIVE ORGANIZATION:

RESPONSIVE ORGANIZATION THE COMPETITIVE SCENARIO AT MARKET PLACE NEEDS RESPONSIVE ORGANIZATION IT NOT ONLY SEEKS TO PUT CUSTOMER AT THE CENTER OF BUSINESS BUT REQUIRES DESIGNING OF ALL ITS SYSTEMS & PROCEDURES FOR IMPROVING THE SPEED AND RELIABILITY OF THE RESPONSE 1. FROM FUNCTIONS TO PROCESSES EMPHASIS ON MANAGEMENT OF PROCESSES BY CREATING OUTPUTS RATHER THAN MANAGING RESOURCES 2. FROM PROFITS TO PERFORMANCE THE LOGIC IS PERFORMANCE DRIVES PROFITABILITY, GET RIGHT PERFORMANCE, THE PROFIT WILL FOLLOW Contd.

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3. FROM PRODUCTS TO CUSTOMERS EMPHASIS ON CUSTOMER VALUE AND NOT ON JUST BRAND VALUE 4. FROM INVENTORIES TO INFORMATION INFORMATION ON ACTUAL / FORECASTED USAGE OF THE PRODUCT COULD BE LINKED DIRECTLY IN TO LOGISTICS SYSTEM FOR FACILITATING ADJUSTMENTS IN THE INVENTORIES NEEDED IN TERMS OF QUANTITY /PLACE /TIME. 5. FROM TRANSACTION TO RELATIONSHIP LONG TERM RELATIONSHIP WITH CUSTOMERS / SUPPLIERS / SERVICE PROVIDERS ( THIRD PARTY / FOURTH PARTY)

OUTSOURCING IN LOGISTICS MANAGEMENT:

OUTSOURCING IN LOGISTICS MANAGEMENT WHAT IS OUTSOURCING ? (DEFINATION) OUTSOURCING IS DEFINED AS THE CONTRACTING OF ONE OR MORE OF COMPANY’S BUSINESS PROCESSES / ACTIVITIES TO OUTSIDE SERVICE PROVIDERS FOR INCREASING SHAREHOLDER’S VALUE (PROFITABILITY) BY PRIMARILY REDUCING OVERALL OPERATING COST AND FOCUSING ON CORE COMPETENCIES FOR MAXIMUM UTILISATION OF AVAILABLE RESOURCES ( FINANCIAL / MANPOWER / TECHNOLOGY ETC.) WITH THE COMPANY

WHY DO COMPANIES OUTSOURCE?:

WHY DO COMPANIES OUTSOURCE? REDUCTION IN OPERATING COSTS FOCUS ON CORE COMPETENT FUNCTIONS ACQUIRING NEW SKILLS ACQUIRING BETTER MANAGEMENT AVOID LABOUR PROBLEMS FOCUS MORE ON BUSINESS POLICIES & STRATEGIES REDUCE MAJOR INVESTMENTS & AVOID FINANCIAL RISKS HANDLE OVERFLOW (EMERGENCY) SITUATIONS Contd

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9. IMPROVE FLEXIBILITY IN FUNCTIONS 10. IMPROVE FINANCIAL RATIOS 11. ENHANCE MARKET CREDIBILITY 12. IMPROVE OVERALL OPERATING PERFORMANCE.

RISKS INVOLVED IN OUTSOURCING :

RISKS INVOLVED IN OUTSOURCING OPERATIONAL ISSUES AT OUTSIDER’S END NON-ALIGNMENT OF COMPANY’S GOALS/ OBJECTIVES WITH OUTSIDER’S GOALS 3. OUTSIDER’S UNABILITY TO COPE WITH THE REQUIREMENTS OF NEW MANUFACTURING / INFORMATION TECHNOLOGY 4. TOO MUCH DEPENDANCE ON VERY FEW SUPPLIERS INVOLVES BUSINESS RISKS 5. BUSINESS OUTLOOK OF THE OUTSIDERS MAY NOT MATCH WITH THE COMPANY’S BUSINESS PHILOSOPHY & VISION

THIRD PARTY LOGISTICS :

THIRD PARTY LOGISTICS IN VIEW TO KEEP THE COSTS OF INBOUND / OUTBOUND LOGISTICS ACTIVITIES UNDER CONTROL BY REDUCING THE LIABILITIES OF FIXED NATURE, AN OUTSIDE AGENCY APPOINTED TO PERFORM THESE LOGISTICS FUNCTIONS IS CALLED “ THIRD PARTY LOGISTICS COMPANY (3 PL)” THIRD PARTY LOGISTICS (3PL) PROVIDER HANDLES ALL OR MOST OF THE SUPPLY MANAGEMENT (PROCUREMENT / STORES / INVENTORY MANAGEMENT) & DEMAND MANAGEMENT ( RIGHT FROM WAREHOUSING TO REVERSE LOGISTICS) ACTIVITIES INCLUDING MANAGEMENT OF RELATED INFORMATION.

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SCOPE OF THIRD PARTY LOGISTICS ACTIVITIES INVENTORY CONTROL WAREHOUSING PACKAGING ORGANISATION TRANSPORTATION REVERSE LOGISTICS MATERIALS MANAGEMENT DELIVERY OF GOODS COLLECTING PAYMENTS THIRD PARTY LOGISTICS COMPANY

FOURTH PARTY LOGISTICS :

FOURTH PARTY LOGISTICS FOURTH PARTY LOGISTICS (4PL) PROVIDER IS A SUPPLY CHAIN INTEGRATOR THAT MANAGES THE RESOURCES, CAPABILITIES & TECHNOLOGIES OF ITS OWN ORGANIZATION WITH THOSE OF COMPLEMENTARY SERVICE PROVIDER TO DELIVER A COMPLETE SUPPLY CHAIN SOLUTION IT PROVIDES MAXIMUM OVERALL BENEFITS THAT CANNOT BE ACHIEVED BY ANY INDIVIDUAL SERVICE PROVIDER IT IS A COMPLETE OUTSOURCING OF MANUFACTURING & LOGISTICS FUNCTIONS INCLUDING SELECTION OF THIRD PARTY SERVICE PROVIDERS

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SCOPE OF FOURTH PARTY LOGISTICS ACTIVITIES CASH FLOW MANAGEMENT IT INTEGRATION RISK MANAGEMENT & INSURANCE ORGANISATION MANUFACTURING REVERSE LOGISTICS LOGISTICS ACTIVITIES (3 P/L ACTIVITIES) CUSTOMER SERVICE QUALITY IMPROVEMENT FOURTH PARTY LOGISTICS COMPANY

NEEDS FOR FOURTH PARTY LOGISTICS:

NEEDS FOR FOURTH PARTY LOGISTICS EVER-INCREASING CUSTOMER’S REQUIREMENTS COMPETITIVE & COMPLEX MARKET SCENARIO RISING GLOBALIZATION WITH LIFTING OF MARKET BARRIERS & IMPORT TARIFFS 4. INCREASED INCLINATION OF COMPANIES TO ENTER HIGHER MARGIN AND VALUE-ADDED BUSINESS 5. RISING ACCESSIBILITY OF SUPPLY CHAIN TECHNOLOGY 6. EMPHASIS TO IMPROVE ASSET UTILIZATION & COMPLIANCE OF ENVIRONMENTAL STANDARDS

SERVICES PROVIDED BY 4PL COMPANY :

SERVICES PROVIDED BY 4PL COMPANY PROCUREMENT OF INPUTS STORAGE & INVENTORY CONTROL OF INPUTS MANUFACTURING ACTIVITIES INCLUDING INSPECTION / TESTING NEGOTIATIONS / SELECTION OF THIRD PARTY LOGISTICS COMPANIES TRANSPORTATION MANAGEMENT (ROUTING / SCHEDULLING ETC.) WAREHOUSING DECISIONS INFORMATION TRANSFER / IT SOLUTIONS COLLECTION OF PAYMENTS / CASH-FLOW MANAGEMENT RISK MANAGEMENT AND INSURANCE CONTINUOUS LOGISTICS IMPROVEMENT PROGRAM

DIFFERENCES BETWEEN 3PL AND 4PL :

DIFFERENCES BETWEEN 3PL AND 4PL 1. GENERALLY, 3PL OWNS AND MANAGES THE ASSETS ( LIKE MANPOWER, WAREHOUSE, FLEET ETC.) SO THAT IT CAN MAXIMISE ITS UTILIZATION AND HENCE RETURN ON INVESTMENTS. WHEREAS, 4PL MANAGES THE SUPPLY CHAINS AND OFFERS INTELLECTUAL CAPITAL OR ADDS VALUE. 2. 3PL SERVICE PROVIDER’S CORE ACTIVITIES INCLUDE TRUCKLOAD, PARCEL, OCEAN AND AIR FORWARDING, WHEREAS A 4PL PROVIDER MAINLY CONCENTRATES ON INFORMATION EXCHANGE THROUGH TECHNOLOGY INTEGRATION. 4PL PROVIDER SERVES AS THE HUB, WHICH TIES TOGETHER DIFFERENT LOGISTICS SERVICES TO FULFILL CLIENT’S NEEDS

LOGISTICS PERFORMANCE MEASUREMENT :

LOGISTICS PERFORMANCE MEASUREMENT

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INTRODUCTION IRRESPECTIVE OF THE SIZE OF OPERATION, ALL THE BUSINESS ORGANISATIONS NEED PERFORMANCE MEASUREMENT & CONTROL FOR EFFICIENT & EFFECTIVE APPLICATION OF AVAILABLE RESOURCES FOR THE CONCEPT OF LOGISTICAL INTEGRATION TO BE PRACTISED & RESULTS TO BE DERIVED, A SYSTEM OF LOGISTICS PERFORMANCE MEASUREMENT & CONTROLS NEED TO BE DESIGNED THE MAIN OBJECTIVE OF LOGISTICS CONTROLLING IS TO TRACK PERFORMANCE AGAINST OPERATING PLANS & TO IDENTIFY OPPORTUNITIES FOR ENHANCED EFFICIENCY & EFFECTIVENESS “ THINGS WHICH CANNOT BE MEASURED, CANNOT BE MANAGED ”

MAIN OBJECTIVES :

MAIN OBJECTIVES 1. MONITORING IT FOCUSSES ON REPORTING THE CURRENT STATUS OF OPERATIONS IT MAY BE MONITORED ON A DAILY / WEEKLY / MONTHLY BASIS DEPENDING ON VOLUME & CRITICALITY. IN LOGISTICS, THE MONITORING SYSTEM REPORTS ON THE COST BREAK-UP ACROSS VARIOUS LOGISTICL ACTIVITIES BESIDES INDICATING SERVICE LEVEL PARAMETERS LIKE DELIVERY STATUS, TRANSIT DAMAGES,WRONG DESPATCHES ETC. 2. CONTROLLING THE SYSTEM COMPARES THE ACTUAL PERFORMANCE WITH THE SET STANDARDS OR OBJECTIVES IT ALSO REPORTS THE REASONS FOR DEVIATIONS FROM THE SET GOALS, SO THAT SUITABLE CORRECTIVE ACTIONS CAN BE INITIATED FOR IMPROVEMENT IN THE LOGISTICAL PERFORMANCE

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3. DIRECTING THE OBJECTIVES OF PERFORMANCE MEASUREMENT IS TO MOTIVATE AN INDIVIDUAL IN THE SYSTEM TO ENHANCE HIS PERFORMANCE SO THAT PERFORMANCE OF THE ENTIRE SYSTEM CAN BE IMPROVED. THE SYSTEM HELPS THE ORGNISATION TO DRAW & IMPLEMENT INDIVIDUAL APPRISAL SYSTEM BASED ON REWARDS / PENALTIES.

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PERFORMANCE MEASUREMENT PRESPECTIVES EXTERNAL MEASURES INTERNAL MEASURES COMPETITOR’S PERFORMANCE BENCHMARKING CUSTOMER PERCEPTIONS SERVICE QUALITY RELIABILITY RESPONSIVENESS RELATIONSHIP NON-FINANCIAL CUSTOMER SERVICE PRODUCTIVITY TIME QUALITY FINANCIAL OPERATING COSTS RETURN ON INVESTMENT (ASSET MANAGEMENT) LOGISTICS PEFORMANCE MEASUREMENT

ELEMENTS OF INTERNAL PERFORMANCE MEASUREMENT:

ELEMENTS OF INTERNAL PERFORMANCE MEASUREMENT INTERNAL PERFORMANCE MEASUREMENT FOCUSSES MAINLY ON COMPARING ORGANISATION’S PRESENT ACTIVITIES & PROCESSES TO PERFORMANCE OF PREVIOUS LEVEL OF OPERATIONS & GOALS. INTERNAL MEASURES ARE PREFFERED BECAUSE MANAGEMENT KNOWS THE RELIABILITY OF SOURCES OF INFORMATION & DATA IS RELATIVELY EASY TO COLLECT & ANALYSE A) FINANCIALMEASURES 1. OPERATING COST IT IS THE MOST IMPORTANT MEASURE WHICH REFLECTS THE EFFICIENCY & EFFECTIVENESS OF THE LOGISTICS SYSTEM THE ACTUAL COSTS ARE MEASURED IN TERMS OF % OF SALES VALUE OR PER UNIT OF THROUGHPUT MOVED / HANDLED

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2. RETURN ON INVESTMENT ( ASSET MANAGEMENT) THIS IS AN IMPORTANT FINANCIAL PERFORMANCE MEASURE THAT INDICATES WHETHER THE INVESTMENT MADE IN LOGISTICAL ASSETS LIKE WAREHOUSE / MATERIAL HANDLING ETC. IS PAYING DIVIDENDS BY WAY OF INCREASE IN PROFITS THROUGH COST REDUCTION IT ALSO INDICATES WHETHER THE INVESTMENT IS PROPERLY UTILISED TO GENERATE DESIRED REVENUE. B) NON FINANCIAL MEASURES 3. CUSTOMER SERVICE IT EXAMINES FIRM’S CAPACITY TO SATISFY CUSTOMERS & IT IS MEASURED BY FILL RATE / STOCK OUTS / ON TIME DELIVERY / CYCLE TIME ETC.

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4. PRODUCTIVITY IT IS A RELATIONSHIP BETWEEN REAL OUTPUT (GOODS & SERVICES) PRODUCED & QUANTITY OF INPUT (RESOURCES) UTILIZED BY THE SYSTEM TO PRODUCE THOSE OUTPUTS THEY ARE SOMETIMES DIFFICULT TO COMPUTE AS THE OUTPUTS ARE SPREAD OVER LONGER PERIOD & SOMETIMES ALL OUTPUTS CANNOT BE EXPRESSED IN MONETORY TERMS 5. TIME THIS IS IMPORTANT CRITERIA TO JUDGE THE LEVEL OF CUSTOMER SERVICE OFFERED BY THE ORGANISATION. IT INDICATES THE SYSTEM’S EFFICIENCY IN TERMS OF RESPONSE TIME, LEAD TIME, ON TIME PRODUCT SHIPMENT ETC. THE SYSTEM NEEDS REAL TIME INFORMATION SUPPORT & CAPABILITY FOR PRO-ACTIVELY INITIATING CORRECTIVE STEPS

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6. QUALITY QUALITY MEASURES,WHICH ARE THE MOST PROCESS ORIENTED EVOLUTIONS, ARE DESIGNED TO DETERMINE THE EFFECTIVENESS OF SERIES OF ACTIVITIES RATHER THAN AN INDIVIDUAL ACTIVITY. HOWEVER,THE QUALITY IS GENERALLY DIFFICULT TO MEASURE BECAUSE OF ITS BROAD SCOPE THE CONTEMPORARY QUALITY MEASUREMENT CONCEPT WHICH IS RECEIVING MORE ACCEPTIBILITY & CREATING INTEREST WITH MANY PROFESSIONAL ORGANISATIONS IS “ THE PERFECT ORDER CONCEPT ”

THE PERFECT ORDER CONCEPT :

THE PERFECT ORDER CONCEPT DEFINATION ( WHAT IS PERFECT ORDER ? ) “ THE PERFECT ORDER CAN BE DEFINED AS A DESIRED CUSTOMER SERVICE CAPABILITY OF AN ORGANISATION, IN TERMS OF AVAILABILITY OF PRODUCT & OPERATIONAL PERFORMANCE, TO ACHIEVE DESIRED CUSTOMER SERVICE LEVEL OBJECTIVE EACH & EVERY TIME ” THE ORDER SHOULD BE COMPLETE IN TERMS OF ALL ASPECTS OF CUSTOMER SERVICE - RIGHT FROM ORDER RECEIPT TO PRODUCT DELIVERY- ALONG WITH ERROR FREE DOCUMETATION IN OTHER WORDS, THE TOTAL ORDER CYCLE PERFORMANCE MUST BE MANAGED WITH ZERO DEFECTS. THE CONCEPT OF PERFECT ORDER IS THE LOGICAL EXTENTION OF QUALITY ASPECT.

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THE COMMITMENT TO THE PERFECT ORDER PERFORMANCE IS BASED ON AN AGREEMENT THAT DEVELOPS FROM CLOSE WORKING RELATIONSHIPS BETWEEN THE COMPANY / SUPPLIERS / CUSTOMERS THESE ARRANGEMENTS GET DEVELOPED OVER THE TIME & ARE SUPPORTED BY EXCHANGE OF RELEVENT INFORMATION BETWEEN INVOLVED BUSINESS PARTENERS TO FACILITATE & MAINTAIN AN IN-DEPTH UNDERSTANDING OF MUTUAL REQUIREMENTS. THE MANAGERIAL & OPERATIONAL EFFORTS REQUIRED FOR PERFECT ORDER PERFORMANCE IS NOT ONLY EXPENSIVE BUT REQUIRES OUTSTANDING INFORMATION SYSTEM SUPPORT. SUCH SUPERIOR SERVICE PERFORMANCE MUST BE FOCUSSED ON CUSTOMERS THAT REQUIRE, APPRECIATE AND RESPONDING WITH INCREASED PURCHASE LOYALTY IF ORGANISATION DESIRES TO IMPLEMENT A PERFECT ORDER STRAEGY, IT IS ESSENTIAL FOR IT TO FULLY UNDERSTAND THE RISKS AND POTENTIALS INVOLVED IN IT . THERE IS NO PLACE FOR ERRORS IN ZERO DEFECT COMMITMENT

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THE CUSTOMER EXPECTS THAT THE PROMISED PERFORMANCE WILL BE OFFERED BY THE SUPPLIER EACH & EVERY TIME. THEREFORE,THE COMMITMENT SHOULD BE REAL,BELIEVABLE & CONSISTENTLY ACHIEVED TO TANSLATE THE COMMITMENTS INTO EFFICIENCIES. THERE IS NO ROOM EXISTS TO LIP SERVICES THE PERFECT ORDER REPRESENTS IDEAL PERFORMANCE HAVING FOLLOWING STANDARDS: COMPLETE DELIVERY OF ALL THE ITEMS REQUESTED BY THE CUSTOMERS DELIVERY MADE ON COMMITTED TIME COMPLETE & ACCURATE DOCUMENTATION SUPPORTING THE ORDER 4. PERFECT CONDITION ( FAULTLESSLY INSTALLED, CORRECT CONFIGURATION, READY TO USE WITH NO DAMAGES )

REASONS FOR FAILURE IN EXECUTING PERFECT ORDER :

REASONS FOR FAILURE IN EXECUTING PERFECT ORDER THERE ARE MANY ROADBLOCKS FOR ACHIEVING “ PERFECT ORDER” ORDER ENTRY ERROR MISSING INFORMATION NON AVAILABILITY OF ORDERED ITEMS INABILITY TO MEET SHIPMENT DATES / LATE SHIPMENTS PICKING / PACKING ERRORS DAMAGED SHIPMENTS INCOMPLETE / WRONG PAPERWORK TODAY, THE BEST LOGISTICS ORGANIZATIONS IN USA, REPORT ACHIEVING 55 - 60 % PERFECT ORDER PERFORMANCE, WHILE MOST ORGANIZATION BELONGING TO DEVELOPING COUNTRIES REPORT LESS THAN 10 %

EXTERNAL PERFORMANCE MEASUREMENT:

EXTERNAL PERFORMANCE MEASUREMENT THE MAIN OBJECTIVE OF THIS MEASUREMENT IS TO UNDERSTAND & MONITOR CUSTOMER PERSPECTIVE CUSTOMER’S PERCEPTION TO ACHIEVE COMPETITIVENESS IN LOGISTICAL OPERATIONS,THE COMPANY SHOULD GET REGULAR FEEDBACKS FROM ALL ITS CUSTOMERS ON EXISTING SERVICE LEVELS & SHORTFALLS. THE FEEDBACK ON DELIVERY PERFORMANCE, RELIABILITY, RESPONSIVENESS & RELATIONSHIP INITIATIVES OF A COMPANY AGAINST THAT OF COMPETITORS, NEED TO BE REGULARLY OBTAINED AS A PART OF EXTERNAL PERFORMANCE MEASURES & CONTROLS THERE AFTER. .

2. COMPETITOR’S PERFORMANCE CUSTOMER’S FEEDBACK MAY GIVE THE COMPANY A COMPARATIVE ANALYSIS OF SERVICE LEVEL & VALUE ADDED SERVICE OFFERED BY ITS COMPETITORS OPERATING IN THE MARKET THE COMPANY SHOULD REGULARLY CONDUCT CUSTOMER SURVEYS TO GET SUCH FEEDBACK FOR UNDERSTANDING CUSTOMER’S PERCEPTIONS & FOR IMPROVING ORGANISATION’S PERFORMANCE OF LOGISTICAL SERVICES & ENHANCING COMPETITIVENESS :

2 . COMPETITOR’S PERFORMANCE CUSTOMER’S FEEDBACK MAY GIVE THE COMPANY A COMPARATIVE ANALYSIS OF SERVICE LEVEL & VALUE ADDED SERVICE OFFERED BY ITS COMPETITORS OPERATING IN THE MARKET THE COMPANY SHOULD REGULARLY CONDUCT CUSTOMER SURVEYS TO GET SUCH FEEDBACK FOR UNDERSTANDING CUSTOMER’S PERCEPTIONS & FOR IMPROVING ORGANISATION’S PERFORMANCE OF LOGISTICAL SERVICES & ENHANCING COMPETITIVENESS

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3. BEST PRACTICES / BENCHMARKING WHAT IS BENCHMARKING? IT IS A PROCESS OF MEASURING ORGANISATION’S OVERALL PERFORMANCE AGAINST THE OTHER ORGANISATIONS FROM THE SAME INDUSTRY OR OTHER INDUSTRIES. IT IDENTIFIES THE GAP IN PERFORMANCE & ASSIST COMPANIES TO CLOSE THAT GAP. BENCHMARKING PROCESS GET AWARE OF THE INDUSTRY’S BEST PRACTICES ESTABLISH REALISTIC OBJECTIVES MAKE STRATEGY / STRUCTURE / TACTICAL ACTION PLAN FOCUS ON RELEVENT RESOURCES IMPROVE SERVICE QUALITY CONTROL COST EFFECTIVELY MEET CUSTOMER REQUIREMENTS DETERMINE TRUE MEASURE OF PRODUCTIVITY ATTAIN COMPETITIVE POSITION

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TYPICAL BENCHMARKING MEASURES ASSET MANAGEMENT OPERATING COST CUSTOMER SERVICE LEVEL QUALITY OF PRODUCTS & SERVICES TECHNOLOGY ORDER PROCESSING PROCEDURES TRANSPORTATION - ROUTES, MODES, FREIGHT STRUCTURES WAREHOUSING - STORAGE, MATERIAL HANDLING,AUTOMATION PACKAGING REVERSE LOGISTICS INFORMATION FLOW & CONNECTIVITY THE BENCHMARKING MAY BE DONE BASED ON PUBLISHED DATA, ALLIANCES WITH THE FIRMS TO BE BENCHMARKED OR BY APPOINTING CONSULTING FIRM, DEPENDING ON CRITICALITY OF THE RESULTS.

LOGISTICS AUDIT:

LOGISTICS AUDIT IT IS NECESSARY TO TAKE STOCK OF EFFICIENCY & EFFECTIVITY STATUS OF THE VARIOUS LOGISTICAL ACTIVITIES FOR ENHANCING THE PERFORMANCE OF THE LOGISTICS SYSTEM. THIS PROCESS IS CALLED “ LOGISTICS AUDIT “ THE SHORT-FALLS,BOTTLENECKS & GAPS IN THE SYSTEM CAN BE IDENTIFIED BY THE AUDITING PROCESS. IT EXAMINES & TESTS THE OPERATIONS OF LOGISTICS PROCESSES IN TERMS OF QUALITY, TECHNOLOGY,PRODUCTIVITY & EXTERNAL FACTORS. IT REVEALS THE WEAKNESSES IN THE SYSTEM OF THE COMPANY. IT MEASURES THE CAPABILITIES & QUALITIES OF LOGISTICS OPERATION & HIGHLIGHTS RESOURCES FOR RATIONALISATION & COST REDUCTION

AREAS OF LOGISTICS AUDIT:

AREAS OF LOGISTICS AUDIT QUALITY OF LOGISTICAL SERVICES PRODUCTIVITY OF ASSETS,EQUIPMENT & MANPOWER EMPLOYED ADEQUACY OF PACKAGING SYSTEM WAREHOUSING CAPACITY UTILISATION TECHNOLOGY RELATED TO SPEED OF INFORMATION, MATERIAL FLOW EXTERNAL FACTORS SUCH AS BUYER/SUPPLIER RELATIONSHIP, TRANSPORT CONDITIONS, CUSTOMER SPECIFIC DEMANDS ( CUSTOMISATION) EMERGING TECHNOLOGIES & ITS LIKELY IMPACT ON LOGISTICS OPERATIONS OF THE COMPANY. STRATEGIC LOGISTICS PLANNING FOR IMPROVING OVERALL EFFICIENCY OF ENTIRE LOGISTICAL SYSTEM

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Ways to improve logistics management Though there is no standard set of options for improving the logistics across different industries, following can be used to improve the logistics management 1.Configuring the transportation facilities 2. Channel options 3. Depot checks related to inventory management 4. Reduction in the stock-in-transit 5. Shared software cost 6. Transport rate reduction 7. Optimize the truck utilization 8. Damage and shortage reduction 9. Optimize the distribution network (number of depots 10. Planning systems 11. Physical modes 12. Reducing the logistics costs a. Identify the customer service targets and business goals b. Estimate the current logistics costs c. Benchmark the estimated costs against the best companies d. Develop the low cost supply chain methodology 13. Another approach to cost reduction is to use Activity-Based Costing (ABC) 15. The logistics operations can be outsourced

LOGISTICS PERFORMANCE CONTROL:

LOGISTICS PERFORMANCE CONTROL TO ALIGN THE OBJECTIVES OF LOGISTICS TO THAT OF A COMPANY, A POWERFUL CONTROL MECHANISM NEEDS TO BE EVOLVED & IMPLEMENTED. 1.BUDGETARY CONTROL IRRESPECTIVE OF ORGANISATIONAL REPORTIG STRUCTURE, THE COMPANY FIXES UP THE BUDGET FOR EACH OF THE LOGISTICAL ACTIVITIES,WHICH ARE TEATED AS COST CENTRES. TRADITIONALLY,THESE ARE FINANCIAL BUDGETS INDICATING LIMITS ON APPLICATION OF FUNDS ON EACH COST CENTRE. DEVIATIONS IN COSTS ARE MONITORED,EMPHASIS BEING ON COST SAVING RATHER THAN PROVIDING CUSTOMER SERVICE

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2. STRUCTURAL CONTROLS THESE COTROLS ARE EXERCISED THROUGH BUILDING PROPER ORGANISATIONAL STRUCTURE. AN ORGANISATION HAVING COST AS ITS DIFFERENTIATION STRATEGY WILL HAVE SEVERAL LAYERS OF REPORTING STRUCTURE TO CUT COST AT SUBSEQUENTLY HIGHER LEVELS OF INVESTMENT PROPOSALS ON THE OTHER HAND CUSTOMER FOCUSSED WILL HAVE A FLAT REPORTING STRUCTURE. THE SPAN OF CONTROL IS WIDER. THE DECISION MAKING PROCESS IS FASTER & ACTIVITIES ARE TREATED AS PROFIT CENTRES. THESE ARE RESULT ORIENTED ORGANISATIONS ,WHERE THE PERFORMANCE MEASURES ARE USED FOR CONTINUOUSLY IMPROVING THE ORGANISATION’S COMPETITIVENESS AT MARKET PLACE.

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