1. Logistics – An Introduction
N.Chandrasekaran

2. LOGISTICS- DEFINITION
Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and the related information flows through the organization and its marketing channels for the cost effective fulfillment of customers’ orders.

3. SUPPLY CHAIN MANAGEMENT-Definition
Supply chain Management(SCM) is the network of organizations that are involved through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer.

4. The Value Chain Primary Activities Support Activities
Firm Infrastructure
Human Resource Management
Procurement
Technology Development
Information Technology
Supply Chain Management
Margin
Inbound
Logistics
Operations
Outbound
Marketing
& Sales
Services
The Value Chain

5. Theory of Firm Resource based view Core competencies
Sustainable competitive advantage depends upon the firm’s resources and how they are used.
Core competencies
Heterogeneous resources and need for protecting and enhancing critical and the best value creating resource/skill.

6. Logistics, Production and Inventory Management
Logistics – Logistics managers seek to minimize total logistics costs and at times larger issues of integrating strategies for logistics, manufacturing and even marketing are not addressed.
Hence integrated approach is recommended
Marketing and Manufacturing may drive planning function and logistics function as fulfillment agency …contd

7. Logistics, Production and Inventory Management
Production management takes care of detailed tactical planning and many a times strategic issues are also dealt with for optimizing resources and investments.
Current trends in lean production or agile manufacturing are focused on elimination of waste and responsive systems where supply chain function has a significant role to play

8. Logistics, Production and Inventory Management
The core of SCM focuses on inventory management. Responsive and efficient supply network models are critical for inventory decisions. More over, decisions like transportation, warehousing, service levels and inventory management are inter-linked. Inventory management has benefits of application of mathematical programming for better decisions.

9. Other disciplines
Management Accounting – the process of identifying, measuring, reporting and analyzing information about the economic events of organizations.
Demand forecasting and marketing
Operations Research

10. Innovations in IT
Supply chain modeling systems are critically needed to help management extract effective plans from transaction plans.
Two problems arise:
There is too much of transactional data
Lack of adequate knowledge to relate data with activities and use for decision making
Technological solutions
Organizational solution

11. Organizational adaptation
Globalization
E-commerce
ERP systems
Business process reengineering
Organizational learning and change management
Integrated supply chain management

12. Logistics Cost – Macro Analysis
Prepared by N.Chandrasekaran
(Based on Prof.G.Raghuram’s study)

13. Significance of Logistics Costs
Given the opportunity costs and hidden costs (resulting in value foregone), assessment of measurable direct and indirect logistics costs has limited value.

14. Significance of Logistics Costs
Nature of Costs
Direct (transportation and handling)
Indirect (inventory, losses within a system)
Hidden (costs borne by other systems like infrastructure wear and tear, safety, pollution, distortions due to side payments, losses outside a system)
Opportunity (foregone sales transactions)

15. Significance of Logistics Costs
Further, there have been several numbers floating around but we have not found any paper where methodology is explicitly discussed.
In the absence of rigorous methodology, it is difficult to use this number for meaningful discussion.

16. Logistics Costs for the Indian Economy
93-94 prices
Rs billion
Source: CSO Statistics

17. Logistics Costs for India
Nominal Values
Organized Sector
1987
1994
Transportation
38%
45%
Inventory
28%
25%
Warehousing
20%
30%
Packaging
Losses
14%
Total Cost
10%
12%
Logistics Cost
(Rs billion)
250
800
GDP (Rs billion)
2,500
6,700
Source: Raghuram, G, 1992

18. Logistics Costs for the US Economy
Nominal Values
Organized Sector
US: 1990
US: 2001
US: 2002
Transportation
50%
60%
63%
Inventory
20%
40%
37%
Warehousing
24%
Packaging
Losses 6%
Total Cost
11.4%
9.5%
8.7%
Logistics Cost
($ billion)
659
957
910
GDP ($ billion)
5,800
10,080
10,470
Source: CASS Information Systems, 2002

19. Logistics Costs for India (2001-02 and 2002-03)
Nominal Values

20. Logistics Costs for India (2001-02 and 2002-03)
(Rs billion)

21. Logistics Performance
Poor Logistics Quality
Significance of Logistics Costs

22. Petrol price trends

23. Key Actors Shipppers (Users of Logistics)
Suppliers of logistics servcies
Carriers – Rail, Road, pipeline, air, water rope-way
Warehouse providers
Freight forwarders
Terminal operators (ports, stevedores, etc.)
Government – Regulator of Logistics

24. Logistics Displine Management Decision sciences Infrastructure
Engineering
Regulatory