1. Logistics System Design and Administration Module 3
Sulbha Nigam

2. Logistical Positioning
Logistics Environmental Assessment
Time-based Logistics
Alternative Logistics Strategies
Strategic Integration and Logistics
Time-based control techniques
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3. What is Logistics Positioning?
(Or “Strategic”) Logistics Positioning is the process to provide policies and deploy facilities, equipment and operating system to achieve performance goals at the lowest cost.
The plan provides guidelines concerning
How many, what type and where warehouses will be located
What inventory assortment will be stocked at each facility
Philosophy and practice of purchasing
How transportation will be performed and integrated into other areas
Which methods of material handling will be utilized
Methods of order processing
And so forth...
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4. Logistics Environmental Assessment
External factors limit the flexibility of logistics performance and therefore it is important to assess them.
They are
Industry competitive assessment
Geo-market differentials
Technology assessment
Material energy assessment
Channel structure
Economic social projection
Service industry trends
Regulatory structure
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5. Time-based Logistics
Focus is on reducing time from order receipt to order delivery
Highly responsive Logistics add value and reduce costs
Time based Logistics builds on two concepts
Postponement
Consolidation
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6. Time-based Logistics: Postponement
It offers the strategy to reduce the anticipatory risk of Logistics
Risk is reduced to the degree to which commitment to final manufacturing or distribution of the product can be postponed until receipt of customer order
There are two critical types of postponement
Manufacturing or Form postponement
Logistical or Geographic postponement
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7. Time-based Logistics: Postponement
Manufacturing or Form postponement :In this postponement , the standard or base product is manufactured to achieve economies of scale while deferring finalization of features until customer commitments are received.
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8. Time-based Logistics: Postponement
Logistical or Geographic postponement: Such a setup maintains full manufacturing economies of scale while meeting customer requirements using direct shipment capabilities. Focuses on time by stocking differentiated products at a central location and responding rapidly when a customer order is received.
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9. Time-based Logistics: Postponement
Manufacturing Postponement
Logistics Postponement
Production Costs
Mid – High
Low
Inventory Costs
Low - Mid
Distribution Cost
High
Customer Service
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10. Time-based Logistics: Consolidation
Retention of transportation economies associated with large size shipments.
To get maximum transportation consolidation advantage and minimize the effects of unpredictable demand, managers use the following consolidation ways
Market area
Scheduled delivery
Pooled delivery
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11. Time-based Logistics: Consolidation
Market area: Small shipments of different customers are combined based on the delivery area or region. Drawback is that there may not be sufficient daily volume for a particular area.
Scheduled delivery: Limiting shipments for markets based on predefined delivery schedule. The delivery is guaranteed based on this schedule.
Pooled delivery: Freight Forwarder, Public warehouse, Transportation company – Together arrange consolidation for multiple shipper
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12. Alternative Logistics Strategies
There is no single best way that can service all customers
Structural separation
Marketing and Logistics
Separation in practice
Logistical Operating arrangements
Echelon Structure
Direct Systems
Flexible Systems
Emergency Flexible Structure
Routine flexible Structure
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13. Distribution Channel: Logistical and Marketing Separation
Logistical channel
Factory
warehouse
Company
truck
Regional
warehouse
Common
carrier
Public
warehouse
Local
delivery
(1)
(2)
(3)
(4)
(5)
(6)
(7)
consumer
Marketing channel
(5)
General sales
office
Direct sales
office
Distributor
Retailer
(1)
(2)
(3)
(4)
Manufacturer - operated
Operated by other channel members
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14. Distribution Channel: Echeloned and Direct Structured Logistics
Industrial
Distribution or
Consolidation
warehouse
Wholesalers or
Distribution
center
supplier
Manufacturer
Retailers
customer
Industrial
Distribution or
Consolidation
warehouse
Wholesalers or
Distribution
center
supplier
Manufacturer
Retailers
customer
Direct plan delivery
(DPD)
Direct store delivery
(DSD)
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15. Distribution Channel: Complex Alternative Logistics Structure
Flow through
Flow through
Service supplier
arrangements
Service supplier
arrangements
Industrial
Distribution or
Consolidation
warehouse
Wholesalers or
Distribution
center
supplier
Manufacturer
Retailers
customer
Direct plant delivery
(DPD)
Direct store delivery
(DSD)
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16. Strategic Integration and Logistics
Integration of Logistics function with material and suppliers is important to achieve maximum synergy
End result is a series of synchronized capabilities that implement time-based principles in a resource efficient format based on customer-focused requirements
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17. Logistics Time Based Control Techniques
Supply Driven Techniques
Just in Time (JIT) (Kanban)
Requirements Planning (RP)
Material Requirement Planning (MRP)
Distribution Requirement Planning (DRP)
Demand Driven Techniques
Rules Based Reorder Point (ROP)
Quick Response (QR)
Continuous Replenishment (CR) ( or Vendor Managed Inventory (VMI) )
Automatic Replenishment (AR)
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18. Logistics Administration
Organization
Planning, Costing and Pricing
Performance Measurement and Reporting
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19. Logistical Organizational Development Cycle
Fragmented Functional Structures
Stage 2
Functional groupings
Stage 3
Stage 4
Process Functional Integ
Stage 5
Process Infor-mation Integ
Stage 1
Fragmented Functional Aggregation Process Integration
PREVAILING PARADIGM
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20. Traditional Organization of Logistically Related Functions
Chief executive
Finance
Manufacturing
Marketing
Material requirement
planning
Forecasting
Inventory control
Customer sales
Order service
Purchasing
Order processing
Raw material
warehousing
Finished goods
Field warehousing
Credit authorization
Finished goods
Factory warehousing
Management
information
system
Transportation
Facility planning
Industrial
engineering
Production scheduling
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21. Stages of Functional Aggregation: Stage 1 Organization
Chief executive
Finance
manufacturer
Marketing
Finished goods
Factory warehousing
Forecasting
Inventory control
Physical
distribution
Industrial
engineering
Order processing
Transportation
Credit authorization
Production scheduling
Finished goods
Inventory control
Management
information
system
Materials
management
Order processing
Material requirement
planning
Facility planning
Finished goods
Field warehousing
Purchasing
Customer sales
Order service
Raw material
warehousing
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22. Production scheduling
Stage 2 Organization
Chief executive
Finance
Manufacturing
Marketing
Physical
distribution
Industrial
engineering
Forecasting
Transportation
Inventory control
Production scheduling
Order processing
Order processing
Materials
management
Finished goods
Inventory control
Credit authorization
Management
information
system
Material requirement
planning
Finished goods
Field warehousing
Finished goods
Factory warehousing
Purchasing
Facility planning
Raw material
warehousing
Customer sales
Order service
Raw material
Inventory control
Credit authorization
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Distribution system
planning

23. Logistical resource planning Logistical operations
Stage 3 Organization
Chief executive
Logistic executive
Planning
Controlling
Logistical
support
Logistical resource planning
Product market
forecasting
Packaging
Order processing
Material handling
engineering
Functional
planning
Logistical operations
Warehousing
Manufacturing
support
Physical
distribution
Requirement
planning
Purchasing
Inventory control
Transport and traffic
Production
scheduling
Capacity
planning
Material
requirement
planning
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24. Stage 4 Organization: A shift in Emphasis from function to process
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25. Stage 4 A shift in Emphasis from function to process
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26. Stage 5 Beyond Structure: Virtuality and Organizational Transparency
Trend has been to evolve from Functional Aggregation to Process Aggregation (Stage 4)
Process Aggregation has limited the control of Functional owners over complex global logistics
Solution may be a “virtual” organization where IT brings together process organizations to execute logistical functions and removes the need of Organizational hierarchies creating bureaucracy.
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27. Virtual Organization
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28. Concepts having Logistical Significance
Structural Compression
Centralization/Decentralization
Line and Staff distinction
Matrix to Horizontal Structure
Empowerment
Teaming
Learning
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29. Planning Operations Planning Performance Goals Budgeting
Fixed Budgeting
Flexible Budgeting
Zero Level Budgeting (or Target Budgeting)
Capital Budgeting
Final Operating Plans
Operating Plan Modification
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30. Costing Total Cost Analysis Logistics Activity Based Costing
Cost Identification
Cost Time Frame
Cost Formatting
Total Cost Presentation
Outsource Considerations
Cost Revenue Analysis
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31. Pricing Pricing Methods F.O.B. Pricing Delivered Pricing
Single Zone Pricing
Multiple Zone Pricing
Basing Point Pricing
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32. Various Pricing Issues
Potential Discrimination
Quantity Discounts
Pick up allowances
Promotional Pricing
EDLP
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33. Logistical Performance Measure
Dimensions of Performance measurement
Objectives
Monitoring
Controlling
Directing
Perspective
Internal Performance Measurement
Cost
Customer Service
Productivity
Asset Management
Quality
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34. Logistical Performance Measure
External Performance Measurement
Customer perception measurement
Best practice benchmarking
Comprehensive Supply Chain Measurement
Customer Satisfaction / Quality
Time
Costs
Assets
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35. Levels of Measurement and Information Flow
Policy
Chief Executive Officer
Degree Of
Information
Selectivity
Decision
Vice President
Variation
Department heads
Operation Databank
Direction
Line managers
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36. Reporting Report Structures: Status Reports Trend Reports
Ad-hoc Reports
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37. Thank you