SUPPLY CHAIN MANAGEMENT
CHAPTER-08
LOGISTICS IN SUPPLY CHAIN
PREPARED BY:
AFROZA RAHMAT RINKY
LECTURER
DEPARTMENT OF BUSINESS ADMINISTRATION
DHAKA CITY COLLEGE
LEARNING OBJECTIVES
➢Physical Distribution
➢Objectives, Importance and Functions of Physical Distribution
➢Logistics- Definition
➢Logistics Management
➢Logistics- Objectives, Process, Functions, Goals, Components, Decisions , Benefits
➢Third Party Logistics
➢Movement within a Facility(MWF)
➢Incoming and Outgoing Shipments and logistics
➢Distribution Requirements Planning (DRP)
➢Electronic Data Interchange (EDI)
PHYSICAL DISTRIBUTION
Physical Distribution
PHYSICAL DISTRIBUTION
Physical distribution is the movement of goods, products, and
raw materials between warehouses, factories, and
distribution centers, and sending finished products to the
customer.
It involves sales distribution channels, such as ecommerce and
wholesale, and components like customer service, inventory,
materials, order processing, and transportation.
WHAT IS AN EXAMPLE OF PHYSICAL
DISTRIBUTION?
An example of physical distribution is a company transporting goods from a
warehouse to a retail store. The company could use a fleet of trucks to make the
deliveries, or could outsource the transportation to a third-party logistics provider.
OBJECTIVES OF PHYSICAL DISTRIBUTION
IMPORTANCE OF PHYSICAL
DISTRIBUTION
IMPORTANCE OF PHYSICAL
DISTRIBUTION
Increased sales
Faster shipping
Reduced costs
Supports price stabilization
1. INCREASED SALES
Businesses can increase customer satisfaction and sales by using a physical
distribution system that ships products faster and more economically.
That’s why regionalization remains a top priority for many companies.
Almost 90% say they plan to work with regional suppliers and distributors over the
next three years.
The ability to store products in convenient places and move them efficiently is the
key to retailers' continued success in an increasingly competitive global market.
2. FASTER SHIPPING
The biggest benefit of investing in distribution is faster shipping times. Nearly half
(48%) of shoppers say they normally receive packages within 2 and 3 days, and 42%
receive them within 4 to 7 days. Consumers expect faster shipping from all
retailers.
“Investing in a physical distribution system is the most surefire way to shorten
shipping times and keep customers happy. This works by strategically storing items
in several locations all over the country,” says Dan Potter, Head of Digital at CRAFTD,
a premium jewelry brand based out of London.
3. REDUCED COSTS
Another benefit of optimizing distribution is reduced supply chain costs. Areas in
which you can save include:
•Transportation: Using a physical distribution system can speed up and improve your
shipping processes. As a result, you won't have to pay extra for shipping or storage.
•Inventory: You can better balance inventory and meet demand, which leads to
savings on storage fees from holding excess inventory.
•Warehousing: Efficiently moving products leads to lower warehousing costs, since
you won’t have to pay for extra storage space.
4. SUPPORTS PRICE STABILIZATION
Another major benefit of physical distribution is price stabilization. Implementing a
system that can deliver products efficiently and quickly can prevent price spikes
when demand is high and supplies are low.
With a physical distribution system in place, you can fulfill products even when
there is high demand, which keeps prices stable. It also helps you avoid marketing
up prices to cover unforeseen handling and shipping costs.
FUNCTIONS/COMPONENTS/ELEMENTS OF
PHYSICAL DISTRIBUTION
COMPONENTS OF PHYSICAL
DISTRIBUTION
Customer
service
Package and
material
handling
Order
processing
Inventory
control
Warehousing
Transportation
Another
Component:
6. Customer
Service
5. Material Handling
Material handling is the movement,
protection, storage and control of
materials and products throughout
manufacturing, warehousing,
distribution, consumption and
disposal.
6. Customer Service
Customer service is key in physical distribution. Delightful experiences, such as
consistently good service and friendly interactions, impact customer loyalty. Successful
companies set high levels of customer service that guide physical distribution activities.
For example, the company may guarantee:
Immediate responses to shipping-related inquiries.
2-day delivery.
Various shipping options.
These guarantees dictate the shipping and distribution methods a company will use.
Logistics
Introduction
• Many companies state their market-logistics objective as “getting the right
goods to the right places at the right time for the least cost"
• Unfortunately, no system can simultaneously maximize customer service and
minimize distribution cost. Maximum customer service implies large
inventories, premium transportation, and multiple warehouses, all of which
raise market-logistics costs.
• Given that market-logistics activities require trade-offs, managers must make
decisions on a total-system basis. The starting point is to study what
customers require and what competitors are offering.
• Customers want on-time delivery, help meeting emergency needs, careful
handling of merchandise, and quick return and replacement of defective
goods. The company must also consider competitors’ service standards. It
will normally want to match or exceed these, but the objective is to maximize
profits, not sales.
Logistics
• Logistics is the process of planning and executing the efficient
transportation and storage of goods from the point of origin to
the point of consumption. The goal of logistics is to meet
customer requirements in a timely, cost-effective manner.
• Originally, logistics played the vital role of moving military
personnel, equipment and goods. While logistics is as important
as ever in the military, the term today is more commonly used in
the context of moving commercial goods within the supply chain.
What is logistics?
• Logistics refers to the overall process of managing how resources are
acquired, stored, and transported to their final destination.
• It is a science of planning, organizing and managing activities that provide
goods or services.
• Logistics management involves identifying prospective distributors and
suppliers and determining their effectiveness and accessibility.
• Logistics managers are referred to as logisticians.
Logistics management, as defined by The Council of Logistics Management,
refers to the process of planning, implementing and controlling the efficient,
effective flow and storage of goods, services and related information from point of
origin to the point of consumption for conforming to customer requirements .
Logistics management
• Logistics management is a supply chain management
component that is used to meet customer demands
through the planning, control and implementation of the
effective movement and storage of related information,
goods and services from point of origin to point of
destination to meet customer requirements..
• Logistics
management
helps
companies
expenses and enhance customer service.
reduce
Objectives of Logistics Management
Cost
Reduction
Service
Improvements
Meet
Customer
Requirements
Objectives of Logistics Management
• The role of logistics is integral in every industry. The main objectives
of Logistics deals with taking care of 7 R’s these are as follows:
Logistics Management Process
Materials Flow
Suppliers
Procurement
Operations
Necessary Information Flow
Distribution
Customers
Logistics components and Their Roles
Logistics components and Their Roles
The management of logistics can involve some or all of the following business
functions, including
Inbound
transportation
Outbound
transportation
Warehousing
Materials
handling
Order
fulfillment
Inventory
management
Demand
planning
Packaging
Inventory
Information
and control
storage, material
handling and warehouses
in logistics?
• It is to enable a steady stream of
products
to
be
supplied
by
manufacturers.
Why
is
this
important? Manufacturers need to
operate at peak efficiency, but
consumers tend not to demand
goods at the same rate as a
manufacturer supplies them.
• There tends to be an imbalance
between supply, which is steady,
and
demand,
which
can
be
unpredictable. The answer is to
store the surplus goods produced
by a manufacturer until they are
demanded
by
consumers.
To
achieve this, warehouse buildings
What is the role of
packaging?
• A key definition and one of the Rs
of
logistics
is
the
care
and
condition of a product. Packaging is
an essential part of that.
What is the role of
inventory?
• Inventory is a logistics element
that is closely related to storage
and warehousing. It is concerned
with what stock to hold, where
the stock is located and how much
stock to hold. In effect, inventory
is controlling the flows of goods
going into and out of a warehouse.
How is this achieved? By looking at
sales data of past orders and
using various mathematical and
statistical tools to attempt to
predict how much goods will be
demanded
by
consumers.
Inventory management is not an
What is the role of
transport?
• A major element of logistics that
most will recognise is transport.
This
includes
all
modes
of
transport including road vehicles,
freight trains, cargo shipping and
air transport. Without transport,
goods would be unable to move
from one stage to another within a
supply chain. Some goods with
short supply chains, such as foods,
do not travel far. Other more
complex products consist of many
components
that
can
be
transported from all over the
world.
What is the role of
information and control?
• The element of information and
control
is
needed
by
all
the
elements to act as triggers to
various
operational
procedures.
We
have
mentioned
the
information needed for inventory.
Order levels help decide what
orders need to be picked and
packed in warehouses and enable
the planning and organisation of
transport.
Information
and
control’s role is to help design
information
systems
that
can
control operational procedures.
They
are
also
key
in
the
Major decisions regarding logistics
Major decisions regarding logistics
• The firm must make four major decisions about its market
logistics:
• (1) How should we handle orders (order processing)?
• (2) Where should we locate our stock (warehousing)?
• (3) How much stock should we hold (inventory)? and
• (4) How should we ship goods (transportation)?
Major decisions regarding logistics
• There are four major decision areas in supply chain management:
• 1) location, 2) production, 3) inventory, and 4) transportation
(distribution), and there are both strategic and operational elements
in each of these decision areas.
Major decisions regarding -Order
Processing
• Most companies try to shorten the order-to-payment cycle—the
time between an order’s receipt, delivery, and payment. This
cycle has many steps, including order transmission by the
salesperson, order entry and customer credit check, inventory
and production scheduling, order and invoice shipment, and
receipt of payment. The longer this cycle takes, the lower the
customer’s satisfaction and the lower the company’s profits.
Major decisions regarding- Warehousing
• Every company must store finished goods until they are sold
because production and consumption cycles rarely match.
More stocking locations mean goods can be delivered to
customers more quickly but warehousing and inventory costs
are higher. To reduce these costs, the company might centralize
its inventory in one place and use fast transportation to fill
orders. To better manage inventory, many department stores
such as Nordstrom and Macy’s now ship online orders from
individual stores
Major decisions regarding -Inventory
• Salespeople would like their companies to carry enough stock
to fill all customer orders immediately. However, this is not cost
effective. Inventory cost increases at an accelerating rate as
the customer-service level approaches 100 percent.
Management needs to know how much sales and profits would
increase as a result of carrying larger inventories and promising
faster order fulfillment times and then make a decision.
Major decisions regarding Transportation
• Transportation choices affect product pricing, on-time delivery
performance, and the condition of the goods when they arrive,
all of which affect customer satisfaction. In shipping goods to
its warehouses, dealers, and customers, a company can choose
rail, air, truck,
Benefits of Logistics Management
Benefits of Logistics Management
• Given that the movement of goods is what drives cash flow, it stands to
reason that managing that movement—logistics management—is a core
business concern. Indeed, logistics management impacts a company’s
bottom line for better or worse. It’s best not to leave that impact to
chance.
• The following are six major benefits of effective logistics management.
1. Visibility:
• Logistics management affords greater visibility into the supply chain. This
enables businesses to better control costs, tease out efficiencies, spot
supply chain problems, conduct demand planning and gain insights into
opportunities.
Benefits of Logistics Management
2.Reduced overhead:
Logistics management enables companies to reduce overhead in areas
from cutting shipping costs to shrinking how much warehouse space
they need by proactively controlling inventory levels.
3. Improved customer experience:
An excellent customer experience (CX) is the driving factor behind
repeat sales. By delivering orders accurately and quickly, you improve
the customer experience which in turn increase brand loyalty and
future sales.
Benefits of Logistics Management
4. Preventing loss:
Logistics management helps prevent loss in several ways. One is by a true inventory accounting, so your
company knows exactly how much stock it has on hand at any given time. Companies can also track movement
and current location so stock won’t be misplaced or diverted without notice. In addition, by ensuring optimal
storage and transport conditions, such as temperature and moisture management, solid logistics prevents
spoilage and damage.
5.Support expansion:
Demand forecasting supports expansion by realistically calculating inventory needs and ordering, transporting
and stocking accordingly. Further, logistics management best practices help companies scale to fulfill more
customer orders on time.
6. Competitive edge:
Delivering orders correctly and on time is a foundational element in the customer experience—and good CX is
key to repeat orders as well as solid brand reputation and net promotor scores, which in turn help a company
acquire new buyers. Logistics management helps a company consistently deliver, or over deliver, on promises
and sharpen its competitive edge.
The End