Logistic in supply chain management
.
ABSTRACT
Logistics is a process which interfaces and interacts with the entire
company and with external companies, vendors, customers, carriers and more.
Logistics is responsible for the movement of products from your vendor’s right
through to the delivery at your customer's door, including moves through
manufacturing facilities, warehouses, third-parties, such as repackages or distributors.
It is not shipping and receiving, nor is it traffic or warehousing. It is more.
In this paper we have explained how the various links of SCM helps us in increasing
the profitability & productivity. We have also elaborated the clear-cut difference
between the logistics & SCM. Finally we have explained how the logistic s helps us in
achieving our business goals.
Logistics must make work effectively. This is required by your customers
and, in turn, by your company.
Dept. of Production engineering
-1-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Introduction
It will not be less than correct to mention that marketing starts with customers and
also ends with customers only. So to say, customer and marketing are inseparable
from each other. Customer is considered king in the market who dictates the market
and makes the enterprise run. Today, what customer wants is better products, lower
prices and faster supplies of goods and services. These enhance the customer delight
and enterprise plight. Meeting customer’s wants have never been simple especially in
a competitive market. Marketers have been engaged in evolving devices to gain
competitive advantage that enables them to satisfy the customer’s wants and stay and
survive in market. In fact, innovate and invent have become, of late, the new mantras
in modern marketing to possess competitive advantage especially in a highly
productive market.
Logistics
Logistics is a logical extension of transportation and its related areas to achieve an
efficient and effective goods distribution system. Thus, logistics encompasses the
activities of inventory management, order processing, warehouse and materials
handling and physical distribution. SCM is the design and operation of the physical
and managerial systems needed to transfer goods and services from vendor to
customer in an effective and efficient manner.
.
Need of logistic
LogicSM is a suite of multi-currency services that help you more effectively manage
your transactions and supply chain. LogicSM, you have complete access to accurate
information regarding inventory, purchases, shipments, returns, exchanges, and much
more. You know what products are where, when they ship, when they'll arrive, who's
buying them, why they're returning them, and how profitable they are:-
Dept. of Production engineering
-2-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management

.
LogicSM gives you control of your supply chain. Continuous visibility of the
movement of your products is available to you, your customers, and your
suppliers. You have the complete information needed to optimize your
operations. Your customers are kept informed, shipment delays are avoided,
and problems in delivery can be quickly corrected. The need for new supplies
can be anticipated for your customers and quickly arranged for.

LogicSM enables you to shorten the delivery cycle by eliminating touch points
and increasing customer satisfaction. Accomplished through intelligent
sourcing and follow the sun logic we ship using the least expensive delivery
path based on availability, cost, proximity and time of day.

LogicSM further enables you to easily track your customers across multiple
channels, including face-to-face field sales, websites, retail business partners,
and catalog sales centers supporting inbound and outbound operations.
LogicSM can provide any or all of the following functions:
Dept. of Production engineering
-3-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Supply Chain Management
What is Supply Chain Management?
Since the introduction of computer into the workplace there has been an
expectation that the manager could push a button and the computer would magically
churn out results that humans used to painfully labour over. Well now that is a virtual
reality though no system is ever that perfect
Here are some official definitions
"MIT's definition is integrated supply chain management is a processorientated, integrated approach to procuring, producing, and delivering products and
services to customers. ISCM has a broad scope that includes sub-suppliers, suppliers,
internal operations, trade customers, retail customers, and end users. It covers the
management of material, information, and funds flows." (Demystifying Supply chain
Management by Peter J Metz from Supply Chain Management Review Winter 1998)
"A supply chain is a network of facilities and distribution options that performs
the functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products to
customers."
NEED OF SUPPLY CHAIN MANAGEMENT
The global competitive environment has made reduced costs, improved
quality, improved responsiveness and customer service, flexibility and better product
availability a top priority agenda for business.
In meeting this challenge, a business can no longer expect that the objectives can be
met just by becoming efficient in it. The situation requires that for value to reach the
Dept. of Production engineering
-4-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
customers, this efficiency be evident even in the suppliers, the distribution channel
and all associated activities and partners.
Global competitiveness today means that the customer is supreme and hence only
those enterprise are going to successful which are able to provide goods and services
to the customer in a timely cost effective manner and also provide quality which not
only satisfies him but delights him.
This engenders the need for supply chain management to ensure that all the elements
participating in the customer value chain can be integrated, coordinates / and managed
effectively to reach the common objective in terms of cost, quality, responsiveness,
service and flexibility. If the supply chain is not managed properly, the delivery
chains is automatically bound to be affected resulting in customer dissatisfaction and
loss of business.
Product catalogs are seamlessly integrated with your entire supply chain to provide
real-time visibility of products using intelligent sourcing logic. Automatic product
code generation, pricing management, including multi-tiered pricing schedules, and
dynamic content management tools provide an easy to use solution built to meet
unique needs.
Supply chain management is about suppliers, manufacturers, third party logistics
providers, wholesalers and retailers sharing information so that goods move faster
through the system. However, what is usually lacking is an overall global or regional
strategic plan that integrates the activities of the many players. A strategic plan that
ensures that the overall cost of delivering goods to customers is the lowest possible
while maintaining the desired service level.
.
Different OR techniques (such as optimization and simulation technologies) lend
themselves readily for addressing issues like: the appropriate product specialization
and production capacity of the plants; location and size of distribution centers;
assignment of customers to be serviced by distribution centers; mode of transportation
Dept. of Production engineering
-5-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
for every link in the supply chain; optimal inventory level to meet desired service
level. The end result is a globally optimized supply chains that perform robustly under
foreseeable future scenarios, thus avoiding costly infrastructure changes.
Difference between logistics and supply chain management
Supply chain management (SCM) encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics
management activities. Importantly, it also includes coordination and collaboration
with channel partners, which can be suppliers, intermediaries, third-party service
providers, and customers. In essence, SCM integrates supply and demand
management within and across companies.
Dept. of Production engineering
-6-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Logistics management is that part of SCM that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services and related
information between the point of origin and the point of consumption in order to meet
customer’s requirements.
Now, SCM can easily be differentiated from logistics. While logistics is a function,
SCM is a process involving entire business activity.
Activities of logistic management
Logistics
management
activities
typically
include
inbound
and
outbound
transportation management, fleet management, warehousing, materials handling,
order fulfillment, logistics network design, inventory management, supply/demand
planning, and management of third party logistics services providers. To varying
degrees, the logistics function also includes sourcing and procurement, production
planning and scheduling, packaging and assembly, and customer service.
It is involved in all levels of planning and execution: strategic, operational and
tactical. Logistics management is an integrating function, which coordinates and
optimizes all logistics activities, as well as integrates logistics activities with other
functions including marketing, sales manufacturing, finance and information
technology.
Dept. of Production engineering
-7-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Relation between logistic and SCM
Supply chain management is the paradigm that is changing business and business
relationships. It reflects the realization that the product pipeline for a business extends
from the vendor right through to delivery to the customer. This makes managing such
a supply chain a joint effort of suppliers and customers to develop and exploit the
savings, service and benefits of SCM.
SCM success just doesn't happen. Six issues must be recognized for maximizing
supply chain management. These ares-1. Logistics skill
2. International sourcing and sales
3. Vendor penetration
4. Tailored versus standard practices
5. Accounting silos
6. Organization silos
1) Logistics skill
Since it is a supply chain, logistics is the keystone to SCM success. It is not about
shipping or warehousing; it is logistics. The logistics focus is as follows;
2) Movement of product
This is more than transportation of goods. The modes and carriers selected must
complement the supply chain strategy and must be responsive to the needs of
customers and the entire chain.
3) Movement of information.
Information technology is key to being responsive. It must be both internal--the
enterprise--and external, with customers and suppliers.
Dept. of Production engineering
-8-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
4) Cost
This is the cost of the entire supply chain, both operating and capital. It is not the cost
of discrete cost factors such as freight or warehousing.
5) Time/service
Supply chain management is tailored to and responsive to each customer. To gain a
competitive advantage, service and time compression is vital to keep customers
replenished and inventories under control.
6) Integration
The integration of systems and people, teamwork, must be both internal and external.
If it is not, then there are gaps, potential for delays and errors, and failures in the
supply chain process.
Understanding service means knowing more than just the port-to-port rotation
schedule. It includes the inland movement, container availability and other aspects
that affect the total movement time. The greater distances with international impact
the time inventory is moving in the supply chain. In-transit inventory can be a positive
factor as an inventory buffer.
Yet it is also unavailable for satisfy customer orders. Longer transit times have a
direct effect on lead times and cycle times and on inventory levels, both of which
impact sales responsiveness and operating capital requirements. Just-in-time, vendor
managed inventory and other programs have to recognize the time factor.
Manufacturing must build in the total time in its production schedule. Purchasing
must select vendors that are dependable in meeting their schedules; delays have a
domino effect throughout the supply chain.
Dept. of Production engineering
-9-
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
CASE STUDY
Consumer Products Industry Inventory Management Case Study
Luxottica Group
With annual sales of $2 billion, Luxottica Group is a world leader in the design,
manufacture, marketing and distribution of eyeglass frames. The company’s brands
include Giorgio Armani, Yves Saint Laurent, Ray Ban, and Emanuel Ungaro.
Luxottica strives to maintain excellent customer service levels, while maintaining the
minimum stocks and short time-to-market for all their products.
Luxottica distributes its own products in 120 countries around the world through 29
wholly-owned branches and approximately 100 independent distributors. Through
Lens Crafters and Sunglass Hut International, Luxottica occupies a leading position in
the North American optical retail market, with more than 2,500 stores. A detailed
study of Luxottica’s supply chain concluded the following:

Some articles had low seasonality and long lifecycles, while others such as
sunglasses, behaved like fashion items with short lifecycle, lots of models, etc.

Lack of correct logistics parameters (lead time, average delay, purchasing lot
size)

The same warehouse treatment for all products without considering product
mix

Lack of a Client Service Policy strategy

Excess user intervention in the planning process
Dept. of Production engineering
- 10 -
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Luxottica decided to implement a tool to strategically analyze stock levels, choosing
DPM, an inventory optimization solution from Tools Group, to accomplish the
following:

Create the forecast for all the products, including fashion items

Reduce stock levels

Adjust production to market needs and quick changes

Reduce logistics costs

Position the inventory to be able to react quickly to market changes
As a result of the project, DPM optimizes inventory for 2,500 models that
become 27,000 finished products in a complex distribution network with 5
manufacturer sites, 23 distribution centers, and more than 800 points of sale (with an
average of 70 additional points of sales per year). The entire DPM Solution was
implemented in six months and achieved the following benefits:

In the first six months, Luxottica reduced inventory levels by 10% while
maintaining the same high service level.

Luxottica reduced manual intervention in the planning process by 50%, while
then progressively increasing service levels.
The goals set for DPM - to reduce stock, to improve stock mix and to
further increase our service level - were therefore very ambitious. With DPM and the
support of Tools group we were able to carry out this project and achieve the set
goals," says R. Chemello,
Dept. of Production engineering
- 11 -
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
Closing Remarks
Logistics is a process which runs from the vendor's door through to the customer's. It
interacts with almost every group within the company and with many companies
outside the company, including its customers.
Effective logistics revolves around five key issues--movement of product, movement
of information, time/service, cost and integration. Each of this is critical to the success
of logistics and to creating value-added to the company and improving
competitiveness.
Dept. of Production engineering
- 12 -
KIT’s college of engineering, Kolhapur.
Logistic in supply chain management
.
References

The New Supply Chain 2000, Business Today

Best Practice in Supply Chain Management, Gower, Hampshire

Supply Chain Management by vasant & Rajani Renu

www.luxottica.com
Dept. of Production engineering
- 13 -
KIT’s college of engineering, Kolhapur.