1

After this unit you should be able to answer following questions

A. Concept Questions
1. Commodities market
2. Concept of Supply Chain Management is a favorable out come of Integration of internal functions
in an organization
3. Co-operation is better than competition is an outdated concept in current environment
4. Total Cost Approach leads to ignoring of individual inputs to Supply Chain
5. Logistical Competency is competitive Logistical Information System
6. Logistical function is significant in global business
7. Logistical Mission is irrelevant to Customer satisfaction
8. Marketing has nothing to offer in the absence of logistics
9. Logistics Interface With Marketing
10. Functions Of Logistics Management
11. Importance Of 3Cs

B. Short notes Questions

Role of planning in logistics management
Logistics interface with marketing
Material handling equipment
Inbound logistics
Importance of 3Cs
What is SCM?/Logistics management
Logistics overview and its implications
Different attributes of logistics management and need of coordination
of different organizational departments with that of logistics
Outbound and inbound logistics
Military logistics
C. Section II descriptive questions [10 marks each]questions ]
Explain in detail various parameters to achieve logistical competency

Explain the concept of integration in logistics operation

Logistics interaction with other departments & its contribution to the
bottom line
What are operational objectives of logistics? Explain briefly.

Impact of cooperatives on inbound logistics

logistics competency can be achieved by coordinating information,
transportation, inventory into network design

What is integrated logistics? Distinguish between logistics &

SCM
List down basic work involved in logistics. Explain any one
Explain the concept of SCM
from activity centered functional organization to Consumer Focused
Process Organization is major change in SCM. Comment.
Distinguish between any two. Logistics and SCM/SNM &
DNM/SCM & DCM
Define logistics management. Explain the growing importance of
logistics management in India in global era.

D. Review all the past university question papers. You should be able to answer questions from the
portion Overview of Logistics function as described below
a.

Meaning and concept of logistics? Definition, Genesis of modern

b.
c.
d.
e.

logistics
Importance of logistics
Operational objectives of logistics
Logistical functions
Important concepts: SCM, Logistical Interfaces with production
& marketing, 3Cs, Logistical mission etc.

ELEMENTS OF LOGISTICS MANAGEMENT

WHAT IS LOGISTICS?
Logistics is concerned with getting the products and services where they are needed and when they
are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It
involves the integration of information, transportation, inventory, warehousing, material handling,
and packaging.
The operating responsibility of logistics is the geographical repositioning of raw materials, work in
process, and finished inventories where required at the lowest cost possible.
The formal definition of the word logistics as per the perception of Council of Logistics
Management is the process of planning, implementing and controlling the efficient, effective
flow and storage of goods, services and related information from the point of origin to the point
of consumption for the purpose of conforming to customer requirements.
Mission of logistics is providing a means by which customer satisfaction is achieved. Art of moving,
lodging and supplying troops, supplies and equipment is logistics. Concept of logistics has moved
into business to move, lodge and supply inputs and outputs.
Logistics is practiced for ages since organized activity began. Without logistics support no activity
can be performed to meet defined goal. The current challenge is to perform logistics scientifically in
order to optimize benefits to the organization.
Logistics is a planning function of management. Logistics function is concerned with taking
products and services where they are needed and when they are needed.
Logistics ensures that the required inputs [what] to a value adding process are made available,
where they are needed, when they are needed and in the quantities [how much] they are needed. It
also ensures that the outputs of the value adding process are made available where they are needed
when they are needed and in the quantities [how much?] they are needed.
There are many ways of defining logistics but the underlying concept might be defined as follows:
Logistics is the process of strategically managing the procurement, movement and storage of
materials, parts and finished inventory through the organization and its marketing channels in
such a way that current and future profitability are maximized through the cost-effective
fulfillment of orders.
GENESIS OF MODERN LOGISTICS
Several Modern Management concepts are born or refined in the crucible of II World War. You
may remember several OR techniques like Value Analysis & PERT/CPM have their origin in the II
World War. Resources come under pressure in a war, like no other time and one is expected to
deliver results in spite of all odds. These trying situations forced the military planners to evolve

solutions to their problems. After the war these concepts traveled to business where resource crunch
is usual. In business there is no enemy, but there are competitors who pose threat to the organizations
survival.
Field Marshall Rommels words that before they are fought, battles are won or lost by
quartermasters speak about the importance of logistics.
There are several examples where battles are lost due to long & ineffective supply lines.
Logistics received great importance in military planning and subsequently became a very important
management function in the course of last 40 years.
Logistical management includes the design and administration of systems to control the flow of
material, work in process and finished inventory to support business unit strategy
OVERVIEW OF LOGISTICS FUNCTION
Logistical History of India: India was a maritime power since about 300 BC, trading with several
countries of the world bringing prosperity home. Traders of Surat brought riches to the country by
extensive maritime trade. Like many of our excellent practices, logistical efficiency also faded away
over a period of time.
Some important logistical feats in history:
1.

Berlin Airlift 1945: A study in logistics. When the city of Berlin was blockaded by Soviets
and all supply lines were cut off, Americans planned and executed a major logistics operation to
feed the city from air.

2. Indians in the Gulf countries 1991:

1n 1991, when gulf war broke out, Indian Government evacuated thousands of Indians from the
gulf countries and brought them home in a massive exercise employing Indian airlines planes.
3.

Operation Overlord-1945: Allies invasion of Europe and subsequent victory In II World War.

4. American war of Independence

Keeping 12,000 soldiers armed and fed from England was a big task; British lost the American
war of independence due to bad logistics.
What causes bad logistics?
a.

Infrastructure: Bad roads, inefficient railways, poor communication lines, and congestion in the
ports.

b.

Taxation: e.g. Octroi

c.

Information: Inadequate information

d.

Management: Poor management decisions

IMPORTANCE OF LOGISTICS.[you may also read Physical distribution

Management: Logistical approach by K.K.Khanna page # 8]
Logistics is the bed rock of trade and business.

1.

Without selling and or buying there can be no trade and business. Buying and or selling

takes place only when goods are physically moved into and or away from the market.

Take away logistical support trade and business will collapse

2.

Leads to customer satisfaction through superior customer service.

Organizational objectives of P[Productivity],Q [Quality],C [Cost],D [Delivery],E [Employee
Morale],F [Flexibility],S [Safety],H [Health],E [Environment] are set to meet customer
expectations of Q,C,D.
Q, C, S, H, E are parts of must be quality that a customer expects. Logistics addresses D, F
objectives which lead to customer satisfaction through superior customer service
Integrates logistical activities

3.

In conventional management environment, various activities of logistics work in isolation under

different management functions. Each pocket trying to sub optimize its objectives at the cost of
overall organizational objectives. Purchasing trying to purchase at minimum price at the cost of
what is needed by operations. Operations produce large quantities at minimum production cost
ignoring demand leading to doom inventory. Logistics function of management brings all such
functions under one umbrella pulling down inter departmental barriers.
4.

Competitive edge: In the fiercely competitive environment logistics provides the edge. Due to
technological revolution most of the products are moving into commodity markets. In a
commodity market where price is controlled by competition, where there is no product
differentiation in terms of quality parameters like performance & reliability, where brands are
almost irrelevant, competitive edge is that of availability of product and service in terms of time,
place and quantity.
Logistics wins or loses wars

5.

British lost American war of independence due to poor logistics

6.

Rommel was beaten in the desert by superior logistics of Allies

Supports critical functions like operations and marketing

Strong logistics support enables a company to move towards JUST IN TIME production system
for survival in a highly competitive market

a) Interface with marketing

These days marketing a product is increasingly on the strength of availability and flexibility as we
discussed earlier. Stronger emphasis is on the last of four Ps of marketing [product, price,
promotion and place]. Logistics provides the interface between production function and marketing
function. Marketing is trying to sell the product in the market place. Logistics makes the product
accessible to marketing by acting as interface between the function that produces it and the
function that makes the consumer buy it.
This interface is gaining importance due to following changes that are sweeping the market
making many companies adopt JUST IN TIME production system.
a. change in the customer: demanding, knowledgeable, conscious of rights, lacking in brand loyalty,
changes preferences very fast, expects very high degree of service
b. many products are moving towards commodities market: product differentiation in terms of
quality of performance is vanishing and brands are losing their magic.
As a result of above we find that availability is an important determinant of purchasing decision.
7.

Logistical costs: For individual businesses logistics expenditures are 5% to 35% of sales
depending on type of business, geographical areas of operation, weight/value ratios of products
and materials. This is an expensive operation. Improvement in the efficiency of logistics function
yields savings as well as customer satisfaction
WHY SHOULD WE LEARN LOGISTICS?
HOW OR WHY DOES LOGISTICS BECOME IMPORTANT FOR MANAGEMENT
STUDENTS?

1. Impact on cost of creating and delivering of product to the customer

2. provides competitive edge to business
3. crucial to survival and prosperity in global trade and business
4. many products have short life cycles
5. more & more logistics experts are going up the hierarchical ladder
6. leads to the concept of supply chain management
7. Logistics is important in the Indian market due to the sweeping changes, which are taking place.
a. Competition: Internal as well as external
b. Shift from sellers market to buyers market
c. Changing customer
d. Expanding business, growing exports
e. Corporate mangements Shift towards modern management concepts like Lean management, Just
In Time, Total Quality Management etc.,

IMPORTANCE OF LOGISTICS MANAGEMENT IN INDIA

[Explain the growing importance of logistics management in India in todays context
Q4 2001]
I.

Liberalization and opening our door to competition

II. Global business has long supply & distribution lines

III. Changing Indian customer, aware, demanding and less brand loyal
IV. Competition ensures that product differentiation in terms of quality is difficult
V. Product life cycles are shrinking
VI. Our markets are shifting from sellers to buyers
VII. Many consumer products are moving into commodities market
VIII.

India is a large country. Large distances separate production and consumption centers.
Essential commodities have to travel from Food Corporation warehouses to consumers
through PDS.

IX. Logistics performance has not been impressive

X. Fruits and vegetables are grown at various places but do not enjoy access to market
WHAT ARE THE OPERATIONAL OBJECTIVES OF LOGISTICS?
[sh. note Oct03] concept Oct03
1. Rapid response
F-flexibility objective of an organization: Some companies measure this as response time to
customers order. On an average how much time do we need to fulfill one particular type of
customers order in a year? This is a measure of Rapid response
Logistics should ensure that the supplier is able to respond to the change in the demand very fast.
Entire production should change from traditional push system to pull system to facilitate rapid
response. Instead of stocking the goods and supplying on demand, orders are executed on
shipment to shipment basis. Information Technology plays an important role here as an enabler.
IT helps management in producing and delivering goods when the consumer needs them. This
results into reduction of inventory and exposes all operational deficiencies. Now the management
resolves these deficiencies and slashes down costs. [Concept of SMED and KANBAN as practiced
by JIT companies in Japan or elsewhere]
2. Minimum variance
D-delivery objective of an organization, this can be measured as On Time Delivery or OTD. If
100 deliveries are made in a month/quarter/year how many reached as per the commitment made
to the customer? This percentage is OTD.

Any event that disrupts a system is variance. Logistics operations are disrupted by events like
delays due to obstacles in information flow, traffic snarls, acts of god, wrong dispatches, damage
in transit. Traditional approach is to keep safety stocks and transport the goods by high cost mode.
The cost of this approach is huge. Logistics is expected to minimize these events, thereby
minimize and improve on On Time Delivery.
3. Minimum inventory
This is component of cost objective of a company. Inventory is associated with a huge baggage of
costs. It is termed as a necessary evil. Objective of minimum inventory is measured as Inventory
Turns or Inventory Turnover Ratio. Americans call this measure as turn velocity. Logistics
management reduces these turns without sacrificing customer satisfaction. Lower turns ensure
effective utilization of assets devoted to stock. [Concept of single piece flow as practiced by JIT
companies in Japan or elsewhere]. Logistical management should keep the overall well being of a
company in view and fix a minimum inventory level without trying to minimize the inventory
level as an isolated objective
4. Movement consolidation
Transportation is the biggest contributor to logistics cost. Transportation cost depends on product
type, size, weight, distance to be transported etc. for transporting small shipments just in time
[reduction in inventory costs] expensive transport modes are used which again tend to hike the
costs. Movement consolidation is planning several such small shipments together [of different
types of shipments] by integrating interests of several players in the supply chain. Generally, large
shipment size and long distances reduce transportation cost per unit. Movement consolidation shall
result into reduction in transportation costs.
Quality
If the quality of product fails logistics will have to ship the product out of customers premises and
repeat the logistics operation again. This adds to costs and customer dissatisfaction. Hence
logistics should contribute to TQM initiative of management. In fact, commitment to TQM has
made the managements world over wake up to the significance of logistics function. Logistics can
play a significant role in total quality improvement by improving the quality of logistics
performance continuously and continually.
5.

Life cycle support [cradle to cradle logistical support- produce, pack (cradle) and repack(cradle)]
Logistics function is expected to provide life cycle support to the product after sale. This includes

a.

After sales service: the service support needed by the product once it is sold during its life cycle

b. Reverse logistics [concept Oct03] or Product recall as a result of

rigid quality standards [critical in case of contaminated products which can cause

environmental hazard]
-

transit damage [leaking containers containing hazardous material]

product expiration dating

rigid laws prohibiting unscientific disposal of items associated with product [packaging]

Rigid laws making recycling mandatory

Erroneous order processing by supplier

Reverse logistics is an important component of logistics planning

INFORMATION
SYSTEMS
- Internal &
External
Information flow

NETWORK
DESIGN
- Suppliers,
operations,
TRANSPORTATIO
warehouses
N
- Water, Road, Rail,
Pipeline & Air

WARE
HOUSING
INVENTORY
LOGISTICS
- Storage,
When
to
order?
FUNCTIONS
Handling,
How much to
Packing &
order? Just In
Distribution
Time

10

LOGISTICAL FUNCTIONS [components of logistics or elements of logistics]

[Functions of Logisticsshort notes 2001]
Information management
Management is appreciating importance of information as an element of logistics of late, now. The
role of information is vital in order processing. Quality of information is critical as error in
composition of information requirement creates potential disturbance in the supply chain. Incorrect
order processing due to erroneous information will result into product recall and reshipment if the
sales opportunity still exists.
Faster and quality information flow from customer to processor results into cost effective logistics.
Forecasting and order management are two areas of logistical work dependent on information.
Forecasting is an effort to estimate future requirements to position inventory or assets devoted to
inventory. As forecasting becomes unreliable in a fast changing environment, control strategies
like JIT, Quick Response and Continuous Replenishment came into being. Now it is the task of the
logistics function to use information technology to strengthen operation control and forecasting
to the best advantage of the organization.
Leading firms typically have information systems capable of monitoring logistical performance on
a real time basis giving them the capability to identify potential operational breakdowns and take
corrective actions prior to customer service failure. In situations where timely corrective action is

11

not possible, customers can be notified in advance and thereby taking the surprise out of
forthcoming service failures
1. Inventory control
Keeping the stock levels in such a position, so that neither stock out nor stock piling takes place is
Inventory control. While formulating inventory policies find out 20% of the products marketed
that account for 80% of the profit.
2. Transportation
Transportation is the most visible of all elements of logistics and high contributor to logistics
expenditure. Costs of transportation are mainly as follows
a. Movement costs: money paid for moving material across geographical terrain
b. Preservation costs: money spent on preserving the material during transit
c. Cost of idle asset: inventory is unavailable for conversion during transit. This results into costs
for organization
d. Administration costs: money spent on administration
Transportation is accomplished in three ways
a. Ones own fleet private carriage
b. Contract with specialists on long term basis contract carriage
c. Contract on individual shipment basis common carriage
Expectations from transportation service are
a.

minimum cost transportation costs are explained earlier

b.

Speed: speed of transport means the speed with which goods reach the destination.

c.

Consistency: consistency in speed is achieving the same speed over a long period of time.
Consistency reflects on the reliability of carrier. Any unexpected variance can play havoc with
logistics. Modern information technology has made continuous tracking of consignments possible.
This takes the element of surprise out. IT has helped logistics managers to seek out ways and
means to improve speed and consistency. What is becoming important is a combination of speed
and consistency.
Requirement of speed depends on type of industry. In some situations speed may not be important.
Then transportation service offering high speed increases cost. So logistics managers have to strike
a balance between service and cost. Three important aspects of transportation are facility location,
transportation cost and consistency.
Design of logistics system should consider total costs rather than elemental cost of transportation

3. Warehousing

12

Warehousing is holding material before dispatch after it is produced. Although warehousing is

conventionally considered to be a storage facility, it plays a much higher role from logistics
viewpoint. It is perceived to be a switching facility rather than a storage facility. Warehouse
ownership can be private, public or third party contract. Warehouse provides economic and service
benefits to the logistical system.
Economic benefits are Movement Consolidation, Break-bulk, Cross-dock,
Processing/Postponement & stock piling.
Service benefits are spot stocking, assortment, mixing & production support
5. Material handling
Material handling covers receiving, moving, storing, dispatching activities. It has an
impact on cost [capital as well as running], quality and safety. One of the principles of
material handling is minimum movement. Commonly used material handling
equipment
are forklifts, EOT Cranes, hoists, pulley blocks, trolleys, railroad cars, conveyers, ropes
and slings etc.
6. Packaging
Packaging is done to make handling and transporting cost effective. It protects the product in
transit and handling. Packing is expected to facilitate lifting and moving by providing easy access
to forks or hooks. Packing is also expected to display universal symbols and other instructions for
handling. Eg. pallets and containers, wooden boxes, wrapping etc.
Types of packaging: consumer packaging and industrial packaging
Consumer packaging - There is no focus on logistics. Importance is given to marketing appeal
and packaging the finished product.
Industrial packaging importance is given to logistics considerations handling and moving.
Individual parts are packed in cartons or bags and grouped together as master cartons.
Master cartons are grouped into units for handling. This concept leads to unitization and
subsequently to containerization.

13

SOME IMPORTANT CONCEPTS

Logistics Management and Supply Chain ManagementDevelopment of Logistics and
Supply Chain Management Concept[Logistics and Supply Chain Management by
G.Raghuram, N.Rangaraj. Page #15, The Management of Business Logistics by Coyle,
Bardi, Langlely Page # 13 ]
a. 1950 1960: Importance of examining costs and benefits in physically moving the goods to
customers came into focus in post war1950s. We have seen earlier that concept of logistics was
born in the crucible of warfare and came into business after the end of II world war. Idea of total
system cost emerged during this period. Analyses of trade off situations between costs of several
activities, selection of modes of transport keeping total system cost in mind are fallout of this
concept. It can be understood that selection of water as a mode of transport gives low
transportation cost that will result into high transit inventory adversely affecting total system cost.
Initially outbound logistics was in focus as value of the finished goods inventory is high.
I
N

V1

V3

V2

I
N
V

F
O

V5

Receiving stores

I
N

I
Inbound
N
Logistics

Procurement

I
N
V

INBOUND
LOGISTICS

F
O

PROCUREMENT

V4

Outbound
Logistics
OPERATION
I

Operation

OUTBOUND
LOGISTICS

F
O

N
V

Finished Goods Stores

I
N

F
O

MarketR4
R3

W3
R5

R6

I
N
V

DISTRIBUTION

14

W1

W2

I
N

R1

R2

I
N
V

F
O

A new management function called Physical Distribution Management emerged integrating various
activities on the outbound side like transportation, warehousing, packaging, customer
service etc.
Advent of electronic era of 1960s made information a strong component of physical distribution
management. Inbound logistics was still considered to be a concern of vendors and did not receive
the attention of management.
b. In 1970s strengthened by IT, physical distribution management started looking into some
aspects of financial management subsystems. Monitoring and planning for efficient completion of
cash cycle became attached to physical distribution management. Around the same time
importance of inbound logistics was appreciated. c. In 1980s physical distribution management
function came to be called logistics management encompassing inbound and outbound logistics.
During this time this function started looking closely into logistical operations adopting modern
concepts like TQM & TPM to logistical operations.
d. 1990: This concept expanded, all up stream and down stream organizations and activities were
brought closer for mutual cooperation in order to gain benefits of QCD. This idea of external
integration is Supply Chain Management.
Definition: the management of upstream and down stream relationships with suppliers and
customers to deliver superior customer value at less cost to the supply chain as a whole. Supply
Chain Management looks beyond the confines of organizations to deliver value to the end user at
minimum cost. Supply chain is visualized as a pipeline through which products from raw materials
stage to the end user. Supply Chain Management is ensuring that this flow is smooth and quick.

15

Henry Ford visualized the importance of this flow in early 1990s [L/M, Bowersox page 88] and
expanded his business to cover raw materials, their deposits, forests, plantations and even
transportation activities like shipping lines. His business interests extended beyond the frontiers.
This diverse expanse of business gave him final control on the supply chain but became nonviable
due to labor problems and unwieldy bureaucracy. He realized that smaller independent
organizations were more efficient and cost effective in delivering value and shifted his focus to a
network of competent dealers.
Idea of supply chain management
Supply Chain Management aims at breaking down organizational barriers
a] to share sales information on real time basis that reduces inventories and need for safety
stocks. This is called supply chain compression resulting into inventory reduction and larger
inventory turns. Dell Computers considered to be leaders in computers business have recorded 50
inventory turns in 1997, IV Q, whereas Compaq could manage only 10 turns.
b] Smoothen the flow of information both ways [orders reaching the suppliers, and products
reaching the that results into reduced delivery time or reduction of lead-time resulting into
shortened cash-flow cycle
Ref fig.6
particulars
Scope

Logistics management
Inbound logistics, in process

Supply chain management

All players in the supply chain

inventory [movement from one

from raw material source to

plant to another], outbound

finished product consumer,

logistics

vendors, their vendors, supplier

organization[shipper],
Warehouses, service providers,

How this is

By internal integration of logistics

customers, their customers

By external integration of roles of

created in

functions handled by various

various players in the supply

business?

management functions within

chain.

Main

organization
Logistics cost reduction by

Supply chain profitability by value

objective

integrating resources across the

creation.

definition

pipeline
Logistics is the process of

Management of upstream and

strategically managing

down stream relationships with

procurement and storage of

suppliers and customers to deliver

16

material , part and finished

superior customer value at less

inventory [and related information

cost to the supply chain as a

flow] through organization and its

whole.

marketing channels in such a way

that current and future profits are
maximized through cost effective
Origin

fulfillment of order
A very old concept in military

As a logical extension of logistics

focus

planning.
L/M tries to take the product to

management
SCM focuses on value creation in

the consumer at minimum

the supply chain. Hence this is

logistical cost. Hence it is supply

customer focused or demand

driven.

driven.

2. Business functions of logistics management [physical distribution management:

logistical approach by K.K.Khanna page # 13]
As discussed earlier logistics is a concept of military planners. But now it has found its way into
business.
I] Business logistics is planning, implementing and controlling efficient & effective flow and
storage of goods, efficient & effective flow services, and related information from point of origin
to point of use or consumption in order to meet customer requirements.
a. Food and agricultural products: We are familiar with warehouses owned by Food Corporation of
India. The government in these warehouses stores huge quantities of procured food grains. These
stocks are subsequently moved to outlets of Public Distribution System. This is a logistical
operation by Govt. of India in Agricultural Products Sector
b. Raw materials and finished engineering, chemical, pharmaceutical goods.
c. Consumer durable goods: Logistical Management is receiving attention in industry as many
consumer durable products are moving into commodities market.
II] Business logistics plays the role of facilitator for trade and business. It makes business happen.
3. Logistical mission[Logistics and Supply Chain Management by Martin Christopher,
Page # 13, Logistics Management by Bowersox Page #9]
Mission of logistics is to achieve business objectives by delivering desired quality of service at the
lowest total cost. This is nothing other than delivering QCD expectations of the customer by

17

planning logistical operations at minimum cost. This can also be called creating customer value at
minimum cost. The illustration below shows that

Transportation

Warehouse

290

M/H
Customer service
goals [QCD]
At market type A
Customer service
goals [QCD]
At market type B
Customer service
goals [QCD]
At market type C

Functional Inputs to Logistical Management

Fig. 7

18

logistical mission cuts across functional lines to achieve business objectives at minimum cost.
Logistical mission is a set of goals to be achieved at a particular type of market for a particular
type of product. Naturally this is responsive to competition. Hence logistical mission is to achieve
above goals at minimum system cost. Focus is on mission rather than on isolated functions.
Mission of logistics is providing a means by which customer satisfaction is achieved. Ref Fig.7
4. Role of planning in logistics management

Role of planning is central to logistics management

Mission of logistics management is to plan and coordinate all those activities necessary to achieve

desired levels of service and quality at lowest possible cost.

Logistics is fundamentally a planning concept that seeks to create a frame work through which

needs of the market place can be translated into a manufacturing strategy and plan

Logistics makes one plan, integrating various resources of the organization that replaces

traditional concept of planning in pockets

5. Logistics interface with marketing[Logistics and Supply Chain
Management by Martin Christopher, Page # 37,]
Interface is a common wall or surface between two objects, concepts or functions. It can also be
common area/areas of performance or interest. Outbound logistics plays an important role in selling
the product of the company as it moves the product through the distribution system to the customer.
Hence it is called the other half of marketing. In several instances making the product available at the
right time at the right place itself is the key to successful selling. A student of management very well
knows four Ps of marketing. We have already seen the role of logistics as far as Place is concerned.
It is quite interesting to see the interface with respect to other Ps as well.
Price: Logistics enables marketing to quote a competitive price by providing discount opportunities
on account of Transportation cost savings. Logistics Manager can plan the size of the consignment
confirming to the most economical schedules published by transportation service providers to save
transportation costs. If order size matches with the favored size the benefits are substantial. Logistics
Management has to balance inventories to tackle anticipated price-triggered sales.

19

Product: Inputs of logistics manager are quite important as far as the size and shape of the product
are concerned. Size and shape of the product can make logistics nightmarish, thereby adding huge
amount of costs. Weight/volume ratio plays very important role in deciding economics of logistics.
The story of Gillette is well known logistical circle. The low weight, unwieldy floor display proved
to be a very expensive logistical operation. While consumer packaging provides sales push in a
retailers shop, it can make industrial packaging difficult due to its shape and ability to protect the
contents. Product and its packaging is a common area from the point of view of logistics.
Promotion: Logistics Management is required to manage inventory needed to match sales triggered
by promotional activities in the market. Marketing Management & Logistics Management need to
work closely in deciding promotional strategies for the product. Promotional strategies may be push
or pull type. Logistical problems may be faced in either or both, but being aware takes the punch
away from the blow!
Place: Marketing decision to distribute the product directly to retailers or through wholesalers has a
great impact on logistical operations. Demand placed by wholesalers is more streamlined as
compared to retailers. Logistical management of retailers demand often requires time sensitive
transportation methods which are expensive.
In addition to the four Ps, customer service is another area where marketing & logistical
mangements have to work closely to effectively beat the competition.
6. Inbound & outbound logistics
[What do you understand by inbound and outbound logistics? Explain with examples
Q5[a] May03]
Inbound Logistics
Creation of value in a conversion process heavily depends on availability of inputs on time. Making
available these inputs on time at point of use at minimum cost is the essence of Inbound Logistics.
All the activities of a procurement performance cycle come under the scope of Inbound Logistics.
Scope of Inbound Logistics covers transportation during procurement operation, storage, handling if
any and overall management of inventory of inputs. Several activities or tasks are required to
facilitate an orderly flow of materials, parts or finished inventory into a manufacturing complex. They
are sourcing, order placement and expediting, transportation, receiving and storage. Overall,
procurement operations are called inbound logistics. A procurement cycle is shown below. Inbound
logistics have potential avenues for reducing systems costs.
Delivery time, size of shipment, method of transport & value of products involved are different from
those of physical distribution cycles. Normally delivery time is large as a low cost transportation

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mode is chosen. As the value of inventory is low size of shipment is large & transit inventory costs
are low. As the price of products is lower, trade off between cost of maintaining inventory in transit
and low cost transport exists to the benefit of the organization.
Inbound logistics

Sourcing

Receiving

Order
placement
& expediting

Transportation

Outbound Logistics
Value added goods are to be made available in the market for customers to perceive
value. Finished goods are to be distributed through the network of warehouses and
supply lines to reach the consumer through retailers shops in the market. During
conversion value is added to the raw materials and as a result value of the inventory in
this case is very high unlike inputs. Now the size of shipment, modes of transport and delivery time are different as
compared to inputs. Activities of distribution performance cycle come under the scope of Outbound Logistics. They are
order management, transportation, warehousing, packaging, handling etc.
6.

Importance of 3Cs competitive advantage by effective logistics management [Logistics and

Supply Chain Management by Martin Christopher, Page # 5,]

The three Cs in business are Company, Customer and Competition. All the three C are vital
for healthy business and prosperous economy. Buying decision is always triggered by a need a
consumer is experiencing due to the stress he is under. Customer is attracted by value when he is
about to make a buying decision. Competitors in business continuously add value to their products
in order to be ahead in the competition. Any supplier organization or Company tries to be better
than the Competition by utilizing their assets efficiently and effectively. Ref. Fig.12
The Supplier Company tries to differentiate her products in terms of functional quality and product
cost. Competition has ensured that technology and human skills are almost same everywhere.
Hence product differentiation in terms of functional quality and product cost is nearly impossible.
But a great opportunity exists for the Supplier Company to differentiate her products by service

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and logistics cost by superior logistics. When this happens customer sees better value in the
products of Supplier Company as compared to competition.
Importance of 3Cs

Value
C company
By effective utilization of
assets tries to create and offer
value to customers

C customers
Look for value, benefit at
lowest price

Cost differentials

Value
C competitor
By effective utilization of assets
tries to create and offer value to
customers

7. Logistics overview and its implications

a. Birth and development of logistics in post war business since 1950. [Refer our earlier notes]
b. External integration of supply chain and concept of Supply Chain management 1990
c. Elements of Logistical Management function
d. Scope of Logistical Management
e. Significance of logistics in Business Management, the time and place
a. Overall goal of Logistical Management function
11. Different attributes of logistics management and need of coordination of different
organizational departments with that of logistics [Logistics and Supply Chain Management by
Martin Christopher, Page # 31, Logistics Management by Bowersox Page # 33]
Attributes of Logistics Management [what makes Logistics Management distinct from other
departments?]
1. Functions of logistics are spread across various stages of value chain.
2. Provides interface between marketing and customers, marketing and operations, operations and
supplier
3. Provides competitive edge to business in the current environment
4. Handles flow of information and materials.
5. Large avenue for cost reduction.
Need of coordination of different organizational departments with that of logistics
The above features show the complexity and scope of logistics management. For such a management
function to function effectively various pieces of jigsaw puzzle should fall at correct places which

22

requires coordination of all functional departments. If we want to solve a jigsaw puzzle, we need to
have the complete picture on the box. In the absence of this picture solving the puzzle becomes
impossible. Overall coordination of different organizational departments can provide the complete
picture. This requires integration of all functions of logistics.
If a firm does not consistently satisfy time and place requirement it has nothing to sell in the market,
it is simply out of business. Good logistics alone can enable organizations to do business. To enjoy
full benefits of logistics, full range of functional work must be performed on an integrated basis.
Excellence in each aspect of functional work is relevant only when it is viewed in terms improving
overall efficiency and effectiveness of integrated logistics. This requires that the functional work of
logistics be integrated to achieve business unit goals.
12. Logistical competency. [Logistics Management by Bowersox Page # 7]
What is logistical competency?
Competency is the ability to perform a function. Logistical competency is the ability of the firm to
perform logistical function effectively and efficiently.
Definition: Logistical Competency is the relative assessment of a firms capability to provide
competitively superior customer service at the lowest possible total cost. It is a strategy to provide a
superior service at a total cost below industry average. Its aim is to view how logistics can be
exploited as a core competency so that fits into a firms overall strategic positioning
How can this be achieved?
1. Strategic positioning by the company - developing logistics as core competence of the
company
2. Using logistics to gain competitive advantage in creating customer value [every companys
business goal]
Logistical competency can be achieved by performing logistical functions effectively. To understand
logistical excellence in each aspect of functional work is relevant only when it is viewed in terms of
improving overall efficiency and effectiveness of integrated logistics.
In the above process of achieving logistical competency the firm should coordinate all functions well.
Network design should integrate the need of information, transportation & inventory. These elements
play important roles in overall effectiveness of logistical function. A well designed Network keeping
in view the objectives of the company is primary for logistical competency.

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13. Concept of Integration in Logistics Operation.. [Logistics Management by Bowersox

Page # 33]
What is the concept of Integration in Logistics Operation?
In order to perform various functions of logistics in coordinated fashion bringing all functions of
logistics under one operational command is important. Performance of these functions in an isolated
fashion is detrimental to the objectives organization. Performance in isolation loses sight of overall
picture. It is like trying to solve a jigsaw puzzle without complete picture before you.
What do we integrate? Information flow, inventory flow, procurement, operations support, physical
distribution.
Concept of Integration in Logistics Operation

Inventory flow
Customer

Physical
distribution

Manufacturing
support

Procurement

Suppliers

Information flow

If we view the above graphic we see all internal logistical operations in an organization. We
also see their close relationship with each other and the need to perform them in an
orchestrated fashion.

14. Value added role of Logistics

Different types of economic utilities like form utility, place and time utility and possession utility add
value to a product. In other words make product attractive and trigger purchase.

a) Form Utility is given by Production to a product when conversion process is held. Logistics
also adds form utility when warehousing activities like mixing, assembling, processing
postponement or unpacking take place.

b) Place and Time Utility is given by logistics functions when a product is moved to a needed
place on time to serve the customer

c) Possession Utility: Marketing creates Possession Utility by promoting the product by

advertising and or by any other means. But logistics finally possession by customer happen
Role of value added Logistics

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PRODUCTION
Form Utility

LOGISTICS
Place &
Time Utility

MARKETING
Possession
Utility

Fig. 25