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UNIT-1 BBA III Year Notes – Logistics Management (Osmania University)



Logistics Management, Inbound, Internal and Outbound Logistics in SCM, Developing the Logistics organization for effective Supply Chain Management, development of Integrated Logistics Strategy, Logistics in Maximizing profitability and cash flow, 3PL, 4PL, International Logistics, Reverse Logistics.

Development of Integrated Logistics Strategy

  • Integration has been one of the dominant themes in the development of logistics management.
  • The process of integration has transformed the way that companies manage the movement, storage, and handling of their products.

The process of logistical integration can be divided into four stages:

Stage-1: The first stage in the process is generally considered to have been the “revolution in physical distribution management,” which began in the early 1960s in the U.S.A. and involved the integration into a single function of activities associated with the outbound distribution of finished goods.

Stage-2: PDM was initially concerned only with the distribution of finished products. The same general principle was subsequently applied to the inbound movement of materials, components, and subassemblies, generally known as “materials management. By the late 1970s, many firms had established “logistics departments” with overall responsibility for the movement, storage, and handling of products upstream and downstream of the production operation.

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Stage-3: Having achieved a high level of integration within the logistics function, many firms tried to co-ordinate logistics more closely with other functions. Most businesses have a “vertical” structure built around a series of discrete functions such as production, purchasing, marketing, logistics, and sales, each with their own objectives and budgets. Logistics can play an important co- ordinating role, as it interfaces with most

Stage-4: To achieve wider, supply chain optimization it is necessary for companies at different levels in the chain to co-ordinate their operations. This is the essence of supply chain management (SCM). The main driver of SCM over the past 20 years has unquestionably been the desire to minimize inventory.

Reverse logistics:

“The process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.”

Any process or management after the delivery of the product involves reverse logistics. If the product is defective, the customer would return the product. The manufacturing firm would then have to organize the shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing of the product. The product would travel in reverse through the supply chain network in order.

Logistics in Maximizing profitability and cash flow:

When you think about Supply Chain optimization you typically think of improving delivery times, delivery accuracy and customer service. Here are four suggestions for how an organization can improve profitability by making quick and simple savings:

Inventory Management:

Organizations must find the right balance between minimizing their stocks and being able to meet order demands. The threat of a stock shortage must be visible before it actually arises.

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Supplier Cash Control:

A great deal of insight can be found in the supply and payment agreements with suppliers.

There are a number of elements to consider:

  • How you can avoid purchasing unnecessary stock (through automated order placement),
  • Avoidance of costs for corrections in orders and supplies
  • The optimization of the payment behavior of suppliers.

Operating Expenses Control:

There can be reasons for incorrect supplies occurring, and instead of simply correcting the relevant order, it’s important to search for the point in the process where the error arose in order to prevent the same mistake from happening again.

Customer Cash Control:

By continually measuring whether the right product in the right quantity is delivered to the right place at the time required by the client, supply processes can be further optimized and costly errors avoided.

Reducing the term between ordering and payment, solving late payments, making missing payments visible and invoicing for them can save a great deal.

Third-party Logistics (3PL):

  • Third-party logistics companies handle physical distribution and logistics.
  • 3PL companies can do this by using their own resources, such as warehouse facilities, and their network of freight transportation providers to help clients ship or store their products appropriately.
  • Whether in transit or in storage, 3PL companies leverage their experience to ensure that all steps are taken to keep the

3PL companies tend to specialize in:

  • Inbound and outbound freight
  • Customs
  • Freight consolidation
  • Warehousing
  • Distribution
  • Order fulfillment
  • Cross-docking
  • Inventory management

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Fourth-party Logistics (4PL)

  • A 4PL company does not stop at outsourcing logistics services but also outsources the management of said services.
  • Generally, 4PL companies have no way of transportation or warehousing, but rather use the transportation and warehousing services of a 3PL company.

4PL companies tend to provide (generally through 3PL partners):

  • Distribution
  • Procurement
  • Storage

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