Lecture 01 : Introduction to Logistics: Design and Management — Transcript

Full transcript

1. 0:26Hello dear friends. So, welcome to NPTEL online  certification course on Logistics and Supply Chain
2. 0:32Management. I am Dr. Vikas Thakur, Assistant  Professor, Department of Humanities and Social
3. 0:37Sciences, IIT, Kharagpur. So, today we will  be starting with our very first session that
4. 0:43is on Introduction to Logistics. And already  we discussed little bit about why I have given
5. 0:52so much preference on logistics while designing  this course as being I have included almost 15 to
6. 1:0020 percent portion to specifically logistics  and including warehousing and transportation
7. 1:06storage as part of supply chain. So, as the first session we are going
8. 1:12to cover the obviously the basic concepts about  logistics and how it evolved, what are the key
9. 1:19elements of logistics management, we will talk  about the stakeholders in logistics management
10. 1:24and what are advantages of effective logistics  management system. So, we will talk about some
11. 1:30modern concepts evolving in the logistics area  and leading towards the comprehensive supply
12. 1:38chain management perspective. We will talk about  some of the national, international forces which
13. 1:45are contributing towards or may be forcing  our logistics and supply chains to develop
14. 1:50in a better way. So, we will talk about this  industry and obviously we will consider the
15. 1:56global as well as the local scenario. So, before we will proceed further I will
16. 2:03just take very simple example and we  will try to differentiate somewhere or
17. 2:09may be relate the logistics function with the  overall supply chain management concept. So,
18. 2:16if I will talk about the very common product we  are using. So, that is let us take the example of
19. 2:24bread. So, everyone is using bread and butter  as their breakfast or kind of short meal. So,
20. 2:31from where it is coming? If I will talk about  the raw material we are using, so maybe we are
21. 2:36using wheat, maybe we are using salt or maybe  sugar or maybe yeast or maybe something else.
22. 2:45So, these all are ingredients which are used to  make the bread. So, if I will take only wheat,
23. 2:51since wheat is coming obviously, as  flour as one of the ingredient and
24. 2:57is coming from where is coming from another  stakeholder which is flour mills right. Now,
25. 3:04flour mills are using their raw material as  wheat grain and which is coming from another
26. 3:11stakeholder you can say the farmers. Now again  farmer are also using so many raw materials like
27. 3:21they are using seeds they are using fertilizers  they are using machines and etcetera pesticides
28. 3:32and all other raw materials to grow their crops  right. So let's take only one example of machine
29. 3:40where they are using let's say tractor for growing  their field so for tractor another stakeholder may
30. 3:50be then it is coming Mahindra and Mahindra  they are purchasing the tractor from that.
31. 3:54Now mahindra and mahindra while preparing that  manufacturing unit so so many different suppliers
32. 4:00are there for manufacturing one unit of that  tractor right so lets take so many different
33. 4:06supply again use supply chain will be there  down the line so if i will take for example
34. 4:11only one component which is as raw material  which is tire now this tire is again made up
35. 4:19of may be we are using rubber and then we are  using steel wires as well so steel wires again
36. 4:26coming from some steel industry steel industry  again taking the raw material from mining and
37. 4:33all that and this supply chain will keep on  keep on growing and going and going till the
38. 4:38end right so this is a complete system so supply  chain management is So, systematic approach. So,
39. 4:46we will consider the whole chain as one system  and whether you are suffering from losses or
40. 4:53you are gaining some profits. So, that will be  shared through all the supply chain stakeholders.
41. 5:00Now, where comes the role of your logistics  function? So, in between whenever we in between
42. 5:07means two stakeholders whenever we are going for  transportation of the material from one end to
43. 5:12other end then comes the function of logistics.  In between whenever we are storing grain in
44. 5:18our warehouses or in our storage houses. So, then again we need logistics functions. So,
45. 5:25logistics means through that supply chain  whenever you are storing whenever you are
46. 5:32transporting physical distribution of the product  from one end to other end will definitely will
47. 5:39be addressed under logistics function. So,  this is not only limited to warehouses and
48. 5:45transportation obviously, in the chain if we  are managing somewhere information also that
49. 5:51will be part included in logistics. So, we can see  the logistic function is subset of supply chain
50. 6:00and because this is very important and why  this is important in the very next slide we
51. 6:06will see why this is so important that we need  to pay special attention when we are managing
52. 6:12our logistics. see if i will quickly talk about  the total supply chain cost so here you can see
53. 6:2050 percent is coming from the transportation which  is again part of your logistics function and then
54. 6:26again if i will add inventory as carrying  cost into this that means approximately
55. 6:3270 percent these two components are carrying. Although this there are so many other elements
56. 6:40we are managing with respect to supply chain with  respect to logistics, but if we will take roughly
57. 6:45amount so that means, 60 to 70 percent cost in  the supply chain is because of your logistics. So,
58. 6:53becomes very important to address this special  function and will prioritize under this function
59. 7:02what are the different elements so that we can  address those elements separately. Quickly if
60. 7:07we will go through this logistic function, if we  will divide this logistic function these are the
61. 7:13major four factors which are contributing. So,  first one is you can see 58 percent is because of
62. 7:20transportation. So, transportation is carrying the  maximum share and if you will see by a road we are
63. 7:28transporting the maximum material which is again  is a kind of limitation that we will talk about
64. 7:33in our further sessions about the transportation  is one particular separate chapter we will see
65. 7:39why we should go for sometimes we should go  for ship transportation, rail transportation,
66. 7:45where air transportation is required. So, we are not saying that completely we should
67. 7:50obsolete any of this these mode, but yes in what  percentage or proportion we should use each mode
68. 7:57of transportation that so many different factors  are there cost may be one sustainability may be
69. 8:03one, another your reliability may be another  one, speed of delivery may be another one,
70. 8:08customer requirements may be the other factor,  right so we will talk about these factor in that
71. 8:16chapter. Second, followed this transportation  is then followed by your inventory carrying
72. 8:23cost. I talked about the carrying cost  whatever we are holding inventory. So,
73. 8:30that is also required. So, again there will  be one session on inventory management.
74. 8:34There will be talk we will be talking about why  inventory is required, because always we have some
75. 8:42gap with the supply and demand so to fill that  gap there is concept of inventory so inventory
76. 8:49management we are always focusing on neither we  should be having excess inventory or we should
77. 8:55not be stock out right so these are the two basic  objectives So, next comes the part of warehousing
78. 9:01which is again a logistics function. So, before  distribution to the end customer we have some
79. 9:07strategic locations where we are defining our  storage, it can be at a temporary storage or it
80. 9:14can be may be for some duration right depending  upon the nature of the product. So, we will be
81. 9:20again discussing about this in detail and there  are some administrative cost related to this. So,
82. 9:26from these facts it is clearly indicated that  logistics is very very important part of any
83. 9:33supply chain so we should focus on this so just  going further I'll just show you this small video
84. 9:44and you'll just see how as a logistics or supply  chain the companies or organizations have evolved
85. 9:51over the time check this out It hasn't been  such a long time since people first started
86. 9:59shopping online, and it was easy to keep up with  the clips. Little by little by little by more,
87. 10:06the clicks added up to be more than the stores,  and e-tailers worked harder than ever before,
88. 10:11because they had to keep up with the clicks. The clicks came from laptops, then tablets and
89. 10:16phones, Monday through Sunday, office  and home, 24 hours in every zone,
90. 10:21and still they kept up with the clicks. Now  shoppers ask more from the websites they're on,
91. 10:26their language, their currency, their way,  or they're gone, so you'd better keep up
92. 10:30with the clicks. All of a sudden, there are  so many must-dos if you want to keep selling,
93. 10:35like delivery there, no, there, or there. And make  it tomorrow, first thing. No time for borders.
94. 10:43Got to stay in control to stay in the flow and  continue to grow. But we'll help you. Keep up
95. 10:51with the clicks. Right, so with this video you  can just imagine the wonder which is happening
96. 11:00at the back end of any supply chain or logistics  with one click how the things are being delivered
97. 11:06at your doorstep or maybe there are different  distribution models depending upon that whether
98. 11:12the customers are picking some pick up locations  and going there and collecting their products
99. 11:16or you are preferring your product should  be delivered at home. but what I'm saying
100. 11:22that the ad says that that you can make that  click from anywhere any part of the world and
101. 11:29then you can pick the product from any other  part of the world right so then once you will
102. 11:35click that so whole team on the back hand will  start collecting your information processing
103. 11:40your information as order processing and all that  and then will make every effort that your product
104. 11:46reaches your home and then it's not end with  another click you can return the product as well
105. 11:54right so the effort which has been put up by the  whole team to ensure the timely delivery of that
106. 12:02product from one end to the other extreme corner  of the world right so with another click the
107. 12:10again this cycle will start right so that is the  promises So coming from all the logistics players,
108. 12:18all the e-commerce websites and they cannot simply  say that returns are not allowed then you can
109. 12:24just imagine the situation of those players. So that means there is no mercy for those players
110. 12:29and they have to evolve like this and the next  generation maybe the scenario will be totally
111. 12:36different where we will be talking about AI and  machine learning and internet of things coming
112. 12:41into picture and then the picture will be totally  changed. but let's go back and then we'll start
113. 12:47the journey of how this logistic function started  so when there was very local view whatever we were
114. 12:55producing there was no concept of kind of economy  or common currency which we can use for making the
115. 13:01transactions and all that so what we were doing as  a local community whatever i was producing maybe
116. 13:06i'll give you to some other person other person  is producing something else he will be giving to
117. 13:12me right. So, this is a kind of local view, but  then we develop this view further and then we
118. 13:18went for a regional right. So, may be at one place  we want to have the access to all the product and
119. 13:26services nearby right. So, then obviously you  can see bull cart or horse cart you can use to
120. 13:31travel up to that much distance, but now this  is obviously not sufficient enough right.
121. 13:37so now I want that if something is being produced  in south part of the country India and then that
122. 13:46should be delivered to the northern region as  well eastern region as well and western region as
123. 13:50well right so if apple is being produced maybe in  the hills top there so that should be distributed
124. 14:00through this kind of supply chain or logistic  should be distributed to every part of the country
125. 14:06not only country then we are talking about should  be distributed to whole world right so Then,
126. 14:12if we are talking about the this country as  one market. So, obviously, we need to develop
127. 14:19the transportation means as well right. So, we can  see that clearly by a road we are going or we are
128. 14:26using trains or sometimes we are using ships if  that infrastructure is available for us right. So,
129. 14:32that is now we are expanding this business to  whole country right now obviously now the ad
130. 14:41says that we can make click and we can pick the  product from anywhere even if you are sitting
131. 14:46here then from if you liking some product from  maybe ah from alibaba or may in China or maybe
132. 14:54you want to ah shop something in US market you can  do from anywhere right so that means you have to
133. 15:01expand your business globally right so expanding  your business globally essentially means that
134. 15:09your supply chain is the first thing you need  to set up your logistic distribution network
135. 15:14is the first thing you need to set up from where  you will source your raw material from it's not
136. 15:20that if you are producing in this country you  can source your raw material here only if you
137. 15:26are finding better options in terms of price in  terms of quality in terms of quantity obviously
138. 15:32you will go cross borders right So, if all those  obviously, if we are going cross border and if
139. 15:39we have localized vendors. So, obviously, there  are some pros and cons with the local vendor as
140. 15:46well and with the overseas vendors as well. but the point here is we are not limited to one
141. 15:52market and we cannot we are forced to expand our  business across the boundaries right so this is
142. 16:02how the logistics over the time has evolved and  Now the only next imagination is if I am clicking
143. 16:09something so automatically the product should come  out of the screen right from where I am clicking
144. 16:15that information. But think about your latest  online purchase and with just one click your
145. 16:22package is so swiftly arrives at your doorstep.  so you just imagine so many different things we
146. 16:29need to align it's not only transportation it's  not only ensuring the inventory or product it's
147. 16:35not only ensuring the quality it's not only  ensuring the speed of the delivery variety so
148. 16:41many different expectations from the customer  perspective right so all those things you ever
149. 16:48wonder how all those things are streamlined and  then the doorstep delivery is done so behind the
150. 16:55scenes magic that ensures your favorite products  are always within reach is logistics so Then what
151. 17:05is logistics? Logistics refers to the management  of flow of goods. I told you that goods are
152. 17:11flowing raw material or may be sub assembled  part or may be final product from one end to
153. 17:17other end. That is one part that is flowing  in that supply total complete supply chain.
154. 17:23so taking care of the flow of the goods then  information is another thing information from
155. 17:29the market what is going to be the demand pattern  what is going to be the expectations from the
156. 17:34customer their preferences right so what quantity  they want what type of quality they want right so
157. 17:40that information is also shared let's say very  small information that uh even because this is
158. 17:47a broader perspective and information plays huge  role when we will talk about the complete supply
159. 17:53chain but here in logistics where the information  is important see if as a delivery partner i am
160. 18:00delivering the packet to the end customer and  end customer has picked the option of maybe cash
161. 18:05on delivery so in that i have to process that  information i have to collect that in cash or
162. 18:11maybe at their doorstep as well they can use UPI  they can use so many different platforms digital
163. 18:18transaction platforms they can use their credit  cards their debit cards so I have to be equipped
164. 18:25with everything every possible option so that my  customer should be relaxed should feel that they
165. 18:31are getting the best services So, that is another  thing then resources sometimes we are moving our
166. 18:37resources from one point to other point. Let us  say if we are talking about project big project
167. 18:42and there we deployed so many different kind  of machines right. So, that project is over
168. 18:48or we are starting the next project then we are  moving the resources as well. It is not only the
169. 18:54machines only we are moving as the resource,  we are moving the manpower as well right. So,
170. 19:00whatever resources either man, money, machine,  material whatever or technology you are using.
171. 19:05So, those kind of resources also you are  transporting from one end to other end
172. 19:11using your logistics. So, obviously,  then it is not only the forward flow,
173. 19:16the obviously reverse flow with another click  can happen and we need to ensure that. So,
174. 19:22we will talk about the range of activities. So,  you can see in logistics function essentially
175. 19:31includes this planning, implementing, controlling  the efficient movement and storage of goods. Now,
176. 19:37it is not only that some way you have to store  or may be any day you can deliver the product.
177. 19:44so efficiency and responsiveness is something  are two extreme ends right so if i'm saying
178. 19:50that within half an hour i want the delivery how  you will make this happen within half an hour yes
179. 19:56this is going to be the reality maybe next decade  within half an hour and amazon already started
180. 20:02this thing where they are planning the instant  deliveries using drone system right so or maybe
181. 20:09uvs right unmanned aerial vehicles they will use  and will drop their baggage or packet packets at
182. 20:17the doorstep or whatever the customer location  is but that is something you cannot say that
183. 20:23we are doing all those things and providing you  the efficient deliveries and then we can charge
184. 20:30extra for that no no no so if you will think in  that way the very next slide says that that you
185. 20:37have to provide the right product this you can see  the right product but at right financial resources
186. 20:47you cannot claim that because we are providing all  those services so price can be little high because
187. 20:53that you need to compete with other players in  the market now let's say seven R's if we will
188. 20:59talk about of logistics is first is write product,  there comes the rule of how the information flows
189. 21:05through your logistics network. When you are  distributing your product to the customer only
190. 21:10then you are recording the information right, that  information is required to supply the next order
191. 21:17or may be it this information can be related  to anything related to your packaging is not
192. 21:22good or maybe not recyclable and that customer is  very environmental conscious kind of thing maybe
193. 21:28there so then information you need to provide to  your supplier that the packaging we need to think
194. 21:34of because now customers are getting aware about  the sustainability and all those things so we
195. 21:39need to shift towards that So, not only packaging  may be sometimes you need to change the design of
196. 21:46your product, you need to add more features into  that. So, that whole information will be flowing
197. 21:52through this network, right quantity. So, right  quantity let us say if I am having a very small
198. 22:00ice cream parlour and I know that in any campus  where may be 10000 students are there. So,
199. 22:07I may consume may be in the end of the day  around 1000 to may be 1500 ice creams daily.
200. 22:17now let's say they they got some occasion or they  are celebrating their placement session or maybe
201. 22:24some incidentally some birthdays are there on  the same day so maybe there may be the demand
202. 22:34which may be around maybe sometimes 3k maybe  5k or maybe even 6k right so that means that if
203. 22:43they are visiting my ice cream parlor every day  and then suddenly if they are asking for higher
204. 22:50quantity right or variety it is not only quantity  or variety. So, I should not say no to my customer
205. 22:57right. So, that right quantity you have to be  flexible enough or your logistic distribution
206. 23:04network should be flexible enough that you can  ensure that availability of the product. Right
207. 23:10time if you are making some promises that your  packet will be delivered at the right time and
208. 23:17because that packet may be associated with some  maybe some occasion we are celebrating and today
209. 23:24evening 6 o'clock we will start our party  so it should be delivered before that right
210. 23:28and right condition obviously if you are  saying that as maybe Zomato or Swiggy that
211. 23:36your services are the best services then if I  am ordering my dinner using your services it
212. 23:42should i should feel that it is directly coming  from the frying pan to my dining table right
213. 23:48so right place what are the different channels  how you are placing your product right to right
214. 23:53customer and right customer we have already  identified through your right information
215. 23:59and then delivering all these services we have  to be efficient as well we cannot say that
216. 24:06providing these many services will increase  our cost no this should not happen. So,
217. 24:12how we can ensure that because even if you  will talk about the main point the Swiggy
218. 24:18entered into this market was the even the single  piece of sweet you can order through Swiggy.
219. 24:24otherwise already there are so many other players  who are doing well in the market how you can
220. 24:28enter right there should be some USP obviously  if I don't want to eat too much sweet or maybe
221. 24:36restricted by the doctors or my diet is not  allowing me whatever may be the reason but today
222. 24:42i just want to taste one piece of sweet so then  swiggy you should go on that and there is no such
223. 24:48requirement of minimum order so here you will talk  about the efficiency because if you are processing
224. 24:53one piece of sweet obviously you cannot say that  that we can be efficient right within thirty
225. 24:59minutes delivery thirty minutes delivery that that  means if your this you are ordering pizza and that
226. 25:07is the person delivery person is covering  10 kilometers to your house right so within
227. 25:1530 minutes that means i cannot wait for another  order so that i can combine the orders and then
228. 25:21the economies of scale concept somewhere i can  ah utilize right so that won't be happening So,
229. 25:31these are some of the challenges. We will go  further and then we will see how we can deal
230. 25:36with these challenges. So, here I have included  some video links. You guys can just quickly go
231. 25:42through these videos and then we will continue our  discussion on the topic. so see how we are making
232. 25:50promises within 10 minutes super fast deliveries  even because obviously the people whosoever
233. 25:58delivery boys they are coming there they have to  come through the normal traffic jams and all those
234. 26:04things we are facing in their routine life but  still we cannot say that this is because traffic
235. 26:09jam is happening every day right so this cannot be  excused for delayed services so Now, how we will
236. 26:19arrange our key elements in logistics in such a  way that your delivery can be ensured on time.
237. 26:27So, these are five key elements under logistics.  First is your transportation. so obviously
238. 26:35all mode of transportation you will use right  intermodal transportation to ensure the fastest
239. 26:41and efficient delivery as well that is on the back  end that we need to ensure as the service provider
240. 26:47we need to ensure the efficient delivery what  customer expects is the fastest delivery they are
241. 26:53hardly bothering about whether we are efficient as  logistics distribution partner or we are not right
242. 26:59second is warehousing before delivering the final  product to the customer we are usually storing
243. 27:05the product in the warehouse so that we can meet  unexpected rise in the demand or sometimes fall in
244. 27:12the demand inventory control is another element  under logistics where we need to take care of
245. 27:19the inventory excess inventory is also dangerous  and if we are below the safety stock that is also
246. 27:24dangerous for the inventory manager right so we  need to maintain the proper level of the inventory
247. 27:31obviously we always cannot say that it should be  like just in time system we can implement in all
248. 27:36the components whatever raw material or final  product we are supplying we cannot go for just
249. 27:42in time so we will discuss about the inventory  control as well in detail order fulfillment this
250. 27:49is a complete process as a customer i'm visiting  zomato website and then i'm placing my order it
251. 27:56will be routed to the restaurant i'm picking  or sometimes the best rated restaurant and then
252. 28:02they will be preparing this and packaging will be  done there my delivery partner will be picking the
253. 28:09packet and then will be shipped finally. So, this  is how order fulfillment happens and in the end
254. 28:18distribution again one complete chapter is there  when we will be discussing about how we can give
255. 28:24different options to the customers while designing  the distribution network. one extreme end can be
256. 28:31that you just click on your system on your mobile  tab whatever laptop you are using and will ensure
257. 28:38the doorstep delivery the other thing can be you  are visiting the retail showroom or whatever shop
258. 28:45and then you want to feel the actual product  you want to see and then you want to buy.
259. 28:51So, we have to be open for all the channels and  we should be able to provide the inventory or
260. 28:58products through all the channels. So, obviously,  the ultimate aim of logistics is to deliver the
261. 29:03correct products to the right location at the  appropriate time while minimizing the expenses
262. 29:10and maximizing the effectiveness. So, competent  logistics management is vital for companies to
263. 29:18meet customer needs, enhance operational  efficiency and also you need to sustain as
264. 29:24competitor in the market. So, this is all  about your the basic concept of logistics
265. 29:34and the key elements of logistics. So, till  now we can conclude that so logistics is very
266. 29:41very important function in supply chain overall  supply chain and we have to meet the customer
267. 29:50requirement their demand in a very efficient way  and effectively right and whatever way if we are
268. 29:58talking about the distribution we are talking  about the doorstep delivery so in that way
269. 30:03we need to meet the customer demands with the  variety with the expectation with the delivery
270. 30:08speed with the quality all those features  keeping in mind we have to be efficient as
271. 30:14well so this is all about the logistics the  basic concept of logistics In the next slide,
272. 30:21we will be talking about in detail what are the  different factors which are forcing us to go for
273. 30:30the next level development in the logistics, what  are the latest developments as far as the research
274. 30:36part is concerned, and as far as the industries  are focusing on that, and we'll talk about this
275. 30:42logistics industry scenario international  as well as the local Indian perspective.
276. 30:48So, these are the books you can refer. So, this  content has been prepared by using these books.
277. 30:56So, first is logistics and introduction  to supply chain management you can refer,
278. 30:59introduction to logistics system management,  and then supply chain management and transport
279. 31:04logistics. Some reference books also are there,  global logistics and supply chain management,
280. 31:10the logic of logistics. So, that is all for  the first session. Thank you very much.