ʾ Module 1: Introduction to Logistics
and Supply Chain Management
1. Logistics
Definition
Logistics = movement + storage of
goods, services, and information from
origin to customer.
Aim: deliver correctly, safely, and at low
cost.
Key Focus Areas
1. Transportation – Moving goods by
truck, rail, ship, or air.
2. Warehousing & Storage – Storing
products safely and using space
efficiently.
3. Inventory Management – Deciding
how much stock to keep to meet
demand.
4. Material Handling – Moving items
inside warehouse/factory smoothly.
5. Packaging – Protecting goods during
storage and transport.
6. Order Fulfillment – Receiving and
delivering customer orders on time.
7. Reverse Logistics – Handling returns,
recycling, repairs.
Scope
Logistics mainly deals with the
operational side (transport, storage,
packaging).
It is considered a part of Supply Chain
Management (SCM).
2. Supply Chain Management (SCM)
Definition
SCM = managing all steps from raw
material supplier → manufacturer →
distributor → retailer → customer.
It is broader than logistics.
Key Characteristics
1. End-to-End – Covers entire flow: raw
material → final customer → returns.
2. Inter-Organizational – Connects
suppliers, manufacturers, retailers,
customers.
3. Strategic Coordination – Aligns goals
of all partners in chain.
4. Value Creation – Deliver best
quality/service at lowest cost.
5. Information Flow – Smooth
information sharing is as important as
moving goods.
Scope of SCM
Includes: sourcing, procurement,
production planning, demand
forecasting, logistics, customer
relationship, return management.
3. Objectives/Goals of SCM
1. Enhance Customer Satisfaction –
Deliver the right product, place, time,
quality, quantity, and price.
2. Reduce Costs – Lower inventory,
transport, and production costs.
3. Improve Efficiency &
Responsiveness – Respond fast to
market changes.
4. Competitive Advantage – Beat
competitors with better service or
lower cost.
5. Increase Profitability – Make every
partner in the chain earn more.
6. Build Resilience – Be prepared for
disruptions (pandemics, strikes,
disasters).
4. Historical Evolution of SCM &
Logistics
1. 1950s–1970s: Cost Focus
Each department worked separately.
Aim: reduce cost in purchasing,
production, warehousing individually.
2. 1960s–1980s: Physical Distribution
Focus on outbound logistics (finished
goods delivery).
Improved customer service through
transport & warehouse networks.
3. 1980s–1990s: Logistics
Management
Combined inbound (suppliers) +
outbound (customers) logistics.
Used IT for inventory and transport
planning.
4. 1990s–2000s: Supply Chain
Management
Managed the whole network of
suppliers and partners.
Collaboration, alliances, and
globalization became key.
5. 2000s–Present: Modern Supply
Chains
Global: international sourcing and
production.
Digital: IoT, AI, Blockchain, Automation,
Cloud.
Sustainable: focus on eco-friendly,
ethical practices.
Resilient: prepare for risks and
disruptions.
5. Key Components of SCM
(a) Sourcing
Choosing the right suppliers for raw
materials/services.
Importance: reduce cost, improve
quality, innovate, reduce risks, ensure
sustainability.
(b) Procurement
Actual process of buying
goods/services.
Includes: request, quotation, order,
contract, delivery, payment.
Difference: sourcing = “who to buy
from?”, procurement = “how to buy?”.
(c) Inventory Management
Controlling stock levels to balance
customer demand vs. cost.
Types: raw materials, work-in-process,
finished goods, MRO supplies, in-transit
goods.
Costs: carrying (storage), ordering,
shortage (stockouts).
Models:
EOQ (Economic Order Quantity) – Best
order size.
ROP (Reorder Point) – When to order
again.
Safety Stock – Extra stock for
uncertainties.
(d) Distribution
Getting goods to customers.
Activities: warehousing, transportation,
order fulfillment, customer service.
Channels: direct, indirect, omni-channel.
(e) Logistics Network Design
Deciding number, size, and location of
warehouses/factories.
Factors: cost, customer service,
transport, location.
Trade-offs: cost vs. service,
centralization vs. decentralization.
6. Challenges in Logistics & SCM
1. Globalization & Complexity – Long
supply chains, customs rules, political
risks.
2. Volatility & Uncertainty – Demand
changes, disasters, pandemics.
3. Cost Management – Rising costs of
transport, storage, labor.
4. Technology Adoption – Need to
adopt AI, IoT, Blockchain, while
avoiding cyber risks.
5. Sustainability & Ethics – Reduce
pollution, fair labor, recycle materials.
6. Talent Gap – Shortage of skilled
professionals.
7. Risk & Resilience – Over-reliance on
one supplier/location creates risk.
8. Customer Expectations – Faster
delivery, transparency, personalization,
ethical sourcing.