THE TECHNICAL UNIVERSITY OF KENYA

SCHOOL OF BUSINESS AND MANAGEMENT STUDIES

DEPARTMENT OF MANAGEMENT SCIENCE AND
TECHNOLOGY
DIPLOMA IN BUSINESS STUDIES (PROCUREMENT
OPTION)
ABBE 321P2: PURCHASING & SUPPLIES
MANAGEMENT

MR. VINCENT ODHIAMBO

 TOPIC 2: INTEGRATED SUPPLY LOGISTICS

Topic Outline

• Concept of supply logistics

• Inbound, outbound and internal logistics

• Importance of integrated logistics

• Concept of total cost and trade-offs

• Added value concept in supply logistics

Concept of Supply Logistics

 Supply logistics, also known simply as logistics, is a critical

component of supply chain management that focuses on the
planning, implementation, and control of the efficient
movement and storage of goods, services, and related
information from the point of origin to the point of
consumption.

 The primary goal of supply logistics is to ensure that

products are delivered to the right place, at the right time,
and in the right condition, while minimizing costs and
maximizing efficiency.
 Key concepts within supply logistics include:

• Supply Chain Management (SCM): • Transportation: Logistics plays a

This is the broader process that crucial role in transportation,
encompasses all activities which involves the physical
involved in the production and movement of goods from one
delivery of goods and services location to another. This can
from the supplier to the customer. include various modes of
SCM includes various functions transportation such as road, rail,
such as procurement, production, air, and sea. Efficient
transportation, warehousing, and transportation is vital for meeting
distribution. delivery timelines and reducing
overall logistics costs.
• Inventory Management: Efficient
supply logistics involves • Warehousing: Warehousing
managing inventory levels to involves the storage of goods in a
ensure that products are facility before they are shipped to
available when and where they the final destination. Effective
are needed. This includes warehouse management includes
maintaining an optimal balance proper storage, order picking,
between demand and supply, packing, and shipping to ensure
minimizing carrying costs, and timely and accurate deliveries.
avoiding stockouts
 …key concepts

• Order Fulfillment: This process • Risk Management: Supply logistics

involves receiving and processing also involves identifying and
customer orders, picking the managing potential risks that could
required products from inventory, disrupt the supply chain. This
packing them, and shipping them includes risks related to natural
to the customer. Streamlining order disasters, geopolitical events,
fulfillment is essential for meeting transportation disruptions, and other
customer expectations and factors that could impact the flow of
maintaining customer satisfaction. goods.

• Technology Integration: The use of

• Information Flow: Timely and technology is integral to modern
accurate information is crucial for supply logistics. This includes the use
effective supply logistics. This of advanced software for inventory
includes real-time data on management, route optimization, and
inventory levels, order status, real-time tracking of shipments.
transportation schedules, and other Technologies like Internet of Things
relevant information. Advanced (IoT), artificial intelligence, and
technologies such as RFID, blockchain are increasingly being
barcoding, and integrated used to enhance efficiency and
information systems are often transparency in the supply chain.
employed to enhance information
flow.
 Inbound, Outbound & Internal Logistics

In the context of supply chain management, logistics can be

categorized into three main types based on the flow of goods
and information, namely:

i) Inbound logistics,

ii) Outbound logistics,

iii) Internal logistics.

Each type of logistics plays a distinct role in the overall supply

chain process.
Inbound Logistics

Inbound logistics refers to the set Procurement & Sourcing:

of processes and activities Involves identifying, selecting, and
involved in the sourcing, negotiating with suppliers to secure
procurement, transportation, and the necessary raw materials,
storage of goods, materials, and components, or finished goods.
components from suppliers or Establishing strong relationships
vendors to a company's with suppliers to ensure a reliable
production or distribution facilities. and timely supply of materials.
Transportation: Focuses on the
movement of goods from suppliers
It is a crucial component of the to the company's facilities.
overall supply chain management Selecting appropriate
process, playing a key role in transportation modes and carriers
ensuring that a company has the to optimize cost and efficiency.
necessary inputs to manufacture
Receiving & Unloading: Involves
its products or provide its services.
the physical receipt of goods at the
company's receiving dock.
Unloading, inspecting, and
Inbound logistics comprises the verifying the received items
following: against purchase orders to ensure
accuracy.
Warehousing & Storage: Efficient inbound logistics has the
Encompasses the storage of incoming following advantages to an
materials in the company's warehouses organization:
or distribution centers. Efficient
warehouse management to organize,
categorize, and store materials  Cost Reduction: Optimizing
effectively. transportation, inventory, and
storage processes can lead to cost
savings.
Quality Control: Conducting quality  Improved Production Planning:
checks and inspections on incoming Timely and reliable delivery of
goods to ensure they meet the specified materials supports effective
standards and requirements. Identifying production planning and
and addressing any discrepancies or scheduling.
quality issues in collaboration with
suppliers.  Reduced Lead Times: Streamlining
inbound logistics processes helps
reduce the time it takes for
Supplier Relationship Management materials to move from suppliers to
(SRM): Building and maintaining strong production facilities.
relationships with suppliers to foster  Enhanced Supplier Relationships:
collaboration and communication. Effective collaboration with
Collaborating with suppliers to improve suppliers strengthens relationships
processes, reduce lead times, and and fosters a more reliable and
enhance overall supply chain efficiency. responsive supply chain.
Outbound Logistics

Outbound logistics is the set of processes and activities

involved in the movement and distribution of finished
products or services from a company's production or storage
facilities to its customers or distribution points.

It represents the flow of products from the end of the

production line to the end consumers, playing a crucial role in
delivering goods to the market and meeting customer
demand.

Effective outbound logistics is essential for ensuring that

products reach customers in a timely and cost-effective
manner.
 Key elements of outbound logistics

Order Processing: Involves receiving and Shipping & Documentation: Arranging

processing customer orders, which may shipments and coordinating with carriers
come through various channels such as for timely deliveries. Managing shipping
online platforms, sales representatives, or documentation, including bills of lading,
customer service centers. Verifying order invoices, and customs paperwork.
details, including product specifications,
quantities, and delivery addresses. Last-Mile Delivery: Involves the final leg
of the delivery process, from distribution
Picking & Packing: Selecting products centers to the end customer's location.
from inventory based on customer orders Last-mile logistics aims to optimize the
(picking). Preparing the selected products delivery route and ensure timely and
for shipment by packaging them accurate deliveries.
appropriately (packing).
Customer Service & Communication:
Warehousing & Storage: Managing Providing information to customers
finished goods inventory in warehouses or regarding the status of their orders,
distribution centers. Organizing and shipping details, and expected delivery
optimizing warehouse space for efficient times. Addressing customer enquiries,
storage and retrieval. concerns, and resolving issues related to
Distribution & Transportation: the delivery process.
Coordinating the transportation of products Returns Management: Handling product
from warehouses to distribution centers or returns and managing the reverse logistics
directly to customers. Selecting process. Streamlining the return and
transportation modes and carriers based on
exchange process to maintain customer
factors such as cost, speed, and the nature
satisfaction.
of the products.
Effective outbound logistics has the following advantages to
an organization:

 Customer Satisfaction: Timely and accurate deliveries

contribute to positive customer experiences and
satisfaction.

 Reduced Lead Times: Efficient outbound logistics helps

minimize the time it takes for products to reach customers.

 Optimized Inventory Levels: Balancing inventory levels

and ensuring the availability of products to meet demand.

 Cost Efficiency: Optimizing transportation and

distribution processes can lead to cost savings.
 Internal Logistics

Internal logistics, also known as in-plant logistics or materials

handling, encompasses the movement and management of
materials within an organization's facilities.

This aspect of logistics is focused on optimizing processes

within the company's premises to ensure the smooth flow of
materials from receiving through production to distribution.

Effective internal logistics contributes to operational efficiency,

reduced costs, and improved overall supply chain
performance.

Key elements of internal logistics include:

Material Handling: Involves the Quality Control: Integrates quality checks
physical movement of materials within a and inspections within the production process.
company's facilities. Utilizes equipment Ensures that materials meet specified
such as forklifts, conveyor systems, and standards before being used in production.
automated guided vehicles (AGVs) to
transport materials.
Work-in-Progress (WIP) Management:
Monitors and manages the flow of materials
through various stages of the production
Inventory Management: Encompasses process. Coordinates with production teams to
the control and tracking of inventory avoid bottlenecks and ensure a smooth
within the company's facilities. Involves production flow.
managing stock levels, conducting
regular audits, and optimizing storage
space. Communication & Information Flow:
Facilitates communication and information
exchange between different departments
Production Support: Ensures that involved in internal logistics, such as
materials and components are delivered production, warehousing, and quality control.
to the production line as needed. Utilizes technology and information systems to
Coordinates with production planning to track the movement of materials in real-time.
align material availability with production
schedules.
Optimization of Processes: Constantly
reviews and optimizes internal logistics
processes to enhance efficiency. Identifies
Storage & Warehousing: Organizes opportunities for automation and technology
and manages the storage of raw integration to streamline operations.
materials, work-in-progress (WIP), and
finished goods within the company's
facilities. Optimizes warehouse layouts to
facilitate efficient storage and retrieval.
Effective internal logistics has the following benefits to an
organization:

• Reduced Material Handling Costs: Streamlining material

handling processes helps reduce labor and equipment costs.

• Improved Production Efficiency: Ensures a steady and

efficient flow of materials to support production schedules.

• Minimized Downtime: Optimized internal logistics helps

minimize downtime by preventing production delays and
bottlenecks.

• Enhanced Overall Supply Chain Efficiency: Contributes

to the overall efficiency of the supply chain by ensuring that
materials move seamlessly within the company's facilities.
Importance of Integrated Logistics

Integrated logistics refers to the seamless coordination and

collaboration of various logistics functions, including inbound,
outbound, and internal logistics, to optimize the overall supply
chain performance.

The importance of integrated logistics lies in its ability to enhance

efficiency, reduce costs, improve customer satisfaction, and
create a competitive advantage for businesses.

The following are some of the reasons why integrated logistics is

important:

Efficiency and Cost Reduction

Integration allows for better coordination of activities, reducing
redundancies and improving overall efficiency. Streamlining
processes across the supply chain minimizes waste, lowers
operating costs, and enhances resource utilization.
Improved Visibility & Communication: Agility & Flexibility:
Integrated logistics systems provide Integrated logistics systems allow
real-time visibility into the entire companies to adapt quickly to changes in
supply chain, from procurement to demand, supply chain disruptions, or
delivery. Enhanced communication and market conditions. Flexibility in logistics
information flow between different operations helps businesses stay
stakeholders lead to better decision- competitive and responsive to dynamic
making and responsiveness to market environments.
changes. Supply Chain Visibility & Traceability:
Optimized Inventory Management: Integrated logistics provides end-to-end
Integrated logistics helps in visibility, allowing companies to trace the
maintaining optimal inventory levels movement of products and materials
by synchronizing demand forecasts, throughout the supply chain. Traceability
production schedules, and order is crucial for quality control, compliance
fulfillment. Reducing excess inventory with regulations, and addressing issues
and preventing stockouts contribute to such as product recalls.
cost savings and improved cash flow. Collaboration with Partners:
Enhanced Customer Service: Integration fosters collaboration between
Integrated logistics enables companies various supply chain partners, including
to respond more effectively to suppliers, manufacturers, distributors,
customer demands and changes in the and retailers. Collaborative relationships
market. Timely and accurate deliveries enable the sharing of information,
contribute to improved customer resources, and best practices, leading to
satisfaction and loyalty. mutual benefits.
Technology Integration:
Integrated logistics often involves the use of advanced technologies such
as IoT, RFID, and data analytics. Technology integration improves
automation, data accuracy, and decision-making capabilities within the
supply chain.
Risk Management:
Integrated logistics enables a more comprehensive approach to risk
management by identifying and addressing potential disruptions across
the supply chain. Proactive risk management helps mitigate the impact of
events such as natural disasters, geopolitical changes, or supply chain
interruptions.
Competitive Advantage:
Businesses with well-integrated logistics operations can gain a
competitive edge in the market. Improved efficiency, reduced costs, and
enhanced customer satisfaction contribute to overall competitiveness.

Integrated logistics is a strategic approach that aligns different

components of the supply chain to work cohesively. It does not only
improves operational efficiency, but also makes firms to be more
responsive, adaptive, and competitive in the dynamic business
environment.
Concept of total cost & trade-off

In logistics, the concepts of total cost and trade-off are

fundamental considerations in making decisions related to the
movement and management of goods throughout the supply chain.

Understanding these concepts helps organizations optimize their

logistics processes, improve efficiency, and enhance overall supply
chain performance.

Total Cost Concept:

It refers to the sum of all costs associated with the logistics
activities within a supply chain. It goes beyond the obvious
transportation costs and includes other relevant expenses such as
inventory holding costs, order processing costs, warehousing costs,
and more.

It comprises of the following components:

 Transportation Costs: Expenses related to the movement of goods
from one location to another.

 Inventory Costs: Costs associated with holding and managing

inventory, including storage, insurance, and obsolescence.

 Order Processing Costs: Expenses linked to processing and managing

customer orders, including order entry and order fulfillment costs.

 Warehousing Costs: Expenses related to the storage and handling of

goods within warehouses or distribution centers.

 Information & Communication Costs: Costs associated with

managing information flow and communication within the supply
chain.

By considering the total cost, organizations can make more informed

decisions that optimize the entire supply chain rather than focusing on
individual cost components in isolation.
Trade-off Concept

Trade-offs in logistics involves making choices between conflicting factors

or objectives. Organizations often face trade-offs between different aspects
of logistics, such as cost and service levels, speed and reliability, or
centralization and decentralization of inventory.

The following examples provide some illustration.

• Cost vs. Service Level: A company may have to decide whether to use a
faster but more expensive mode of transportation to meet customer
demands or opt for a slower but cheaper alternative.
• Centralized vs. Decentralized Inventory: Choosing between centralized
warehouses (reducing inventory costs) and decentralized warehouses
(improving responsiveness and reducing lead times).
• Economies of Scale vs. Flexibility: Deciding whether to consolidate
shipments for economies of scale or maintain flexibility by shipping
smaller quantities more frequently.

Understanding and managing trade-offs is crucial in logistics decision-

making. No single solution fits all scenarios, and trade-offs help
organizations find the right balance based on their specific goals,
constraints, and market dynamics.
Added value concept in supply logistics

The concept of added value in supply logistics refers to the

enhancement or increase in worth that occurs at various stages of the
supply chain as goods and services move from the point of origin to the
final customer.

Adding value in supply logistics involves activities and processes that

contribute positively to the product or service, making it more desirable
to customers. This concept is essential for companies looking to
differentiate themselves in the market and achieve a competitive
advantage.

Some key aspects of the added value concept in supply logistics include
the following:

Product Quality and Features

Enhancing the quality of the product or introducing new features can add
significant value. This may involve using superior materials,
incorporating innovative technologies, or improving design to meet or
exceed customer expectations.
 …key aspects

Efficient Logistics & Supply Chain Sustainability & Social Responsibility

Management
Incorporating sustainable and socially
Streamlining logistics processes and responsible practices in the supply chain can
optimizing the supply chain can contribute to enhance the perceived value of a product or
added value. Efficient transportation, service. Consumers often value
inventory management, and order fulfillment environmentally friendly and socially
reduce lead times, enhance reliability, and responsible business practices.
ultimately improve customer satisfaction.

Branding and Marketing

Customization & Personalization
Effective branding and marketing strategies
Offering customization or personalization contribute to perceived value. Building a
options allows customers to tailor products or strong brand identity, communicating the
services to their specific needs. This unique selling points of a product, and
flexibility adds value by providing a more creating a positive brand image can increase
personalized experience and meeting unique the perceived value of the offering.
customer requirements.

Innovation & Technology Adoption:

Responsive Customer Service:
Embracing innovation and adopting new
Providing excellent customer service, technologies can add value by improving
including responsive communication, quick efficiency, reducing costs, and offering novel
issue resolution, and a user-friendly interface, solutions. This could involve adopting
adds value to the overall customer advanced manufacturing processes, utilizing
experience. A positive customer service data analytics, or implementing automation in
experience can contribute to customer logistics.
loyalty.
Risk Management & Reliability
Ensuring reliability and mitigating risks in the supply chain contribute
to added value. Customers value consistency, and organizations that
can deliver products or services reliably and with minimal disruptions
create additional value.

Collaborative Partnerships
Collaborating with suppliers, distributors, and other partners in the
supply chain can contribute to added value. Strong partnerships can
lead to better coordination, improved efficiency, and shared expertise.

Continuous Improvement
Emphasizing a culture of continuous improvement ensures that
processes are regularly reviewed and refined. This ongoing effort to
enhance efficiency and effectiveness contributes to long-term added
value.
Thank you!

Q&A