Fundamentals of Logistics and Supply Chain Management
Domain 1 - Fundamentals of Logistics and Supply Chain Management
This domain tests whether you can define logistics and supply chain management precisely, explain how modes and cost trade-offs work, and compute the basic service metrics that appear on performance reports you will file and circulate.
Definitions examiners reward
- Logistics is the part of the supply chain that plans, implements and controls the efficient forward and reverse flow and storage of goods, services and related information between origin and consumption to meet customer requirements.
- Supply chain management is wider: it coordinates procurement, production, logistics and customer service across partner firms.
- The 7 Rs: right product, right quantity, right condition, right place, right time, right customer, right cost.
Cost and mode logic
- Total logistics cost = freight + inventory carrying + warehousing + handling + order processing + service failure cost. A cheaper truckload that arrives late and damages stock is not cheaper overall.
- Road dominates Indian freight through flexibility and last-mile reach; rail suits bulk over long hauls; air suits high-value, urgent or perishable cargo; water is cheapest per tonne-km for bulk.
- Lead time = order processing + procurement/production + transit + receiving and put-away.
Worked example
A warehouse despatches 200 order lines in a month. 190 lines are shipped complete, and 180 of those are also delivered within the promised date.
- Line fill rate = 190 ÷ 200 = 95%
- OTIF (on time in full) = 180 ÷ 200 = 90%
Reasoning: fill rate measures quantity completeness only; OTIF multiplies completeness by punctuality, which is why OTIF is the lower number here.
Traps that cost marks
- Writing that logistics and SCM are the same thing.
- Optimising freight alone without mentioning inventory or damage.
- Reporting fill rate as OTIF performance.
- Ignoring reverse logistics (returns, packaging take-back) when asked for the full flow.