Logistics management is a supply chain management component that is used to meet customer demands through the planning, control and implementation of the effective movement and storage of related information, goods and services from origin to destination. Logistics management helps companies reduce expenses and enhance customer service.
The
logistics management process begins with raw material accumulation to the final
stage of delivering goods to the destination.
By
adhering to customer needs and industry standards, logistics management
facilitates process strategy, planning and implementation.
- Increase revenue
- Improve
operating cost structure
- Reduce
overall transportation costs
- Improve customer service
Importance:
- Logistics management
deals with the coordination of resources in an organization. Logistics
management focuses on the organization as a whole and not on individual
units and departments while deciding about the allocation of resources The
resources may be in the form of men, machines, materials, money and time.
Logistics management helps in the efficient use and deployment of the
scarce resources. In absence of effective logistics management, there will
be a depletion of various meager resources.
- In case a problem
arises, logistics management would investigate the problem and resolve the
same on the basis of costs and benefits to the organization as a whole and
not to any particular department or unit.
·
Logistics
management does away with the ambiguity in the definition of the
responsibilities of individuals, Units and departments in an organization. It
focuses on areas of possible inefficiency and ensures that all areas are
effectively managed. It brings about co-ordination between units and
departments.
Q: Major logistic Function?
Ans: Customer
service
Customer service
has been defined as "a customer-oriented philosophy which integrates and
manages all elements of the customer interlace within a predetermined optimum
cost-service mix. Customer service is the output of the logistics system. It
involves getting the right product to the right customer at the right place, in
the right condition and at the right time, at the lowest total cost possible,
Good customer service supports customer satisfaction.
Demand
forecasting/planning
There are many
types of demand forecasts. Marketing forecasts customer demand based on
promotions, pricing, competition, and so on. Manufacturing forecasts production
requirements based on marketing's sales demand forecasts and current inventory
levels. Logistics usually becomes involved in forecasting in terms of ho\v much
should be ordered from its suppliers (through purchasing), and how much of
finished product should be transported or held in each market that the
organization serves.
Inventory
management
Inventory
management involves trading off the level of inventory held to achieve high
customer service levels with the cost of holding inventory, including capital
tied up in inventory, variable storage costs, and obsolescence. These costs can
range from 14 to over 50 percent of the value of inventory on an annual basis!
With high costs for items such as high-tech merchandise, automobiles, and
seasonal items that rapidly be come/obsolete, many organizations, including
Hewlett Packard. Xerox, and Sears, are giving inventory management much more
attention.
Logistics
communications
Communications
are becoming increasingly automated, complex, and rapid. Logistics interfaces
with a wide array of functions and organizations in its communication
processes. Communication must occur between:
1.
The organization and its suppliers and customers.
2.
The major functions within the organization, such as logistics, engineering,
accounting, marketing, and production.
3.
The various logistics activities listed previously.
4.
The various aspects of each logistics activity, such as coordinating
warehousing of material, work in process, and finished goods.
5.
Various members of the supply chain, such as intermediaries and secondary
customers or suppliers who may not be directly linked to the firm.
Material
handling
Materials
handling is a broad area that encompasses virtually all aspects of all
movements of raw materials, work in process, or finished goods within a plant
or warehouse. Because an organization incurs costs without adding value each
time an item moves or is handled, a primary objective of materials management
is to eliminate handling wherever possible. That includes minimizing travel
distance, bottlenecks, inventory levels, and loss due to waste, mishandling,
pilferage, and damage.
Order
processing
Order processing
entails the systems that an organization has for getting orders from customers,
checking on the status of orders and communicating to customers about them, and
actually filling the order and making it available lo the customer. Part of the
order processing includes checking inventory status, customer credit,
invoicing, and accounts receivable. Thus, order processing is a broad, highly
automated area.
Packaging
Packaging is
valuable both as a form of advertising/marketing, and for protection and
storage from a logistical perspective. Packaging can convey important
information to inform the consumer. Aesthetically pleasing packaging also can
attract the consumer's attention. Logistically, packaging provides protection
during storage and transport. This is especially important for long distances over
multiple transportation modes such as international shipping.
Parts and
service support
In addition to
supporting production through the movement of materials, work in process and
finished goods, logistics also is responsible for providing after-sale service
support. This may include delivery of repair parts to dealers, stocking
adequate spares, picking up defective or malfunctioning products from
customers, and responding quickly to demands for repairs.
Traffic and
transportation
A key logistics
activity is to actually provide for the movement of materials and goods from
point of origin to point of consumption, and perhaps to its ultimate point of
disposal as well. Transportation involves selection of the mode (e.g., air,
rail, water, truck, or pipeline), the routing of the shipment, assuring of
compliance with regulations in the region of the country where shipment is
occurring, and selection of the carrier. It is frequently the largest single
cost among logistics activities.