5.Logistics management and organization.
Logistics is generally the detailed organization and implementation of a complex
operation. In a general
business
sense, logistics is the
management
of the flow of things between
the point of origin and the point of consumption in order to meet requirements of customers or
corporations. The resources managed in logistics may include tangible goods such as materials,
equipment, and supplies, as well as food and other consumable items. The logistics of physical
items usually involves the integration of information flow,
materials handling
,
production
,
packaging
,
inventory
,
transportation
,
warehousing
, and often
security
.
In military science, logistics is concerned with maintaining army supply lines while
disrupting those of the enemy, since an armed force without resources and transportation is
defenseless. Military logistics was already practiced in the
ancient world
and as modern military
have a significant need for logistics solutions, advanced implementations have been developed.
In military logistics, logistics officers manage how and when to move resources to the places
they are needed.
Logistics management is the part of
supply chain management
that
plans
,
implements
,
and
controls
the
efficient
,
effective
forward, and reverse flow and storage of
goods
,
services
, and
related
information
between the
point of origin
and the
point of consumption
in order to meet
customer's requirements. The complexity of logistics can be modeled, analyzed, visualized, and
optimized by dedicated
simulation software
. The minimization of the use of resources is a
common motivation in all logistics fields. A professional working in the field of logistics
management is called a logistician.
Logistics management involves the integration of transportation, inventory, facilities, and
communications to provide a level of logistics service desired by customers and middlemen at
the lowest possible cost.
An appropriate logistics system requires an appropriate physical distribution design,
efficient inventory management and an excellent customer service level.
Desired/Required service levels
Incremental revenue
Incremental cost of goods
Resource variables Inventory facilities Transportation information
Contribution to Profit
Investment Operating Costs Inventory Carrying Costs Bricks and Warehousing Costs Mortar
Equipment Transportation Costs and Leases Systems Clerical/Operating Development &
Hardware Costs
Physical distribution activities are concerned with the storage and the movement of the
finished products after their production and before their consumption. According to Saxena,
―The term physical distribution refers to the outbound logistics or to the flow of products,
services and information from the firm to the consumer through a defined network of
transportation links, distribution nodes and a dedicated network of computers linking the firm to
the customer. This network may tie the firm to an individual customer or to other firms that may
either use the product for further value addition or to distribute it to a larger market‖.1 According
to Kotler, ―Physical distribution involves planning, implementing and controlling the physical
flows of materials and final goods from points of use to meet customer requirements at a profit‖.2
According to perreault and McCarthy, ―Physical distribution concept the requires that
transporting, storing and product handling activities of a business and a whole channel system
should be co-ordinated as one system that seeks to minimize the cost of distribution for a given
service level‖.3 From the various definitions, it can be said that physical distribution relates to the
physical flow of goods from the manufacturers to the consumers and also between the producers
to the marketing middlemen. In the present day industrial set up there is the need for an efficient
logistics system, which should enable quick deliveries and also be capable of easy tracing of
inventory.
Importance of Physical Distribution Management Physical distribution provides place-
utility and time-utility to a product. In other words, it is physical distribution that makes the
product available at the right place and at the right time, thereby maximizing the company‗s
chance to sell the product and strengthening its competitive position. Physical Distribution Costs
The costs of physical distribution rank third in the total cost of goods and are exceeded only by
costs of raw materials and labour. Economies achieved in physical distribution of goods will go a
long way in reducing the total logistics costs. According to Ramaswamy and Namakumari,
―Physical distribution is a fertile area for cost savings. Over the years, in most businesses,
physical distribution costs have grown into a sizable chunk of the total costs and now ranks
second among all cost elements, next only to material costs. And surprisingly, it has remained
one of the neglected areas of cost control‖.6 Till recently, cost reduction has been being adopted
in the production and the marketing functions. Now, it is being adopted even in physical
distribution management. Savings effected thereby lead to a healthy bottom line. Physical
distribution efficiency is closely related to customer service. Inventory Management Inventory
management is the ―buffer‖ in the logistic system. It is another important elements of physical
distribution management. Inventories are needed in industrial channels because of three
important reasons. First, production and demand for industrial products are not perfectly
matched. Secondly, operating deficiencies in the logistics system often would result in product
unavailability e.g. delayed shipments, inconsistent carriers‗ performance. Thirdly, industrial
customers cannot predict their product needs with certainty e.g. a machine breakdown or a
sudden need to expand production. Inventory is an alternative method for providing the level of
service required by industrial users. The level of inventory is determined on the basis of cost,
investment and revenue.
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