Logistics is a concept valuable to any firm, regardless of its size. Sometimes equated only with large organizations, logistics offers significant competitive advantages to small firms as well.
A logistics system can be made up of many different functional activities, some of which are described.
Customer service: it’s a multidimensional and very important part of any organization’s logistics effort. In a broad sense, it is the output of the entire logistics effort; that is customer service and some resulting level of satisfaction are what the logistics system ultimately provides the buyer. However, many organizations do have a more narrow functional view of customer service as something they actually perform.
Inventory Management: It deals with balancing the cost of maintaining additional products on hand against the risk of not having those items when the customer wants them. This task has become more complex as firms have gradually lowered inventory levels. The challenge in this situation is to manage the rest of the logistics system to accommodate the lack of inventory so that customer service does not suffer. However, all of the interest in reducing inventories notwithstanding, the fact remains that they are still necessary for serving customers in many markets.
Transportation:It refers to the physical movement of goods from a point of origin to the point of consumption and can involve raw materials being brought into the production process and/or finished goods being shipped out to the customer. Transportation has assumed a greater role in many logistics systems.
Storage and material handling: It addresses the physical requirements of handling inventory. Storage encompasses the tasks necessary to manage whatever space is needed; material handling is concerned with the movement of goods within that space. Thus, the former would consider issues related to warehouse number, size, layout and design; the latter would focus on the systems needed to move goods into, through, and out of each facility. Obviously, an organization’s inventory policies will have a direct impact on its storage and handling needs. Thus, one result of the move to smaller inventories is the requirement of less storage space.
Packaging: It focuses on protecting the product while it is being shipped and stored. Too much packaging increases costs while inadequate protection can result in merchandise damage and, ultimately, customer dissatisfaction. Furthermore, since every bit of packaging is ultimately discarded, logistics managers must also consider the societal costs associated with waste disposal. Increasingly, firms are working to develop materials that provide requisite levels of protection yet are recyclable or quickly biodegradable.
Information Processing: Its what links all areas of the logistics systems together. The growth of reasonably priced computers and software has put sophisticated management information systems within the reach of even smallest organization. Indeed, firms are now linking their integral logistics information systems with those of their vendors and customers as a means of adding more value to the entire channel.
Demand forecasting: It addresses the need for accurate information on future customer needs so that the logistics system can ensure the right products and/or services are available to meet those requirements. Logistics requirements necessitate going beyond market sales forecasting to obtain specific data on the timing, mix and quantity benefits desired by buyers. Without this information, the logistics system runs the risk of comprising customer satisfaction rather than enhancing it.
Production planning: It can be included under logistics because manufacturing needs components and raw materials to make finished goods that are, in turn, demanded by a customer. Thus, production planning is arguably at the center of the logistics process.
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