Importance of Logistics and Supply Chain
Q: explain the importance of logistics / Supply Chain Management & What Strategies and planning Use with it. Discuss ANS : Before the explain the importance of Logistics I want to introduce the logistic history . Early people had the choice of Consume the goods at their immediate location or moving the good to a preferred site and storing them for a letter use . However because no well Developed transportation And Storage system yet existed . the movement of goods was limited to want and individual could personally move . storage of commodity was possible for only short time. This limited movement –storage system generally constrained to people live close to the sources of production Even today in some Areas of world Consumption and production take Places only within a very limited geographic region some population live in Small Self Sufficient Villages and most of goods needed by the resident are produced in the immediate Vicinity . few goods are import ted from other areas . therefore production Efficiency and Economics Standard of living is low . n this type of economy a well Developed and inexpensive logistics system would encourage an exchange of goods with other production areas of the country or even in the world In start I want to put some Definition of supply chain management Monczka, Trent, and Handfield (1998) Supply Chain Management requires traditionally separate materials functions to report to an executive responsible for coordinating the entire materials Process, and also requires joint relationships with suppliers across multiple tiers.
SCM is a concept, “whose primary objective is to integrate and manage the sourcing, flow, and control of materials using a total systems perspective across multiple functions and multiple tiers of suppliers. ” La Londe and Masters (1994) Supply chain strategy includes: “… two or more firms in a supply chain entering into a long-term agreement; … the development of trust and commitment to the relationship; the integration of logistics activities involving the sharing of demand and sales data; the potential for a shift in the locus of control of the logistics process. Stevens (1989)
The objective of managing the supply chain is to synchronize the requirements of the customer with the flow of materials from suppliers in order to affect a balance between what are often seen as conflicting goals of high customer service, low inventory management, and low unit cost. Houlihan (1988) Differences between supply chain management and classical materials and manufacturing control: “1) The supply chain is viewed as a single process. Responsibility for the various segments in the chain is not fragmented and relegated to functionalareas such as manufacturing, purchasing, distribution, and sales. ) Supply chain management calls for, and in the end depends on, strategic decision making. “Supply” is a shared objective of practically every function in the chain and is of particular strategic significance because of its impact on overall costs and marketshare. 3) Supply chain management calls for a different perspective on inventories which are used as a balancing mechanism of last, not first, resort . 4) A new approach to systems is required—integration rather than interfacing. Jones and Riley (1985) Supply chain management deals with the total flow of materials from suppliers through end users.. Cooper et al. (1997) Supply chain management is “… an integrative philosophy to manage the total flow of a distribution channel from supplier to the ultimate user. Supply Chain Management Activities 1. Integrated Behavior 2. Mutually Sharing Information 3. Mutually Sharing Risks and Rewards 4. Cooperation 5. The Same Goal and the Same Focus on Serving Customers 6. Integration of Processes 7. Partners to Build and Maintain Long-Term Relationships
Logistics / Supply chain is a collection of functional Activities ( transportation , inventory Control etc,) which are repeated many times throughout the channel through which raw material are converted in to finish products and consumer value is added . because raw material sources plants and selling points . are not typically located at the same places and the channel represents a sequence of manufacturing steps logistics Activities recur many times before a product arrival in a market place . ven then the logistics activities are repeated one again and as uses product are recycled in the logistics channel. A single firm is generally not able to control its entire product flow channel from raw material source to point of the final consumption although this is an emerging opportunity. For practical purposes the business logistics for the individual firm has a narrow scope. The maximal managerial control that can be Expected is over the physical Supply and physical distribution channel For Example.
Transportation –> Warehousing — Transportation — Customers Factory Transportation Warehouse Transportation Vendor/ ports/plants The physical Channel refers to the time and space gap between a firms immediate material sources and processing points. Similarly, the physical distribution channel refers to the time and space gap between the firms’ processing points and its customers.
Due to the similarities in the activities two channel Although it is easy to think of logistics as managing the flow of product from the point of raw material acquisition to end customers, for many firms there is a reverse logistics channel the must manage as well. the life of a product from a logistics view point ,does not end with delivery to the customer. Product become obsolete damaged or nonfunctional and are returned to their source point for repair or disposition. Packing material may be returned to the shipper due to environmental regulation or because it makes good economic Sense to reuse them . he reverse channel must be considered to be within the scope of logistics planning and control. The activities to be management that make up business logistics vary from form to form depending on a firm a particulars organizational structure . the components of a typical logistics system are Customer service ,demand , forecasting, distribution , communication , Inventory Control ,material Control , material handling , order processing ,parts and service support , plant and warehouse site selection ,purchasing ,packing ,return goods handling ,salvages and scrape disposal ,traffic and transportation ,and warehousing and storage .
Key Activities 1) Customer Service standers cooperate with marketing to: a. Determine customer needs and wants for logistics customer service b. Determine customer response to service c. Set customer service level 2) Transportation a. Mode of transport service selection b. Freight consolidation c. Carrier routing d. Vehicle scheduling e. Equipment selection f. Claims processing g. Rate auditing 3) Inventory Management a. Raw material and finish goods stocking policy b. Short term sale forecasting c. Product mix at stocking points d. Number ,size, and location of stocking points e. Just in time push and pull policy ) Information flow and order processing a. Sales order inventory interface procedures b. Order information transmittal method c. Ordering rules Support Activities 1) Warehousing a. Space determination b. Stock layout and dock design c. Warehouse configuration d. Stock placement 2) Material handling a. Equipment selection b. Order picking procedure c. Stock storage and retrival 3) Purchasing a. Supply service selection b. Purchase timing c. Purchase quantity 4) Protective packaging designed for a. Handling b. Storage c. Protection loss and damage 5) Cooperate with production / operation to a. Specify aggregate quantities b.
Sequence and time production output c. Schedule supplies for for production / operation 6) Information maintenance a. Information collection storage and manipulation b. Date analysis c. Control procedures Key and support activities are separated because certain activities will generally take place in every logistics channel, whereas other will take place , depending the circumstances, with in a particular firm . the key activities are on the “ critical “ loop with in a firm ‘s immediate physical distribution channel as Inventory Maintenance or transportation Customers Supply
The contribution most to the total cost of logistics or they are essential to the effective coordination and completion of the logistics task Customer service standard set the level of output and degree of readiness to which the logistics system must respond. Logistics costs increase in proportion to the level of customer service provider, such that setting the standard for service also affects the logistics cost to support the level of service . setting very high service . requirement can force logistics cost to exceeding high levels.
Transportation and inventory maintenance are the primary cost –absorbing logistics activities . experience has shown that each will represent one-half to two third of total logistics coast. Transportation adds place value to product and services , whereas inventory maintenance adds time value. Transportation is essential because no modern firm can operate without providing for the movement of its raw material or this finish product . this importance is underscored by the financial Strain placed on many firm by such disasters as a national railroad strike or independent trucks refusal to move goods because of rate dispute . n this circumstances market can not be served and product back up in the logistics pipeline to deteriorate or become absolute Inventories Are also essential to logistics management because it is usually not possible or practical to provide instant production or ensure delivery times to customer they serve as buffers between supply and demand so that need product availability may be mentioned for customer while providing flexibility for production and logistics in seeking efficient method for manufacture and distribution of the product .