Logistics Industry Analysis Essay Example

do with procuring, maintaining and transporting material, personnel and facilities.

” The American Council of Logistics Management defines logistics as“the process of planning, implementing and controlling the efficient and effective flow, and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. ”

Objective of Logistics Management: The primary objective of logistics management is to effectively and efficiently move the supply chain so as to extend the desired level of customer service at the least cost. Thus, logistics management starts with ascertaining customers’ needs till their fulfilment through product supplies.

However, there are some definite objectives to be achieved through a proper logistics system. These can be described as follows: 1. Improving customer service: An important objective of all marketing efforts, including the physical distribution activities, is to improve the customer service.

An efficient management of physical distribution can help in improving the level of customer service by developing an effective system of warehousing, quick and economic transportation, andmaintaining optimum level of inventory.

Rapid Response: Rapid response is concerned with a firm's ability to satisfy customer service requirements in a timely manner. Information technology has increased the capability to postpone logistical operations to the latest possible time and then accomplish rapid delivery of required inventory.

Reduce total distribution costs: The cost of physical distribution consists of various elements such as transportation, warehousing and inventory maintenance, and any reduction in the cost of one element may result in an increase in the cost of the other elements. Thus, the objective of the firm should be to reduce the total cost of distribution and not

just the cost incurred on any one element.

Generating additional sales: A firm can attract additional customers by offering better services at lowest prices.

For example, by decentralizing its warehousing operations or by using economic and efficient modes of transportation, a firm can achieve larger market share. Also by avoiding the out-ofstock situation, the loss of loyal customers can be arrested.

Creating time and place utilities: The products are physically moved from the place of their origin to the place where they are required for consumption; they do not serve any purpose to the users. Similarly, the products have to be made available at the time they are needed for consumption.

Total quality management (TQM) has become a major commitment throughout all facets of industry. If a product becomes defective or if service promises are not kept, little, if any, value is added by the logistics. Logistical costs, once expended, cannot be reversed.

Movement consolidation: Consolidation one of the most significant logistical costs is transportation. Transportation cost is directly related to the type of product, size of shipment, and distance. Many Logistical systems that feature premium service depend on high-speed, small shipment transportation.

Premium transportation is typically high-cost.

To reduce transportation cost. It is desirable to achieve movement consolidation. Logistics Management Function Logistics is the process of movement of goods across the supply chain of the company.

This process is consist of various functions, which have to be properly managed to bring effectiveness efficiency in the supply chain of organization. The major logistical function are shown in figure 1. Order processing: The starting point of physical distribution activities is the processing of customers’ orders.

In order to provide

quicker customer service, the orders received from customers should be processed within the least possible time. Order processing includes receiving the order, recording the order, filling the order, and assembling all such orders for transportation, etc. the company and the customers benefit when these steps are carried out quickly and accurately.

The error committed at this stage at times can prove to be very costly. Order processing activity consist of the following

• Order checking in any deviations in agreed or negotiation terms
• Prices , payment and delivery terms
• Checking the availability in of the material stocks
• Production and material scheduling for storage
• Acknowledge the order, indicating deviation

Warehousing: Warehousing refers to the storing and assorting products in order to create time utility. The basic purpose of the warehousing activity is to arrange placement of goods, provide storage facility to store them, consolidate them with other similar products, divide them into smaller quantities and build up assortment of products.

Generally, larger the number of warehouses a firm has the lesser would be the time taken in serving customers at different locations, but greater would be the cost of warehousing.

Thus, the firm has to strike a balance between the cost of warehousing and the level of customer service. Major decision in warehousing is as follow: 

• Location of warehousing facility
• Number of warehousing
• Size of warehouse
• Design of the building
• Ownership of the warehouse.

Inventory Management: Linked to warehousing decisions are the inventory decisions which hold the key to success of physical distribution especially where the inventory costs may be as high 15 as 30-40 per cent (e. g., steel and automobiles). No wonder, therefore, that the new concept

of Just-in-TimeInventory decision is increasingly becoming popular with a number of companies. The decision regarding level of inventory involves estimate of demand for the product.