Logistics

WHAT IS LOGISTICS MANAGEMENT?

“Logistic is the process of planning, implementing and controlling the efficient, effective flow of goods 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”

Logistics exists to satisfy customer requirements by facilitating relevant manufacturing and marketing operation. The main responsibility of logistic is the geographical positioning of raw materials, work in process and finished inventories at the lowest possible cost.

Creating logistics value is costly. Logistics accounts for one of the highest costs of doing business. Logistics expenditure normally ranges from 5% to 35% of sales depending on the type of business. Thus logistics even though very important for any business success is expensive.

VARIOUS DEFINITIONS OF LOGISTICS MANAGEMENT

Logistic management encompasses all materials flows management, from the inflow of purchased materials into works (i.e. materials planning of raw materials components and other products, transport of materials from suppliers to works, receiving and inspection and storage of materials) materials flow through manufacturing processes (i.e. materials issues and materials handling) and material (flow to customers (physical distribution (Refer fig.1 for these relationships)

Materials Logistics physical distribution

Management Management

Fig.1

(Relationship between logistics and other)

Schmidt describes logistics management as:

“The management (i.e. the planning, execution and control) of all factors that affect the material flow and the information about it, seen from the perspective of customer’s requirements for the purpose of achieving a high reliability,

A high degree of completeness and a short delivery time”

Institute of purchasing and supply define logistics as:

“Logistics is the concept which seeks provide for the management and co-ordination of the activities within the supply chain from sourcing and acquisition through production, where appropriate, and on through distribution channels to the customer. The goal of logistics is the creation of competitive advantages through the simultaneous achievement of high customer service levels, optimum investment and value for money.”

According to Bowersox and Closs:

“Logistics management includes the design and administration of systems to control the flow of materials work in progress and finished inventory to support business unit strategy”

From the above definitions, we conclude that--

(1) Logistics management is the function of managing the total flow of materials which includes movement of raw materials from suppliers, in process within the firm, and movement of finished goods to the customer.

(2) Logistics management covers both physical flow of products as well as information flow covering reports and documentation relating to goods movement.

(3) Logistics management evolves procedures that meet customer service at the minimum cost.

(4) Logistic management achieves cost reduction by speeding the flow of materials, work-in-progress and finished products.

ACTIVITIES OF THE LOGISTICS FUNCTIONS

Logistics function consists of following sets of activities:

(1) Order processing. Though this activity does not contribute much to

Total costs, yet it is treated important because of its contribution to lead time.

(2) Transportation Management. Transportation involves---

• Firm’s own transport (if goods are to be collected)

• Hiring of transport (if services of external firm are to be used)

• Routing and load planning.

• Selection of the most suitable of transport (i.e. rail, road, sea or air).

• Packaging needed (i.e. loose, pallets or special).

• Documentation required (especially if goods are arriving from overseas.)

(3) Inventory management. Inventories require to be maintained to take care of needs between the time of demand and time of supply. Inventory management involved decisions concerning.

• Buffer stocks.

• Lead time.

• Replenishment of stocks.

(4) Warehousing. Is concerned with management of space to hold inventories and it involves such problems as:

• Site selection.

• Space determination.

• Layout and design.

• Receipts and issues and storage.

• Preservation.

(5) Materials handling is concerned with movement of product at the stocking point and it involves such decision as :

• Smoothening of materials flow.

• Selection