Top points to understand about Logistics Business before reading ahead
The industrialised world that we live in mainly consumes quality goods manufactured in standardised and scientific way.
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Completely manufactured goods are required at different points for sale and consumption or final use.
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Partially manufactured goods find their way in to further manufacturing.
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Raw materials too are required at various factories.
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It is common to see rejects from market place reaching back the place of manufacture either for re-work or condemnation.
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For this growing consumerist world, goods flow is the life line and backbone.
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This complex goods flow is accomplished by a combination of problem-solving techniques, main and alternative plans of transportation, software applications, and establishment of permanent and temporary infrastructure, trucking and packaging, safety of cargo, warehousing and very well trained man power and huge loads of fixed and working capital. This combination of necessary resources is the foundation for what is known as logistics industry.
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Some management thinkers say logistics is just a glorified description of transport business.
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Supply Chain Management and logistics are interchangeably used in various occasions.
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Supply of goods essentially to manufacturing hubs is often viewed as in a ‘chain-like’ fashion. This ‘chain’ needs to be managed with techniques that ensure timely and efficient movement or execution promoting reliability and dependability. The management science that deals with this problem domain is basically defined as Supply Chain Management (SCM).
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Shipping, logistics and SCM are virtually inseparable and must be studied together.
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The clearing of the ship inward and outward of a port/harbour itself is a very special activity and mandates its own procedures and documentation.
Business Logistic Defined
Business logistics is a relatively new field of integrated management study in comparison with the traditional fields of finance, marketing, and production. As previously noted, logistics activities have been carried out by individuals for many years. Businesses also have continually engaged in movestore (transportation-inventory) activities. The newness of the field results from the concept of coordinated management of the related activities, rather than the historical practice of managing them separately, and the concept that logistics adds value to products or services that are essential to customer satisfaction and sales. Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one cost for another (transportation costs for inventory costs) was evident in the selection between road and water transport:
“The fact is that carriage by road being quicker, more reliable and less subject to loss or damage, it possesses advantage to which businessmen often attach a considerable value. However, it may well be that a saving induces the merchant to use a canal; he can buy warehouses and increase his floating capital in order to have a sufficient supply of goods on hand to protect himself against slowness and irregularity of the canal, and if all told the saving in transport gives him a cost advantage, he will decide in favour of the new route.”
The first textbook to suggest the benefits of co-ordinated logistics management appeared around 1961, in part explaining why a generally accepted definition of business logistics is still emerging. Therefore, it is worthwhile to explore several definitions for the scope and content of the subject.
A dictionary definition of the term logistics is:
“The branch of military science having to do with procuring, maintaining, and transporting material, personnel, and facilities.”
This definition puts logistics into a military context. To the extent that business objectives and activities differ from those of the military, this definition does not capture the essence of business logistics management. A better representation of the field may be reflected in the definition promulgated by the Council of Logistics Management (CLM), a professional organization of logistics managers, educators, and practitioners formed in 1962 for the purposes of continuing education and fostering the interchange of ideas. Its definition:
“Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements.”
This is an excellent definition, conveying the idea that product flows are to be managed from the point where they exist as raw materials to the point where they are finally discarded. Logistics is also concerned with the flow of services as well as physical goods, an area of growing opportunity for improvement. It also suggests that logistics is a process, meaning that it includes all the activities that have an impact on making goods and services available to customers when and where they wish to acquire them. However, the definition implies that logistics is part of the supply chain process, not the entire process.
So, what is the supply chain process or, more popularly, supply chain management?
Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it. Supply chain management emphasizes the logistics interactions that take place among the functions of marketing, logistics, and production within a firm and those interactions that take place between the legally separate firms within the product-flow channel. Opportunities for cost or customer service improvement are achieved through co-ordination and collaboration among the channel members where some essential supply chain activities may not be under the direct control of the logistician.
Although early definitions such as physical distribution, materials management, industrial logistics and channel management - all terms used to describe logistics - have promoted this broad scope for logistics, there was little attempt to implement logistics beyond a company’s own enterprise boundaries, or even beyond its own internal logistics function. Now, retail firms are showing success in sharing information with suppliers, who in turn agree to maintain and manage inventories on retailers’ shelves. Channel inventories and product stockouts are lower. Manufacturing firms operating under just-in-time production scheduling build relationships with suppliers for the benefit of both companies by reducing inventories.
Definitions of the supply chain and supply chain management reflecting this broader scope are:
“The supply chain (SC) encompasses all activities associated with the flow and transformatio of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Materials and information flow both up and down the supply chain.”
“Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to achieve a sustainable competitive advantage.”
After careful study of the various definitions being offered, Mentzer and other writers propose the broad and rather general definition as follows:
“Supply chain management is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The Activity Mix
The activities to be managed that make up business logistics (supply chain process) vary from firm to firm, depending on a firm’s particular organizational structure, management’s honest differences of opinion about what constitutes the supply chain for its business, and the importance of individual activities to its operations. Follow along the supply chain as shown in following figure and note the important activities that take place. Again, according to the CLM:
“The components of a typical logistics system are: customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage.”
Key Activities
1. Customer service standards co-operate with marketing to:
4. Information flows and order processingBusiness Logistic Defined
Business logistics is a relatively new field of integrated management study in comparison with the traditional fields of finance, marketing, and production. As previously noted, logistics activities have been carried out by individuals for many years. Businesses also have continually engaged in movestore (transportation-inventory) activities. The newness of the field results from the concept of coordinated management of the related activities, rather than the historical practice of managing them separately, and the concept that logistics adds value to products or services that are essential to customer satisfaction and sales. Although co-ordinated logistics management has not been generally practiced until recently, the idea of co-ordinated management can be traced back to at least 1844. In the writings of Jules Dupuit, a French engineer, the idea of trading one cost for another (transportation costs for inventory costs) was evident in the selection between road and water transport:
“The fact is that carriage by road being quicker, more reliable and less subject to loss or damage, it possesses advantage to which businessmen often attach a considerable value. However, it may well be that a saving induces the merchant to use a canal; he can buy warehouses and increase his floating capital in order to have a sufficient supply of goods on hand to protect himself against slowness and irregularity of the canal, and if all told the saving in transport gives him a cost advantage, he will decide in favour of the new route.”
The first textbook to suggest the benefits of co-ordinated logistics management appeared around 1961, in part explaining why a generally accepted definition of business logistics is still emerging. Therefore, it is worthwhile to explore several definitions for the scope and content of the subject.
A dictionary definition of the term logistics is:
“The branch of military science having to do with procuring, maintaining, and transporting material, personnel, and facilities.”
This definition puts logistics into a military context. To the extent that business objectives and activities differ from those of the military, this definition does not capture the essence of business logistics management. A better representation of the field may be reflected in the definition promulgated by the Council of Logistics Management (CLM), a professional organization of logistics managers, educators, and practitioners formed in 1962 for the purposes of continuing education and fostering the interchange of ideas. Its definition:
“Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements.”
This is an excellent definition, conveying the idea that product flows are to be managed from the point where they exist as raw materials to the point where they are finally discarded. Logistics is also concerned with the flow of services as well as physical goods, an area of growing opportunity for improvement. It also suggests that logistics is a process, meaning that it includes all the activities that have an impact on making goods and services available to customers when and where they wish to acquire them. However, the definition implies that logistics is part of the supply chain process, not the entire process.
So, what is the supply chain process or, more popularly, supply chain management?
Supply chain management (SCM) is a term that has emerged in recent years that captures the essence of integrated logistics and even goes beyond it. Supply chain management emphasizes the logistics interactions that take place among the functions of marketing, logistics, and production within a firm and those interactions that take place between the legally separate firms within the product-flow channel. Opportunities for cost or customer service improvement are achieved through co-ordination and collaboration among the channel members where some essential supply chain activities may not be under the direct control of the logistician.
Although early definitions such as physical distribution, materials management, industrial logistics and channel management - all terms used to describe logistics - have promoted this broad scope for logistics, there was little attempt to implement logistics beyond a company’s own enterprise boundaries, or even beyond its own internal logistics function. Now, retail firms are showing success in sharing information with suppliers, who in turn agree to maintain and manage inventories on retailers’ shelves. Channel inventories and product stockouts are lower. Manufacturing firms operating under just-in-time production scheduling build relationships with suppliers for the benefit of both companies by reducing inventories.
Definitions of the supply chain and supply chain management reflecting this broader scope are:
“The supply chain (SC) encompasses all activities associated with the flow and transformatio of goods from the raw materials stage (extraction), through to the end user, as well as the associated information flows. Materials and information flow both up and down the supply chain.”
“Supply chain management (SCM) is the integration of these activities, through improved supply chain relationships, to achieve a sustainable competitive advantage.”
After careful study of the various definitions being offered, Mentzer and other writers propose the broad and rather general definition as follows:
“Supply chain management is defined as the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The Activity Mix
The activities to be managed that make up business logistics (supply chain process) vary from firm to firm, depending on a firm’s particular organizational structure, management’s honest differences of opinion about what constitutes the supply chain for its business, and the importance of individual activities to its operations. Follow along the supply chain as shown in following figure and note the important activities that take place. Again, according to the CLM:
“The components of a typical logistics system are: customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage.”
Key Activities
1. Customer service standards co-operate with marketing to:
- a. Determine customer needs and wants for logistics customer service
- b. Determine customer response to service
- c. Set customer service levels
- a. Mode and transport service selection
- b. Freight consolidation
- c. Carrier routing
- d. Vehicle scheduling
- e. Equipment selection
- f. Claims processing
- g. Rate auditing
- a. Raw materials and finished goods stocking policies
- b. Short-term sales forecasting
- c. Product mix at stocking points
- d. Number, size, and location of stocking points
- e. Just-in-time, push, and pull strategies
- a. Sales order-inventory interface procedures
- b. Order information transmittal methods
- c. Ordering rules
1. Warehousing
- a. Space determination
- b. Stock layout and dock design
- c. Warehouse configuration
- d. Stock placement
- a. Equipment selection
- b. Equipment replacement policies
- c. Order-picking procedures
- d. Stock storage and retrieval
- a. Supply source selection
- b. Purchase timing
- c. Purchase quantities
- a. Handling
- b. Storage
- c. Protection from loss and damage
- a. Specify aggregate quantities
- b. Sequence and time production output
- c. Schedule supplies for production/operations
- a. Information collection, storage, and manipulation
- b. Data analysis
- c. Control procedures
