Logistics is officially defined as the process of planning, implementing and controlling the efficient and cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption, for the purpose of conforming to customer requirements.The original notion of logistics involves three operations that each add value to goods. The value added is of three sorts:Place. Adding place value to items by moving them from locations of lower value for the customer to locations of higher value to the customer. Adding space value involves transportation costs.
Period&Pace. Adding time value to items by sorting them until they are needed and by making all processes more efficient. Adding time value involves inventory carrying costs.Pattern. Adding order value to items by arranging them in more desirable quantities and patterns.
Examples include consolidation, break-bulk, sequencing, picking/packing, etc.In addition to concentration on the operations above, some firms are now achieving quantum leaps in service, sales and cost through process coordination involving the sharing of data and knowledge.By integrating processes along their product supply chain, and by forming partnerships with key vendors and customers, they are eliminating functions without sufficient added-value and sharpening their focus on the final customer, and on significant, bottom-line results.List the activities that are typically included in the logistics function. Would the importance of these activities vary with different types of products? Why or why not?The business functions which fall within the scope of logistics management are included in what commonly known as the logistics mix. All of these functions and sub-functions need to be planned in a systematic way, both in terms of their own local environment and also in terms of the wider scope of the logistic system as a whole.
The Logistics Mix:Planning and Marketing Strategy: the major influences of design and marketing on materials requirements and distribution requirements.Purchasing: source research and selection, negotiation, building supplier partnership programmes.Production Planning: plant capacity, location and layout, scheduling, manufacturing resource planning, and the control and support of work in progress.Storage and Materials Handling: the handling and storage of goods, utilisation and packaging.Inventory Management: control over inventories, sustaining minimum practical stock levels, minimising holding costs, wastage and obsolesce.Warehouses and Stores: location, capacity, mix and operation.
Transport: mode decisions, scheduling, routing and operation.Customer Service: demand forecasting, service levels, order processing, parts/service support, and aftermarket operations.Technical Support: the provision and management of the systems needed to support these activities.Market Strategy and Product Design: in combination determine the nature, volume and timing of demand to be met by the purchasing operation.
Additionally marketing and engineering functions can greatly influence the extent to which the product to be produced or manufactured is "logistically friendly".Materials management: embraces all aspects of materials flow from determination of requirements and capacity planning through purchasing, source ad selection, and scheduling - the latter including the planning and control of production processes, applicable most commonly when manufacturing is central to the business. Tools employed to achieve effective planning and execution may include Manufacturing Resource planning (MRPII), Just-In-Time (JIT) and Optimised Production Technology (OPT), as appropriate to the individual needs of the business.Inventory Management: determination of stocking policy to ensure continuity of suppliers with minimum investment costs, including the effective control and executing of that policy.Storage and Materials Handling: covers the safe, secure and disciplined handling of materials as initial receipts, as parts awaiting processing, as work in progress during manufacture, and subsequently as finished product.
It embraces packaging design, utilisation and the full range of simple to sophisticated aids to storage.Distribution: includes warehousing and both inbound and out bound transportation, all strongly influenced by demands for higher levels of customer service, JIT requirements and the evolution of contract distribution.Not all elements in this mix will essentially coincide with all business interests. The logistics concept, however, actively concentrates on those elements that do.
For example, retailer or FMCG (Fast Moving Consumer Goods) sourcing and distribution are likely to be key elements, because retailers need to present their products in desirable location, in desirable quantity. For manufacturer, purchasing and production planning are naturally more dominant, because manufacturer is primarily concerned with size of his plant, and building strong supplier relationships.It is rare for all elements of logistics to be of equal importance to the business.
