Concept of Logistics Management
To understand the concept of logistics management one must beware that all operations that assist product flow from the point of raw material acquisition to final consumption, as well as the information flow that sets the production in action, are referred to as logistics. The goal of logistics is to provide appropriate levels of customer service at a fair cost.
The scope of logistics is twofold: first, physical supply (or materials management) refers to the movement of raw materials to the plant, and second, physical distribution refers to the flow of finished goods from the plant to customers.
The process of strategically managing the transit and storage of supplies, parts, and finished goods from the supplier to the company and then to the customers is known as logistics management. It encompasses the complete flow of materials and products into, through, and out of the organization.
Let us understand the Concept of Logistics Management step by step:
Logistics of Distribution or Marketing
In the Concept of Logistics Management, the logistics task itself is supportive in nature. Transportation, inventory, warehousing, materials handling, packaging, and information technology are all integrated. The logistics of marketing entails getting the right product to the right customer at the right time at the right place.
Physical distribution refers to the storage of products after they are manufactured but before they are consumed, as well as their conveyance to customers or end-users. Producers and merchant middlemen are responsible for physical distribution tasks such as storage (warehousing), transformation, and inventory control.
Because they account for such a large portion of the total costs, these operations must be carried out efficiently. Physical distribution expenses are only surpassed by the costs of raw materials and labour in the total cost of commodities. Its economies will go a long way toward lowering total costs of goods and increasing revenues.
The physical supply is primarily concerned with material handling, such as material purchase, transportation, and storage, inventory control, and information management.
Physical distribution activities can be divided into two categories:
(1) Primary Functions:
c) Order fulfilment
d) Keeping track of inventory
(2) Extracurricular Activities:
a) Packaging of goods
b) Handling of the product
d) Product planning
e) Management of data
Actual distribution refers to the process of getting a product to a customer, and it includes all operations involved in the physical movement of goods from the producer to the consumer. Supply Chain Management is another name for it.
Management of Integrated Logistics
In the Concept of Logistics Management, the idea is based on a holistic perspective of material and commodities flow activities from source to point of consumption. It recognizes the interconnections and interdependencies among the numerous functions involved in the movement from source to users, forcing management to think in terms of managing the entire system rather than just one component of it.
Logistics management is concerned with the integration and coordination of marketing activities in order to provide the most effective service to end markets. Although managers have used logistics in the military to fine-tune delivery processes that are time and place-specific, there is a lag in the civilian sector in incorporating military logistical requirements.
Marketing Logistics’ Objectives
The broad goals of marketing logistics are to ensure the flow of resources to the production system and to transport products to other channel members and consumers in a timely and efficient manner compatible with the level of service that customers expect.
The following are the other goals:
1. To Save Money:
Costs can be cut by managing the physical distribution of the system intelligently and finding the optimal number and location of warehouses, optimizing materials handling, boosting stock turnover, shipping products in sealed containers, rectifying wasteful order processing procedures, and so on.
2. Enhance Customer Service:
The firm’s promotional activities are boosted by strengthening the physical distribution infrastructure, resulting in higher sales results.
In Order to Boost Sales: A company’s sales can be increased by ensuring the availability of goods and having strategies in place for speedy order processing.
3. Gaining a Competitive Advantage:
A company can gain an advantage over competitors by providing better customer service, such as arranging for prompt and reliable delivery, avoiding order processing problems, and delivering undamaged items.
4. Create an Efficient Communication System:
Salespeople may transfer orders on a daily basis and reply to client inquiries on a priority basis thanks to logistics management.
Concept of Logistics Management
1. Designing a Network
Logistics facilities include manufacturing plants, warehousing, materials handling, distribution, and after-sale services. One of the most important roles of logistical management is network design. It’s necessary to figure out how many and where all of the different sorts of facilities are needed to carry out logistics activities.
Choosing a superior locational network can be the first step toward gaining a competitive edge. The right design of the network and infrastructure is strongly related to logistical efficiency.
2. System of Information
The following are two key areas that rely on data:
a) Forecasting Sales:
Sales forecasting is used to forecast future logistics requirements. It aids inventory management in meeting client demands at the appropriate moment.
b) Order Processing:
In logistics, the customer’s order is crucial. Both external and internal clients require logistics services. External customers are individuals who use the products or services, as well as any trade partners who buy them for resale.
Internal customers are the company’s organizational units. The more efficient a company’s logistical system is designed, the more sensitive it is to data correctness. Inaccurate data and order processing delays can wreak havoc on logistical performance.
It aids in the transfer of materials for production and the delivery of goods to clients.
In terms of transportation performance, there are two key elements to consider:
It is the payment for transportation between two sites as well as administrative and inventory-in-transit expenditures. As a result, logistical systems should be structured to make the most efficient use of transportation.
It’s the amount of time it takes to accomplish a particular movement.
Transportation speed and cost are linked in two ways:
- Higher rates for faster service.
- Shorter time intervals imply faster service. As a result, it’s critical to strike a balance between speed and cost.
c) Transportation Modes:
There are three modes of transportation available:
1. Surface or Land Transport:
It comprises both road and rail transportation. Road transportation is capable of providing door-to-door service.
2. Transportation by Water:
It encompasses both interior and coastal water transportation via rivers and canals. Cost-effective transportation is available through this method.
3. Air Transportation:
Freight is transported by aeroplanes. It is a very expensive means of transportation that is used to send expensive and vital items.
Different modes of transportation’s suitability:
- Road transportation is best for transporting goods of medium volume and weight over short distances and offering point-to-point services. It is frequently used to carry perishable goods such as vegetables, fruits, milk, and milk products.
- Rail transportation is the most efficient way to transport large items across vast distances inside the country. It travels faster than land, air, and water.
- Water shipping is best for big, low-cost commodities that can withstand handling and travel hazards, as well as when speed is of the utmost importance.
- Air transport is best for transporting precious, perishable, and less bulky items such as gold, jewellery, pharmaceuticals, and spare parts where time is critical or where other modes of transportation are unavailable.
It entails establishing suitable arrangements for storing commodities until they are required by customers. Storage allows commodities to be made available to purchasers wherever and whenever they are needed by storing them in numerous warehouses throughout the country. It produces temporal utility by keeping commodities from the time they are manufactured until they are desired by customers.
The following are the functions of a warehouse:
A warehouse can be defined as a location where items are stored or accumulated. Warehousing is an essential commercial activity for large-scale production and delivery. During the lean season, warehouses assist business owners in keeping their inventories safe.
They are responsible for the following tasks:
- Time utility creation
- Surplus items are kept in a secure environment
- A consistent supply of commodities
- Price stabilization
- Theft, fire, and other hazards protection
- Packaging, labelling, and so on
5. Handling of Materials
Materials handling occurs at every stage of the logistics process, including production, storage, transportation, and packaging. If we look at materials handling solely from a marketing perspective, it refers to the movement of a product after it leaves a manufacturing plant but before it is loaded into a transport mode and delivered to a consumer’s location.
As a result, it denotes product handling from the plant to the warehouse, product movement inside the warehouse, product movement from the warehouse to the point of loading onto the transport vehicle, and finally to resellers and customers.
Materials handling is such a crucial activity in logistics that it cannot be overlooked. Materials handling operations should be kept to a minimum because they involve a significant capital investment as well as a high direct labour cost. The network of facilities serves as a foundation for performing logistical activities within a network design framework that meets the needs of customers.
For efficient loading and unloading, material handling is essential. Materials handling ensures that products are received, transferred, sorted, and assembled to satisfy the needs of customers and distributors in warehouse operations.
The following guidelines should be followed while constructing a materials handling system:
- Material handling and storage equipment should be standardized.
- According to the company’s needs, the system should be constructed to offer maximum continuous product flow.
- Handling equipment should be used correctly.
It has to do with getting items and supplies from outside sources. Resource planning, supply sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage and handling, and quality assurance are all tasks performed by it.
It is in charge of working with suppliers to improve scheduling, supply continuity, hedging, and speculation, as well as doing research that leads to new sources or programs. Its primary goal is to assist manufacturing and resale businesses by offering timely purchases at the lowest total cost possible.
7. Inventory Control
It deals with the transportation and storage of raw materials and final goods. It begins with the delivery of materials or component parts from a supplier and ends with the delivery of a finished or processed product to a client.
By transferring merchandise when and where it is needed, the logistical process provides value. Work-in-process inventory must be shifted to enable final assembly, gaining value at each stage of the process.
The primary goal of inventory management is to meet market demands, i.e., create sales and fulfill customer orders. As a result, inventories are maintained in anticipation of market demand—ideally based on sales estimates. Management also considers two other factors: the amount of inventory required to meet immediate demand, and the distribution system’s ability to deliver the required inventory on schedule.
For the proper operation of the business, some inventory of materials, work-in-progress, and finished goods is always required. Even if inventory is considered an idle resource, it is not possible to delete it. Inventory control entails keeping inventory at a desirable level, where the costs of holding stocks and the costs of not carrying inventories are equal.
The act of deciding what and how much of certain things should be maintained in stock is known as inventory control. It also defines the quantity and timing of various things that must be bought. The primary goal of inventory control is to reduce inventory investment while ensuring that the manufacturing process is not harmed.
Inventory the control must fulfil the following functions to achieve this goal:
- Decide which items should be stocked
- Determine when to stock and refresh, as well as how much to stock
- Maintain appropriate records
- Remove any objects that are no longer in use
8. Labelling and Packaging
Logistics is incomplete without packaging and labelling. Packaging is the process of creating and designing appropriate packaging for a product. The importance of packaging has grown in recent years as a result of fierce market competition and an improvement in people’s standard of life.
A product’s packaging protects it during its journey from the seller to buyer, and in some situations, even during its lifetime with the user. In general, packaged goods are easier to handle. Packaging makes it easier to sell a product. It serves as a silent salesman for the manufacturer, especially in areas where self-service, automatic vending, and other self-selection methods of retail selling are common.
Packages are sometimes properly wrapped to ensure that consumers receive high-quality products. Due to the lack of sealing, unscrupulous merchants may distribute duplicate products to consumers.
Labelling is the process of placing identification marks on a product’s package. It could be part of a box or a tag directly attached to a product. A label contains information such as the brand, grade, price, production and expiration dates, and so on.
9. Processing Orders
It includes the procedures that must be followed in order to fulfil consumers’ orders swiftly, precisely, and efficiently. Receiving, filling, and assembling orders for execution are all part of this process. When clients place an order, they initiate the order cycle, which is a flow of items and information. The seller gets an order, assembles the items, and ships them to the customer, among other aspects of the order cycle.
The marketing department’s method for processing customer orders has an impact on its service to them. Due to delays, buyers seek to shift their orders to suppliers who can deliver goods quickly.
As a result, the marketing manager should be thorough with the concept of logistics management and consider how to best process orders in order to retain clients and generate repeat orders. Rapid order processing can help the company save money in other aspects of physical distribution, such as inventory, storage, and transportation.