Key logistics activities

I`m going to describe the key logistics activities required to facilitate the flow of a product from a point of origin to a point of consumption. All of these activities may be considered part of the overall logistics process.

Customer service is a multidimensional and very important part of any organization`s logistics effort. In a broad sense, it is the output of the entire logistics effort. Customer service and some resulting level of customer satisfaction are what the logistics system provides the buyer. However, many companies have a more narrow view of customer service as something they actually perform. So such companies may have a customer service department that handles complaints, special orders, damage claims, returns, billing problems, etc. These customer service employees are the organization as far as many buyers are concerned, so their role in the overall logistics system becomes crucial. Disappointment at this level can lead to dissatisfaction with the whole organization.

Inventory management deals with balancing the cost of maintaining additional products on hand against the risk of not having those items when the customer wants them (i.e. the cost of lost sales). This task has become more complex as firms have gradually lowered inventory levels. The challenge in this situation is to manage the rest of the logistics system to accommodate the lack of inventory so that customer service doesn`t suffer. Anyway, having enough goods in stock is still necessary for serving customers in many markets despite the fact that it costs money. Therefore, a company must have an appropriate inventory policy that balances the cost of maintaining stocks on the one hand with the costs that could result from not having requisite items on the other.

Transportation refers to the physical movement of goods from a point of origin to a point of consumption. It can involve raw materials being brought into the production process and/or finished goods being shipped out to the customer. Transportation has assumed a greater role in many logistics systems for two reasons: 1) the liberalization of transportation laws; 2) popularity of just-in-time strategies.

Storage and materials handling addresses the physical requirements of holding inventory. Storage is about managing the storage space that include such issues as warehouse number, size, layout, design. Materials handling is concerned with the movement of goods within that space, in other words, it focuses on the systems needed to move goods into, through and out of each facility.

Packaging is valuable both as a form of advertising and for protection and storage purposes. From marketing perspective, packaging is important to attract consumer`s attention. From logistics perspective, packaging provides protection during storage, materials handling and transport.

Information processing is what links all areas of logistics system together. Sophisticated management information systems create an open exchange of information between suppliers, consumers, agents, freight forwarders, etc. This can result in faster order placement, faster delivery and greater accountability.

Demand forecasting helps the logistics system to ensure that the right products and/or services are available to meet customers` requirements. Logistics requirements necessitates going beyond market sales forecasting to obtain specific data on timing, mix, and quantity of benefits desired by customers. Without this information, the logistics system runs the risk of compromising customer satisfaction rather than enhancing it.

Production planning is important because manufacturing needs components and raw materials to make finished goods. But production planning should not be the primary focus, customer needs should come first.

Purchasing deals with the buying of goods and services that keep the organization functioning. Purchasing is important because it affects directly the cost and quality of the final product. Especially, when there is a trend of global buying, not local

Facility location concerns the strategic placement of warehouses, plants and transportation resources. These decisions have long-term effect on the organization`s productivity.

Order processing includes the systems of getting orders, checking their status, communicating with customers about them, filling the orders and making them available to the customer. As the order processing is a key area of customer interface with the organization, it can have a big impact on the customer`s perception of the company.

There are also such activities as after-sales service, service support, return goods handling or recycling operations.

In conclusion, organizations may combine the above functions to achieve the better service and efficiency. But the main point is to satisfy their customers.

10. Logistics: a challenge for today. Demand flow leadership

Today's customer demands quality products, quality service, and increasing value. Logistics is the management of inventory to achieve customer satisfaction. And logistics is a major frontier for both customer service enhancement and cost reduction.

The challenge confronting many companies is this: they desire to enhance customer satisfaction by improving logistics but lack the knowledgeable work-force necessary to make this happen.

In the early days of logistics, warehousing was offered as a supplemental service to transportation, and the facility was part of the clearance terminal. The word "terminal" implies that the warehouses were located in the center of the city, usually close to the railroad depot and the wholesale market district. Since the amount of land necessary for single-story warehouses was not available in the city, relocation to the outskirts of cities took place. Today, with the focus on increasing inventory turns while improving customer satisfaction, the trend toward the substitution of transportation for inventory is prevalent.

The challenge of enhancing customer satisfaction by improving logistics requires a fully integrated approach. All components of the logistics process must work as one. The only way to enhance customer satisfaction is to pursue the integration of logistics. The operational requirements having the greatest impact on integrated logistics' ability enhancing customer satisfaction are business requirements, customer requirements, and logistics requirements.

Your challenge is to address the business requirements, customer requirements, and logistics requirements in a way that maximizes customer satisfaction and value. To do this, you must move beyond the obsolete concept of supply chain management and instead embrace the integrated logistics philosophy of demand flow leadership.

There are only three problems with the concept of supply chain management.

1) The word "supply" is wrong because it indicates an obsolete "push" mentality. It should be replaced with the word “demand”, which indicates “pull” and encourages reduced inventories and costs and enhanced customer service

2) The word "chain" is wrong because it indicates individual, discrete links that are viewed as entities unto themselves. It should be replaced with the word "flow" to indicate continuous movement, as in a pipeline.

3) The word "management" is wrong because it implies a static environment of control and measurement. Instead, "leadership" is needed to harness the energy of change, to pursue continuous improvement, and to achieve peak-to-peak performance.

Demand flow leadership can be achieved only through a continuously improving, customer oriented approach of integrated logistics.

11. Supply chain management – an overview

Operating successfully today requires organizations to become much more involved with their suppliers and customers. As global markets expand and competition increases, making products and services that customer want means that business must pay closer attention to where materials come from, how their suppliers’ products and services are designed, produced and transported, how their own products and services are produced and distributed to customers, what their direct customers and the end-product consumers really want.

Nowadays firms are selling off many business units and otherwise paring down their organization to focus more on core capabilities, while trying to create alliances or strategic partnerships with suppliers, distributors and other customers. This approach to making and distributing products and services to customers is becoming the best way for companies to be successful and is central to the practice of supply chain management.

There are several reasons that require today’s firms to work together more effectively than ever before:

· communication and information exchange through computer networks using enterprise resource panning

· rapidly expanding competition in all industries and markets

· global economic recession that made customers more cost-conscious while seeking higher quality and service; customers are demanding more socially responsible and environmentally-friendly activities from organizations.

Supply chains

1. Firms extracting raw materials

2. Raw materials suppliers (lumber companies, steel mills, food distributors)

3. Component manufacturers (make and sell intermediate components)

4. Final product manufacturers assemble finished products

5. Wholesalers and distributors

6. Retailers

7. End product consumers – buy products based on a combination of cost, quality availability, maintainability and reputation

Focal firm is the end product manufacturer. First-tier suppliers are direct suppliers and customers of the focal firm. The first-tier suppliers’ suppliers are the focal firm’s second tier suppliers and the first-tier customers’ customers are the focal firm’s second-tier customers.

Thus, the series of companies eventually making products and services available to consumers including all of the functions enabling the production, delivery and recycling of materials, components, end products and services is called a supply chain. Companies with multiple products are likely to have multiple supply chains. All products reach their customers via some type of supply chain. Some supply chains may involve foreign suppliers or markets. The only one true source of income for all supply chain organizations are the supply chain’s end customers. There is also a number of companies indirectly involved in the supply chain and they play a very important role. These are service providers, information system providers, public warehousing firms, freight forwarders, agents and consultants.

Supply chain management

There are plenty of definitions:

The Council of the SCM Prifessionals: The planning and managing of all activities involved in sourcing and procurement, conversion and all logistics management activities. Also includes coordination and collaboration with channel partners, which can be suppliers, intermediearies, third-party service providers and customers.

The Institute for SCM: The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of end customer.

The Singapore-based Logistics and SCM Society: The coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods and deliver both goods and services to customers.

The main idea of SCM – coordinating or integrating a number of goods- and services-related activities among supply chain participants to improve operating efficiencies, quality and customer service among collaborative organizations. Thus for SCM to be successful firms involved in supply chain must work together by sharing the information.

In theory supply chain works as a cohesive, singularly competitive unit. But in practice independent firms in a supply chain are relatively free to enter and leave the supply chain’s relations if these relations are no longer beneficial. That makes supply chain more efficient than vertically integrated conglomerates because supply chains are much more dynamic and fluid and are able to adapt to changes. But from the other hand it may be hard to manage them.

There are also some conditions of a successful supply chain:

· change in the corporate cultures of all participating firms – many traditional cultures with short-term, company focused performance may conflict with objectives of supply chain;

· high levels of trust, cooperation, collaboration and honest, accurate communications

· managers should have necessary expertise in critical supply chain functions and should understand how these functions affect the supply chain.

Boundaries of a supply chain are also dynamic. Many firms (Procter & Gamble, Apple, Toyota, Wal-Mart etc.) extend these boundaries to include their second-tier suppliers and customers.

Может быть, тоже нужно – Seven principles of a supply chain:

1. Segment customers based on service needs

2. Customize the SCM network

3. Listen to signals of market demand and plan accordingly

4. Differentiate products closer to customers

5. Strategically manage the sources of supply

6. Develop a supply chain-wide technology strategy

7. Adopt channel-spanning performance measures

Дата добавления: 2015-10-29