Logistics management

Definition of Logistics
According to Council of Logistics Management (CLM) :
“Logistics is the process of planning, implementing and controlling the 
efficient, cost-effective flow and storage of raw material in-
process inventory, finished goods and related information from point of
origin to point of consumption for the purpose of confirming customer
requirements”.

According to Robert A. Novack : 

"Logistics is an activity involving the creation of time, place, form and
possession of utilities within and among firms and individuals through
strategic management with the goal of creating products/services that
satisfy customer through attainment of value”.

Objectives of Logistics
1) Improving Customer Service : 
By attaining customer satisfaction, highest level of profits can be ensured.
Thus, continuous improvement in customer service acts as the core
objective of logistics.

2) Speedy Response : 
It refers to the organisation's ability to give prompt response to the
customers queries. In today's era of IT, it has become completely
manageable to give immediate response to the customers' queries by
acquiring related data and postponing logistical functions to latest time
for increasing the response rate.

3) Decreasing Costs of Total Distribution :

Decreasing the costs associated with overall distribution is another vital
objective of logistics. The expenses on distribution of goods include
expenditure on shipment, storage and ,record keeping, etc. As these
processes are interlinked, reducing the cost of one function often
increases the cost of the other.

4) Consistent and Reliable Delivery Performance : 

Ensuring consistent and reliable delivery performance is another main
objective of logistics. This will significantly help companies to strengthen
their relationships with the customers by developing trust and gaining
confidence.
5) Least Product Damages : 
Damaged products contribute to extra expenditure on logistics. This
extravagant expenditure on damage can be avoided by using mechanical
system for handling materials, using logical and efficient system of
packaging.

6) Creating Additional Sales : 

One of the other aims of logistics is to increase sales by creating
additional sales. This can be attained by providing better services in the
most economical way.

7) Generating Place and Time Utilities : 

Ensuring the utility of product at right time and right place is another
main objective of logistical functions. The product is not good for the
consumers until it reaches them at the right place and right time.

8) Stability of Costs : 
Another purpose of logistics is to ensure the stability of costs. It can be
attained by managing the supply of goods through thoughtful use of the
accessible transportation and suitable storage facilities.
9) Upgrading Quality : 
In the long-run, logistics seeks to ensure continuous quality improvement.
Total Quality Management has emerged as a primary obligation in all
parts of the industry within this aspect. Its assurance is mainly
responsible for logistical regeneration.

10) Life cycle Support : 

A sound logistical system is mainly responsible for maintaining
healthy PLC. Sometimes goods are sold without giving guarantee
regarding their lasting performance as advertised. These situations call for
reversing the direction of normal value added inventory offered to the
customers.

11) Movement Consolidation : 

Transportation cost is one of the most important logistical costs as
logistics aims to reduce costs through consolidation and integration of
operations. It is directly related with the product type, shipment Size,
distance, etc. Thus, movement consolidation becomes desirable for
ensuring the reduction in transportation costs.

12) Inventory Reduction : 

One of the major factors which can prove to be unfavorable for the firm is
heaps of records. Conventionally, abundant inventory was maintained for
 ensuring good customer care services, which indulged a lot of
expenditure. Thus, reduction in inventory is another main objective of
logistics.

MEANING : LOGISTICS MANAGEMENT

Logistics management is a supply chain management component that is

used to meet customer demands through the planning, control and
implementation of the effective movement and storage of related
information, goods and services from origin to destination.
The logistics management process begins with raw material accumulation
to the final stage of delivering goods to the destination.
Logistics management involves numerous elements, including:

 Selecting appropriate vendors with the ability to provide

transportation facilities
 Choosing the most effective routes for transportation
 Discovering the most competent delivery method
 Using software and IT resources to proficiently handle related
processes

Major Functions of Logistics Management

1. Order Processing

2. Material Handling

3. Inventory Management

4. Warehouse Management

5. Transportation

6. Packaging and Labelling

7. Information and Control

Main components

  1. Demand planning 

To guarantee customer order fulfilment, demand planning is an essential
logistics function. By ordering merchandise in the correct quantities and
at the right price and mobilising suitable transport, customer demand is
met and profits protected.

     2. Storage and materials

Because demand is unpredictable, it’s important to have surplus goods on
standby until consumers demand them. Warehouses are responsible for
the storage, care, retrieval, packaging, and unitisation of merchandise.
Warehouse management systems (WMS) optimise storage capacities,
equipment (forklifts, for example), retrieval speeds, and warehousing
processes. 

     3. Inventory management

Inventory management controls the flow of goods in and out of a
warehouse. It dictates how much stock to hold and where to locate it
using targeted data to predict consumer demand. 

     4. Transportation management

Logistics involves mobilising different modes of transport to move
merchandise from one stage of the supply chain to the next. Merchandise
might need to travel via road vehicles, freight trains, shipping, or even air
travel for long-distance supply chains.
Consolidation is the process by which shipping companies or carriers
combine multiple smaller shipments in one. This speeds up deliveries and
keeps costs low. 

     5. Control 
Logistics is a complex operational procedure that requires a lot of precise
information to be effective. Forecasting demand, transportation times,
and inventory are crucial to keeping the operations to a tight timescale. 

Different Types of Logistics

Logistics is a complex service enabling the product to reach the right
consumer. From the source of origin to order fulfillment, different types
of logistics and aspects of logistics combine to make order fulfillment
possible. Some of the major types of logistics with examples are
discussed below for your reference:
 
Inbound Logistics
Inbound logistics is the process of executing the transportation between
the companies and their suppliers (learn more about vendor
management system). This area focuses on ensuring that the other
departments or manufacturers have the necessary raw materials and
supplies. Usually, a wide network and large trucks help companies
transport goods at a lesser cost. An example would be receiving inventory
products into your company's warehouse directly from the manufacturer.
 
Outbound Logistics
Outbound logistics can also be referred to as order fulfillment mainly
because outbound logistics involves delivering goods to the customers. It
focuses on moving the goods from one supply chain to another, like
manufacturers to warehouses and warehouses to customers. A significant
type of logistics is that it plays a vital role in building a good relationship
with customers.
 
Reverse Logistics
One of the most complex and lesser-known types of logistics benefiting
consumers is reverse logistics. It primarily deals with the returns. The
reverse logistics supply chain involves procuring goods from the end-
users and transferring them back to the source/ manufacturer/ warehouse.
It is meant for products damaged in the delivery process or eligible for
repairing, refurbishing, or recycling.
 
Third Party Logistics (3PL Logistics)
Third Party Logistics 3pl is the outsourcing of other operational logistics
companies to carry out the company's logistics services. In 3PL logistics,
all the logistics activities, including inventory management, warehousing,
transportation, and delivery, are handled by a third party. Hence, the
company gets to focus on other aspects of the business. For example,
Amazon has outsourced its inventory management.
 
Fourth Party Logistics (4PL)
Companies use a fourth party or 4PL logistics to outsource their logistics
operations to a single partner. The 4PL provider is responsible for
managing the entire supply chain, including assessment, designing,
building, controlling, and tracking supply chain solutions for their client.

Types of logistics Systems

7 R's of Logistics

Physical distribution
Physical distribution is the movement of goods, products, and raw
materials between warehouses, factories, and distribution centers, and
sending finished products to the customer.

The channels involved include warehousing, inventory control, order

processing, materials handling, transportation, and customer service.
Physical distribution and the ability to get a product to a consumer
quickly and economically has a direct impact on customer satisfaction.
By storing goods in convenient locations, and by creating fast, reliable
means of moving those goods, small business owners can help assure
continued success in a rapidly changing, competitive global market.

Components of Physical Distribution

Physical distribution is a supply chain forecasting and management term

best viewed as a system of distribution channels linked together for the
efficient movement of products. These components are interrelated,
meaning decisions made in one area affect the relative efficiency of
others. 

Customer Service
Customer service in supply chain management refers to the precisely-
defined standard of customer satisfaction that a small business provides to
its customers. Once a standard is set (ex: 60% of all shipments delivered
to customers within 48 hours of ordering) a physical distribution system
is then set up to reach that goal at the lowest possible cost. 

Transportation

Transportation is an indispensable component of distribution

management. Different transportation modes (LTL, Parcel, Air Freight)
enables retailers to make their goods and services available in a store,
wholesaler, or at the customer’s doorstep. 

From a cost perspective, U.S. companies spend trillions on shipping

costs, amounting to   nearly 25-40% of your average retailer’s total
distribution costs. Fortunately, a retail organization can use anyone, or a
combination of the following transport modes to offset some of the
overall shipment cost:

Warehousing

The warehousing component of physical distribution refers to the process

of receiving inbound shipments, storing merchandise, breaking down
bulk materials, and ecommerce fulfillment for delivery to the customer. 

A Warehouse distribution centers generally keep goods for longer

periods, whereas fulfillment centers operate as central distribution
locations for quick shipments of the finished product to customers and
retail locations. 

Order Processing

Order processing is a physical distribution function that directly affects

the ability of a retailer to meet the customer service standards defined by
the owner. Assuming the order processing system is efficient, the owner
can avoid the costs of premium transportation or high inventory levels. 

Order processing methods often vary from industry to industry, but the
basic idea is to deliver the order as the customer expects, in the way they
expect it, and when they expect it to be there. Thus, accuracy plays a vital
role in successful order processing, as do procedures that minimize the
order processing cycle.

Inventory Control
Inventory control is a major component of any physical distribution
system. Inventory control is used to keep inventories in a desired state
while continuing to adequately supply customers. Costs include funds
invested in inventory, depreciation, and possible obsolescence of the
goods.

Materials Handling

Another important component of a small business physical distribution

system is material handling. Material handling comprises all of the
activities associated with moving products within a production facility,
warehouse, and transportation terminals. In the case of chain retailers,
raw materials and finished goods are shipped from a common warehouse
to various store locations.

What Is Inventory Management?

Inventory management refers to the process of ordering, storing, using,

and selling a company's inventory. This includes the management of raw
materials, components, and finished products, as well as warehousing
and processing of such items. 

Steps in Inventory Management

1. Products arrive at your warehouse 

2. Products are checked and stored 
3. Managers or crew update inventory levels 
4. Customers place an order 
5. Customer orders are approved based on inventory 
6. Products are pulled and packaged 
7. Inventory levels are updated again 

Inventory management techniques/ Types/ Methods of inventory

control
 ABC Analysis
ABC (Always Better Control) Analysis is inventory management that
separates various items into three categories based on pricing and is
separated into groups A, B, or C. The A category is usually the most
 expensive one. The items in the B category are relatively cheaper
compared to the A category. And the C category has the cheapest
products of all three. 
 EOQ Model
Economic Order Quantity is a technique utilized for planning and
ordering an order quantity. It involves making a decision regarding
the amount of inventory that should be placed in stock at any given
time. The order will be re-ordered once the minimum order has been
reached.
 FSN Method
This method of inventory control refers to the process of keeping
track of all the items of inventory that are not used frequently or are
not required all the time. They are then categorized into three
different categories: fast-moving inventory, slow-moving inventory,
and non-moving inventory.
 JIT Method
Just In Time inventory control is a process utilized by manufacturers
to control their inventory levels. This method saves them money by
not storing and insuring their excess inventory. However, it is very
risky since it can lead to stock out and increase costs.
 Minimum Safety Stocks
The minimum safety stock refers to the level of inventory that an
organization maintains to avoid a possible stock-out.
 MRP Method
Material Requirements Planning is a process utilized by
manufacturers to control the inventory by planning the order of the
goods based on the sales forecast. The order is usually based on the
data collected by the system.
 VED Analysis
VED (Vital, Essential, Desirable) is a technique utilized by
organizations to control their inventory. It mainly pertains to the
management of vital and desirable spare parts. The high level of
inventory that is required for production usually justifies the low
inventory for those parts.
 What is warehousing?

Warehousing is the process of storing physical inventory for sale or

distribution. Warehouses are used by all different types of businesses that
need to temporarily store products in bulk before either shipping them to
other locations or individually to end consumers.

For instance, many ecommerce businesses will purchase products in bulk

from their suppliers, who ship them to their warehouse for storage. When
an end customer then places an order from the ecommerce site, the
business — or its third-party fulfillment provider — picks and packs the
product from the warehouse and ships it directly to the customer.

What are the 3 basic functions of warehousing?

 Order Fulfillment: Warehouses are responsible for fulfilling

customer orders by picking, packing, and shipping products.
 Inventory Management: Warehouses play a major role in keeping
track of inventory levels and ensuring stock is regularly replenished.
 Asset Protection: Warehouses must also protect their assets from
environmental factors and theft. They also need to ensure that products
are stored in a safe and secure manner.

functions of a warehouse –

1. Storage
 carefully estimated storage required to meet the regular customer
demand.
2. Safeguarding of Goods
protection to goods from loss, theft, or damage due to unfavourable
weather conditions like heat, wind, dust and moisture, etc.
3. Movement of Goods
It consists of the following-
 Inbound activity– It means unloading of goods received by the
warehouse.
 Transfer to storage– It refers to transferring the goods from the
inbound area to the storage area. 
 Order selecting–It means choosing the item in the storage
corresponding to the order to be shipped and moving it to the
shipment area. 
 Outbound activity– Lastly, we have ‘outbound activity’, which
means inspecting and loading the goods for shipment.
4.  Information Management
keep track of information about goods and materials sent into the
warehouse, stored and shipped out. In addition to that, any other
information regarding the warehouse is recorded.
5. Other Functions
Risk bearing- The moment goods are delivered for storage, the liability
of these goods transfers to the warehouse-keeper. Consequently, the risk
of loss or damage to goods is borne by the warehouse keeper.