Components of Logistics

12 Business
November 20, 2023

Objectives

 What is “Value-Added logistics”?

 What are the categories of value-added logistics

 Explain two reasons for value-added logistics

 What is the definition of “Inventory”?

 Explain the various types of “inventory” in a business

 Explain three inventory management technologies

 Outline some of the costs associated with Inventory management

 What is the role of Inventory in logistics

Value Added Logistics

 Value-added logistics involves providing extra services beyond basic transportation and
storage, aiming to enhance the value of products in the supply chain. These services
include customization, packaging, assembly, quality control, and more, aiming to
improve the product or its delivery to customers, allowing businesses to stand out and
potentially gain a competitive edge.

Some categories of Value-Added Logistics

 Cross Docking.
 Co-packing & Assembly.
 Product Rework/ Sorting.
 Reverse Logistics.
 Quality Checks.
Reasons for Value Added Logistics

The primary objectives of value-added logistics revolve around enhancing customer satisfaction,
optimizing costs and resources, maximizing supply chain flexibility, improving inventory
management, and speeding up time-to-market.

 Enhanced Customer Experience: Value-added logistics directly impacts customer satisfaction

by tailoring products or services to specific needs, ensuring high-quality standards, and
providing efficient order fulfillment and delivery.

 Efficiency and Optimization: Value-added services often streamline processes within the
supply chain, leading to cost efficiencies, reduced waste, and optimized inventory
management.

 Market Adaptability: The ability to customize, package, or adapt products according to

changing market demands allows businesses to respond swiftly to consumer preferences and
industry trends.
Inventory
 Inventory in logistics refers to the stock of goods, materials, or products that a company
holds at various stages within its supply chain. It includes raw materials, work-in-
progress items, and finished goods that are either ready for sale or in the process of being
manufactured or distributed.

Types of Inventories

 Raw Materials: These are the basic materials or components used in the manufacturing process
before they undergo any transformation. Examples include raw metals, wood, fabric, or chemicals
used in production.

 Work-in-Progress (WIP) Inventory: This inventory consists of partially completed products

still in the production process. These items have undergone some transformation but are not yet
finished goods ready for sale.

 Finished Goods: These are the final products that have completed the manufacturing process
and are ready for distribution, sale, or use by customers.

 Maintenance, Repair, and Operations (MRO) Inventory: These are materials and supplies
used in the day-to-day operations of a business, including items like tools, cleaning supplies,
spare parts, or office supplies.

 Safety Stock: This inventory is held as a buffer against unexpected fluctuations in demand or
supply chain disruptions. It helps prevent stockouts and ensures there's always inventory available
to meet customer demand.
 Cycle Stock: This refers to inventory that fluctuates as it moves through the regular production
and sales cycle. It represents the typical inventory that businesses expect to move within a
specific period.

 Anticipatory Inventory: This is inventory held in anticipation of expected events, such as

seasonal demands or predicted changes in market trends.

 Consignment Inventory: Inventory that is still owned by the supplier but held by a retailer or
distributor until it is sold. The retailer only pays for the inventory once it's sold, reducing their
financial risk.