BUSINESS LOGISTICS

Saturday, March 7, 2015 @ 4:31 PM

❝CHAPTER 2 : BUSINESS LOGISTICS/SUPPLY CHAIN ❞

INTRODUCTION
- This chapter introduces students to the fundamental concepts and terms of business logistics and the related to business logistics.

2.1 BUSINESS LOGISTICS : THE ACTIVITY MIX

Business logistics is also sometime known as physical distribution, materials management, transportation management and supply chain management. Activities involved in business logistics are:

Transportation
Inventory management
Order processing
Customer service standard
Purchasing
Warehousing
Materials handling
Packaging
Product scheduling

Logistics can be defined as the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in process inventory, finished good and the related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

2.2 THE ACTIVITY MIX

Key Activities

Customer Service Standards
Transportation
Inventory Management
Order Processing

Support Activities

Warehousing
Materials Handling
Purchasing
Protective Packaging
Cooperate with Production/Operations
Information Maintenance

2.3 OBJECTIVES OF BUSINESS LOGISTICS

Cost reduction (minimize cost) ; strategy directed toward minimizing the variable costs associated with movement and storage. The best strategy is usually formulated by evaluating alternatives courses of action
Capital reduction (minimize investment) ; strategy directed toward minimizing the level of investment in the logistics system. Maximizing the return on logistics assets is the motivation for this strategy.
Service improvement (maximize customer service) ; strategy usually recognizes the revenues depend on the level of logistics service provided.

2.4 IMPORTANCE OF BUSINESS LOGISTICS

Reason for the Importance of Logistics

Cost
Length of Supply and Distribution Lines
Strategic Role
Customer Wants
Customer Value

2.5 SUPPLY CHAIN MANAGEMENT

Supply chain management

- referring to the management of interaction and coordination of the upstream & downstream value added flows of materials final goods & related information among suppliers, the company, resellers and final consumers

2.5.1 Materials Management

The thurst of materials management in towards the operating systems such as manufacturing production line in terms of a schedule for production/operations. Therefore, the operations of the firm are integral in materials management.
The needs of the production line or operating systems are translated into purchase orders.The important logistical information in the purchase order is quantity tl be shipped, delivery destination & requested delivery date. Delivery might be handled by the supplier of the buyer depending on the purchase terms. Once the shipment of goods reached the destination, it is inspected for quality & then placed in inventory until it is needed in operations.

2.5.2 Physical Distribution

Also called marketing logistics. It involves planning, implementing and controlling the physical flows of goods, services & related information from the points of origin to the points of consumption in order to meet customer requirements of a profit. Physical distribution is primarily concerned with finished and semi finihed goods that a company produces & are usually on offer for sale.

The logistician can arrange the distribution strategically through:

i) Direct shipments form plant inventories; or

ii) Direct shipment form vendors: or

iii) The production line/shipment through the warehousing systems

Direct shipment usually involves large quantities, as the transportation cost will be lower. For smaller quantities as the transportation cost will be lower. For smaller quantities, an alternative strategy is to supply it through the warehousing system. This would reduce the costs of transportation & increase level of customer service.

2.5.3 Reverse Logistics

Products sent to the customers might be returned by the customer if a wrong product is delivered, damaged, broken, unwanted, access for simply that the customer changes his mind. Therefore, procedures and arrangements for the products to be returned form customers' locations must be established. Similar arrangement must be conducted for for products that becomes obsolete while in stock in order to be disposed of or returned to the plant for rework.

2.6 LOGISTICS AND DISTRIBUTION STRUCTURE

The discussion in the previous sections of this chapter has illustrated the major components to be found within a logistics/distribution system . The fundamental characteristics of a physical distribution structure could be considered as the flow of material/product is stationary. This flow is usually some form of transportation of the product.

There is also, of course, a cost incurred to enable the distribution, operation to take place. The importance of this distribution or logistical cost to the final cost of the product has already been highlighted. As has been noted, it can vary according to the sophistication of the distribution system used and the intrinsic value of the product itself. One idea that has been put forward in recent years is that these different elements of logistics are providig an 'added value' to a product as it is made avalaible to the final user - rather than just imposing an additional cost. This is more positive view of logistics and is a useful way of assessing the real contribution 7 importance of logistics & distribution services.

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