Effective logistics management can provide a major source of competitive advantage. The bases for successes in the marketplace are numerous, but a simple model has been based around the three C’s — Customer, Company & Competitor. The source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of the customer, from its competition and secondly by operating at a lower cost and hence at greater profit. Seeking a sustainable competitive advantage has become the concern of every manager who realizes the realities of the marketplace. It is no longer acceptable to assume that the goods will sell themselves. An elemental, commercial success is derived either form a cost advantage or a value advantage or, ideally both. The greater the profitability of the company the lesser is the cost of production. Also a value advantage gives the product an advantage over the Continue reading
Logistics Management
Warehousing Function of Logistics
A warehouse is a location with adequate facilities where volume shipments are received from a production center, broken down, resembled into combinations representing a particular order or orders and shipped to the customer’s location or locations. The rationale for establishing a warehouse in a distribution network is the creation of a differential advantage for the firm. This advantage accrues from achieving a lower overall distribution cost and/or obtaining service advantage in a market area. The concept of a distribution warehouse or a distribution center is vastly different from the earlier concept of a godown for storage. The need of that system is sue to Ensuring protection against delays and uncertainties in transportation arising from a variety of factors. Eliminating lack of sophistication in production control and consequent uncertainties in the availability of product at the desired time and place. Providing for adjustment between the time of production and the time Continue reading
Supply Chain Management Processes
Although there are many views of supply chain management (SCM), at present, many practitioners look upon SCM as the management of key business processes across the network of organizations that form the supply chain. A supply chain is a network of manufacturers, suppliers, distributors, transporters, storage facilities and retailers that perform functions like procurement and acquisition of material, processing and transformation of the material into intermediate and finished tangible goods, and finally, the physical distribution of the finished goods to intermediate or final customers. According to the definition given by the Global Supply Chain Forum, supply chain management is the integration of key business processes from end-user,to original suppliers that provides products, services, and information that add value for customers and other stakeholders. There are eight business processes that are carried out across the supply chain. They are: Customer Relationship Management: Customer relationship management involves establishing a framework for building Continue reading
Total Cost Approach to Logistics
Total cost approach to logistics is the key to managing the logistics function. Management should strive to reduce the total cost of logistics rather than the cost of each activity. So logistics must be viewed as an integrated system rather than the individual system, because reduction in one cost invariably lead to increase the cost of other components. Effective management and real cost savings can be accomplished only by viewing logistics as an integrated system and minimizing its total cost given the firms customer service objectives. So the main costs which are involved in logistics function are: Customer service level costs Transportation costs Warehousing costs Order processing and information costs Lot quantity costs Inventory carrying costs Customer Service Level Costs Most business people find it difficult, if not impossible to measure this cost. The cost associated with alternative customer service levels is the cost of lost sales( not only the Continue reading
Business Objectives of Logistics Systems
The General objectives of the logistics can be summarized as: Cost reduction Capital reduction Service improvement The specific objective of an ideal logistics system is to ensure the flow of supply to the buyer, the: right product right quantities and assortments right places right time right cost / price and, right condition This implies that a firm will aim at having a logistics system which maximizes the customer service and minimizes the distribution cost. However, one can approximate the reality by defining the objective of logistics system as achieving a desired level of customer service i.e., the degree of delivery support given by the seller to the buyer. Thus, logistics management starts with as curtaining customer need till its fulfillment through product supplies and, during this process of supplies, it considers all aspects of performance which include arranging the inputs, manufacturing the goods and the physical distribution of the products. Continue reading
Evolution of Logistics and Supply Chain Management (SCM)
The evolution of logistics and Supply Chain Management (SCM) in the 1990s can be traced back to “physical distribution management” in the 1970s when there was no coordination among the various functions of an organization, and each was committed to attain its own goal. This myopic approach then transformed into “integrated logistic management” in the 1980s that called for the integration of various functions to achieve a system-wide objective. Supply Chain Management (SCM) further widens this scope by including the suppliers and customers into the organizational fold, and coordinating the flow of materials and information from the procurement of raw materials to the consumption of finished goods. The objectives of Supply Chain Management (SCM) are to eliminate redundancies, and reduce cycle time and inventory so as to provide better customer service at lower cost. The focus has shifted from the “share of the market” paradigm to the “share of the Continue reading