Prior to the 1950s, functions now accepted as logistics were generally viewed as facilitating or support work. Organizational responsibility for logistics was dispersed throughout the firm. This fragmentation often meant that aspects of logistical work were performed without cross-functional coordination, often resulting in duplication and waste information was frequently distorted or delayed and lines of authority and responsibility were typically blurred. Managers recognizing the need for total cost control began to reorganize and combine logistics functions into a single managerial group. Structuring logistics as an integrated organization first appeared in the 1950s. The motivation behind functional aggregation was the belief that grouping logistics functions into a single organization would increase the likelihood of integration. The paradigm (model) was that functional proximity would facilitate improved understanding of how decisions and procedures in one area affect performance in other areas. The belief was that eventually all functions would begin to work as Continue reading
Logistics Management
Use of Logistics Channel and Public and Private Distribution Facilities – For Material Sources
Use of Logistics Channel The procurement cycle occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that materials are available for manufacturing to occur according to schedule. During the procurement cycle, the manufacturer orders the components from suppliers that replenish the component inventories. The relationship is quite similar to that between a distributor and manufacturer, with one significant difference: whereas retailer or distributor orders are triggered by uncertain customer demand, component orders can be determined precisely once the manufacturer has decided what the production schedule will be. Component orders are dependent on the production schedule. Of course, if a supplier’s lead times are long, the supplier has to produce to forecast because the manufacturer’s production schedule may not be fixed that far in advance. In practice, there are several tiers of suppliers, each producing a component for the next tier. A similar cycle would then flow back Continue reading
Integrated Logistics Management
Integrated Logistics is defined as “ the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies and information necessary to meet those needs and wants; optimizing the goods-or-service-producing a network to fulfill customer requests; and utilizing the network to fulfill customer request in a timely way.” Integrated logistics is a service-oriented process. It incorporates actions that help move the product from the raw material source to the final customer. Integrated Logistics Management The movement of raw materials and components to a manufacturing company must be managed. So must the movement of finished goods from the manufacturing plant to further processing, to the retail, or to the final consumer. The management of this movement is called integrated logistics management. Variables affecting the Evaluation and Growth of Integrated Logistic Many variables affected the evaluation and growth of integrated logistic. The first was the growth of the consumer awareness Continue reading
Activity Based Costing in Logistics
Activity-based costing seeks to relate all relevant expenses to the value adding activities performed. For example, costs are assigned to a customer or product to reflect all relevant activity cost independent of when and where they occur. The fundamental concept of activity-based costing is that expenses need to be assigned to the activity that consumes a resource rather than to an organizational or budget unit. For example, two products produced in the same manufacturing facility, may require different assembling and handling procedures. One product may need an assembly or packaging operations that requires additional equipment or labor. If total equipment and labor costs are allocated to the products on the basis of sales or units produced than both items will be charged for the additional assembly and packaging operations required by only one of them. In case of logistics, the key event is a customer order and related activities and Continue reading
Planning the Inventory Resources in Logistics
Planning is extremely important when it comes to inventory resources. The lack of planning can be costly to the firm either because of the carrying and financing costs of excess inventory or the lost sales from inadequate inventory. The inventory requirements to support production and marketing should be incorporated into the firm’s planning process in an orderly fashion. The production side: Every product is made up of a specified list of components. The planner must realize the different mix of components in each finished product. Each item maintained in inventory will have a cost. This cost may be based on volume purchases, lead time for an order, historical agreements or other factors. Each component can be assigned a value. Once the mix is known and each component has been assigned a value, the planner can calculate the materials cost. The marketing side: The second step in inventory planning involves a Continue reading
3 Important Categories of Logistics
Logistics is the process of accurately interpreting customer requirements or orders or marketing strategy, as also providing manufacturing operations support, with precise execution of the process of reaching the product material from the point of origin to the point of requirement consumption ensuring suitable care of the product material throughout to avoid damage deterioration, continuously ensuring the lowest possible cost throughout the process. Logistics is concerned with getting products and services where they are needed when they are desired. The responsibility of logistics is the temporal and spatial positioning of raw materials, work in progress, and finished inventories when and where required. Integrated logistics support, when properly understood and applied, can provide the means to identify and resolve many logistic problems, frequently before they developed. Logistics, in the broadest sense of the word, can be considered as scope of activity comprised of three major areas or subsets. Subsistence logistics, Operation Continue reading