Deal with the management of the flow of goods or materials from point of origin to point of consumption, and in some cases even to the point of disposal. Logistics is not confined to manufacturing operations alone. It is relevant to all enterprises, including government institutions such as hospitals and schools, service organization such as retailers, banks and financial service organizations. Logistics is dependent upon natural, human, financial and information resources for inputs. Suppliers provide raw materials, in process inventory and finished goods.
Management actions provide the framework for logistics activities through the process of planning, implementation and control. The outputs of the logistics system are competitive advantage, time and place utility, efficient movement to the customer, and providing a logistic service, mix such that logistics becomes a propriety asset of the organization. These outputs are made possible by the effective and efficient performance of the logistic activities.
Logistics activity is literally thousands of years old, dating back to the earliest forms of organized trade. As an area of study, however, it first began to gain attention in the early 1900s n the distribution of farm products as a way to support the organization’s business strategy and a way of providing time and place utility. Following the clear importance of the contribution of logistics during the Second World War, logistics began to receive increased recognition and emphasis. The first dedicated logistics texts began to appear in the early 1960’s, which was also when Peter Drucker, a noted business expert, author and consultant, stated that logistics was one of the last real frontiers of opportunity for organizations wishing to improve their corporate efficiency. These factors combined to increase the interest in logistics.
The Role of the Logistics in the Economy
Logistics plays a key role in the economy in two significant ways. First, logistics is one of the major expenditures for the business, thereby affecting and being affected by other economic activities.
Second, logistics supports the movement and flow of many economic transactions; it is an important activity in facilitating the sale of virtually all goods and services. One of the fundamental ways that logistics adds value is by creating utility. From an economic standpoint, utility represents the value or usefulness that an item or service has in fulfilling a want or need.
The Role of Logistics in the Organization
In the recent years, effective logistics management has been recognized as a key opportunity to improve both the profitability and the competitive performance of firms. By the early 1900s, customer service took centre stage in many organizations. Even organizations that had previously adhered to the “marketing concept” were examining what it meant to be customer driven. The trend toward strong customer focus continues today.
Key Logistics Activities
Outlined below are the key logistics activities required to facilitate the flow of a product from point of origin to point of consumption. All these activities, listed alphabetically below, may be considered part of the overall logistic process: Customer service and support
Demand forecasting/ planning
Purchase and procurement
Logistics communications and order processing
Material handling and package
Facilities site selection, warehousing and storage
Return goods handling and reverse logistics
While all organization may not explicitly consider these acti9vities to be part of logistics activities, each affects the logistics process.
Issues in Logistics
This section presents some of the key challenges and issues that logistics faces today and will continue to face in the future. As the role of logistics grows and takes on greater importance in achieving the overall goals of the organization, it needs to meet the challenge and improve its performance to support those goals. Some areas of opportunity include: Greater participation in setting organizational strategy and the strategic planning process Total quality management (TQM) and the just-in-time (JIT) logistics The use of quick response (QR) and efficient consumer response (ECR) techniques Identification of opportunities for using logistics as a competitive weapon/marketing strength Better understanding of global logistics issues and improved logistics information systems Improved understanding of and accounting for logistics costs Greater understanding and appropriate application of technology Greater participation of logistics professionals in work teams Green or environmental logistics
Appropriate understanding and use of outsourcing, partnerships and strategic alliances.
Logistics as a Boundary-spanning Activity The logistics function and the activities performed by logistics do not exist in isolation. Logistics plays a key role in activities throughout the supply chain, both within and outside the organization. Outside the organization, logistics interfaces with the customers in the order processing, order fulfillment and delivery cycles. Logistics also interfaces with carriers, warehouses, suppliers and other third parties that play a role in the supply chain. Within the organization, logistics interfaces with virtually every functional area in some capacity. Logistics interfaces with finance in the planning process and in the analysis of capital expenditures on investment of building and equipment to support distribution, transportation, warehousing, information technology and related issues.
Logistics must work closely with production and operations in a number of capacities. First logistics often receives order releases for material for production, and it needs to ensure that the items required are ordered, transported and received on a timely basis. Storage may also need to be arranged. Logistics often manages the flow of materials or work in process within the organization. Logistics must also work with production in terms of stocking and shipping the finished product as it is available.
Reference: Fundamental of Logistics Management (European edition) Authors: David B. Grant, Douglas M. Lambert, James R. Stock and Lisa M. Ellram