SCLM/U2 Topic 1 Evolution and Objectives of Logistics
Evolution of Logistics
The evolution of logistics 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.
Logistics involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost. The logistic network consists of the suppliers, the retailer and the users. The purpose of an integrated logistic network in a supply chain is to fulfill customer orders through providing place utility to deliver products and services to end users. The place utility is achieved by managing a number of key functions of a supply chain. The functions include:
- Demand management
- Inventory management
- Order processing
- Information Management
Logistics is a key enabler of supply chain collaboration. Improving performance in this field allows supply chains to increase their efficiency significantly and help to create innovations in different areas. In this context, an important task is to find structures and approaches which enable all types of performance management in logistics and supply chains for a better fulfillment of customer needs.
Objectives of Logistics
- Cost Reduction and Profit Maximization
Logistics management results in cost reduction and profit maximization, primarily due to:
- Improved material handling
- Safe, speedy and economical transportation
- Optimum number and convenient location of warehouses etc.
- Efficient Flow of Manufacturing Operations
Inbound logistics helps in the efficient flow of manufacturing operations, due to on-time delivery of materials, proper utilization of materials and semi-finished goods in the production process and so on.
- Competitive Edge
Logistics provide, maintain and sharpen the competitive edge of an enterprise by:
- Increasing sales through providing better customer service
- Arranging for rapid and reliable delivery
- Avoiding errors in order processing; and so on.
- Effective Communication System
An efficient information system is a must for sound logistics management. As such, logistics management helps in developing effective communication system for continuous interface with suppliers and rapid response to customer enquiries.
- Sound Inventory Management
Sound inventory management is a by-product of logistics management. A major headache of production management, financial management etc. is how to ensure sound inventory management; which headache is cured by logistics management.