SCLM/U2 Topic 2 Components and Functions of Logistics Management
According to Phillip Kotler, “Market logistics involve planning, implementing and controlling physical flow of material and final (finished) goods from the point of origin to the point of use to meet customer requirements, at a profit.”
Logistics management consists of the process of planning, implementing and controlling the efficient flow of raw-materials, work-in-progress and finished goods and related information-from point of origin to point of consumption; with a view to providing satisfaction to the customer.
Components of Logistics Management
Logistics management consists of three major components:
- Order processing or Input
This component is the first process of logistics where information about the resources and production is gathered based on which the products are manufactured. In the case of freight forwarding, order processing refers to the step where the various source of vendors and transportation are gathered for the importing or exporting of goods.
- Inventory Management
Inventory management plays an important role in the supply chain management system. As the name suggests, inventory management helps the logistics company in allocating the resources like transport vehicles, labour and other resources according to the order received by the client. This helps in making sure that no orders or freights are being left out or are being delayed for delivery.
- Freight transportation
This is the last and the major component of logistics management. After the order is processed and the resources are allocated in order to transport the freight to the destination. Various routes and types of transportation are analysed to check which transportation and the routes will deliver the product on or before the delivery time. There are tools and software which analyse these factors with the help of artificial intelligence and machine learning tools and provide the best plans to the logistics company.
These components together help in delivering the best quality goods to the consumers and is delivered on time. These components help in reducing the additional costs and increasing the productivity of the work, therefore the logistics company will be able to provide the best services with great quality to their clients and consumers.
Functions of Logistics Management
(i) Network Design
Network design is one of the prime responsibilities of logistics management. This network is required to determine the number and location of manufacturing plants, warehouses, material handling equipment’s etc. on which logistical efficiency depends.
(ii) Order Processing
Customers’ orders are very important in logistics management. Order processing includes activities for receiving, handling, filing, recording of orders. Herein, management has to ensure that order processing is accurate, reliable and fast.
Further, management has to minimize the time between receipt of orders and date of dispatch of the consignment to ensure speedy processing of the order. Delays in execution of orders can become serious grounds for customer dissatisfaction; which must be avoided at all costs.
It is related to obtaining materials from outside suppliers. It includes supply sourcing, negotiation, order placement, inbound transportation, receiving and inspection, storage and handling etc. Its main objective is to support manufacturing, by providing timely supplies of qualitative materials, at the lowest possible cost.
(iv) Material Handling
It involves the activities of handling raw-materials, parts, semi-finished and finished goods into and out of plant, warehouses and transportation terminals. Management has to ensure that the raw-materials, parts, semi-finished and finished goods are handled properly to minimize losses due to breakage, spoilage etc. Further, the management has to minimize the handling costs and the time involved in material handling.
(v) Inventory Management
The basic objective of inventory management is to minimize the amount of working capital blocked in inventories; and at the same time to provide a continuous flow of materials to match production requirements; and to provide timely supplies of goods to meet customers’ demands.
Management has to maintain inventories of:
- Raw-materials and parts
- Semi-finished goods
- Finished goods
(vi) Packaging and Labeling
Packaging and labeling are an important aspect of logistics management. Packaging implies enclosing or encasing a product into suitable packets or containers, for easy and convenient handling of the product by both, the seller and specially the buyer.
Packaging facilities the sale of a product. It acts as a silent salesman. For example, a fancy and decorative packaging of sweets, biscuits etc. on the eve of Diwali, makes for a good sale of such items.
Labeling means putting identification marks on the package of the product. A label provides information about – date of packing and expiry, weight or size of product, ingredients used in the manufacture of the product, instructions for sale handling of the product, price payable by the buyer etc.
Storage or warehousing is that logistical activity which creates time utility by storing goods from the time of production till the time these are needed by ultimate consumers.
Here, the management has to decide about:
- The number and type of warehouses needed and
- The location of warehouses.
Transportation is that logistical activity which creates place utility.
Transportation is needed for:
- Movement of raw-materials from suppliers to the manufacturing unit.
- Movement of work-in-progress within the plant.
- Movement of finished goods from plant to the final consumers.