Components of Logistics

Topics: Logistics, Inventory, Supply chain management Pages: 6 (1639 words) Published: July 31, 2013

Logistics is the management of the flow of resources between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, equipment, liquids, and staff, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation.

The Objectives of Logistics

Rapid response
F-flexibility objective of an organization: Some companies measure this as response time to customer’s order. On an average how much time do we need to fulfill one particular type of customer’s order in a year? This is a measure of rapid response.Logistics should ensure that the supplier is able to respond to the change in the demand very fast. Entire production should change from traditional push system to pull system to facilitate rapid response. Instead of stocking, the goods and supplying on demand, orders are executed on shipment to shipment basis information Technology plays an important role here as an enabler. IT helps management in producing and delivering goods when the consumer needs them. This results into reducing of inventory and exposes all operational deficiencies. Now the management resolves these deficiencies and slashes down costs. [Concept of SMED and KANBAN as practiced by JIT companies in Japan or elsewhere]  

Minimum variance
D-delivery objective of an organization, this can be measured as ‘On Time Delivery’ or OTD. If 100 deliveries are made in a month/quarter/year how many reached as per the commitment made to the customer? This percentage is OTD.Any event that disrupts a system is variance. Logistics operations are disrupted by events like delays due to obstacles in information flow, traffic snarls, acts of god, wrong dispatches, damage in transit. Traditional approach is to keep safety stocks and transport the goods by high cost mode. The cost of this approach is huge. Logistics is expected to minimize these events, thereby minimize and improve on Time Delivery.  

Minimum inventory
This is component of cost objective of a company. Inventory is associated with a huge baggage of costs. It is termed as a necessary evil. Objective of minimum inventory is measured as Inventory Turns or Inventory Turnover Ratio. Americans call this measure as turn velocity. Logistics management reduces these turns without sacrificing customer satisfaction. Lower turns ensure effective utilization of assets devoted to stock. [Concept of single piece flow as practiced by JIT companies in Japan or elsewhere]. Logistical management should keep the overall well being of a company in view and fix a minimum inventory level without trying to minimize the inventory level as an isolated objective  

Movement consolidation
Transportation is the biggest contributor to logistics cost. Transportation cost depends on product type, size, weight, distance to be transported etc. For transporting small shipments just in time [reduction in inventory costs] expensive transport modes are used which again tend to hike the costs. Movement consolidation is planning several such small shipments together [of different types of shipments] by integrating interests of several player s in the supply chain. Generally, large shipment size and long distances reduce transportation cost per unit. Movement consolidation shall result into reduction in transportation costs  

If the quality of product fails logistics will have to ship the product out of customers’ premises and repeat the logistics operation again. This adds to costs and customer...
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