Logistics 5.
Lesson 1
Objectives
At the end of the lesson, students will be able to:
● Define the terms logistics and supply chain
● Identify the components of Logistics
Introduction
Production links many organisations together; these are often based in
different locations. The process of production is not complete until a
product reaches the customer and satisfies their requirements.
Every business relies on others to produce and distribute its products. For
example, suppliers of raw material and parts, machinery, energy,
transportation, financial services and retail outlets etc, Together they form
the supply chain for its product.
A supply chain represents all the organisations and steps involved in
producing a product and delivering it to its final consumer.
Logistics
Logistics is the process of organising the movement of these goods from one
part of the supply chain to another, to ensure they are available for production
when they are needed so that the product reaches its customer in the right place
at the right time.
Components of Logistics-forward flow of goods
Logistics management govern the flow of goods, storage of goods within a
supply chain and between the producer of a final product and the final
customer.
Forward logistics organises the forward flow of goods from the producer to the
end user. (from a warehouse to the shops)
Components of Logistics-forward flow of goods
Reverse Logistics organises the reverse flow of goods such as a customer
returning a good to the producer for example damaged or delivered in error, or
faulty.
Reverse logistics organises return, recalls, recycling, refurbishments,
repackaging products for resale and also the disposal of waste.
Organising the storage of goods-warehousing
A warehouse is a building used for storing goods used by the producers,
exporters, wholesalers, custom officials, distributors and many more.
They can be large plain buildings located in industrial zones or out of cities.
They have specialised equipment for moving goods such as forklifts and cranes.
Warehousing involves inbound flows of goods and outbound flow of goods.
Inbound flow of goods
Inbound flow of goods in the production setting will include raw materials and
parts which need to be sorted so that they can be easily moved on to the
production process.
Outbound flow of goods
Outbound flow of goods comes after the production process when goods need
to be moved to a location in the warehouse where staff can prepare orders for
customers.This may involve pulling products from the warehouse to put
together an order to pack and label for transportation to the customer.
Advantages of storing in a warehouse
Managing the flow of goods through the warehouse will have significant impact
on the profitability of the business as follows:
Storing only what is needed: if the business can store only what it needs, it can
have cash available to invest in other areas.
Storing large quantities of raw materials: A warehouse will store large
amounts of raw materials until they are needed. Businesses can also prepare for
the increased demand for their goods through storing the extra raw materials
needed in their warehouse.
Advantages of storing in a warehouse
Storing seasonal products: Warehouses also fill the gap between when the
demand is reduced and when they are required by customers. For example rain
coats and winter coats are produced during the year but are only needed
seasonally
Collateral for a loan: the goods in a warehouse have a dollar value. They can be
used by the owner of the goods as collateral for a loan based on the value
stored.
Minimising risk: Warehouse help to minimize the risk to business owners.
Perishable goods can be kept in cold storage to prevent damage. Goods in
warehouses can be insured to minimise risk of fire, theft and accidental damage.
Insuring risks in production, storage and distribution
There are many risks involved in the production, storage and distribution of
goods. This include damages caused by thefts, fire, vandalism, natural disasters.
Where perishable goods are involved, there may be the loss of power or delays
at the sea ports or airport, causing spoilage of goods. This can have significant
financial effects on the business.
Businesses need to insure themselves against these losses. There are several
types of transport and logistics insurance available to businesses, including
warehouse and vehicle insurance, storage risk insurance, land and marine cargo
insurance, theft and accident insurance.
