Logistics- concept, need and benefits

LOGISTICS

“Logistics is the process of planning, implementing and controlling the efficient, effective flow and
storage of goods, services and related information from point of origin to point of consumption for
the purpose of conforming the customer requirement”.

This definition clearly points out the inherent nature of logistics and it conveys that Logistics is
concerned with getting products and services where they are needed whenever they are desired. In
trade Logistics has been performed since the 3 beginning of civilization: it‟s hardly new. However
implementing best practice of logistics has become one of the most exciting and challenging
operational areas of business and public sector management. Logistics is unique, it never stops!
Logistics is happening around the globe 24 hours a days Seven days a week during fifty-two weeks a
year. Few areas of business involve the complexity or span the geography typical of logistics.

Word, ‟Logistics‟ is derived from French word „loger‟, which means art of war pertaining to
movement and supply of armies. Basically a military concept, it is now commonly applied to
marketing management. Fighting a war requires the setting of an object, and to achieve this
objective meticulous planning is needed so that the troops are properly deployed and the supply line
consisting, interalia, weaponary, food, medical assistance, etc. is maintained. Similarly, the plan
should be each that there is a minimum loss of men and material while, at the same time, it is
capable of being altered if the need arises. As in the case of fighting a war in the battle-field, the
marketing managers also need a suitable logistics plan that is capable of satisfying the company
objective of meeting profitably the demand of the targeted customers.

Logistics has gained importance due to the following trends

 Raise in transportation cost.  Production efficiency is reaching a peak  Fundamental change in

inventory philosophy  Product line proliferated  Computer technology  Increased use or
computers  Increased public concern of products Growth of several new, large retail chains or mass
merchandise with large demands & very sophisticated logistics services, by pass traditional channel
& distribution.  Reduction in economic regulation  Growing power of retailers  Globalization

Further more Logistics has gained importance in the international marketing with the following
reasons:

1. Transform in the customer’s attitude towards the total cost approach rather than direct cost
approach.
2. Technological advancement in the fields of information processing and communication.
3. Technological development in transportation and material handling.
4. Companies are centralizing production to gain economies of scale.
5. Most of the MNC organizations are restructuring their production facilities on a global basis.
6. In many industries, the value added by manufacturing is declining as the cost of materials
and distribution climbs.
7. High volume data processing and transmission is revolutionizing logistics control systems.
8. With the advancement of new technologies, managers can now update sales and inventory
planning faster and more frequently, and factories can respond with more flexibility to
volatile market conditions.
 9. Product life cycles are contracting. Companies that have gone all out to slash costs by
turning to large scale batch production regularly find themselves saddled with obsolete
stocks and are unable to keep pace with competitors‟ new-product introductions.
10. Product lines are proliferating. More and more product line variety is needed to satisfy the
growing range of customer tastes and requirements, and stock levels in both field and
factory inevitably rise.
11. The balance of power in distribution chain is shifting from the manufacturers to the trader.

OBJECTIVES OF MARKETTING LOGISTICS

The General objectives of the logistics can be summarized as:

1. Cost reduction

2. Capital reduction

3. Service improvement

The specific objective of an ideal logistics system is to ensure the flow of supply to the buyer,
the:  right product  right quantities and assortments  right places  right time  right cost /
price and,  right condition

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) has been defined as "a process-oriented approach to procuring,
producing, and delivering products and services to customers. SCM has a broad scope that includes
sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users. It
spans all movement and storage of raw materials, work-in-process inventory, and finished goods
from point-of-origin to point-of-consumption. The term supply chain management was coined by
strategy consulting firm Booz Allen Hamilton in 198.Supply chains are dynamic and complex reaching
into many customers and back into many suppliers throughout the world. It exists in both service
and manufacturing organizations, although the complexity of the chain may vary greatly from
industry to industry and firm to firm. The following definitions are the evidence of role played by the
logistics business development.

Definitions of Supply Chain Management

 A strategic concept that involves the understanding and managing of the sequence of activities -
from supplier to customer - that add value to the product supply chain.

 The supply chain encompasses all activities associated with the upstream and downstream flow
and transformation of goods and information from the raw materials stage (extraction), through to
the end user.
 Supply chain management is the collaborative effort of multiple channel members to design,
implement, and manage seamless value-added processes to meet the real needs of the end
customer.

Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations

along the supply chain operated independently. These organizations have their own objectives and
these are often conflicting. Marketing's objective of 20 high customer service and maximum sales
conflict with manufacturing and distribution goals. Many manufacturing operations are designed to
maximize throughput and lower costs with little consideration for the impact on inventory levels and
distribution capabilities. Purchasing contracts are often negotiated with very little information
beyond historical buying patterns. The result of these factors is that there is not a single, integrated
plan for the organization and there were as many plans as businesses. Clearly, there is a need for a
mechanism through which these different functions can be integrated together. Supply chain
management is a strategy through which such integration can be achieved.

NEED FOR SUPPLY CHAIN MANAGEMENT

The need of supply chain management has been identified as follows:

 Improve operations

 Increasing levels of outsourcing

 Increasing transportation costs

 Competitive pressures

 Increasing globalization

 Increasing importance of e-commerce

 Manage inventories

Major module of international supply chain management has two major components:

1. International movement of products and raw materials, title transformation, payments,

controlling risk factors

2. In parallel with the above activities, an information network is hard at work. Information sharing
and collecting is very important to run an effective global supply chain management system