Logistics management.

Logistics Management Definition Logistical management includes the design and administration of system to control the flow of material, WIP and finished inventory to support business unit strategy. Overall goal of logistics is to achieve a targeted level of customer service at the lowest possible total cost. LOGISTICAL TOTAL COST – includes the cost of physical distribution system and cost of logistical supply chain PHYSICAL DISTRIBUTION SYSTEM cost includes • Manufacturing • Wholesale • Inventory • Transportation • Administration LOGISTICAL SUPPLY CHAIN cost includes • Cost of inventory • Production cost • Service cost Logistical Integration Hierarchy Basic  Functions  Performance Cycle  competencies  strategic positioning (universal process) Basic work – consists of specific job essential to logistical performance. E.g., order pricing/ truck driving. It involves many people. Functional Areas – served as the organizational focus to perform and administer logistics work. E.g. Traffic dept  transportation. These are the area of logistics essential for operational excellence. The resources are to be integrated over function. It is a cross functional coordination. Performance cycle • Operational cycle for logistics execution • Provides operational structure for logistics integration • Linking basic work and function to complete order to delivery operation • Logistical temporal integration Logistical Competency It is a relative measurement of firm’s capability to provide competitively superior customer service at lower possible cost. It is achieved through • Alternative logistical capabilities • Emphasizing flexibility • Time based performance • Operational control • Postponement capabilities • Commitment o perfect service performance Strategic positioning It is the expectation concerning logistical competency directly depend upon firm’s strategic positioning. It focuses on; • Creating customer value for gaining or retaining loyal customers • To excel in one or more of core competencies (more resources and management attention is given) Importance of logistics • It creates value in terms of time and place to customer and supplies of a firm. • Significant costs. • Logistics customer service expectations are increasing through lesser error rates and high inventory turn over for finished goods. • Supply and distribution line are lengthening with greater complexity. • Logistics is more important to strategy • It adds customer value • Customers increasingly want quick, customized response. Activity mix of Logistics It refers to the activities that make up business logistics. It varies upon organizational structure, management opinion about supply chain, and importance of operational activities. Primary activities 1. Transportation a. Mode of transport service selection b. Freight consolidation c. Carrier routing d. Vehicle scheduling e. Equipment selection f. Claim processing g. Rate auditing 2. Inventory management a. RM and FM stocking policies b. Sales forecasting c. Product mix at stocking point d. Number, Size and location of stocking point e. JIT, push & pull strategies 3. Information flow and order processing a. Sales order inventory and interface procedures b. Order information transmitted methods c. Ordering rules Secondary activities 1. Warehousing a. Space determination b. Stock layout and spatial design c. Warehouse configuration d. Stock placement 2. Material handling a. Equipment selection b. Equipment replacement policies c. Order pricing procedures d. Stock storage and retrieval 3. Purchasing a. Supply source selection b. Timing c. Quantity 4. Packaging a. Package handling b. Storage c. Protection from loss and damage 5. Information maintenance a. Information collection b. Storage c. Manipulation d. Data/control procedures These support activities co-operate operations and production department to; • Specify aggregate quantities • Sequence and time of production output • Schedules supplies for production and operations