Objectives of Logistics

The objectives of Logistics are summarized as under.

Rapid response: Rapid response is concerned with a firm’s ability to satisfy customer’s requirement in a timely manner. 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.

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 for management to resolve these deficiencies and slashes down costs.

Minimum variance: Variance is any unexpected event that disrupts system. Logistical operations are disrupted by events like delays in order receipt, disruption in manufacturing, goods damaged at customer’s location and delivery to an in correct location etc.

Traditional solution to deal with variance was to keep safety stock or use high cost transportation. Such practices were expensive and risky and thus have been replaced by information technology to achieve positive logistics control.

Minimum inventory: This is a 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.

Logistics management reduces these turns without sacrificing customer satisfaction. Lower turns ensure effective utilization of assets devoted to stock. Logistical management should keep the overall wellbeing 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 players’ 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.

Quality: 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 dissatisfaction.

Hence logistics should contribute to TQM initiative of management. In fact, commitment to TQM has made the management world over wake up to the significance of logistics function. Logistics can play a significant role in total quality improvement by improving the quality of logistics performance continuously and continually.

Life cycle support: Life cycle support is also called cradle-to-cradle logistical support. It means going beyond reverse logistics and recycling to include the possibility of after sales services, product recalls and product disposal. This means that firms must consider how to make a product and its package (cradle) and then how to remake and reuse them (to cradle).

From Manufacturer’s Point of View

Manufacturers are a major player in business operations as they bear the maximum risk in the whole chain. Consequently the key objectives in logistics management from the manufacturers perspective is considered as primary and these are as follows.

  • Reduction in transportation cost for in-bound raw materials and components
  • Reduction in inventory leading to lower operational costs
  • Optimising the route for transporting the products to the customers
  • Efficient and faster transportation system
  • Minimised waiting time for inventory at plants and warehouses
  • Reduction in material handling costs
  • Smooth flow of materials through production systems

 From Logistician’s Point of View

Logisticians are the intermediaries who carry out various activities between the manufacturer, seller and the buyer for reaching the materials to their destination. A list of such logisticians is as follows.

  • Clearing and forwarding agents.
  • Customs house agents
  • Shipping agents
  • Freight brokers
  • Freight forwarders
  • Stevedores

The key objectives in logistics management from the logisticians’ perspective are summarised as under.

  • Improved scheduling
  • Lower transportation cost
  • Improved services to customers
  • Improved efficiency in transportation

From Customer’s Point of View

The Customer is the focal point of the entire logistics system. The key objectives in logistics management from the Customer’s perspective are summarised as under.

  • Timely delivery
  • Optimum inventory
  • Lower distribution cost

In short the Customers fundamentally expect a reliable service of a high degree and minimum cost of transportation which would help them in structuring a competitive pricing in the market.

Evolution of Logistics
Elements of Logistics

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