Importance and need of Logistics Management in today’s business
Logistics management deals with the coordination of resources in an organization. Logistics management focuses on the organization as a whole and not on individual units and departments while deciding about the allocation of resources The resources may be in the form of men, machines, materials, money and time. Logistics management helps in the efficient use and deployment of the scarce resources. In absence of effective logistics management, there will be a depletion of various meager resources.
In developing countries like India projects do not succeed because of lack of attention to logistics management. Due to this there is a delay in the implementation of the projects. There is also uneven distribution of goods and services. In certain areas, there is excess of goods and services available, while in certain other areas, they are scarce. There is general inefficiency, uncertainty and instability in rendering services to the public.
Depending on the type of business, the expenditure on logistics can be anything between 5 and 35 percent of the sales. The cost of logistics management is therefore found to be high by certain industries. Because of this high cost, they are reluctant to implement logistics management. But, if adequate attention is paid to logistics, cost reduction can be effected in various departments. This is because logistics suggests the use of efficient means of transport, locating areas where cheaper materials are available, determining the correct quantities to be dispatched to market areas so that there is no scarcity or surplus felt in those areas etc.
In case a problem arises, logistics management would investigate the problem and resolve the same on the basis of costs and benefits to the organization as a whole and not to any particular department or unit. For example, to manufacture any product with zero defects would mean high cost of Production, which the customer may not be willing to pay. At the same time, if the finished product contains a lot of defectives, the customers would be unwilling to buy such products. Logistics management tries to find out the permitted standards of allowable defects in the finished products without any loss in the market share. This information is passed on to the production departments, which fix standards for production.
Another type of interface problem is caused when for example-, the marketing department considers that it is responsible only for the sale of the finished product. On the other hand, the production department may feel that the moment the goods are loaded on to the vehicle, its responsibility ceases. Such rigid compartmentalization of responsibilities and roles is definitely not desirable. This leads to neglect of activities in the interface areas which affects the overall efficiency of the organization.
Logistics management does away with the ambiguity in the definition of the responsibilities of individuals, Units and departments in an organization. It focuses on areas of possible inefficiency and ensures that all areas are effectively managed. It brings about co-ordination between units and departments.