Logistics is viewed as the competency that links an enterprise with its customers and suppliers. Information from and about customers flows through the enterprise in the form of sales activity, forecasts and orders. As products and materials are procured, a value added inventory flow is initiated that ultimately results in ownership transfer of finished products to customers. Thus the process is viewed in terms of two inter-related efforts, inventory flow and information flow.
The management of logistics is concerned with the movement and storage of materials and finished products. Logistical operations start with the initial shipment of a material or component part from a supplier and are finalized when a manufactured or processed product is delivered to a customer.
From the initial purchase of a material or component, the logistical process adds value
By moving inventory when and where needed. Thus the material gains value at each step.
For a large manufacturer, logistical operations may consist of thousands of movements, which ultimately culminate in the delivery of the product to an industrial user, wholesaler, dealer or customer.
Similarly for a retailer, logistical operations may commence with the procurement of products for resale and may terminate with consumer pickup or delivery.
The significant point is that regardless of the size or type of the enterprise, logistics is useful and requires continuous management attention.
In order to understand logistics it is useful to divide it into three areas.
The area of physical distribution concerns movement of a finished product to the customers. In physical distribution the customer is the final destination of the marketing channel.
Unless the products are delivered where and when needed, a great deal of marketing effort can be wasted.
All physical distribution systems have one feature in common: they link manufacturers, wholesalers and retailers and ensure that the product is available.
The area of manufacturing support concentrates on managing W.I.P inventory as it flows between the stages of manufacturing.
A Master Production Schedule is prepared and arrangements are made for timely availability of materials, components, parts etc.
Manufacturing support has one significant difference when compared with physical distribution.
Physical distribution attempts to satisfy the needs of the customers while manufacturing support involves movement requirements that are under he control of the manufacturing enterprise.
Procurement is concerned with purchasing and arranging in-bound movement of materials, parts and /or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores.
Procurement is also known as purchasing and buying and in some cases inbound logistics. Procurement s concerned with availability of the desired material assortments where and when needed.
Within a typical enterprise, the three areas of logistics overlap. The prime concern of an integrated logistical process is to coordinate overall value-added inventory movement. The three areas combine to provide integrated management of materials.
Information flow identifies specific locations within a logistical system that have requirements. Information also integrates the three operating areas. The primary objective of developing and specifying requirements is to plan and execute integrated logistical operations. Within individual logistics areas, different movement requirements exist with respect to size of order, availability of inventory, and urgency of movement. The primary objective of information sharing is to reconcile these differences.