In a manufacturing enterprise, the business process starts with the flow of material from the suppliers to the manufacturing plant and then to the customer through the distribution channel. Traditionally, in the functional organization, the business process consists of discrete activities such as procurement, manufacturing, and distribution under the control of the respective departments. The departments may excel in their respective functions, but as an organization, their performance may be dismal. This might happen because of three reasons: (1) a lack of coordination in their activities, (2) different goals to cherish, and (3) no single agency could control them to cherish a common goal.
The concept of logistics is based on the system approach. The flow of material from a supplier to a manufacturing plant and finally to the end customer is viewed as a single chain, ensuring efficiency and effectiveness in sequential activities to achieve the objective of customer satisfaction at a reduced cost. Logistics recognizes that all the activities of material movement across the business process are interdependent and need close coordination. These activities are to be managed as a system and not as functional silos. The functional areas of logistics, termed “Logistics Mix” by Martin Christopher,4 consist of:
Information Flow
- Order registration
- Order checking and editing
- Order processing
- Coordination
Warehousing
- Material storage
- Load unitizing and material handling
- Site selection and network planning
- Order picking and filling
- Dispatch documentation
Inventory Control
- Material requirement planning
- Inventory level decisions for customer service objectives
Packaging
- For handling and damage prevention
- For communication
- For inter-modal transportation
Transportation
- Route planning
- Mode selection
- Vehicle scheduling
The objective of logistics is to facilitate the flow of material across the supply chain of an enterprise so as to cost effectively make available the right product at the right place at the right time. Logistics has to achieve the two polemic goals of customer satisfaction and least cost. This is possible only when all the logistics functions are working as a unified system to achieve the common goal.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.
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