Logistics has always been a critical part as one of the 4 P’s in Marketing: Product, Place, Price and Promotion. The “Place” component ensures the product is at the right place, at the right time, in the right quantity and the right quality. According to the Council of Supply Chain Management Professionals (CSCMP), a professional organization for Logistics and SCM professionals, logistics is defined as: “the process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.” (Logistics.about, 2007)

 

It is a fallacy to assume that the best logistics strategy is to get the product from the supplier to the customer the fastest and always be in stock for all organizations. If this were true, most organizations would not be profitable today. The truth is, creating a logistics strategy is a balancing act which takes many variables into account. Here is a list of what needs to be answered before creating a logistics strategy. (Logistics.about, 2007)

 

Inventory Management:

 

Managing inventory in the supply chain is critical to ensure high customer service levels. However, it is also a very costly asset to maintain. Having the right amount of inventory to meet customer requirements is critical. Find out what inventory best practices reduce inventory costs across the supply chain. (Logistics.about, 2007)

 

Purchasing Practices:

 

In a typical organization, 80 per cent of the purchasing transactions represent approximately 20 per cent of the total pounds spent. Many organizations spend the same amount of money to process a 1,000 pound transaction as a 10,000 pound transaction. (Logistics.about, 2007)

 

Risk Management in Supply Chain Management Operations:

 

As outsourcing of Supply Chain Management and Logistics operations become more popular for firms, the management of risk will gain more importance. Variables such as fluctuating exchange rates, supply disruptions due to labour strikes and supplier bankruptcy may cause havoc in the supply chain. Implementing a solid risk management strategy will help reduce uncertainties. (Logistics.about, 2007)

 

Supply chain management is a cross-functional approach to managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect has been to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity.

(Wikipedia, 2006)

 

References:

 

About.com, Murphy Dan  “Friction in the Supply Chain.”

Available from http://retailindustry.about.com/business/ retailindustry/library/uc/uc_wiat4.htm

 

About.com,“What is Logistics & Supply Chain Management?”

Available from http://logistics.about.com/od/ whatislogisticsscm/p/what_is_log_hub.htm

 

Wikipedia,“Supply chain management.”

Available from http://en.wikipedia.org/wiki/ Supply_chain_management