Logistics Activities of Demand Forecasting and Customer Service - Coursework Example

RUNNING HEAD: Logistics Activities of Demand Forecasting and Customer Service Name Course Instructor Date Logistics is the overall planning and execution and organizing of the placement and movement of goods and other resources that are to support an organization or a functional unit within a designed system that is purposed to meet specific objectives. This involves the processes that are undertaken for the effective flow of goods and mobilized resources from their point of conception or origin to the place of consumption. Logistics incorporates both the supply chain and the inventory processes. This implies that logistic management is the arm of supply chain that focuses on the planning, implementation and the putting of controls that are aimed at enabling the effective, efficient forward and reverse storage and flow of goods, services and other relevant resources in addition to the related information from one point of origin to the other point of consumption based on the customer’s needs (Pearson, 1999). The supply chain of management has three main components which include the logistics, local operations and the customer service. The three components have functions attached to them that effect the smooth and efficient flow of goods and services that will in turn meet and satisfy the consumer’s needs. The functions of the components are well illustrated in the diagram below (Samaranayake, 2005). The supply chain Demand forecasting This is a proactive process where the supplier of certain goods and services determines the goods and services that are required. This involves the determining the venue, time and the approximate quantity of the goods and services that will be required. This is the entire foundation on which logistic processes are built. The function supports all the other logistical activities which include capacity planning, business planning and inventory planning. The forecast demand is based on 5 main characteristics which include the trend, time, season, cycle, average and the elasticity. Demand tends to always huddle around a definite level and at times it decreases and increases over time. Demand has a season where there are seasons of great and high demand and vice versa. Forecasting is done at three different levels which include the firm level, industry level and the total market level. The demand forecasting is illustrated in the diagram below (Hendricks, 2003). (Hendricks, 2003) Types of demand forecasts Demand forecast are of two types namely the passive and the active forecast. The passive forecast involves the forecast of factors that are predominantly assumed to be invariable over a certain time period however, the changes are always ignored. The active forecast involves the factors that are being forecast are expected to be flexible and subject to changes (Hendricks, 2003). Approaches in forecasting Different firms do forecast in a method that is specific to the firm itself. Many techniques in forecasting have been developed and utilized by various logistic firms and have yielded different results. A logistic system that employs the use of algorithms that are used to generate substitute demand forecasts. The existing logistic techniques that are often used are classified into four approaches. These are; judgmental approach, experimental approach, casual approach and the time series approach (Hendricks, 2003). Judgmental approach This approach is based on the essence that someone else knows and is able to tell the right answer. It involves gathering the opinions and knowledge of persons who are in a position to tell how the demand of a certain commodity or service will be at a given period in time. This could be done through a survey of the customer base to be able to estimate the mode of sales in a given period (Hendricks, 2003). Experimental approaches This approach is best suited and applied to new products that are being introduced into the market. This is done using a sample population that is able to give response results for a larger population. Firms for example do test new products in an isolated test market to determine the market share that is probable (Model and Empirical Study in the Automotive Industry, 2005). Casual approach This approach is based on the reason as to why the consumers use a certain product. If the firm is able to understand the reason as to why a certain product is much favored by the consumers over the other then it will be develop a demand forecast based on the set of reasons that have been given. It is expected that the reason as to why many people or consumers buy umbrellas is high dependable on the weather. Thus the best possible time to be able to sell umbrellas is during a rainy season (Cavinato, 2004). Time series approach This approach is based on the collected experiences on consumers of a product over a period of time. The data that is collected is applied to demand data that is not cross-sectional but longitudinal. The main essence of the approach is to find the patterns or behaviors that repeat themselves and the exact period when this happens as well as the causal factors. The descriptions found therefore can be used to form a basis on which demand can be forecast (Model and Empirical Study in the Automotive Industry, 2005). Forecast demand approaches Experimental approach Judgmental approach Casual approach Time series approach Importance of forecasting in logistics Forecasting if effectively applied are able to reduce uncertainties that would happen in the future as the logistic company is able to study a given trend of markets over a given period and determine the demand sequence. The logistic firm is able to determine the market’s volatility, dynamism and competitiveness thus being able to choose the right strategy to bring in their goods and services and in which quantities. Secondly forecasting enables the logistic firms to be able to have controls on their inventory and bring stability to their operations. In addition to this it is able to set pricing policies, sales targets and be able to form sustainable controls and incentives. This is able to have the logistic company to be able to plan and have the right personnel, operations, finances thus being able to minimize wastes. This will in return give efficient and effective logistical operations and minimize conflicts. Lastly, demand forecasting is able to accurately determine the consumer needs and be able to avail it not only in the right time but also in the right quantities and prices (Sherer, 2005). Most manufacturers believe that managing reverse logistics is a very complex venture because of the various activities surrounds it. apart of being a very complex venture to indulge in, reverse logistics under demand forecasting make it hard to predict particular demand thus difficulty in managing flow of products from a producer to a consumer and also information within and outside the plant. According to Jayaraman & Yadong (2007), the establishment of after sales services is an appropriate strategy in which manufacturer can adapt as a way of ensuring that reverse logistics operation cope with returns and repairs. This is very essential since the strategy enables the producer or logistic firm to achieve a competitive advantage against its competitors. The centralized service centers earlier mentioned can be used to deliver after sale services such as repairs (Jayaraman & Yadong 2007). However, there are many challenges experienced in offering such services. For instance in managing repairs, challenges that would arise include inconsistency and uncertainty in demand hence reduced inventory returns, specifications by customers which may require additional resources in terms of expertise and finances. Jayaraman & Yadong (2007) asserts that, reverse logistic activities are needed in the areas of storage and warehousing, transport, collection, recertification, sorting, remanufacture among other areas involved in the product cycle. Companies engaging in reverse logistics should ensure that they get a location which will enable them to know where the products are coming from and how many of the said products are expected to come through the use of reverse logistic chain (Langnau 2005). By doing this it is quite evident that companies will be at a position to avoid cases where electronic equipments and mobile phone where they are likely to be brought back for return and repair. Langnau (2005) maintains that, it is evident that customer service plays a vital concern in logistic practice mostly within reverse logistics. Since customers act as the first intermediaries in any designed reversed logistic, this logistic mainly aims in recycling household residues as a major provision towards adequate customer service that is mainly coupled with increased importance. Reverse logistic success on customer service enable the creation of a competitive advantage through various ways (Langnau 2005). For proper customer service, it is important to identify and promote perceived and real value of once organization to both general marketplace and customer. Further, continuous transformation in organization capabilities ensures improved customer rating which result to great satisfactory ratings. The diagram below gives an overview of both customer service and demand forecasting in relation to logistics concepts. According to Harrington (2006), the above mentioned satisfaction occurs broadly when organization services and goods exceed or have met customer expectation. Satisfied customers are those whose requirement and expectation are met and their voice heard. Reverse logistics may lead to good customer service and satisfaction when is an original delivery making them royal and constantly repurchasing their goods (Harrington 2006). Customer service can be view into forms namely cumulative or specific. By being specific, more emphasis is placed in a manner which a customer evaluate a specific service or product whereas in cumulative, the customer evaluation broadly focuses on his/her pre/post purchase experience with the product in question. Today, new technology assists companies in establishing and maintaining strong relationships with their customers. Marujo (2006) asserts that, market research indicate that based on reversed logistics and customer satisfaction, customers believe that the following for the basis of importance of a good reverse logistic. These includes; doing away with lost and slow shipments, improved profit margin by use of optimization tools, elimination of discrepancies during shipments, great support of customer effort as a measure which reduce inventory investment, reduction of part returns and products and finally, reduction carrying cost for customers (Marujo 2006). The image below gives an overview of importance or customer service in connection to reversed logistics. The above diagram describes how an organization can utilize its reverse logistic capabilities as a leverage that builds and strengthens competitive performances which automatically result to improving customer retention and satisfaction. These are considered to be internal processes that yield benefits. The use of other outbound strategic use of supply chain management is necessary (Langnau 2005). Such setting also widely affects logistic costs so as to support different levels of service. In relation to customer service add value to reverse logistics, logistic activities are essential in the sense that it assists in creating value which is mainly expressed in terms of place and time. According to Langnau (2005), clear understanding of logistic concepts gives a view to each supply chain process as a contributing activity in adding value. Logistic is known to control places and time utility through inventories and transportation and information flow. In conclusion, it is observable that organizations who do not implement proper measures in its reverse logistic processes either because they are not efficient or do not exist within that specific organization, then it is obvious that it becomes virtually impossible to provide its customers with the required goods and services. Likewise, regardless of an appropriate reverse logistic processes may be, if products do not move in and out quickly, then customer satisfaction can never be achieved. Organization that have the ability of measuring its performance based on reversed logistics it gets to know its stand with its loyal customer and time to time it will be encouraged to improve on their product and service quality. Companies need to adapt management processes that are associated with new technology. Management should focus on understanding operational, tactical and strategic which are the three parts that guarantees management. This requires levels of investment in technology. Technology will be able to guarantee importance of demand forecasting and customer services in reverse logistic activities. Adaptation of internet technologies in procurement, logistics and supply chain allows businesses to develop an advantage thus communicating customers with key management within supply management. References Jayaraman, V & Yadong, I. 2007. Creating Competitive Advantage Through New Value Creation: A Reverse Logistics Perspective. Academic of Management Perspective. 21(2), 56-73. Langnau, L. 2005. Room for improvement. Material Handling Management, 60(1), 18. Marujo, L. 2006. A New Organizational Approach to Supply Chain Management . Brazilian Business Review, 3(2), 167-174. Harrington, R. (2006). GM for Reverse Logistics / Projects, NYK Logistics. Reverse Logistics Magazine. 3(2), 167-174 Pearson, N. (1999).Strategically managed buyer–supplier relationships and performance outcomes. Journal of Operations Management, 17(5): p. 497-519. Samaranayake, P. (2005). A conceptual framework for supply chain management: a structural integration. Supply chain management: An international journal, 10:1, 47-59. Sherer S, (2005). From supply-chain management to value network advocacy: implications for e-supply chains. Supply chain management: An international journal, l10:2 (2005), pp.77-83. Cavinato, J. (2004). An analysis of supply risk assessment technique. International Journal of Physical Distribution and Logistics Management, 34(5), 383–387. Hendricks, K. (2003). The effect of supply chain glitches on shareholder wealth. Journal of Operations Management, 21, 501–522. Model and Empirical Study in the Automotive Industry, (2005). International Journal of Operations & Production Management, 25:7, pp. 681-700. Read More