Logistics Management in Organizations - Coursework Example

IMPORTANCE OF LOGISTICS MANAGEMENT IN ORGANISATIONS Introduction Logistics is the life-blood of an organisation. It is important in every economic activity. Without logistics, no materials are involved, and products cannot be delivered to customers. What would be business like without logistics? Our immediate conclusion is: there is no business without logistics. Logistics is aimed at firms and customers. Its great significance cannot be undermined. Logistics has some connection to the concept of supply chain in that it refers to the integration of business functions involving the transfer of materials from manufacturer to retailer, then to the end-users. (Stevens as cited in Fortes 2009, p. 2) Supply chain is the process of converting raw materials into the designed product; it involves steps which start from planning up to the delivery of the product to the customer. Early constructs for supply chain revolving around management strategy involved strategic supplier partnership, customer relationship, and information sharing (Li et al. as cited in Sanchez-Rodriguez 2006, p. 6). Strategic supplier partnership is a business-to-business transaction between suppliers and manufacturers. Customer relationship is a business-customer transaction where emphasis is meeting the customer needs and answering their complaints. Customer relationship management is a part of logistics management. Information sharing involves strategic information between firms and their suppliers. Emphasis is on information regarding green logistics. (Sanchez-Rodriguez 2006, p. 6) Definition and origin of logistics The not-for-profit organisation Council of Logistics Management define logistics management 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’ (Simchi-Levi, Chen, and Bramel 2005, p. 1). Logistics is a process that goes from designing and production of a product to processing, storing, selling, and delivering it to the end user or customer. Logistics emanated from the Greek word logistikos and the Latin logisticus, which refers to the science of computing and calculating. In ancient times, it was more connected to logistics for armies, including supplies of food and materials. Logistics was used way back in the 17th century by the French army. During the Second World War, it was used to refer to the movement of supplies, men and equipment to many places especially across the border. Today, logistics is used in business to refer to the movement of raw materials from suppliers to producers and finally to the end users. (Sople 2007, p. 2) Supply chain gained popularity in the 1970s and was first applied to electricity distribution. Supply chain management refers to the integration of business functions involving the transfer of materials between suppliers, manufacturers and retailers. (Fortes 2009, p. 2) Factors that shape logistics Globalisation, legislation, technology, consolidation, and alliances all influence and shape logistics. Globalisation has long been in existence and is an effect of computers, the internet, and factors like economic integration of nation-states, liberalisation of trade, or the open economy concept in many regions of the world. Internationalisation, liberalisation, increased competitiveness are some aspects of globalisation that affect business operations around the world. (Van der Bly 2005, p. 875) There is also the popularity of the information revolution. Because of high technology and the internet, we can now connect and conduct business with the rest of the world so easily. With just a computer with internet connection, we can obtain indefinite access to partners and organisations around the world. This is the twenty-first century, the age of digitization and fast paced communication. Obviously, logistics has been enhanced by the introduction of the internet and information technology. Legislations and regulations also affect logistics or the flow of materials and products from manufacturer to customer. Businesses also see the relation between supply chain and environmental protection. Industries need to incorporate methods with technologies that preserve and protect the environment. Processes of extracting, manufacturing, and transporting of products must be carefully planned taking into consideration the environmental preservation and protection. The process requires green engineering and management of a product. Thus the concept of green supply chain management was born. Importance of logistics A study found that thirty per cent of the UK workforce work for logistics. Another study by Armstrong and Associates found that, for the major economies in Europe and North America, logistics accounted for about 8 per cent and 11 per cent of each country’s GDP. (Rushton, Croucher, and Baker 2010, p. 10) We can see the importance of logistics in the economies of nations. Logistics is a significant part and driver of every ecnomy. Supply chain is a primary source of products. Core materials cannot become real products without proper implementation of supply chain or logistics management. But supply chain must be handled in a systematic way. This has evolved too, from mere extraction to application of different methods in order to provide quality products to end users or customers. The term quality has many meanings in the new context of supply chain. While before quality applies to durability and long-lasting, now quality applies to the entire process of extracting the material to become a product. Quality should be ‘green’ and must not be a threat to the environment. Quality means good business. It means simple products that will return to the manufacturer for recycling or reprocessing to avoid waste. Logistics is an important part of a business structure. This is true with respect to the different departments of the organisation. For example, in production logistics is important to scheduling, control, plant warehouse design, raw material stocks, and so on. In the field of marketing, logistics is also important when it comes to customer service, packaging, distribution centre location, inventory levels, order processing. And it the field of finance, it is significant to stock-holding, stock control, distribution cost control, and so forth. (Rushton, Croucher, and Baker 2010, p. 143) Because logistics is important in any business, it involves money and is really expensive. This is where firms have to focus their plans and strategies. Although no exact amount can be exactly determined, Supply Chain Digest (as cited in Waters 2011, p. 46) indicated that the costs could involve carrying the stock in logistics and in providing services to customers. Supply chain requires transportation costs and warehouse and delivery of products to customers. Green supply chain includes the disposal of product and turning it up for recycling. Production therefore does not end with marketing and the end user but with the manufacturer who knows how to dispose of the product. Relationship of logistics to corporate structure A new functional approach to logistics in the context of corporate structure is to make it planned and operated like one overall activity. How this is done differs from one corporation or organisation to another. Logistics must be managed as an important function, although there is a need for close coordination with the other departments. A figure-diagram of logistics activities linked together is shown below. SOURCE: Condensed from The Handbook of Logistics & Distribution Management, by Ruston, Courcher, and Baker (1989, p. 145) Organisations now see the relevance of distribution and logistics activity by instituting an organisational change in their corporate structure. The new trend is to refocus logistics operations from functional structures towards process-oriented structures. The new trend in logistics is customer focus. Logistics works out and identifies to strengthen customer satisfaction. The aim is to focus on good relationship with customers. What is important therefore is the product aimed at the customer. Satisfying customers’ needs is an organisational and strategic goal and logistics operation, like supply chain management, is aligned towards this goal. The firm has to keep constant contact with the customers and find ways to satisfy their needs and wants. Good customer relation is an important aspect of business. Supply chains are considered competitive weapons and not mere production and distribution mechanisms. (McColl-Kennedy and Schneider 2000, p. S884) The principle and philosophy followed in the traditional supply chain is that a business organisation should provide products that satisfy customers’ needs through a coordinated set of activities in accordance with organisational objectives. This evolved when researchers found that customer satisfaction was a key to customer loyalty. Organisations then aimed for customer satisfaction. Though logistics is for internal process activity, it is aimed for external factors. External factors influence logistics plans and how these plans will form part of the company strategy. The company strategy must then be followed by analyses regarding external development whereby problems, barriers, risks and possibilities and their relation to the company’s successes are listed (Mintzberg, Quinn, Ghoshal as cited in Enarsson 2006, p. 53). Conclusion Meeting the customers’ needs and wants is one of the objectives of a successful logistics management. This has become a business trend in the age of globalisation. Organisations aim for customer loyalty while keeping the cost of production low. This is rather difficult to achieve because meeting the customers’ needs and wants at the same time minimising cost of production do not ensure quality product or service. Firms also aim that their products and services are geared towards customer focus, and customer satisfaction is a goal in a value added logistics management. Logistics management must be a part of the firms’ strategy to address customer satisfaction. Firms attain competitive edge through constant innovations. References Enarsson, L 2006, Future logistics challenges, Copenhagen Business School Press, Denmark. Fortes, J 2009, Green supply chain management: a literature review, Otago Management Graduate Review, vol. 7. McColl-Kennedy, J and Schneider, U. 2000, ‘Measuring customer satisfaction: why, what and how’, Total Quality Management, Vol. 11, No. 7, 2000, S883-S896. Rushton, A, Croucher, P, and Baker, P 2010, The handbook of logistics & distribution management, Kogan Page Limited, Great Britain. Sanchez-Rodriguez, V., 2006. Supply chain management, transport and the environment – a review. Green Logistics Consortium Working Paper. Simchi-Levi, D, Bramel, J, and Chen, X 2005, The Logic of logistics: theory, algorithms, and applications for logistics and supply chain (second edition), Springer Science+Business Media, Inc., United States of America. Sople, V 2007, Logistics management: the supply chain imperative, Pearson Education (Singapore) Pte, Ltd., Singapore. Van Der Bly, M 2005, ‘Globalization: A Triumph of Ambiguity’, Current Sociology 2005, 53 (875), DOI: 10.1177/0011392105057153 Waters, D 2011, Supply chain risk management: vulnerability and resilience in logistics (2nd edition), Kogan Page Limited, London. Read More