Inbound Logistics Issues - Essay Example

The reason for this is fairly intuitive; if a manufacturer is to produce goods and materials for distribution, it must receive the raw materials and other products necessary for production and distribution. Accordingly, the management of inbound products is central to the organizational goals in two obvious ways: First, the procurement of the materials and, second, the potential cost savings afforded by an efficient inbound supply chain system. As the next section of this paper specifically focuses on the ramifications of failing to procure materials for the manufacturing or distribution process, a word about costs is appropriate here. As cited in the case study, “the ultimate aim to achieve total control over inbound shipments would allow the retailer to eke out cost advantages from the supply chain” (Chatur, 5). Several aspects of increasing efficiency within the inbound logistics side of SCM are discussed, one of which is the use of a third-party logistics company, or 3PL, to manage that part of the supply chain. The idea of a collaborative environment within a large supply chain is a very popular notion. “Logistics alliances - formal or informal relationships between companies and logistics providers - are rapidly emerging...[where companies focus on their core competencies and outsource other activities” to more cost-effective companies (Laarhoven, et al., 188). Thus, managing inbound logistics is important enough to companies that they are willing to outsource the entire process to save money.

Operations are the process whereby a manufacturer makes its product, but purchasing and procurement are what allow operations to do their job. Accordingly, the relationship is a dependent one where, if purchasing doesn’t do its job well, operations can be shut down. Naturally, if procurement is not efficient and unnecessarily cost-intensive, the entire company is threatened. The cost efficiencies related to inbound logistics, however, are not as potentially devastating as the failure of purchasing to ensure an adequate supply of material for the process. Consider the fact that if procurement doesn’t perform, some manufacturers would have to stop operations until the supplies were received. This can be far more expensive than carrying a little too much inventory. As the case study points out, “...the shutdown of large petrochemical plants may cost as much as $500K to $1M daily – far more than the cost of extra hopper cars used to store product” (Chatur, 4). Herein lies the dilemma for inbound logistics; balancing the need to have enough material without having too much material and the need to always have material. In terms of its effects on managing inbound logistics, the impact is clear. Many organizations use just-in-time (JIT) inventory techniques to avoid overstock and the cost of carrying too much inventory. This technique is more expensive than traditional methods due to a higher shipping cost structure but saves on carrying costs. Ultimately, it is less expensive to maintain excess inventory, particularly at prevailing interest rates, but that method has its problems in terms of space and operational efficiency. At the end of the day, however, inbound logistics management has to ensure the availability of products. If it can accomplish that objective along with cost efficiency, great; but if inbound logistics has to choose between a small cost savings and the availability of supplies, it has no choice but to err on the side of carrying inventory.

Inbound logistics in a military application are of paramount importance. As one source noted during the first Gulf War, “Dhahran, Saudi Arabia, which was the principal port of embarkation for US troops coming in the country...[showed the] magnitude of the logistics needed to support an army in theatre” (American Society, 61). The military strategy of an entire campaign can be negatively impacted by errant SCM on the inbound side.  General Schwarzkopf, in the same war, pushed SCM issues to priority status and “gave urgency to the strategic transportation element of logistics. The delays were at great strategic cost and upset the sealift deployment flow” (Menarchik, 153). While this speaks to troops and in-theatre issues, it nevertheless dramatically emphasizes the importance of inbound logistics. Some aspects of a manufacturing model do not directly apply to the military; inventory storage and even small cost-efficiency considerations are lost within the scope of the mission tasks assigned to the USMC. While some creative alliances could be formed, I don’t see the utility or efficacy in a 3PL system for the Marines. Given the nature of some of the material, the urgency of the need, and the importance of the objectives, these corporation-focused activities would not be acceptable. What is completely relatable, however, is that for the USMC, like any other organization, the SCM has to ensure that what is needed is delivered on time. In terms of inbound logistics for the USMC, the importance of an effective SCM policy cannot be overstated.