Inbound Logistics, Conversion Operations and Outbound Logistics - Essay Example

Explain How Inbound Logistics, Conversion Operations And Outbound Logistics Converge To Provide Integrated Logistics. Contents Introduction 2 2. Logistics: Definition 2 3. Inbound Logistics 4 4. Outbound Logistics 6 5. Conversion Operations 8 6. Integrated Logistics 8 7. Conclusion 13 1. Introduction: Companies today are increasingly becoming more and more competitive. Managers across the globe are engaged in the process of designing and developing innovative strategies in order to cope with the organizational pressures and meet its goals of sustainability and profitability. It is owing to such growing competition, that the managers now have turned to logistics as an essentially convenient means of transforming the organizational strengths into increased productivity and to strengthen its competitive standing in the industry as a whole. Logistics operations involves several essential elements of a business such as production management, information flows, transportation of goods, warehousing, inventory control etc. Handling such activities with precision has become inevitable for the companies to gain competitive advantage over their competitors and strengthen its market positioning. It covers several operational aspects of a business, such as order processing, distribution of goods, as well as packaging which are essential for the timely receipt of raw materials as well as delivery of the finished products to the end users. 2. Logistics Definition Logistics can be defined as “The process of planning, implementing, and controlling procedures for the efficient and effective storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements1.” While the business dictionary defines logistics as “planning, execution, and control of the procurement, movement, and stationing of personnel, material, and other resources to achieve the objectives of a campaign, plan, project, or strategy. It may also be defined as the management of inventory in motion and at rest.2” Michael Porter’s Value Chain Model3, is an essential tool that helps in analyzing the various activities through which, the firms across the industry, seek to create competitive advantage. This model involves a series of support activities which are shown in the following diagram: The basic idea behind this model is to depict the various activities that create value to the organization which should be far greater than the cost involved in providing the product or service, hence creating a substantial profit margin in the process. These activities are explained through the case study of the “Bombay Dabbawalas” (Lunch box carriers from a city in India), a six sigma operation, recognized as a standard case study in the field of supply chain management. 3. Inbound Logistics The supply chain management of a company varies according to the type of its business operations, which could be fairly simple or highly complex. Inbound logistics deals with the process involving receipt of raw materials from the suppliers as well as vendors, its application in the production processes and finally its transportation to the storage facilities such as warehouses. Inbound Logistics, involves receiving, transportation controlling / scheduling, storing / warehousing, as well as inventory control. The Bombay Dabbawalas Operation (BDO) makes an excellent case study in logistics, since it is a classic case of unprecedented success in the absence of technology. The BDO is a glaring example of six sigma applicability in the Indian context. Consisting of a group of around 5000 members, the BDO has an enormous success rate with hardly 6 mistakes per million transactions. Inbound Logistics Process Model: Bombay Dabbawalas The inbound logistic procedure includes the collection, transportation and distribution of the lunch boxes to the respective customers through a well organized human network, whereby, the employees, who are assigned a specific route, collect the lunch boxes from the source and deliver it to the nearest railway station. From here, the job is carried further by the other employees who transport the lunch boxes through rail routes to the final destination. Prior to this the lunch boxes are routinely sorted and assigned according to the geographical area. 4. Outbound Logistics The process of outbound logistics involves the movement as well as storage of goods from the end of production line to the ultimate user i.e. the customers. It is a summation of activities that are essential in arranging the supply of the finished product to the end user / consumer, including such activities as warehousing, transportation, distribution management, order fulfillment etc. The outbound logistic process involves the transportation of the lunch boxes (finished products) to the end users (customers) by applying appropriate means of transportation. After which the reverse logistic process is applied and the same (empty) lunch boxes are passed through the same human network and transportation routes, which is explained in detail in the following diagram. The outbound logistics of the Lunch box carriers could be shown in the following diagram: 5. Conversion Operations: Operations, which forms the core segment of logistics, involves all the activities that help in transforming the inputs / raw materials into finished products, such as packaging, machining, assembly, testing etc. 6. Integrated Logistics Integrated logistics involves the entire operations from the organization, beginning from the supply of raw materials to the distribution and delivery of finished goods to the end user. It gives an overview of the entire supply chain management function of the organization as a single process. The same process could be explained with a more complex model of milk processing and supplying company. The inbound logistics of a milk processing and supplying company is depicted in the following diagrams: The inbound logistic process in a typical milk processing and selling company involves the acquisition of raw materials i.e., milk from the dairy farm, transporting it to the factory where it is to be processed, packaged and transported to the retail grocers, who further sell it to the end users. When the raw material is transported to the factory, it is stored in cold storages, till it is processed and ready to be transported to the retail grocers. It also involves acquiring raw materials for packaging, such as card board boxes, or plastic cartons for manufacturing and packaging process. Conversion Operations: The conversion process involves converting the raw material acquired through various sources into a processed good which is worthy of consumption. It involves processing of the raw materials as well as packaging and storage. The conversion operations often involve testing of the goods produced, processed or manufactured to assess its suitability as a final product to be consumed by the end users. All these activities need to be appropriately coordinated so as to speed up the process of supply / delivery of goods to the consumers and avoid wastage arising out of shortage in supply. Outbound Logistics Process: The outbound logistic operation involves transporting and delivering the packaged product to the retailers to be further sold to the end users. Integrated Logistic Process: (source: Reid, Sanders, 2002, Operations Management) Conclusion: All the three logistic operations discussed above, i.e., inbound logistics, outbound logistics, and conversion operations are inter-related since it involves the entire process beginning from the acquisition of raw materials, to converting it into processed / usable form including testing and packaging and finally transporting it to the suppliers. It is thus, of absolute significance for the organizations to carefully manage and handle such processes for the timely delivery of the products and ultimately ensure a smooth functioning of the organization as a whole. With the development of technology, and other factors such as globalization, the world is shrinking with each passing day. The organizations in the industry are hence, faced with severe competition to combat such external forces and ensure sustainability in order to pursue their organizational goals of growth and profitability. REFERENCES Inbound Logistics, 2008. Available from: , Accessed: July 28, 2008. The Business Dictionary, 2008. Available from: Accessed on: July 28, 2008. Reid, R., and N. R. Sanders, Operations Management. Hoboken, NJ: Wiley, 2002. M.E. Porter, Competitive Advantage: Creating and Sustaining superior performance, 1998. N. Ravichandran, World Class Logistics Operations: The Case of the Bombay Dabbawalahs, Indian Institute of Management, 2005. Total word count: 1547 Read More