The Key Components of Logistics Management - Research Paper Example

?LOGISTICS of Introduction Over the years, logistics management hasbeen one of the critical elements not only of businesses but also in other operations such as the military. According to Grant (2006, p. 24), logistics management can be defined as the process which involve planning, controlling, and implementing the effective, efficient flow, as well as storage of goods, services and related information from the point of their origin to point of consumption for the purpose of conforming to all requirements. The rapid growth of technology has significantly changed the social, economic, and political aspects of life. The immense impact of technological advancements has made enterprises to embrace technologies in ways that enhance their competitive advantage. It has become apparent to enterprises that their survival in the knowledge-based economy greatly depends on how they improve their technological capability. In particular regard to logistics, firms have realized the essence of developing adequate methodologies so as to successfully adopt new technologies in this field, as well as integrating logistics into their corporate strategy for gaining more competitive advantage (Waters, 2007, p. 76). Since the conception of computerization, Information, Communication and Technology (ICT) have assumed supporting role for functions of the organizations. In recent years, logistics has changed with the growth and adoption in the use of ICT systems such as GIS, Warehouse Management System, Transport Management System, and GPS among others. The use of these ICT systems has considerably improved the way companies manage their supply chains. Major ICT systems have impacted on each of the logistics component (Sauvage, 2003, p. 237). It is against this background that this paper will seek to evaluate the key components of Logistics Management and discuss the major ICT systems in each component of logistics. In addition, the paper will provide a critical analysis of benefits and challenges in adopting and applying the technology in logistics. Components of Logistics Management It is important to point out that components of logistics management are aimed at achieving the following: satisfying customers’ needs; product selection; monitoring quality of services and goods; dealing with logistics information accordingly; inventory management; and forecasting and procurement (Grant, 2006, p. 24). Mainly, there are eight components of logistics management. i) Customer Order Processing This component is designed to facilitate customer satisfaction. It involves flow of the following actions: filling of the order form; making decisions on the specifications of particular product; making decision on the quality check list of the product; deciding on the delivery schedule and deciding on the delivery location of the goods. The flow of actions is highly customer-focused and aims at meeting all the requirements of the customer. This component takes into consideration several important factors. Firstly, it takes into account the cost of order processing and ensures that this type of cost is appropriate for both the customer and the logistic firm. The second factor that is considered is whether the logistic firm has the capacity to produce the required component (Langley, 2006, p. 42). The third factor that is considered under this component is the detailed list of specifications; the company should ensure that the component being processed for customer has met all the specifications required by the customer. The component of customer order processing has adopted and used ICT systems to make its operations effective and efficient. The major ICT systems that has been adopted and used in this component are Electronic Data Interchange, Web Portal, and E-ERP. Electronic Data Interchange (EDI) is an ICT system that facilitates structured transmission of data by electronic means between organizations (Sauvage, 2003, p. 240). Logistics companies have used this system to transfer business data or electronic documents to other organizations and also to customers, and this has greatly improved customer service. Web portal has also been used in bringing together information from different sources in a manner that is unified and which can enable a customer to obtain nearly all information needed. Customer order processing component has also adopted and used Enterprise Resource Planning (e-ERP) which allows a company to use integrated applications system in managing business. This system allows the company to integrate all facets of operations such as sales and development towards satisfying customers’ needs (Grant, 2006, p. 24). ii) Location Analysis Location analysis is an important component of logistics management. Its flow of actions include: Analyzing the cost of transportation of raw materials, as well as finished goods by looking at proximity to customers and suppliers; analyzing availability and type of land and secondary resources and how they can impact on the logistics processes; analyzing availability of desired manpower at desirable cost; and more importantly, flow of actions involve analyzing communal harmony and governmental regulation and taxation (Hammant, 2005, p. 35). This component also takes into account important factors such as the cost of operations based on the percentage of sales to ensure that the firm operates at a profit. Also, it takes into account the shelf life of product in order to avoid incurring loss that may arise from perishability of goods. This component does not extensively employ the use of ICT compared to the customer order processing component; however, it uses EDI and web portals to communicate to customers and suppliers while trying to undertake comprehensive location analysis (Phan, 2003, p. 581). iii) Inventory Control This component focuses on controlling inventory and involves the following flow of actions: on hand inventory analysis; communication of the timing, quality, and quantity of material with the supply points; and getting the material of proper quantity and quality, at the appropriate time (Stock, 2000, p. 134). This component of logistic management takes into consideration important factors such as inventory control at the planning stage, lead time, and cost versus importance of raw material. This component has adopted and used ICT systems including DRP, fixed order interval system, and selective inventory control using FSN system. Distribution Resource Planning (DRP) is an ICT system that is used by logistic companies to plan orders within the supply chain. Fixed order interval system has been integrated into the ICT to enable logistics companies to have scheduled periodic reviews of the level of stock of all inventory items. Selective inventory control system such as FSN has been adopted in order to help companies to monitor fast moving, non-moving, and slow moving goods, and therefore make appropriate decision (Langley, 2006, p. 44). iv) Material Handling Material handling is a crucial component of logistics management which mainly focuses on the material that the company handles. This component involves consideration of the type of material and the business significance of finished goods and raw materials. It also entails considering handling requirements of the material; for example, whether the material is inflammable or fragile. It also considers the cost ratio of material cost to material handling. Besides, this component takes into account the material default location, traceability, and identification. Some of the important factors that this component considers include: pilferage, number of handlings, cost of material handling, and material breakage (Grant, 2006, p. 29). The ICT systems that this component has adopted and used include computerized material retrieval system which enables companies to retrieve information for a certain material and use that information to decide on how to handle the material throughout the logistics process. Also, this component has used the Advanced Storage and Retrieval System (ASRS) which enables firms to store information on the material it is handling and how such materials should be handled; also ASRS allows firms to retrieve information regarding material when needed (Hammant, 2005, p. 37). v) Packaging Just like material handling component, packaging is an equally important component of logistics management especially in respect on how materials should be handled. This component involves the following flow of actions: packaging of material as required by its type, for instance, if it is perishable should be refrigerated; primary packaging; secondary packaging; consideration of the cost of packaging; and consideration of transportation requirement for packaging (Waters, 2007, p. 91). The component of packaging takes into account important factors including: how the product should be held; how much the packaging would cost; product protection if necessary; reverse packaging logistics; communication of packaging message to the customers; ensuring that packaging has met the customer’s requirements; and recycling of packaging material. This component has taken into account the emerging trends that require that packaging be done in a more efficient way and in a way that does not negatively impact on the environment (Phan, 2003, p. 583). It is in the light of this that the following techniques have been employed: use of standardized box packaging; use of reusable packaging materials; and recycling of packaging materials. In regard to ICT systems, this component has used bar coding, GPS tracking system, and RFID. Bar coding system helps logistics firms to track items and reduce the instances of items that may be lost. The GPS tracking system provides these firms with information on time and location of their fleet which enhances the safety and security of the fleet and goods being ferried (Introna, 2001, p. 35). vi) Transportation Transportation is a central component of logistics management as it involves the actual movement of goods and services from one point to another. This component involves consideration of the mode of transportation based on factors such as the type of the good and the distance to be covered (Grant, 2006, p. 30). The cost of product is usually considered under this component of logistics management. Speed of transportation is also taken into account because it depends on the nature of the goods and the urgency that the goods are required to be moved. In addition, ambience requirement of material is also considered under this component so that aspects such as refrigeration should be taken care of. Most importantly, the cost of transportation and urgency of the products are given utmost consideration as they not only determine the profitability and efficiency of the logistic firm, but also the satisfaction of the customer. The main system used in this component is GPS tracking system which provides logistics firms with information on time and location of their fleet which enhances the safety and security of the fleet and goods being ferried (Phan, 2003, p. 584). vii) Warehousing As a component of logistics management, warehousing plays a very important role in respect to inventory control, packaging, repackaging, and storage. Flow of actions for this component is: location of the warehouse, where factors such as convenience are considered; warehouse’s inventory level is also considered; storage requirement of the product; shelf life of the product; and packaging and repackaging of the product (Introna, 2001, p. 34). This component takes into account important factors such as strategic location, information and allied services relating to warehousing; availability of appropriate and proper material handling systems; strategic location; and availability of space. The ICT systems used in this component are aimed at facilitating third party logistics and third party warehousing. These systems include DRP, fixed order interval system, and selective inventory control using FSN system (Waters, 2007, p. 95). viii) Customer Service This component of logistics management is designed in such a way that it promotes customer satisfaction by striving to meet customers’ expectations. Flow of actions under the customer service component includes taking into account: the type of customer service that is required for the product; cost of services versus replacement; service level at the service centre; location of the service centre; and contractual services that the client is offering. The most important factors that are considered under this component are possibilities of reverse logistics, the quality of the service, and the customer service’s contractual requirements (Timers, 2008, p. 7). The most used ICT systems in customer service are telecommunications technologies which include toll free number, help lines, and call centres. The Customer Relationship Management system (CRM) is used widely by logistics companies for customer service. CRM system is designed to help companies to keep track of their customers’ information and to easily access the information of the clients they are doing business with. Benefits and Challenges in Adopting and Applying the ICT Technology on Logistics The adoption and application of ICT systems in logistics involves embracing of the hardware, the networks investment, the design, and the software to facilitate processing and exchanging of data in logistic companies. The successful implementation of ICT in supporting various processes of logistics has a number of benefits. However, such implementation is usually faced with challenges. According to Grant (2006, p. 98), one of the greatest benefit is reduction of errors from data entry and enhancement of customer services. Also, ICT makes it possible for logistics firms to monitor inventories, improve warehouse and transportation assets utilization, and help in eliminating duplication of duties and efforts in performing different logistic activities. Stock (2000, p. 138) notes that many logistic managers consider ICT systems as major sources of improved competitiveness and productivity. This is because ICT systems reduce workload that could otherwise be done manually and would have exhausted the employees. Also, since ICT systems reduce errors and enhance effectiveness and efficiency within the work environment, firms’ productivity and competitiveness are bound to be enhanced. Several studies have shown that ICT capabilities have significant influence on the overall logistics competence. Studies have found out that there is no single factor that seems to have an enhanced and greater potential to improve operations of logistics than the ICT systems (Introna, 2001, p. 33). The adoption and application of ICT systems on logistics improve efficiency and effectiveness of the processes of logistics. Successful implementation of ICT has enormous impact not only on the logistics strategies of the firm, but also on the organizational structure (Waters, 2007, p. 101). Numerous studies that have been conducted regarding the impact of ICT on logistics have found out that adoption and application of ICT on logistics have led to quick access and response to information. Also, they have found out that it has contributed to better customer service and satisfaction. More importantly, they have shown that companies that have applied ICT on their logistics have gained increased competitiveness over their competitors. Similarly, companies that have applied ICT on logistics have recorded faster data collection, processing and communication of information (Timers, 2008, p. 4). What has become apparent among many players in the logistics industry is the fact that ICT and networking are important to organizational coordination, in short and long term. It is expected that ICT will have more direct impact on logistics in the future especially in respect to reduction of formal structure as a result of increase in the specialists in the ICT and networking field. Rapid growth in external alliances and outsourcing is expected occur due to communication advancements including in EDI. As such, timely and accurate information would be available thereby enabling firms to easily coordinate inter-organizational activities (Grant, 2006, p. 111). However, adoption and application of ICT on logistics have experienced several challenges. The requirements of adoption of ICT are relatively difficult, which present serious challenges to logistics companies. The adoption and application of ICT is usually associated with heavy investments which most of the firms may not have sufficient resources to support (Waters, 2007, p. 104). Also, another challenge emerges due to lack of expertise and technical support within a logistic firm to support effective ICT implementation. Also, business partners may lack such an expertise and technical support thereby undermining effective implementation on the part of the implementing firm (Stock, 2000, p. 134). While these challenges are big, they can be surmounted. The government and the private sector should enhance efforts of resolving these challenges by developing values added information platforms. Also, they should increase their investments in the ICT in order to make it less expensive for the firms adopting and applying it on their operations (Waters, 2007, p. 106). Bibliography Grant, D 2006, Fundamentals of Logistics Management, McGraw-Hill. Hammant, J 2005, “Information Technology Trends in Logistics,” Logistics Information Management, 8(6), 32-37. Introna, D, 2001, “The Impact of Information Technology on Logistics,” International Journal of Physical Distribution and Logistics Management, 25(1), 32-37 Langley, J 2006, Information-based Decision Making in Logistics Management,” International Journal of Physical Distribution and Logistics Management, 15(7), 41-55. Phan, D, 2003, “E-business Development for Competitive Advantages: A Case Study,” Information & Management, 40, 581-590. Sauvage, T, 2003, “The Relationship between Technology and Logistics Third-Party Providers,” International Journal of Physical Distribution and Logistics Management, 33(3), 236-253. Stock, R, 2000, Managing Computer, Communication and Information Technology Strategically: Opportunities and Challenges for Warehousing, Logistics and Transportation Review, 25 (2), 133-48 Timers, P, 2008, “Business Models for Electronic Markets,” Journal on Electronic Markets, 8(2), 3-8 Waters, C, 2007). Global logistics new directions in supply chain management, London, Kogan Page Ltd. Read More