Key Concepts in Logistics Management - Coursework Example

Running Header: Logistics Management Student’s Name: Instructor’s Name: Course: Date Submitted: Number of Words: 2014 Key Concepts in Logistics Management Globalization and nationalization in the contemporary society have led to the demand of logistics management in many industries in developed countries. Logistics is the process of planning, implementing, controlling effective and efficient forward and reverse flow of products and also the storage of services and goods in relation to point of origin or point of consumption in the intention of meeting customers’ requirements. The diagram below shows how business logistics operate in a company. Raw materials are collected by initial suppliers (for example metal industries). According to Tseng, Yue and Taylor (2005), inbound logistics envelops the movement of raw material after its reception from suppliers. They further explain that material management is when raw materials and components are taken to the factory for processing (for example an auto manufacturing industry). Physical distribution is when parts of products which are finished goods are transported to distributers who can assemble the goods and then transport them to retailers who will sell the products to customers. Supply Chain Management (SCM) is larger than logistics because it links logistics directly with a consumer’s communications network and also the factory’s engineering staff (Taniguchi, Thompson & Yamada, 2003). Logistics helps in improving customer service, acquiring capital, materials, technology, necessary data and human resource in meeting wants and needs of customers. Logistics can be described as a customer-oriented operation management. Company’s Problem The company lacks a reverse logistics system which would help in two major areas: environmental protection and globalization of markets. My company wants to build a reverse logistics system which will also help in improving customer service because goods returned will be improved in quality. The company will be at a competitive advantage of reducing the costs of production. A reverse logistics system will require intense professional knowledge in procurement and logistics management. Procurement refers to bringing raw materials, supplies and component parts from other organizations to support the operations of a company. The following are objectives of having a procurement program in the company: manage supply base, create lasting relations with other organizations and support operational requirements. Reverse Logistics Reverse logistics is the process where flow of material, finished goods, related information and in-process inventory is planned, implemented and controlled from the customer (point of consumption) to the producer (point of origin) so as to recapture value and ensure proper disposal of goods. The importance of logistics activities to the reverse logistics operation is to improve customer service and demand forecast. In reverse logistics; defective components and finished products are returned to producers, a process which is part of quality control. The process of reverse logistics is being developed in many companies worldwide to increase industries’ competitiveness and recycling reusable material. The diagram below shows a structure of the logistics system used in my company which includes forward, information flow and how backward or reverse logistics will fit in the company’s operations. The diagram above has black arrows which represent direction of back ward or reverse logistics. This flow is counter to forward logistics which is represented by hollow arrows. The product which is defective or waste product is transported form consumer to the retailer because it was bought in a store or supermarket. The retailer will return the product to the wholesaler who will transport it to the manufacturer and then to the supplier. Flow of information intertwines between different stakeholders within the system. Some products are returned to the producer because they are faulty, damaged or in surplus. This helps the producer to create products with better value and in reasonable amount to suit demand forecast. Reverse logistics can be optimized through the use of efficient equipment and competent personnel who will process waste material and sort out surplus goods. When a reverse logistics is managed internally, the company will require skilled personnel and equipment to handle its own reverse logistics. Third party logistics is outsourcing the work to other operators who will handle the transfer of products from the customers to the supplier (Krumwiede & Sheu, 2002). For example; FedEx is a transport company that helps a lot of suppliers deal with reverse logistics when a product like a computer from Apple Inc. has been returned to the supplier through the Internet by the customer. The customer will be able to trace the computer because FedEx creates a data of all the products that are being returned to the supplier. Poor forecasting demand in the company has resulted to having large amounts of components in the company with soaring inventory costs, poor utilization of factory space and warehouse. Improving demand planning will improve reserve logistics by reducing inventory risk. This is done by minimizing amount of cash, time and product tied up in my company’s inventory. The plan of forecast demand will consider the variability of products demand but it will also allow rapid changes which is a characteristic of current service or product repair environment. Products are returned to the supplier because of the following; reputation of purchasing company, flawed products before sale, high costs of maintenance or repairs. Customer service is very important to the reverse logistics because when customers receive proper service while returning defective products they will ensure that the process is fast and they get their feedback early. The company will be assured of loyal customers and streaming profits from after sale services. When a company is considering the recycling of waste products from the customers, customer service has to be improved so as to ensure that the recycling process is fast and effective in order to protect the environment from toxic wastes. Part of customer service in reverse logistics includes; product upgrades, maintenance and repair, product warranties, sale of complementary products and product disposal. Types of Economic Utilities According to Fleischmann et al., (1997), there are four distinct types of economic utilities: time utility, place utility, form utility and possession utility. Time utility in logistics describes the value generate by when a company for example Apple Inc. makes a product available the time it is needed by customers. Possession utility is the value added to service or a product hence allowing a customer to take ownership. Place utility is when a product or service is available where customers need it. Form utility is the value that is created when manufacturers make materials available to distributers in a completed or finished state. Demand Forecasting and Customer Service in Economics Utilities Customer service and demand forecasting add value to reverse logistics in terms of place, form and time utility. Customers who receive good repair or disposal services will return the products or waste products in the store that they bought them. This will be done using a receipt and warrantee. When customers know where to return the products to, the process of repair or recycling will be fast and effective. Demand forecasting in terms of place utility will add value to reverse logistics because when the demand of a product is high, the repair service and waste recycling will also be higher hence saving production costs in future. Form utility in customer service means that the product will be returned to the supplier in the same condition it was before it was sold. The product will retain its original state so that repair will be easier in case the product was flawed before sale. Many people will be able to also dispose waste products in the correct form to ensure that when they are being recycled, the materials that will be produced will benefit the manufacturing company. Time utility in terms of customer service and demand forecasting is when customers deliver faulty products and waste products in time for repair or disposal. Some products have a return policy of a short period of time while others can take years. When the company knows that many customers will require repair or dispose waste products quickly, the company will provide equipments and expertise to deal with them hence creating loyal customers and attracting a wider range of potential clients. Challenges of Demand Forecasting on Reverse Logistics There are various challenges that my company will face in relation to demand forecasting in the process of reverse logistics. Bienstock (2009) described the challenges as: inconsistent and uncertain demand for product repair parts; extensive inventories of repair parts; customer specific requirements in retaliation to repair processing and short cycle times among others. Relationship between Procurement and Logistics Concepts The relationship between procurement and logistics concepts is that both processes include transportation of raw materials, supplies and component parts that will help the company achieve its key objectives and goals, manage supply base, support operational requirements and manage purchasing process efficiently and effectively. Procurement in the company is very important because as a producing company, my organization requires supplies, equipments and human resource so as to manufacture goods and services and then use the logistics process in planning, implementing, controlling the effective and efficient forward or reverse flow of goods and services from producers to consumer. Procurement is useful in the company because it facilitates logistics. In the diagram below, the procurement system shows how the company will utilize raw materials or supplies from other organizations in order to manufacture its own products and services. While choosing a supplier, the company will focus on the company’s internal factors such as policies of supplies or external factors such as legal issues that affect place and price of supplies. When the company wants to choose an appropriate supplier, it uses the best strategy to select potential suppliers who offer affordable prices and transport. The company will later choose the best supplier and then compare actual and expected performance after purchase of supplies. Role of Logistics and Supply Chain Management Supply Chain Management (SCM) is the handling of production procedures. This can be defined as an incessant management process that unifies collective resources and production competencies that are found in and out of the company. The SCM includes a highly competitive and customer-enriching supply system that is mostly focused on developing solutions that are innovative and synchronizing flow of services, products and information to meet customers’ wants and needs (Thompson & Taniguchi, (2001). The above diagram of supply chain management shows three major elements: business processes, components of SCM and network of supply chain. The process starts from purchasing, production and then distribution to consumers. Flow of information is a link to the whole chain of supply from supplier and manufacturer to the customer. When the flow of information is unconstrained; the company will increase accuracy of operation by saving costs of production and fostering competitiveness of companies (Cooper, Lambert & Pagh, 1997). Product flow profits through this supply chain from materials in raw state to manufacturing and lastly the finished goods which are sold to customers. The vertical items in the diagram show management tasks within this supply chain. The arrow that has reverse direction shows reverse logistic which is an important element in the supply chain. The SCM deals with purchase, manufacture and lastly transport while logistics only deals with product and service flow from where they were manufactured to where they are consumers and vice versa. Logistics is part of SCM but not the entire process. Logistics is important in the supply chain management because it helps to satisfy customers’ needs and wants in possession, place, time and form utility (Taniguchi, Thompson & Yamada, 2001). Customers get the products where they need them and at the right time. When the customers purchase these products, the ownership shifts to the buyers while manufacturers make sure that the raw materials are completed in form of suitable products that are required by customers. Producing goods and services requires an extensive supply chain management and logistics system. Forward logistics will enable the company to transport goods from supplier and reach the customer as finished goods while reverse logistics ensures that flawed goods are returned to the producer for repair of recycling. Many companies prefer outsourcing reverse logistics to third party companies while others prefer an internal reverse logistic process due to the intense knowledge of the products. REFERENCE Bienstock, C, (2009). Designing a Reverse Logistics Operation for Short Cycle Time Repair Services. Journal of Management & Marketing, pp.1-34. Cooper, M.C., Lambert, D.M. & Pagh, J.D. (1997) Supply chain management: more than a new name for logistics, International Journal of Logistics Management, Vol. 8, No. 1, 1-13. Fleischmann, M, Jacqueline, M, Ruwaard, R, Laan, E, & Wassenhove, L. (1997). Quantitative models for reverse logistics: European Journal of Operational Research 103, pp. 1-17. Krumwiede, D.W. & Sheu, C. (2002) A model for reverse logistics entry by third-party providers, Science Direct, Vol. 30, 325-333. Tseng, Y, Yue, W, & Taylor, M. (2005). Proceedings of the Eastern Asia Society for Transportation Studies. The role of transportation in logistics chain, pp. 2-16. Taniguchi, E., Thompson, R.G. & Yamada, T. (2001) Recent advances in modelling City Logistics. In E. Taniguchi and R.G. Thompson (eds.), City Logistics II. Institute of Systems Science Research, Japan, 3-33. Taniguchi, E., Thompson, R.G. & Yamada, T. (2003) Visions for city logistics. Proceedings 3rd International Conference on City Logistics, Institute for City Logistics, 3-17. Thompson, R.G. & Taniguchi, E. (2001) City logistics and freight transport. In A.M. Brewer, K.J. Button and D.A. Hensher (eds.), Handbook of Logistics and Supply Chain Management. Elsevier Science Ltd., UK, 393-405. Read More