Functions of Logistics

The Work of Logistics

• Logistics exists to move and position inventory to
achieve desired time, place, and possession benefits at
the lowest total cost.
• For a supply chain to realize the maximum strategic
benefit from logistics, the full range of functional work
must be integrated.
 The Function of Logistics
- Order Processing
• In most supply chains, customer requirements are
transmitted in the form of orders.

• The processing of these orders involves all aspects of

managing customer requirements including initial order
receipt, delivery, invoicing, and collection.

• The logistics capabilities of a firm can only be as good as

its order processing competency.
• Current information technology is capable of
handling the most demanding customer
requirements.

• When desired, order information can be

exchanged between trading partners.

• Internet communication of orders direct from the

customer, combined with slower, less costly
surface transportation, may achieve even faster
overall delivery service at a lower total cost.
 The Function of Logistics
- Inventory
• The inventory requirements of a firm are directly linked
to the facility network and the desired level of
customer service.
• Logistical strategies should be designed to maintain
the lowest possible financial investment in inventory.
• A sound inventory strategy is based on a combination
of five aspects of selective deployment: (1) core
customer segmentation, (2) product profitability, (3)
transportation integration, (4) competitive
performance.
 The Function of Logistics
-Transportation
• Transportation is the operational area of logistics that
geographically moves and positions inventory. From the
logistical system viewpoint, three factors are fundamental to
transportation performance: (1) cost, (2) speed, and (3)
consistency.
• When transportation lacks consistency, inventory safety
stocks are required to protect against service breakdowns,
impacting both the seller’s and buyer’s overall inventory
commitment. With the advent of new information technology
to control and report shipment status, logistics managers have
begun to seek faster movement while maintaining
consistency.
 The Function of Logistics-
Warehousing, Materials Handling, and
Packaging
• Sorting, sequencing, order selection, transportation
consolidation, and, in some cases, product modification and
assembly related to postponement strategies.
• Within the warehouse, materials handling is an important
activity. When performed in an inferior manner, materials
handling can result in substantial product damage.
• To facilitate handling efficiency, products in the form of
cans, bottles, or boxes are typically combined into larger
units. This larger unit, typically called the master carton,
provides two important features. First, it serves to protect
the product during the logistical process. Second, the
master carton facilitates ease of handling.
 The Function of Logistics
- Facility Network Design
• In business operations, the number, size, and
geographical relationship of facilities used to
perform logistical operations directly impacts
customer service capability and cost.
• The design of a facility network requires
careful analysis of geographical variation. The
fact that a great deal of difference exists
between geographical markets is easy to
illustrate.