Sample Logistics Paper on Supply Chain

Supply Chain

Abstract

The need for better methods and effective processes has triggered change in supply chain and logistics. Some changes have occurred due to compelling pressure for customer needs, company competitors, market position and even financial position. These pressures will always be there to push supply chain managers into strategizing for better techniques of doing things. Moreover, the competitiveness of multi-national companies  have led to intensified pressure for companies to establish efficient and effective logistics systems that ensure the flow of  materials, information and products from supplier, producer and finally to the customer. As such, the purpose of this paper is to discuss the role of logistics in the supply chain of an organization.

On the onset, the paper will include a brief introduction that will define logistics and give a brief explanation on logistics. Moreover, the introduction will differentiate the term logistics and supply chain management since most people interchangeably use the terms. The paper will thereafter review past literatures written on logistics. These review will include the changing trends in the logistics and supply chain functions.

The core of this paper is to discuss the role of logistics in companies. Therefore, the body will discuss the core operations that the logistics system directly affects, which include transportation, manufacturing, inventory planning and management and operations planning. Finally, a brief conclusion of major ideas mentioned in the paper will be included to summarize the paper’s ideas.

Introduction

Logistics is a term that was widely used in the military in during the world wars in the early 19th century. The Business world especially in manufacturing companies adopted the term which has evolved over the years to encompass many activities involving materials, operations, suppliers, inventory needs and transport among many other depending on an organization. Christopher (2013 pp. 2), defines logistics as “the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of order.” Ghiani et al. (2013) states that the logistics function determines the flow of materials and information from suppliers and the subsequent events that lead to the delivery of finished products to customers. The logistics system of any organization is very essential to its overall performance. For instance, the time used to deliver materials, the methods used to communicate, the mode of transportation and the inventory control methods used are important in supply chain management.

In most cases, people mistake logistics for supply chain management by interchanging the terms, which is not right. Supply chain management is a broader concept that encompasses the logistics function. According to Christopher (2013), supply chain management comprises of all activities that manage and maintain supply chain relationships with a goal to achieve sustainable competitive advantage. While logistics focuses on the flow of materials, products and information from suppliers to end user, supply chain management integrates all activities including demand forecast to improve an organization’s standing in a competitive industry. However, efficient logistics management also plays a major role in business sustainment through effective planning and management of inventory, information, and transport operations.

Literature Review

In the past, the term logistics was only used to describe the flow of materials and supplements from supplier to manufacturer and finally to end user. Today, logistics management has evolved to planning and coordinating necessary activities in order to achieve the desired results of delivering quality products and services at the least possible cost (Christopher, 2013). According to Handfield et al. (2013), today’s worldwide logistics environment is portrayed by expanding intricacy of various imperative parameters molding the worldwide environment. These parameters include customer expectations, networked economy, new technology, cost pressure, globalization, volatility, increased risk and disruptions and sustainable pressure. The velocity of change and progress of these parameters is stunning and is driving the logistics operations into multifaceted systems. These trends continue to re-shape the logistics scene, and give a shifting in the environment risks and impediments that either compel choices, or on the other hand present opportunities, which organizations can exploit to their advantage.

            The changing business environment has resulted to trends in logistics operations that have improved supply chain management. The logistic system has evolved to include broader activities and facilities. Transportation, material handling, inventory planning, logistics and supply chain have been integrated over time due to technology and other factors such as customer expectations, demand and supply which has enhanced the ability for organizations with interest to collaborate.

Despite all these changes in logistics concept, the operations conducted by logistics are still the same, which are enabling effective and efficient flow of materials, products, and information from supplier all to the customer. Ghiani et al. (2013) opines that logistics currently includes infrastructure, equipment and resources that are considered indispensable for effective implementation of the logistics function. This means that companies are establishing logistics systems that are able to produce the best results regardless of the resources to be used. Ghiani et al. (2013) further states that the logistics systems of organizations differ depending with their operations. For instance, the logistics system of a manufacturing company is more complex, advanced and involving many players as compared to other organizations. As such, the logistics systems are very essential and contribute to the overall performance of a company and also plays a role in determining the position of a company in an industry.

Logistics

As earlier stated, supply chain involves the logistic function, which involves the flow of materials, products, and information from sources, which are suppliers to the customers. The logistics function is important in any organization’s supply chain operations. However, the logistics system is more effective through the integration of other activities and departments of an organization.

The process of procuring materials in an organization is part of the logistics function that varies from organization to organization. The logistics behind procurement are essential and determine the quality and cost of the final product. Manufacturing companies for instance are the organizations that mostly ensure their supply chains are strong and sustainable. According to Wang (2010), competition between manufacturing companies has intensified due to dynamics relating to the market place that require short time responses to changing markets and production systems. In an attempt to win customers, manufacturing companies are focusing on customer satisfaction, which has resulted to mass customization of products. Moreover, manufacturing companies have resulted to outsourcing of logistics in attempt to achieve competitive advantage. According to Tompkins (2006), manufacturing companies are too large which implies that managing such an organization is challenging due to its complex systems. As such, manufacturing companies are outsourcing for logistics by contracting companies that offer transportation services, warehousing services and others even outsource the manufacturing function of some products.

 Usually in any manufacturing company, materials are transformed into finished goods and then assembled in different centers (Ghiani et al. 2013). This processes are however not possible without the suppliers. Any supply chain is made successful by the suppliers’ commitment to providing quality materials or products at the right time, right place and at a fair price. Moreover, the logistics of transporting the materials to the manufacturer’s premises are essential. Today, companies are importing materials from foreign nations as a result of globalization. Therefore, a company’s logistic system will determine how long the materials take to arrive. Some companies have resulted to establishing manufacturing plants in supplier’s location and there after exporting unfinished products, which are worked on to completion in the company’s manufacturing headquarters. This is all being done in an attempt to gain competitive advantage and to satisfy customers.

Inventory management is another important aspect in supply chain. According to Muller (2011), inventory includes raw materials, work in progress and finished goods. In logistics, the cost of inventory affects the final cost of finished products and hence inventory planning is essential. Inventory brings other costs such as cost of transportation, space, labour to receive and inspect goods, theft, and cost of damaged goods. The real cost associated with inventory is the ordering cost and holding costs. As such, the logistics systems of a company determine the costs it incurs in ordering and holding inventory. According to Muller (2011), a company that uses the Just in Time manufacturing system considers inventory as waste. This is because, inventory that lies idle in a warehouse results to wastage of resources such as storage costs, costs of capital tied up to inventory, cost of handling the inventory, wages paid to warehouse staff, cost of damaged goods and losses as a result of holding the inventory. Due to these costs, companies that use JIT save a lot of money since they order materials depending on the demand of their products. As such, a JIT system requires a company to have a strong and established relationship with its suppliers such that the supplier can ensure the manufacturer is provided with the materials when unanticipated orders are made.

Companies with poor cash flows or with weak control systems on the other hand, have put in place logistics systems that involve maintaining certain amounts of buffer stock at any given moment. This system is however costly due to the costs associated with holding inventory. However, Muller (2011), states that obtaining and holding inventory is important since it provides protection in times of demand fluctuations. This is because it is sometimes difficult to predict future demand and therefore a company remains safe in the event demand increases unexpectedly as compared to a company that uses the JIT system. Moreover, disruptions caused by unreliable suppliers are major supply chain risks that affect the performance of a company. Therefore, such a system mitigates the risk of disruption that affects production and timely delivery of products to customers.

Inventory management is directly linked to warehousing. A warehousing network includes a distribution center, handling equipment and warehouse staff. According to Berg (2007), distribution centers whose function is to hold inventories are crucial in any supply chain since they allow inventories to be made available to the production department and also the finished products to be delivered to customers on time. Poor performance in the warehousing network impairs the whole supply chain. Berg (2007) defines warehouse management as, “the continuous attempt to operate and improve the processes, organizational structure and the use of information technology in the distribution centre as well as the collaboration with supply chain partner.” Berg explains that warehouse management is vital since it maintain the competitiveness of any company. Integrated warehouse operations have proved to improve the logistics systems of companies. These operations involve being transparent, use of information systems that support current and future processes and the alignment of distribution centers and other departments in a company.

An effective warehouse department is transparent and allows the warehouse staff to make important decisions based on facts and not speculations since the inventory decisions made in this department affect the whole organization. Moreover, information systems play a role in warehousing since the use of warehousing managing systems enables the staff to access useful and reliable data concerning inventory levels, orders and other information required. As such, warehouse operations play an important role in logistics.

In supply chain management, operations planning determines how inventory, manufacturing, transportation and warehousing are managed. Operations planning involves the function of managing all key activities in a supply chain. This operations are undertaken by managers who run the specific departments and the overall operations managers who direct and manage the supply chains. The planning decisions are made after thorough analysis since production and inventory decisions are not speculated as it would result to wastage and losses.

Conclusion

Organizations have realized the need of relying on effective logistics systems and supply chains to compete in the global market. This need is not only tied to an individual company’s business processes but it extends beyond boundaries and seeks to integrate the processes throughout a value chain of a company and its suppliers. The turbulent uncertain business environment has played a big role in the development of supply chain networks. As a result of globalization and intensified competition, companies are increasingly improving their logistics systems. This includes adopting systems that are efficient and effective such as the JIT system that enables a company order materials from suppliers when orders are made. Moreover, companies have improved their transportation modes, warehousing operations and manufacturing systems and methods in an attempt to satisfy their customers and gain competitive advantage over competitors. Supplier relations also play a key role in logistics since established supplier relations prove to reliable in times of unanticipated demand. As such, it is critical for every company to build a strong logistics system in order to survive and remain relevant in today’s dynamic business environment.

References

Berg, J. P. (2007). Integral warehouse management: The next generation in transparency, collaboration and warehouse management systems. Utrecht: Management Outlook.

Christopher, M. (2013). Logistics and Supply Chain Management ePub eBook. Business & Economics. Pearson UK.

Ghiani, G., Musmanno, R., & Laporte, G. (2013). Introduction to logistics systems management. Hoboken, N.J: Wiley.

Müller, M. (2011). Essentials of inventory management. New York: AMACOM.

Tompkins, J. A. (2005). Logistics and manufacturing outsourcing: Harness your core competencies. Raleigh, NC: Tompkins Press.

Wang, L., & Koh, S. C. L. (2010). Enterprise networks and logistics for agile manufacturing. London: Springer.