History and Key Components of Logistics, Role of Logistics in Organizations - Literature review Example

Student’s Name Professor’s Name Subject DD Month YYYY LOGISTICS Over time, the importance of logistics and logistics management has stressed as one of the keys to success for any organization. Logistics and supply chain management are often mentioned in the same line but the two concepts differ in terms of how wide they are. Supply chain management is a wider concept of logistics and logistics forms part of supply chain management. Logistics is not a recent phenomenon and has been in use for a long time. Christopher (16) points out that through the history of mankind, wars have been won and lost depending on how good or bad the logistics of the warring parties were. This paper seeks to discuss logistics to a greater extend, giving its definition and history together with various concepts in logistics such as its role in organizations, logistic strategies , distribution networks and transportation Definition and history of logistics The word logistics originated from ancient Greek and according to Farahani et al (3), meant the science of computation. It actually originated from the word logistikos who were military officers in the Greek army who played the role of calculating and estimating the military needs before it went out for a war. Logistics can be defined as the planning, execution, and control of how goods and people are moved from place to place or their placement within a system that has been designed to achieve specific objectives. It mainly involves the provision of products at the right time, place and condition. Christopher (18), states that logistics is made up of a planning orientation and framework that aims at coming up with a single plan that would enable the flow of products and information in businesses or organizations. Logistics deals with how people and material are organized, moved and stored of material. It mainly involves the planning and control of how materials and information related to it flows of within and between various organizations. Its main aim is to facilitate the flow of the right materials to the right place and at the right time. This is usually done while ensuring that the total operational costs of the whole process is optimized. It is important to note that both public and private sectors apply logistics in their operations. In addition to that, the concept of logistics has over the years expanded from being military based to include service activities and businesses (Brewer et al 15). Activities that are included in logistic management include transportation management, warehousing, order fulfillment, materials handling, inventory management, logistics network design, supply/demand planning, and third party logistics providers and their management. Key components of logistics Logistics involves the physical flow of materials and information. It thus follows that activities and processes in logistic systems involve physical flows. Key logistic activities can be divided into core and supporting activities. Core activities occur in every channel of supply and take up the largest portion of logistic costs. They also play the most important role in seeing to it that the logistic task in completed. The 4 main core logistic activities are customer service, inventory management, transportation and information flows and order processing. Transportation accounts for about a third to two thirds of the total costs involved in logistics. It is the most important activity to most organizations and business entities. Time and place utility of products is increased by transportation since it ensures the right goods are delivered at the right time, place and in the right condition (Farahani et al 14). Supporting logistical activities are different from one organization to another. The most common activities include warehousing, purchasing, handling of materials, protective packaging and information maintenance. Warehousing involves determining how much space the materials require, the layout of the materials, stick placement and stock configuration. Ross (538) points out the various functions that warehousing plays in an organization. The roles include material handling, storage, order management, information management. Under material handling, activities performed include receiving of stock, sorting and value added processing. Storage on the other hand is important to products that are seasonal. Material handling in supporting logistical activities involves processes such as selection of equipment and replacement, order picking procedures and retrieval of stored stocks. Purchasing on the other hand involves selection of sources to purchase from, timing of purchase and deciding the quantities to purchase. Role of logistics in organizations As stated earlier, logistics plays an important role in any organization. It is usually consider a continuation of marketing in most organization and plays a key role in the marketing procedure. Marketing areas in which logistics has an influence include customer satisfaction, corporate profit and integrated effort. Logistics plays an important role in ensuring the efficient flow of products from warehouses to the consumers. The important roles it plays in an organization include creating good customer relation, creating an organization’s competitive edge, creating finished products and ensuring maintenance of organization (Hawthorne & Media). Logistics helps in delivering materials and information in an efficient way. This is turn helps in the creation of a good consumer relation between the organization and the people it supplies products to. Good customer relations are not only important for corporate profits, but it also ensures that the organization maintains its customers and remains in the business. Providing quality and exemplary services to customers is a good way through which an organization can build its reputation and advertise itself since it involves no extra costs (Hawthorne & Media). It is also important to mention that a good business logistics system make an organization have a competitive edge against other similar service providers. A well-organized logistics system provides a process through which the needs of most customers are meet in an efficient and effective manner. It is important for an organization to prioritize the delivery materials in a more accurate and fast way than its competitors. In addition to that, business logistics ensure that the process of creation of a new product goes on in an efficient way. Logistics helps in the tracking of the inventory, transportation of stocks and storage of the stocks. Apart from that, it ensures products are manufactured in a manner that will suit all the departments within an organization. By controlling this flow of activities, logistics helps in ensuring that each department in an organization knows its role and what is expected of them (Hawthorne & Media). Logistics strategy It is important for any organization to create a well laid logistics strategy since a logistic strategy defines the level at which an organization plans to optimize the costs involved in the logistic operations. The strategies help the firms minimize costs and remain efficient at the same time. It is important to note that the supply chains in logistic systems are always changing from time to time. It thus important for organizations to come up with a number of logistics strategies for certain products, certain customers or certain countries. A good logistic strategy may result to an organization having a competitive edge over its rivals. Most logistic strategies have three main aims; cost reduction, capital reduction and improvement of service (Horrison et al 156). Cost reduction in a logistic strategy involves the minimization of variable costs that are normally associated with the movement and storage of materials. Capital reduction on the other hand involves minimizing the cost of investment in the logistic systems and maximizing returns. Service improvement on the other hand involves keeping in mind that the level of logistics provided influences the levels of revenue earned. Goldsby and Martichenko (6) discuss a logistic strategy called the lean six sigma logistics. This strategy incorporates the components of lean which aim at reducing wastage and six sigma, which aims at effective management, into logistics. They define lean six sigma logistics as “the elimination of wastes through efforts to understand and reduce variation, while increasing speed and flow in the supply chain.” This definition basically gives the characteristics of a good logistics strategy. An organization creates a logistics strategy by focusing on four main areas of organization that include the organizations strategic organization, structural organization, functional organization and how the organization implements its strategies. The most commonly examined components when creating a logistics strategy includes transportation, competitors, outsourcing and warehousing. Distribution networks in logistics Distribution networks in logistics can be placed into two broad categories, physical distribution networks and trading channels. Physical distribution networks describes the method and materials through which are physically moved from one place to another or distributed from where the materials are produced to where they are required by the final user. Trading channels on the other hand describe the path taken by non-physical aspects of logistics. These aspects include the negation, buying and selling of the materials. The changing ownership of the materials also falls under trading channels. Key players in distribution Channels include manufacturers, wholesalers and suppliers. Manufactures are the producers of the products needed by consumers. They have the purchasing power that matches the demands of the customers. Wholesalers on the other hand fall in the middle of distribution channels and they usually maximize their power when retailers order in small quantities. Retailers are in direct conduct with the final customers. Their financial power and assize affects the other two players. It is also important to note that distribution network designs have in the past focused on the location of customers in relation to warehouses (Blecker et al 47). Distribution networks should be designed in a manner that ensures costs are optimized and that at the same time operations are carried out effectively. Network logistics are usually influenced by a number of factors that include new trade agreements, Security requirements, shifting labor rates, supplier and customer locations, space costs, new carriers and products and fuel costs. In addition to that, optimal network design and redesign plays an important role in minimizing inventory carrying, costs involved in warehousing and transportation costs while at the same time ensuring customer response-time requirements are fully satisfied (Brewer et al 265). Fleischmann et al (2000) describe the general components of a product recovery network. They point out the differences that exist between a distribution network and a recovery network. Activities involved in product recovery networks include collection, inspection, re-processing, disposal and re-distribution. Sudalaimuthu and Raj (74) on the other hand state that an organizations distribution network is the lifeline through which their products can be successfully delivered. They add that inadequate distribution networks result into inefficient methods of storing and transporting an organization’s product. Transportation in logistics Transportation accounts for the largest position of logistic costs in many organizations. There are various ways through which materials are moved from where they are produced to where they are required (Farahani et al 13). Most logistics systems aim at ensuring transportation meets several objectives. The objectives include on-time delivery, minimum delays and damages to the materials, reduction in transit time, minimization of fuel consumption and minimization of personnel costs and overtimes. Transport systems in logistics are made up of three main components which are facilities, equipment and people. Facilities are the fixed components that make up a transportation network and include terminals, warehouse, distribution centers and other user specific facilities. Roads and water ways also make up facilities. Equipment on the other hand includes the machinery used in transportation and includes ships, trains and vehicles. People are the individuals concerned with the transportation process and include managerial personnel, supportive personnel and operative personnel such as drivers. Coyle et al (40) point out the transportation is the most important element of logistics. Logistics managers play the role of selecting the mode of transportation and the carriers that will deliver materials from source to destination. There are different modes of transportation. They include air, sea, road, rail and pipeline. Another mode of transportation that has recently gained popularity is electronic transport. Different products and markets are best suited for specific modes of transport (Farahani et al 13). Road transport is also known as highway transport and is the most popular mode in domestic logistics. It offers lower quantities and capacity capabilities when compared to other modes but it is effective in door to door delivery of goods. It main strength is that it is flexible and versatile (Farahani et al 13). Water transport on the other hand offers the ability to transport very large amounts of materials. Most materials transported on sea are unprocessed raw materials. It main disadvantages includes being limited in terms of operations and speed. It can only be used on specified waterways and is affected by weather conditions. However, the costs on loss and damages are very low. Rail transportation is a slow mode and is mainly used to transport semi processed and raw materials. It not affected by weather conditions and it is possible to transport large quantities of materials at once. Pipelines on the other hand are designed to transport large volumes of products over long distance. Products transported using this mode include natural gas, crude oil, chemicals, water and slurry products. It is efficient since it operates 24 hours per day but its limitation is that every product requires its own pipeline design (Farahani et al 13). Conclusion This paper has discussed various aspects of logistics that include its history and definition, the main components that make it up and its importance in an organization. Logistics was defined as the planning, execution, and control of how goods and people are moved from place to place or their placement within a system that has been designed to achieve specific objectives. It was also noted that it mainly involves the provision of products at the right time, place and condition. The 4 main core logistic activities highlighted in the paper include customer service, inventory management, transportation and information flows and order processing. Works cited Blecker, Thorsten and HatemAldarrat.Management in logistics networks and nodes. Berlin: Erich Schmidt, 2008. Print. Bloomberg, David J, Stephen A Lemay and Joe B Hanna.Logistics. Upper Saddle River, N.J.: Prentice Hall, 2002. Print. Brewer, Ann, Kenneth Button and David A Hensher.Handbook of logistics and supply-chain management. Amsterdam: Pergamon, 2001. Print. Christopher, Martin. Logistics & supply chain management. Harlow, England: Financial Times Prentice Hall, 2011. Print. Fleischmann, Mortiz, et al. "A characterisation of logistics networks for product recovery." Omega 28.6 (2000): 653-666. Goldsby, Thomas J and Robert Martichenko.Lean Six Sigma logistics. Boca Raton, FL: J. Ross Pub, 2005. Print. Harrison, Alan and Remko I. Van Hoek.Logistics management and strategy. Harlow, England: Pearson/Financial Times Prentice Hall, 2011. Print. Ross, David Frederick. Distribution. Boston: Kluwer Academic Publishers, 2004. Print. Sudalaimuthu, S and Anthony S Raj.Logistics management for international business. New Dehli: Prentice Hall of India, 2009. Print. Hawthorne, Madison and Demand Media. "The Importance of Business Logistics." Small Business - Chron.com, 2014.Web. 21 Feb 2014. . Zanjirani Farahani, Reza, ShabnamRezapour and LalehKardar.Logistics operations and management. London: Elsevier, 2011. Print. Read More