A logistics system is a set of interconnected processes and activities involved in the planning, implementation, and control of the movement of goods and services from the point of origin to the point of consumption. The main goal of a logistics system is to ensure that products are delivered to the right place, at the right time, and in the right condition, while minimizing costs and maximizing efficiency.
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Components of Logistics System
The critical logistics decisions are:
- How do I want to process an order?
- Where have the stock been placed?
- How have items been shipped?
In fact, those elements shape a key element of the logistics system. Let us discuss about the components in detail. The components of logistics management are discussed as follows:
Storage, Warehousing and Material Handling
These elements are important for a retail enterprise. The merchandises are required to be stored, warehoused and handled in a proper manner. Some of the important aspects of these elements are warehouse location, storage type and material handling equipment.
It involves transportation of merchandise, and reduces the possibility of damage caused during transit. For example, if items/such as processed foods are not properly packed, these can perish in transit.
It refers to the stock of materials in retail organisations. Retail organisations maintain inventory levels on the basis of sales and demand forecasts.
An effective transportation system ensures timely delivery of merchandises from suppliers to the warehouses, from warehouses to the distribution centres and from distribution centres to the retail stores.
Information and Control
These are the most important elements in logistics. Retail enterprises need to have access to the real-time information and control over their logistics operations. Large retail enterprises, like Walmart, use specialised software to keep track of their operations.
In large organisations, order processing refers to handling voluminous products to make them reach the desired destination. Order processing operations or facilities are generally known as distribution centres. Order processing comprises verifying the order received and checking whether the facility has the required amount of goods.
Order processing is a perpetual process which consists of the following:
- Picking: It entails taking and collecting products in specified quantity prior to shipping the orders for customers.
- Sorting: It refers to the process of separating goods as per their destination. It is crucial for sorting products as it eases the shipment of products. If sorting is not done in correct manner, then it will create a mess for shipment team and the order will not reach the target customers.
- Package formation: It is an important part of order processing as it includes weight, label and pack products. The outer packaging should include weight, usage and specification of the product to inform the customer how to use the product.
The packaging should explicitly mention the date of manufacturing, batch number, expiry date or best before date, price of product, organisation producing the product, etc.
- Consolidation: It consists of accumulating packed products to loading bays to be transported. At the loading bays, the goods will be gathered where bill of landing and various documents will be prepared.
The packaging of goods will also be inspected whether the outer packaging is sturdy enough to bear the loading and unloading of goods. The packaging should also be efficient enough to prevent products from pilferage and spoilage.
Inventory refers to the stock of materials in retail organisations. Inventory management refers to having sufficient inventories to fulfil the customers’ requirements and simultaneously reducing the storage cost. Inventory control basically aims at balancing the customer satisfaction level and reducing the cost at the same time.
Improper inventory can hamper the organisation’s profits due to the huge costs associated with the inventory. While the products are in inventory, they must be prevented from losses, damages, thefts and pilferage.
Warehousing refers to storing of finished goods until they are sold or shipped to the ultimate destination. Warehousing plays a crucial role in the logistics of an organisation. In the context of supply chain management, a warehouse is a requisite as the products once manufactured need to be stored.
They cannot be left in the open as it may harm the product. Warehousing prevents the products from getting affected by the environment. Some of the important aspects while selecting a warehouse are its location, storage type and material – handling equipment.
Transport is the single most important aspect of logistics activities in manufacturing organisations. The physical movement of finished products is pivotal as unless products do not reach the target customers, the demand or customer satisfaction cannot be fulfilled.
Transportation ensures delivery of products from the point of origin to the point of consumption. Timely availability of products is of prime importance as only then the reason to manufacture a product will be attained.
Packaging is a logistic activity that is crucial in SCM. It is a must for every manufacturing organisation. Packing ensures that during the physical distribution of a product, they do not get affected or lose their quality.
Correct packaging assists in minimising damage to finished products and saving the products from spoilage, pilferage and thefts. Packaging also provides a customer with the specification of the product, such as its weight, date of a manufacturing, name of manufacturing organisation, ideal time for product consumption, and price.
Logistics is fundamentally an information-driven activity that deals with the movement of inventory throughout the supply chain. Information system works like oil of the machinery that aims at delivering quality service to the customers.
The use of information technology has further enabled logistics in information identification, storage, scrutiny, archiving, retrieval and decision-making which are the key functions of logistics. Such logistical functions enable an organisation to hone its competitiveness.
The pace of the movement of inventory throughout the supply chain is hinged on the methods employed for material handling. A disorganised material-handling method may cause damage to the product, untimely product delivery and increase the overhead cost.
By implementing automation in the material handling process, an organisation can enhance the productivity, product delivery and mitigate the chance of damage to the product. While choosing the material-handling system, on organisation should also consider the volume of products to be handled, the necessary speed required for the movement of materials and the service level to be offered to the customer.
The warehouse size is also important for effective space utilisation (floor and cubic) of storing products. The material handling system should be effective enough to support the storage system for swift flow (storage and retrieval) of goods in and out of the warehouse.