Summary
The scope of Logistics covers the entire organization, from the management of raw materials to the delivery of the finished product. The mission of logistics management is to plan and coordinate all the activities necessary to achieve the desired levels of service and quality at the lowest possible cost. Logistics has a very important function in customer satisfaction, logistics is considered as an added value component or profitability factor, which links the needs of the market and the operational activity of the entity.
1. Concepts about logistics
In its beginnings, logistics was nothing more than having the right product, in the right place, at the right time, at the lowest possible cost, today this set of activities has been redefined and today they are a whole process. The fundamental mission of Business Logistics is to place the right products (goods and services) in the right place, at the right time and in the desired conditions, contributing as much as possible to the profitability of the firm.The objective of logistics is to satisfy the demand in the best conditions of service, cost and quality. It is in charge of managing the necessary means to achieve this objective (surfaces, means of transport, information technology…) and mobilizes both human and financial resources that are adequate. Logistics is " the set of means and methods necessary to carry out the organization of a company, or a service, especially distribution " (RAE: 2001)
In the business world, there are multiple definitions of the term logistics, which has evolved from military logistics to the contemporary concept of art and technique that deals with the organization of the flows of goods, energy and information.
It is a discipline in charge of managing flows of matter, energy and information; to a system that must provide the necessary resources to provide the service or deliver the product: in the required quantity, with the required quality, in the required time, at a low cost and for the benefit of the social community. “ Logistics is essential for commerce. The logistics activities make up a system that is the link between production and markets that are separated by time and distance ”. (Cedillo: 2008)
Business logistics, definition.
For Professor Ronald H. Ballou “business logistics is all movement and storage that facilitates the flow of products from the point of purchase of materials to the point of consumption, as well as the information flows that are set in motion, with the in order to give the consumer an adequate level of service at a reasonable cost ”. (Ballou: 2004).
Professor Lambert, integrates the term logistics into a more general one and defines it as the “part of the supply chain management (Supply Chain Management (SCM)) that plans, implements and controls the efficient and effective flow of materials and the storage of products, as well as the associated information from the point of origin to the point of consumption in order to satisfy the needs of consumers ”. (Lambert: 1998)
According to the Council of Supply Chain of Management Professionals, CSCMP formerly known as the Council of Logistics Management, CLM) “Logistics is that part of Supply Chain management that plans, implements and controls the flow -back and forth- and the effective and efficient storage of goods, services and related information from the point of origin to the point of consumption in order to satisfy consumer requirements ”. (CSCMP: 2008)
Logistics is "the movement of the right goods in the right quantity to the right place at the right time". (Franklin: 2004)
Logistics fulfills a main service function, supporting production and marketing operations, adding significant opportunity value to the product. A well-designed logistics action, coordinated with marketing and customer-oriented, is one of the most powerful tools to create loyalty through greater value to the product that is delivered. Other benefits are increased profitability due to lower costs, and inventory management for a quick return on investment are also definitive logistics and marketing goals. The classic problems that are observed when there are problems in the logistics distribution system and that force to rethink the situation are:
- Impossibility of compromising a certain delivery date to customers Poor information on deliveries made Stocks of inappropriate and poorly distributed products Excessive lapses between order form and delivery Poor equipment and facilities - obsolete Poor response to customer complaints Systems oriented to the accounting side and not to Logistics management Inelastic distribution and very close to traditional Lack of knowledge of real costs Uncertainty about the quality of service offered Customer dissatisfaction.
In order to effectively supply products and services, Organizations must clearly define, before establishing their distribution policy, the following points:
- The demands of the required service The best methods to satisfy them The transport and delivery systems of the products The appropriate levels of stocks and their online monitoring The location of warehouses and Distribution Centers The appropriate marketing channels for each line.
The objective of setting the different service standards should be to conform to 100% of the expectations of customers, and among them we find:
- Order term cycle Frequency and reliability of delivery Stock availability Quality of documentation Order size restrictions Complete orders completed Ease of receipt Compliance with deadlines
2. Globalization and logistics
Globalization implies internationalization in all aspects, especially in the economic one, provoking changes in the forms of strategic competition, differentiation to low-cost markets, which allow a return to competitive strategies based on the reduction of production and logistics costs. With globalization, companies have been implementing strategies and action plans to improve national and international logistics operations. Some have taken advantage of the new globalized business model and market integration.
In the globalization of the economy it is necessary to introduce the concept of logistics because, among other things, in economics it starts with the consumers in mind, creating new strategies among the load generators (goods) and reaching the end customers. “ In companies, each time, they do what they know how to do well, leaving the rest of the activities of the production chain in the hands of specialized companies. It is the time for logistics platforms to support the development of international markets.
International logistics has become one of the key elements in this new international economic order, since it allows the connection between distant production and consumption centers, all in a fast and efficient way; geography is no longer a strategic limitation or barrier due to recent advances in international logistics.
Among the factors involved in the evolution of logistics we have:
- Increase in production lines Efficiency in production, reach high levels The distribution chain wants to keep less and less inventories Development of information systems JIT strategies All this together will bring the following benefits: Increase competitiveness and improve the profitability of companies to tackle the challenge of globalization Optimize the management and national and international commercial logistics management Optimal coordination of all the factors that influence the purchase decision: quality, reliability, price, packaging, distribution, protection, service.
Expansion of the Management vision to turn logistics into a model, a framework, and a planning mechanism for the internal and external activities of the company.
The scope of logistics encompasses the entire organization, from raw material management to finished product delivery. The management process requires planning, organizing, executing and controlling, the role of the manager is to facilitate the improvement of the process. The mission of logistics management is to plan and coordinate all the activities necessary to achieve the desired levels of service and quality at the lowest possible cost.Consequently, logistics should be seen as the link between market needs and the operational activity of the entity or company. The manager's concerns and objectives have to do with the survival of the business, achieving good market share, maintaining sustained growth, obtaining more attractive returns, and seeking markets in which it is more competitive. According to the characterization of logistics in Colombia, a study carried out by SENA in 2006; “This study is based on the premise that logistics materializes through the explicit coordination of activities that ensure operational management in:
| Logistics activities areas | |
| Planning and sourcing | Warehouse and warehouse management |
|
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| Warehousing and inventories | Transportation and distribution management |
|
|
| Production | Environmental management |
|
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| Commercialization | Administrative support management |
|
|
Table 1 Source: SENA 2006, Study of the characterization of logistics.
3. Logistics management
Business logistics covers the management of the activities of the purchasing, production, transport, storage, maintenance and distribution departments. The components of logistics management, start with the inputs that are raw materials, human resources, financial and information, these are complemented with both managerial and logistical activities, which are combined containing logistics outputs, which are all the characteristics and benefits obtained by good logistics management.
“Today, more and more companies are embracing the concept of integrated logistics management. This concept recognizes that providing better customer services and reducing distribution costs requires teamwork both within the company and among all organizations in the marketing channel. Within the company, the various functional departments must collaborate closely to maximize the company's logistics performance. It must also integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution system ”(Kotler, 2004)
It is necessary a joint management of the entire logistics system that involves flows of goods, information and money. It is about coordinating the entire distribution system from the first supplier until the product reaches the customer. The logistics management units necessary in each of its stages include processes such as:
- WarehousingDispatchProcurementNational and international purchasesInventory controlMaterial economyExternal transportIntercompany transportInter-company transportNational distributionInternational physical distributionTreatment and attention to ordersRecycling of waste and products discarded by the clientProduction planningProduction controlInformation and communicationsNational environmental controlInternational financingApplicationTechnology salesNational environmental controlInternational marketingMaintenance of the environment of information and communication.
Logistics management is a broad field that encompasses numerous activities, among which are:
- The management of the supply system, The management of the Stock of products, The management of warehouses and the transport system.
The integration of the entire network and cooperation between companies facilitates the achievement of the two main objectives of logistics:
- Give a satisfactory service to the customer. Deliver products on time and without errors Reduce the costs of getting the product through the entire system to the end consumer. Among the costs that we can reduce are mainly those related to inventories, storage, management costs and transportation costs.
Purchasing management
Procurement logistics deals with the process of acquisition and storage of products that can be raw materials, materials, parts, pieces, among others, from suppliers to the beginning of the production process in production companies. Procurement covers three areas: Purchasing, storage and inventory management. Supply management involves making decisions that contribute to the achievement of an efficient and effective operation of the logistics system.
Purchases as a business function are more restricted in nature and are intended to acquire the goods and services that the company needs, guaranteeing the supply of the required quantities in terms of time, quality and price.
"But to achieve efficient purchasing management, the entity's supply chain must be well identified. To achieve this, companies must involve in their strategy, the transit through a three-stage path: the functional integration of each area of the organization, the internal integration between the functional areas forming an internal supply chain and the external integration between the suppliers., the internal supply chain and customers ”(Cristopher, 1994).
One of the most important responsibilities of logistics management in a company is to develop an adequate relationship with its suppliers. This is how in recent years, many companies see their suppliers as strategic allies for the development of their businesses; This implies establishing relationships based on trust and the long term, in such a way that both parties become partners in the profits. But, for this relationship to be successful, it is necessary for companies to choose their suppliers properly, for which they must first select and evaluate them carefully.
An efficient purchasing department is essential to the success of any intermediary. Current trends in purchasing management are:
- Investigate suppliers and actively search for them. Get the best providers by expanding the search scope. Large chains are locating suppliers all over the world. Therefore, it is not necessary to wait for the suppliers but to develop an active search task with broad criteria.Increase information on products, costs and suppliers handled by the purchasing department. Reduce the number of suppliers. To reduce purchasing and management costs For example, car manufacturers have drastically reduced the number of suppliers. Increase purchases from each supplier. To have greater negotiating power to be an important buyer. Cooperate and coordinate with the supplier to reduce costs. Coordination with suppliers is essential to get the products at the right time at the minimum cost. For example, a supermarket that unloads trucks that come from suppliers very quickly instead of leaving them waiting like other chains. This means a significant reduction in costs that are shared between the chain and the supplier.The different systems that allow ordering products by computer are another way of cooperating that reduces costs.
Warehouse management
The warehouse is the place or physical space where raw materials, semi-finished product or finished product are deposited, waiting to be transferred to the next link in the supply chain. It serves as a regulating center for the flow of goods between the availability and the need of manufacturers, traders and consumers. Warehouse function:
- They keep raw materials protected from fires, theft and deterioration Allow authorized persons access to stored materials They keep the purchasing department constantly informed about the actual stocks of raw materials It carries out meticulous controls on the materials premiums (inflows and outflows) Make sure that the materials are not used up (maximum - minimum).
Warehouse management involves a series of basic decisions:
- Deciding the number of warehouses and their size Choosing the locations for warehouses The type and level of mechanization. The first decision is whether to use owned, rented, or third-party warehouses. Some products require specialized warehouses like frozen products. Another fundamental decision is the level of automation of the warehouses. Currently we can have fully automated warehouses. Although sometimes an intermediate level of automation is more profitable Establishing the organization and specific management procedures The number of warehouses depends on several factors. A fundamental factor is the cost and duration of the transports. A few years ago in Europe, transport was slower and there was some difficulty at the borders.Improved communications and the elimination of borders within the European Union have made it easier to concentrate operations in a smaller number of automated department stores. Other fundamental factors are related to the characteristics of the product and the market. The location of the warehouses is decided by analyzing the costs of the various alternative locations. And having as a fundamental restriction the maximum response time to customer requests. The organization system. It is necessary to decide the number of warehouse employees, select them, train them and assign them responsibilities. An important aspect in warehouses is plant layout. In other words, how the different products are distributed over the warehouse area.
"Wineries have become platforms from which multimodality, storage systems, material movement systems, information systems, traceability systems and distribution systems, have led to their transformation into process centers" (SENA, Study of the characterization of logistics: 2006)
For example, if we place the products with the greatest movement near the exit, we reduce the total movements. Within the warehouses it will be necessary to determine how the products, the information and the people or mechanical means will move. The different stages or tasks that will be developed from the receipt of the products in the warehouse until their departure. We will have to precisely define the procedures. That is, how the work will be done. Establish the different tasks of each process and how they are carried out.
Transportation management
In relation to the transport system we have a series of basic decisions:
- The transport systems used. That is, if we use trucks, trains, ships, airplanes and a combination of them. Naturally, the chosen system affects costs, response time to customers and even the image of the company. For example, the chain of restaurants specializing in fish "La Dorada" was different because they used a plane to take fresh fish from the port to the restaurants. If we have our own trucks or we hire the services of third-party transport companies. The GPS (global positioning system) communication satellite is important to control the flow of information that moves between stores, warehouses and manufacturers. The organization of the transport system and the information management.Proper coordination of the entire integrated transport system is essential to bring products to consumers at the right time at the lowest possible cost. Establishment of routes. Various computer programs help to establish routes for delivery trucks. As well as the processes by which orders are formulated and shipments are made, distribution costs can be said to be determined by four key factors regardless of the costing systems to be used:We can say that distribution costs are determined by four key factors regardless of the costing systems to be used:We can say that distribution costs are determined by four key factors regardless of the costing systems to be used:
- The product and marketing channels The value of the product The size of the organization The level of service
Bibliography
- ARBONES E., A. The Efficient Company. Editorial Alfaomega 2002BALLOU, Ronald H. Logistics: Supply Chain Management, Fifth Edition, Pearson Education editorial. 2004 CHOPRA Sunil and MEINDL Peter. Supply chain management. Editorial PHH. México 2008 CEDILLO, MG, Sánchez Dynamic Analysis of Industrial Systems. Editorial Trillas, México.2008.COUNCIL OF SUPPLY CHAIN MANAGEMENT PROFESSIONALS, CSCMP. "Definition of Logistics Management" (in English). Retrieved September 4, 2008 Christopher. Logistics Strategic Aspects. Editorial Limusa. 2001CHRISTOPHER. Logistics and supply. Editions Folio Barcelona 1998D.M. Lambert, M. Cooper, JD Pagh, 'Supply Chain Management: Implementation Issues and Research Opportunities, the International Journal of Logistics Management. Vol. 9, No. 2, 1998FRANKLIN B.Enrique Business Organization, Second Edition, de, Mc Graw Hill, 2004, KOTLER Philip. Marketing direction. Editorial PHH. MEXICO 2004 SPANISH REAL ACADEMY. Dictionary of the Spanish Language (Twenty-second edition edition). Madrid (Spain) 2001RUIBAL Handabaca, Alberto. Logistics of international physical distribution. Editorial Norma. Bogota, 1995.
Through the following video you can see the importance of logistics for the company, the economy and society in general. A good learning complement to understand the magnitude of logistics management.
