9. Key logistics activities
I`m going to describe the key logistics activities required to facilitate the flow of a product from a point of origin to a point of consumption. All of these activities may be considered part of the overall logistics process.
Customer service is a multidimensional and very important part of any organization`s logistics effort. In a broad sense, it is the output of the entire logistics effort. Customer service and some resulting level of customer satisfaction are what the logistics system provides the buyer. However, many companies have a more narrow view of customer service as something they actually perform. So such companies may have a customer service department that handles complaints, special orders, damage claims, returns, billing problems, etc. These customer service employees are the organization as far as many buyers are concerned, so their role in the overall logistics system becomes crucial. Disappointment at this level can lead to dissatisfaction with the whole organization.
Inventory management deals with balancing the cost of maintaining additional products on hand against the risk of not having those items when the customer wants them ( i.e. the cost of lost sales). This task has become more complex as firms have gradually lowered inventory levels. The challenge in this situation is to manage the rest of the logistics system to accommodate the lack of inventory so that customer service doesn`t suffer. Anyway, having enough goods in stock is still necessary for serving customers in many markets despite the fact that it costs money. Therefore, a company must have an appropriate inventory policy that balances the cost of maintaining stocks on the one hand with the costs that could result from not having requisite items on the other.
Transportation refers to the physical movement of goods from a point of origin to a point of consumption. It can involve raw materials being brought into the production process and/or finished goods being shipped out to the customer. Transportation has assumed a greater role in many logistics systems for two reasons: 1) the liberalization of transportation laws; 2) popularity of just-in-time strategies.
Storage and materials handling addresses the physical requirements of holding inventory. Storage is about managing the storage space that include such issues as warehouse number, size, layout, design. Materials handling is concerned with the movement of goods within that space, in other words, it focuses on the systems needed to move goods into, through and out of each facility.
Packaging is valuable both as a form of advertising and for protection and storage purposes. From marketing perspective, packaging is important to attract consumer`s attention. From logistics perspective, packaging provides protection during storage, materials handling and transport.
Information processing is what links all areas of logistics system together. Sophisticated management information systems create an open exchange of information between suppliers, consumers, agents, freight forwarders, etc. This can result in faster order placement, faster delivery and greater accountability.
Demand forecasting helps the logistics system to ensure that the right products and/or services are available to meet customers` requirements. Logistics requirements necessitates going beyond market sales forecasting to obtain specific data on timing , mix, and quantity of benefits desired by customers. Without this information, the logistics system runs the risk of compromising customer satisfaction rather than enhancing it.
Production planning is important because manufacturing needs components and raw materials to make finished goods. But production planning should not be the primary focus, customer needs should come first.
Purchasing deals with the buying of goods and services that keep the organization functioning. Purchasing is important because it affects directly the cost and quality of the final product. Especially, when there is a trend of global buying, not local
Facility location concerns the strategic placement of warehouses, plants and transportation resources. These decisions have long-term effect on the organization`s productivity.
Order processing includes the systems of getting orders, checking their status, communicating with customers about them, filling the orders and making them available to the customer. As the order processing is a key area of customer interface with the organization, it can have a big impact on the customer`s perception of the company.
There are also such activities as after-sales service, service support, return goods handling or recycling operations.
In conclusion, organizations may combine the above functions to achieve the better service and efficiency. But the main point is to satisfy their customers.