Logistics management: meaning, benefits and process

Meaning of logistics management

Logistics management (marketing logistics or physical distribution) is the planning, carrying out and control of the efficient, cost-effective flow and storage of goods, services and the related information, from the point of origin to the point where they are used, so as to meet customers' needs. A sale is complete only when the goods reach the buyer; NCERT's main components of physical distribution are transport, storage in warehouses, control of stock and the handling of orders. It covers outbound logistics (moving finished goods to customers), inbound logistics (moving materials to the factory) and reverse logistics (returns, repairs and recycling). Its goal is to give customers the service level they expect at the lowest total cost.

Benefits of logistics management

1. Customer satisfaction. Reliable, fast and accurate delivery improves service and builds loyalty.
2. Wider market reach. Efficient networks let firms serve distant and rural markets profitably.
3. Lower inventory. Better forecasting and coordination reduce stock levels, freeing working capital.
4. Reduced damage and loss. Proper handling, packaging and storage cut wastage, especially of perishables.
5. Cost savings. Logistics is a large share of product cost; efficient warehousing, inventory and transport reduce it and raise profits.
6. Competitive advantage. Superior delivery, same-day or ten-minute delivery, for instance, can become a key selling point.
7. Better coordination. Shared information links suppliers, the firm and channel members, improving planning.

Process of logistics management

1. Order processing. Receiving orders, checking them and the customer's credit, preparing invoices and passing instructions to warehouses; electronic order systems shorten the order-to-delivery cycle.
2. Inventory management. Deciding how much stock to hold and when to reorder, balancing holding costs against the risk of stock-outs; using methods such as reorder levels and just-in-time.
3. Warehousing. Deciding the number, location, type and size of warehouses (owned or public; storage or distribution centres) and organising receiving, storing, picking and dispatching.
4. Materials handling and packaging. Moving goods within warehouses and protecting them with suitable packaging, pallets and containers.
5. Transportation. Choosing modes (road, rail, water, air, pipeline) and carriers according to cost, speed, reliability, capacity and the nature of the goods, and planning routes and loads.
6. Information management and control. Tracking orders, stocks and shipments through barcodes, GPS and software; measuring delivery time, fill rates and costs; and improving the system.

These activities are planned together under integrated logistics management, because a saving in one (fewer warehouses) may raise cost in another (more transport). The total cost of the system, not the cost of each activity, is what should be minimised for the chosen service level.

Conclusion

Logistics management turns production into availability. A well-designed process of order processing, inventory, warehousing, handling, transport and information control lowers costs and raises customer satisfaction. It deserves top-management attention, not only that of the transport department.