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Question – What s Logistic management and define its significance, objectives

and function.

Answer *
Logistics refers to the overall process of managing how resources are acquired,
stored, and transported to their final destination. Logistics management involves
identifying prospective distributors and suppliers and determining their
effectiveness and accessibility. Logistics managers are referred to as logisticians.

"Logistics" was initially a military-based term used in reference to how military

personnel obtained, stored, and moved equipment and supplies. The term is now
used widely in the business sector, particularly by companies in the manufacturing
sectors, to refer to how resources are handled and moved along the supply chain.

Logistics management consists of the process of planning, implementing and

controlling the efficient flow of raw-materials, work-in-progress and finished
goods and related information-from point of origin to point of consumption; with a
view to providing satisfaction to the customer.
According to Phillip Kotler, “Market logistics involve planning, implementing
and controlling physical flow of material and final (finished) goods from the
point of origin to the point of use to meet customer requirements, at a profit.”

A practical and simple way to look at logistics, as quoted from The Handbook of

Technology Management, “is as having the right item in the right quantity at the
right time at the right place for the right price in the right condition to the right

Relation to Supply Chain Management

Logistics management is a subset of the larger supply chain management. Supply
chain management plans, implements and controls the efficient flow of storage,
goods, services and related information from the point of origin to the point of
consumption. This is done for the purpose of meeting the requirements of

Logistics management in business works across all industries. Its aim is to manage
the fruition of project life cycles, supply chains and resultant efficiencies. As
businesses grow more complex and expand into a global marketplace, business
logisticians have evolved into something called supply chain logisticians.

With logistics management in business the focus is twofold: inbound logistics for
internal functions and outbound logistics for the external flow from the point of
origin to the point of consumption. Logisticians focus on inventory management,
purchasing, transportation, warehousing, consultation and the organization and
mapping of these processes.
Inventory reduction

Inventory is the biggest culprit in adversely affecting the objectives of logistics

management at the bottom line of an enterprise.

Through a financial accountancy perspective, inventory is an asset and does not

cause any appreciable disadvantage even when it is stocked in an excess quantity.

Traditionally, firms have carried an excess of inventory for the purpose of

extending excellent customer service.

However, inventory as an asset requires investment to possess it. The funds

invested are blocked and cannot be used for any other productive purpose.
Moreover, there is a capital cost associated with it. The carrying cost will be
equivalent to the interest on the funds at the bank borrowing rates currently
applicable to be strict to the objectives of logistics management.

Reliable and consistent delivery performance

On-time delivery is crucial to the customer to maintain his production schedule.

The customer is not interested in a faster delivery of the material ahead of the
production schedule. This area of operation is subject to variance.

However, proper planning on transportation modes and inventory availability

along with a variation factor will reduce the variance.
The other objectives of logistics management should be consistency in delivery
performance; this will help build customer confidence for keeping a long-term

Freight economy

Freight is a major cost element in logistics cost. This can be reduced by adopting
measures such as freight consolidation, transport mode selection, route planning,
load unitizing and long distance shipments.

Minimum product damages

Product damages add to the logistics cost. The reason for product damages is
improper logistical packaging, frequent consignment handling the absence of load
unitizing, and so on.
Use of mechanised material handling equipment, load unitization, and proper
logistical packaging will reduce the product damage and fulfil the objectives of
logistics management.

Quick response

This is related to the capability of a firm to extend the service to the customer in
the shortest time frame.

Use of the latest technologies in information processing and communications will

enhance the decision-making capability in terms of accuracy and time, enabling the
enterprise to be flexible enough to fulfil the customer requirements in volumes and
varieties in the shortest time frame, hence fulfil the objectives of logistics
management also.

For example, smaller shipments could be delivered rapidly at the point of

consumption. This will also maintain time management.
Significance of Logistics Management 

Logistics management consists of an effective and efficient flow of

materials and products from the factory to the destination. Operations planning
includes those strategies that are executed inside the organization for carrying out
various operations. These generally include the activities of the workers from
production stage till delivery stages.

An organization can employ different concepts of logistics within the company.

Logistics can be used for supporting various aspects that are involved in the
acquisition of materials for a company. Logistics can also help in managing funds
along with planning and controlling of various systems inside a company for
meeting the requirements. Logistics managers also help in determining the price
strategies which are liable to the company and purchase decisions can widely be
influenced by logistics managers.

Most manufacturing organizations need to monitor the inventory and order the
materials if the reorder level falls below a range. It is the duty of the person
handling operations planning to increase the capacity of the plant and maintain
cordial relationships with the clients. There might be several operational planning
methods employed by the company for monitoring of the products.
Functions –
Logistics is a process of movement of goods across the supply chain of a company.
However, this process consists of various functions that have to be properly
managed to bring effectiveness and efficiency to the supply chain of the

Order processing

It is an important task in functions of logistics operations. The purchase order

placed by a buyer to a supplier is an important legal document of the transactions
between the two parties.

This document incorporates the description or technical details of the product to

supply, price, delivery period, payment terms, taxes, and other commercial terms
as agreed.

The order processing activity consists of the following steps:

 Order checking for any deviations in agrees upon or negotiated terms

 Prices, payment, and delivery terms.
 Checking the availability of materials in stock.
 Production and material scheduling for shortages.
 Acknowledging the order indicating deviations if any.
Inventory control

Inventory management is to keep enough inventories to meet customer

requirements, and simultaneously its carrying cost should be lowest.

It is basically an exercise of striking a balance between the customer service for

not losing the market opportunity and the cost to meet the same.

The inventory is the greatest culprit in the overall supply chain of a firm because of
its huge carrying cost, which indirectly eats away the profits. It consists of the cost
of financing the inventory, insurance, storage, losses, damages, and pilferage.


Warehousing is the storing of finished goods until they are sold. It plays a vital role
in logistics operations of a firm. The effectiveness of an organization’s marketing
depends on the appropriate decision on warehousing.

In today’s context, warehousing is treated as switching facility rather than a storage

of improper warehousing management. Warehousing is the key decision area in
The major decisions in warehousing are:
 Location of warehousing facilities
 Number of warehouses
 Size of the warehouse
 Warehouse layout
 Design of the building
 Ownership of the warehouse


For movement of goods from the supplier to the buyer, transportation is the most
fundamental and important component of logistics.
When an order is placed, the transaction is not completed till the goods are
physically moved to the customer’s place. The physical movement of goods is
through various transportation modes.

In logistics costs, its share varies from 65 to 70 percent in the case of mass-
consumed, very low unit-priced products.

Firms choose the mode of transportation depending on the infrastructure of

transportation in the country or region. Cost is the most important consideration in
the selection of a particular mode of transport.

 Material handling and storage system

The speed of the inventory movement across the supply chain depends on the
material handling methods. An improper method of material handling will add to
the product damages and delays in deliveries and incidental overheads.

Mechanization and automation in material handling enhance the logistics system


Other considerations for selection of a material handling system are the volumes to
be handled, the speed required for material movement and the level of service to be
offered to the customer.

The storage system is important for maximum space utilization (floor and cubic) in
the given size of a warehouse.

Logistical packaging

Logistical or industrial packaging is a critical element in the physical distribution

of a product, which influences the efficiency of the logistical system. It differs
from product packaging, which is based on marketing objectives.

However, logistical packaging plays an important role in damage protection, case

in material handling and storage space economy. The utilization of load has a
major bearing on logistical packaging with regard to the packaging cost.

Logistics is basically an information-based activity of inventory movement across

a supply chain. Hence, an information system plays a vital role in delivering a
superior service to the customers.

Use of IT tools for information identification, access, storage, analysis, retrieval

and decision support which is vital among the functions of logistics is helping
business firms to enhance their competitiveness.