In a manufacturing enterprise, the business process starts with the flow of material from the suppliers to the manufacturing plant and then to the customer through the distribution channel.
Traditionally in the functional organization, the business process consists of discrete activities such as procurement, manufacturing, and distribution under the control of the respective departments. The departments may excel in their respective functions, but as an organization, their performance may be dismal. This might happen because of three reasons:
- A lack of coordination in their activities
- Different goals to cherish
- No single agency could control them to cherish a common goal
The concept of logistics is based on the system approach. The flow of material from a supplier to a manufacturing plant and finally to the end customer is viewed as a single chain, ensuring efficiency and effectiveness in sequential activities to achieve the objective of customer satisfaction at a reduced cost.
Logistics recognizes that all the activities of material movement across the business process are interdependent and need close coordination. These activities are to be managed as a system and not as functional silos.
The functional areas of logistics termed “Logistics Mix” by Martin Christopher, consist of:
Order checking and editing
Load unitizing and material handling
Size selection and network planning
Order picking and filling
Material requirement planning
Inventory level decision for customer service objectives
For handling and damage prevention
For inter-modal transportation
Read also: Basic cost elements in transportation
The objective of logistics is to facilitate the flow of material across the supply chain of an enterprise so as to cost-effectively make available the right product at the right place at the right time.
Logistics has to achieve the two polemic goals of customer satisfaction and the least cost. This is possible only when all the logistics functions are working as a unified system to achieve a common goal. I hope your concept of logistics is more clear now.