Objectives of Logistics Management in SCM

The primary objective of logistics management is to move the inventory in a supply chain effectively and efficiently to extend the desired level of customer service at the least cost as done parallel with waste management.

To achieve this, the following subsets of the above broader objective need to be achieved in supply chain management.

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.

The carrying cost will be drained on the enterprise profits.

Hence, the price objective goal can be managed through small, but frequent supplies. A higher transportation cost will be much lower than the inventory carrying cost resulting in better margins.

Read also: Concept of warehouse

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 relationship.

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.

Read also: Basic cost elements in Transportation

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.

Read also: Concept of warehouse

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.

Read also: Concept of Logistics