Logistics and Wholesaling

Logistics is the process of getting products and

services where they are required and when they
are desired.
It involves planning, implementing and
controlling the physical flow of goods, services
and related information from point of origin to
point of consumption to meet customer in the
right place at the right time.
 Reasons for emphasis on
logistics
Companies can gain a powerful competitive advantage
improved logistics can yield tremendous cost saving to
both company and its customer.
Quickly and efficiently manage the flow of goods,
information and finance.
 Delivering customers services

Customer must be given more importance than goods and services.

Product and services are of significance to the customers only when
they are available to them exactly when customers need them.
Availability in terms of form, possession , time and place.
 Objectives of market logistics
Serving the customer in an efficient
manner/delivering customer service. (provide
Targeted level of customer services at the least
cost)
Delivering products on time.
Least cost.
Without damage.
Reducing cycle time.
 Reducing total distribution costs

Improved logistics can yield tremendous

cost saving to both the company and its
customers.
 Reducing cycle time

It refers to the time from which the

requisition is placed with the vendor to the
time the product reaches to the final
customer
Market logistic decision
Order Processing: it is the process
wherein inventory is allocated to meet
the replenishment orders of the
manufactures. Two methods for
inventory allocation:
Real time replenishment
Batch method
 Real time replenishment
It involves an immediate processing of the
order.
It has a quick response time.
 Batch method
The orders are processed at periodic intervals such as at
the end of the day, or shift and on on.
It helps the company to control the inventory in critical
situations of low inventory because in this method the
orders can be processed to allocate the material from
the current stock.
 Inventory management
It is an effort to integrate the firm’s value chain
and its inventory policy.
Inventory is effectively managed by using certain
inventory control tools like: reorder point, order
lead time, usage rate, safety stock, EOQ, JIT
and fixed order interval system
 Reorder point
It is used to identify the stock purchase requirement of an
organisation.
It uses information on the quantum of order and demand forecast.
all the components in the inventory of an organization are
computerized and have a preset reorder point and reorder quantity.
When the inventory reaches a certain predetermined minimum level,
the reorder point system notifies the purchase department through
various procedures such as emails,etc. to issue an order to the
supplier for replenishment of stock.
This system is useful because it automatically alert the purchase
department about required quantity.
 Order lead time
It is the period between the date an order is placed to the
date the raw material are available for production.
Supplier need time to manufacture and deliver the
material
So organisation order material before they are actually
required depending on the time suppliers will take to
make delivery.
 Usage rate
It is the average rate at which the raw
materials are used in the production
process of an organisation.
 Safety stock
It is the extra stock that is maintained in the inventory at any given
point of time as a buffer against out of stock conditions,which may
arise due to unexpected customer demands or delays in suppliers
deliveries.
This level can be reduced by:
Maintaining accurate inventory records
Ensuring the vendors supplies the materials within few days of
reordering
A higher frequency in planning the inventory
 Economic order quantity
EOQ is the replenishment order quantity
that minimizes the overall cost of
inventory i.e. the sum of ordering and
carrying.
 Just in time
Japanese developed a time based logistics management system i.e
JIT
This implies that raw material are delivered in required quantities to
the production plants as and when they are needed without any
delay.
JIT focuses on the reduction or elimination of inventory in plant.
This is based on assumption that whatever inventory is not used
immediately is a waste.
 Fixed order interval system
In this system the order period is fixed but
order quantity varies with requirement.
The quantity requirement each time
depends on the current inventory level or
inventory in hand and future inventory
requirement.
 Transportation
The process o moving the goods from one
physical location to another.
This involves space and time dimension
that enhance the value of the logistics.