Logistics Management

Logistics management is a supply chain management component that is used to meet

customer demands through the planning, control and implementation of the effective
movement and storage of related information, goods and services from origin to
destination. Logistics management helps companies reduce expenses and enhance
customer service.
The logistics management process begins with raw material accumulation to the final
stage of delivering goods to the destination.
By adhering to customer needs and industry standards, logistics management facilitates
process strategy, planning and implementation

Why Is Logistics Management Important?

The purpose of logistics management is obviously about finding more efficient and
effective ways to move resources and products from conception to completion and,
finally, to the customer. But the driving force of these actions is to meet customer
demand and provide the best service possible to retain customers and maintain their
satisfaction by meeting their requirements.
As customers demand better service, there’s a need to ship faster, more accurately and
with a high level of quality. It is through logistics management that customer satisfaction
is achieved.

Measuring Supply Chain Performance

The following is an example list of supply chain resource performance measures:
(1) Total cost. Total cost of resources used.
(2) Distribution costs. Total cost of distribution, including transportation and handling
costs.
(3) Manufacturing cost. Total cost of manufacturing, including labor, maintenance, and
re-work costs.
(4) Inventory. Costs associated with held inventory:
. Inventory investment. Investment value of held inventory.
. Inventory obsolescence. Costs associated with obsolete inventory; sometimes
includes spoilage.
. Work-in-process. Costs associated with work-in-process inventories.
. Finished goods. Costs associated with held finished goods inventories.
(5) Return on investment (ROI). Measures the profitability of an organization. The return
on investment is generally given by the ratio of net profit to total assets.

The following is an example list of supply chain output performance measures:

(1) Sales. Total revenue.
(2) Profit. Total revenue less expenses.
(3) Fill rate. Proportion of orders filled immediately:
. Target fill rate achievement. To what extent a target fill rate has been achieved.
. Average item fill rate. Aggregate fill rate divided by the number of items.
(4) On-time deliveries. Measures item, order, or product delivery performance:
. Product lateness. Delivery date minus due date.
. Average lateness of orders. Aggregate lateness divided by the number of orders.
. Average earliness of orders. Aggregate earliness divided by the number of orders.
. Percent on-time deliveries. Percent of orders delivered on or before the due date.
(5) Customer response time. Amount of time between an order and its
corresponding delivery.
(6) Manufacturing lead time. Total amount of time required to produce a particular item
or batch.
(7) Shipping errors. Number of incorrect shipments made.
(8) Customer complaints. Number of customer complaints registered.

What Is Supply Chain Modeling?

Supply chain modeling represents a conscious attempt to bring order into a supply
chain to achieve certain business objectives, such as lowest supply cost, on-time
delivery and an ability to cope with disruption. It deals with questions such as:
 What to produce
 Market identification
 Siting of production plants
 Finding the best suppliers
 Supplier and plant locations
 Transportation and inventory
 Distributing finished products
 Warehousing strategies

Why Is Supply Chain Modeling So Important?

The ultimate goal of any supply chain must be to satisfy the final customer. Satisfied
customers return to buy more products, and through this process, successful
organizations develop brand loyalty and recognition. According to customer service
consultant Micah Solomon, customer satisfaction starts with:
 A perfect product
 On time delivery
 Friendly service
 Effective problem resolution