Logistic operations are elaborated as part of the supply chain management which emphasis the management of goods. Logistics is defined as the process of maintenance and movement of products from in and out of the firm whereas supply chain management comprises of the management and activities related to procurement and sourcing of materials (Christopher, 2016).
Logistics is a process that plans, executes and monitors the efficient reverse and forward flow of products and services to meet the needs of the consumers (Farahani, et al., 2011). Logistics remain segmented into two parts; outbound logistics and inbound logistics. Outbound logistics is related to the delivery of the products and services to the consumer on time. Whereas inbound logistics focuses on the procurement of goods and then management and transportation of goods.
It is the outcome of logistic operations as it ensures delivering the right products to the right consumers at the right place and time (Oflaç, et al., 2012). Good consumer service leads to better satisfaction level among the consumers. Customer service is an essential part of any successful business and is very important in logistics as it is the source of customer information. Safe and timely logistics of products improves customer satisfaction, which in turn leads to increased sales, market share and profitable growth of the business. Logistics plays a critical role in maintaining the customer base. Logistics is evaluated by customers on the basis of the image of the delivery partner, the quality of packaging and the time taken to deliver the product (Cao, Ajjan and Hong, 2018).
The relation between customer satisfaction and logistics management has many indicators; one of the most important indicators is the cost of the product. The logistics analysis aims to reduce the cost from suppliers to the final user, taking into consideration the quality and the time, two of the major customer satisfaction indicators are the costs and the waiting time (Cao, Ajjan and Hong, 2018). Both customer satisfaction indicators are implied in the logistics process which results in a cheap product like;
- using a cheap raw,
- choosing the cheapest transportation method,
- high production with low labor costs,
- low-cost storage and,
Logistics help in demand forecasting as it guides on the procurement of raw material and storage of finished products in the warehouse (Christopher, 2016). It also helps the production team with necessary information regarding the inventory and demand. Demand forecasting uses historical sales data to develop an estimate of the expected forecast of customer demand. It provides an estimate of the goods and services that customers will purchase in the foreseeable future. Demand forecasting allows a company to take several business decisions, such as planning the production process, purchasing raw materials, managing funds, and deciding the price of the product (van der Laan, 2016).
Demand forecasting also helps businesses to perform at an optimum level in managing:
- inventory stock-outs,
- lowering safety stock requirements and,
- reducing product obsolescence costs.
Based on the current inventory levels, raw material availability and expected customer orders, production remains scheduled effectively (van der Laan, 2016). This leads to improved capacity utilization and judicious allocation of manufacturing resources. A proper demand forecast provides vital information for driving the desired raw material and finished goods inventory levels. Demand forecasts provide better visibility of new product launches and old product discontinuations (van der Laan, 2016). This drives synchronized raw material, manufacturing and inventory planning to support new product launches and most importantly, reducing the risk of obsolescence of discontinued products.
Inventory management and warehousing
Inventory management is the management of the inventory and stock items to ensure that the consumer’s requirements are met all the time (Christopher, 2016). Execution of warehouse management helps businesses with competitive advantages such as:
- minimizing labor expenses,
- enhancing customer service,
- improving inventory accuracy,
- increasing flexibility and,
Inventory management minimizes the total cost of relevant costs to ensure profitable operations as well as maximize the customer service level (Oluwaseyi, Onifade and Odeyinka, 2017). The main functions of inventory and warehousing in logistics are to;
- ensure an adequate supply of products to a customer,
- avoid shortages,
- minimize the financial investment in inventories,
- efficient purchasing, storing, utilization and accounting for materials,
- ensure timely action for restore inventory,
- provide a reserve stock for variations in lead times,
- short-term and long-term planning of materials.
Businesses use the warehouse management systems to manage inventory in real-time, with data as new as the latest order, shipment, or receipt and any movement in between. There are mainly 3 types of inventory systems in logistics;
- Raw Material Inventory.
- Work in Progress (WIP) Inventory.
- Finished Goods Inventory.
Materials handling is the movement of raw materials and finished products within a warehouse or production plant. Packaging has a dual purpose in logistics, first to attract the interests of the consumers as a medium of advertising and marketing and the other is storage and protection while moving from one place to another (Hellström & Nilsson, 2011). Transportation involves the movement of the products from the production unit to the consumers.
For example; Amazon’s logistics operation involve product development, inbound shipping, warehousing, inventory management, e-commerce sales, logistics communication, material handling, packaging, and transportation.
A business’s material handling system and processes are put in place to:
- improve customer service,
- reduce inventory,
- shorten delivery time and,
- lower overall handling costs in manufacturing, distribution, and transportation (Christopher, 2016).
Material handling helps in reducing the total cost of production by reducing materials handling and by improved handling procedures. Using efficient modes of material handling helps in the increase of capacity by better utilization of space. It is also linked to customer service as proper and improved materials handling systems enable regular and timely market supply by avoiding disruption in the production schedule.
- Christopher, M., 2016. Logistics & supply chain management. 4th ed. London: Pearson UK, ISBN 13: 9780273731122.
- Cao, Y., Ajjan, H. and Hong, P., 2018. Post-purchase shipping and customer service experiences in online shopping and their impact on customer satisfaction: an empirical study with comparison. Asia Pacific Journal of Marketing and Logistics, 30(2), pp.400-416.
- Farahani, R., Rezapour, S. & Kardar, L. e., 2011. Logistics operations and management: concepts and models. 1st ed. London: Elsevier, ISBN: 9780323165204.
- Hellström, D. & Nilsson, F., 2011. Logistics-driven packaging innovation: a case study at IKEA. International Journal of Retail & Distribution Management, 39(9), pp. 638-657, DOI: 10.1108/09590551111159323.
- Oflaç, B., Sullivan, U. & Baltacioğlu, T., 2012. An attribution approach to consumer evaluations in logistics customer service failure situations. Journal of Supply Chain Management, 48(4), pp. 51-71, doi: 10.1111/j.1745-493X.2012.03280.x.
- Oluwaseyi, J.A., Onifade, M.K. and Odeyinka, O.F., 2017. Evaluation of the Role of Inventory Management in Logistics Chain of an Organisation. LOGI–Scientific Journal on Transport and Logistics, 8(2), pp.1-11.
- Rushton, A., Croucher, P. & Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. 1st ed. London: Kogan Page Publishers, ISBN 13: 9780749476779. Wolf, C. & Seuring, S., 2010. Environmental impacts as buying criteria for third party logistical services. International Journal of Physical Distribution & Logistics Management, 40(1/2), pp. 84-102, doi: 10.1108/09600031011020377.
- van der Laan, E., van Dalen, J., Rohrmoser, M. and Simpson, R., 2016. Demand forecasting and order planning for humanitarian logistics: An empirical assessment. Journal of Operations Management, 45, pp.114-122.