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Logistics

"Managing logistics requires experience and knowledge of organizing, purchasing, transportation, warehousing and planning so that the coordination of resources can be optimized and that projects can succeed."

Source: Logistics can be considered as a tool for getting the products and services where they are needed and when they are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible.

Background

Logistics can be defined as having the right quantity at the right time for the right price. It is the science of process. Incorporates all industry sectors, and manages the fruition of project life cycles, supply chains and resultant efficiencies.

Logistics as a concept is considered to evolve from the military's need to supply themselves as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title ‘Logistikas’ who were responsible for financial and supply distribution matters. The Oxford English dictionary defines logistics as: “The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities.”

Logistics as its own concept in business evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials and shipping out products in an increasingly globalized supply chain, calling for experts in the field.

Business logistics

In business, logistics may have either internal focus, or external focus covering the flow from originating supplier to end-user (see supply chain management). The main functions of a logistics manager include purchasing, transport, warehousing, and the organizing and planning of these activities. Logistics managers combine a general knowledge of each of these functions so that there is a coordination of resources in an organization. There are two fundamentally different forms of logistics. One optimizes a steady flow of material through a network of transport links and storage nodes. The other coordinates a sequence of resources to carry out some project.

Military logistics

In military logistics, experts manage how and when to move resources to the places they are needed. In military science, maintaining one's supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy, since an armed force without food, fuel and ammunition is defenseless.

The Iraq war was a dramatic example of the importance of logistics. It had become very necessary for the US and its allies to move huge amounts of men, materials and equipment over great distances. Logistics was successfully used for this effective movement. The defeat of the British in the American War of Independence, and the defeat of Rommel in World War II, have been largely attributed to logistical failure. The historical leaders Hannibal Barca and Alexander the Great are considered to have been logistical geniuses.

   

Distribution

"Distributors must provide security and maintain product quality while in storage or in delivery to several carries and destination points, all at a cost effective price for both the supplier and customer." -American Fast Freight, Inc.

Source: 'Distribution' is one of the four aspects of marketing. A distribution business is the middleman between the manufacturer and retailer or (usually) in commercial or industrial the business customer. After a product is manufactured by a supplier/factory, it is typically stored in a distribution company's warehouse. The product is then sold to retailers or customers. The other three parts of the marketing mix are product management, pricing, and promotion.

The distribution channel

Frequently there may be a chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or, rather more exotically, as the 'channel'. Each of the elements in these chains will have their own specific needs; which the producer must take into account, along with those of the all-important end-user.

Channels

A number of alternative `channels' of distribution may be available:

  • Selling direct (via a salesforce)
  • Mail order (including Internet and telephone sales)
  • Retailer
  • Wholesaler
  • Agent (who acts on behalf of the producer)

Distribution channels may not be restricted to physical products. They may be just as important for moving a service from `producer' to consumer in certain sectors; since both direct and indirect channels may be used. Hotels, for example, may sell their services (typically rooms) direct or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, and so on.

There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services - the latter offering anything from televisions through to DIY tools. There has also been some evidence of service integration, with services linking together, particularly in the travel and tourism sector: for example, links now exist between airlines, hotels and car rental services. In addition, there has been a significant increase in retail outlets for the service sector; outlets such as estate agencies and building society offices, for example, are crowding out the traditional grocers and greengrocers from the high street

Channel members

Distribution channels can, thus, have a number of `levels'. Kotler defined the simplest level, that of direct contact with no intermediaries involved, as the `zero-level' channel.

The next level, the `one-level' channel, features just one intermediary; in consumer goods a retailer, for industrial goods a distributor, say. In recent years this has been the level which, together with the zero-level, has accounted for the greatest percentage of the overall volumes distributed in, say, the UK; although the very elaborate distribution systems in Japan are at the other end of the spectrum, with many levels being encountered even for the simplest of consumer goods.

In the UK, a second level, a wholesaler for example, is now mainly used to extend distribution to the large number of small, neighbourhood retailers.

Channel structure

To the various `levels' of distribution, which they refer to as the `channel length', Lancaster and Massingham also added another structural element, the relationship between its members:

  • 'Conventional or free-flow - This is the usual, widely recognized, channel with a range of `middle-men' passing the goods on to the end-user.
  • Single transaction - A temporary `channel' may be set up for one transaction; for example, the sale of property or a specific civil engineering project. This does not share many characteristics with other channel transactions, each one being unique.
  • Vertical marketing system (VMS) - In this form, the elements of distribution are integrated.
   

Links of Interest

http://www.unr.edu/coba/logis - University of Nevada, Center for Logistics Management
http://www.hawaii-freight.info – Freight forwarding and consolidation
http://www.hazmat.dot.gov - Office of Hazardous Materials Safety
http://www.marad.dot.gov - US department of Transpiration Maritime Administration

Downloads
May require a PDF reader

Projects of National and Regional Significance - Freight Management and Operations
America's Freight Transportation Gateways - Bureau of Transporation Statistics
Maritime Shipping Terms - Glossary of ocean related shipping terms
Trucking Glossary - Common terms used in trucking

   

 
   
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