Logistics is the science and art of engineering, technical and management activities concerned with supplying and maintaining resources crucial to achieving set operations, plans, and objectives. Logistics is hence, an important part in the functioning of any organization. It usually intersects with other important functional areas of a company. These sectors that cross with logistics include production, marketing, accounting, and finance (Mentzer, Stank & Esper, 2008). This paper will analyze critically how logistics intersects with these areas.
Production is the process of changing raw materials into finished goods. Logistics interfaces with production during the long run and in times of seasonal demand. Key intersections between production and logistics include product planning, companys location and even purchases made by the organization. During the long runs, a company varies its output levels dependent on expected profits or losses. In the long run, all factors of production are variables and logistics changes the length or period of production runs. Manufacturing efficiency usually varies with the length of production runs and the longer the production run, the higher the manufacturing efficiency. However, long production runs to increase the inventory costs of some finished products. This limitation leaves managers to decide between advantages and disadvantages of long production runs. This has left the directors towards the current trend of pull systems where production is done when there is demand unlike the old regime of push systems where production was done with anticipation of demand. Managers also have to cope with the impact of seasonal demand through minimizing the cost of manufacturing (Kober & Heinecke, 2012). This cost can be minimized through advance manufacturing of the seasonal goods before the peak season. This strategy involves the accumulation of inventory costs plus other associated costs (Coyle et al., 2016). The savings on manufacturing costs are used to cover any increase in inventory costs. Marketing and logistics also intersect mainly through the physical distribution. The physical distribution of an organization may impact its sales significantly. Other key areas that intersect between marketing and logistics are customer service, packaging and distribution channels. There are various distribution channels available, but the general rule that applies is that the larger the shipment, the cheaper it is. This applies to carrier pricing of any transportation company. Consumer packaging is also another factor that affects the logistics costs (Christopher & Peck, 2012). The way a consumer packages the product may raise or decrease costs for transportation, storage, and its handling (Vernuccio, Cozzolino & Michelini, 2010). Hence, since this is an important factor to be considered in the process of decision-making in any organization. Logistics also has a direct influence in the finance and accounting of a company. Logistics directly impact the return on investment and return on assets of a company (Selviaridis et al, 2008). The return on asset is easily affected by logistics through inventory costs, quality, and costs. The supply chain management must ensure that there is enough inventory in business as having enough will make sure that customers will always be satisfied while having excess inventory will be expensive to store. The supply chain management must also ensure that goods being offered to customers are of high quality and that the price tagged to a product matches its quality. This will enhance customer retention and more sales to the company.
Order cycle is the process through which orders undergo after they are placed on an organization. The various stages of order cycle include order transmittal, order processing, order pricing and assembly and order delivery. All these steps are crucial in the order cycle, and every organization must ensure that every stage is efficient. Order Transmittal is the time interval between the placement of an order by a customer and the receiving of the order by the seller (Ellram, La Londe & Weber, 2013). There are five methods that this can be done, by a person, by telephone, by facsimile machine, by mail and electronically. Every method has its advantages and disadvantages. Also, these methods have different characteristics like; the cost of ordering, frequency of errors in ordering, ordering time, and the convenience associated with each process. Orders made directly by a person have a characteristic of few errors in the order transmittal. However, this method is not always applicable especially there is a geographical distance between the company and the customer. Order Transmittal by mails not only slow but also the order may get lost before it reaches the seller. The customer may, in turn, view the company negatively without the knowledge that the company never received his\her order. Order by fax or telephone, on the other hand, fast compared to mail but sometimes errors occur. Businesses that choose this types of order transmittal may receive negative backlash when customers receive what they did not order. Many errors may lead to unsatisfied customers who may limit the success of the organization. The speed and accuracy of the method used will affect the customers' satisfaction with the services produced by the company. Order processing is an order fulfillment that ensures a clients order after being picked is packed and then delivered to a shipping courier (Everaert et al, 2008). Nowadays, companies have come up with robust systems through the use of technologies to form order processing systems. These systems capture information from customers, store the data and send it to the shipping and accounting departments whenever applicable (Bowersox, Carter & Monczka, 2013). Due to the performance of these systems customers keep their customers satisfied and this promotes long-term success to the company. The customers orders are executed accurately and reliably which is key to every customers satisfaction. An organization should choose an effective strategy to apply to their order cycle since it could be very crucial to its success.
Inventory management is important for every organization. It is the process of controlling and overseeing the storage and ordering of both the raw materials and finished goods in a company. There various factors to consider when managing inventory that a company can use; fixed order point, fixed order interval, inventory and customer service, costs of holding inventory and the ways of reducing inventory levels. Fixed order point system is a system that companies use to check the levels of their inventory such that if their stock reaches a certain threshold, they order for more stocks to replenish. There are various factors a company must consider when choosing the optimum level of stocks. The company must consider the optimum levels of stock needed to ensure smooth flow of business operations and also the economic order quantity. The advantages of using this system are that businesses always have a fair level of stocks with them, and also they do not have an excess stock which could create unnecessary costs. Another advantage is that stock is managed with little human input since the use of technology has allowed easy monitoring of the stocks. The disadvantage of this system of management of the environment is that at times the set stock may not be utilized sold due to fluctuations in demand.
Fixed order interval is an inventory management system that views stock levels regularly after a certain fixed period and an order to replenish the stock is given when the stock levels fall below a certain point. The orders that are made can be made once every week or twice a month and if the stock is found below a certain optimum point, an order is placed. The size of the order is not the same every time, as the levels of the stock may vary depending on the date of inspection. The advantages of this system are that it can be automated to reduce the resources needed to monitor and replenish the stocks. Another benefit of this scheme is that the stocks of the company do not fall below a certain point after which the business operations may not go smoothly. This implies that a business using this system will have its operations running smoothly since the stocks are always replenished when necessary. A disadvantage of this method is that at times, the stock levels may fall too much if there is increased demand and an inspection of the stock have not been done (Jones & Chung, 2007).
Inventory levels are sometimes affected by the customer service of the company. Customer service can be described as the number of staff a company has on hand to interact with potential customers and sell them goods when they enter the store. Inventory levels are on the other hand the amount of product a company has on hand to sell to customers available (Binti, 2016). Service and inventory levels are determined by the anticipated demand of goods by the company as they hope to match the anticipated needs of their customers. The demand is usually affected by cycles that are there in the industry. There are peak times and low seasons where the company anticipates a low demand for their goods, and hence their inventory levels will be low. Other factors that affect the customer service levels and the inventory levels are uncertainty by the seller, flexibility, and coordination (Reuther et al, 2014). Many companies are uncertain of the actual demand for their goods, and they may adjust their inventory levels accordingly. The ability of a business to coordinate the service levels and the inventory levels may also determine the levels held by the company.
Logistics is a crucial part of any industry. Logistics have a big influence on the company as a whole as it affects other major functionality areas in a company. Logistics have an effect on the production, marketing and the finance of a company. It affects the production by influencing the length of production runs by the company. Logistics also affects the marketing of a company since the consumer packaging may increase or decrease logistics cost which is crucial in the decision-making process. The finance department of a company is affected by logistics since the return on assets and investment is influenced by the logistics of the business. The order cycle of the business is also crucial in the business. The method that a company chooses to use may affect their success in the long run as it affects consumer satisfaction. The last part of this paper discusses various systems that a business can adopt to manage their inventory. The management of inventory is important since proper inventory levels in a business ensure the smooth running of the companys operations.
Binti, D. F. (2016). Inventory Management System (Doctoral dissertation, East West University).
Bowersox, D. J., Carter, P. L., & Monczka, R. M. (2013). Materials logistics management. International Journal of Physical Distribution & Logistics Management.
Christopher, M., & Peck, H. (2012). Marketing logistics. Routledge.
Ellram, L. M., La Londe, B. J., & Weber, M. M. (2013). Retail logistics. International Journal of Physical Distribution & Logistics Management.
Everaert, P., Bruggeman, W., Sarens, G., Anderson, S. R., & Levant, Y. (2008). Cost modeling in logistics using time-driven ABC: Experiences from a wholesaler. International Journal of Physical Distribution & Logistics Management, 38(3), 172-191.
Jones, E. C., & Chung, C. A. (2007). RFID in logistics: a practical introduction. CRC press.
Kober, J., & Heinecke, G. (2012). Hybrid production strategy between make-to-order and make-to-stocka case st...
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