This can be exercised on the aspects of:
- Cost control
Organisations should strive to control their costs. Over time, many costs tend to rise e.g. labour which can cut into profits unless business can raise prices without hurting demand. By continuously improving logistics, a business can take control of its costs.
- Utilize production capacity
Logistics supply a business with materials and other resources it needs to produce goods for sale. Improvements in logistics allow a firm to utilize the fullest extent of its production capacity. Any shortages or slowdowns of raw materials or labour could mean idle factories and production that can satisfy demand or meet sales targets. Managing logistics can ensure there is a steady stream of resources available, regardless of market conditions. This will be the case when a business identifies and invests in new suppliers of essential goods or pursues a vertical integration strategy to take control of the upstream supply chain.
- Improve capacity
Quality is a major element of business logistics. Having access to the right materials at the right time is of little use to a business of the materials are of poor quality and unusable. Continuous improvement in logistics strives to supply firms with rising percentages of quality resources. This is especially important for specialty goods, where there is a low tolerance for error and
customers returns or rejected products are costly.
- Better face competition
Every business faces competition in some form from another company. While there are numerous ways in which business can compete, logistics ranks high among them. Improving logistics to a point and then taking a passive approach to the system allows competitors to gain advantages in terms of cost savings; logistics can translate into significant savings over time and lay the foundation for further improvement s in the future.
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