Logistics is comprised of five interdependent activities: costumer response, inventory planning and management, supply, transportation, and warehousing.
1. Customer Response
Costumer response links logistics externally to the customer base and internally to sales and marketing. Costumer response is optimized when the customer service policy (CSP) yielding the lowest cost of lost sales, inventory carrying, and distribution is identifies and executed.
The logistics of customer response includes the activities of:
- Developing and maintaining a customer service policy.
- Monitoring customer satisfaction.
- Order entry (OE).
- Order Processing (OP).
- Invoicing and collections.
2. Inventory Planning and Management.
The objective of inventory planning and management (IP&M) is to determine and maintain the lowest inventory levels possible that will meet the customer service policy requirements stipulated in the customer service policy. The logistics of inventory planning and management includes
- Order quantity engineering.
- Service level optimization.
- Replenishment planning.
- Inventory deployment.
Supply is the process of building inventory (through manufacturing and/or procurement) to the targets established in inventory planning. The objective of supply management is to minimize the total acquisition cost (TAC) while meeting the availability, response time, and quality requirements stipulated in the customers service policy and the inventory master plan. The logistics of supply includes,
- Developing and maintaining a Supplier Service Policy (SSP)
- Supplier integration
- Purchase order processing
- Buying and payment
Transportation physically links the sources of supply chosen in sourcing with the customers we have decided to serve chosen as a part of the customer service policy. We reserve transportation for the fourth spot in the logistics activity list because the deliver-to points and response time requirements determined in the customer service policy and the pick-up points determined in the supply plan must be in place before a transportation scheme can be developed. The objective of transportation is to link all pick-up and deliver-to points within the response time requirements of the customer‘s service policy and the limitations of the transportations infrastructure at the lowest possible cost. The logistics of transportations include:
- Network design and optimization.
- Shipment management.
- Fleet and container management.
- Carrier management.
- Freight management.
I present warehousing as the last of the five logistics activities because good planning in the other four activities may eliminate the need of warehousing or may suggest the warehousing activity be outsourced. In addition, a good warehouse plan incorporates ultimately portrays the efficiency or inefficiency of the entire supply chain. The objective of warehousing is to minimize the cost of labor, space, and equipment, in the warehouse while meeting the cycle time and shipping accuracy requirements of the customers
service policy and the storage capacity requirements of the inventory play. The logistics of warehousing includes
- Order picking