The scope of logistics management is very wide. It is not confined to manufacturing operations alone. It is pervasive in all types or organizations whether government or private, wholesalers or retailers.
In a manufacturing organization having an integrated structure, activities such as purchasing, production planning and control, warehousing and inventory control are centralized under materials management/logistics department and distribution of finished goods is done by marketing department.
Considerable amount of cross-functional co-ordination is required.
- Marketing department does the demand forecasting and incoming order processing.
- Production planning and control uses this information to plan work schedules and priorities.
- Again the information regarding production capacity is utilized by the marketing department to realize and process the delivery of incoming orders.
- The receipt of the material bought from the supplier and finished goods sold to the customers have to be informed to the accounts department for making payment to the supplier and billing the customers.
Thus logistics management includes all these cross functional coordination activities of material management, production planning and control and physical distribution management including raw material, semi-finished, finished goods warehousing, inventory and transportation. Binding to these entire cross functional and coordination activities requires an efficient information system. Logistics management adds value when inventory is correctly maintained to facilitate sales to meet the customer demand.
Costs of logistics
• Logistics expenditure accounts for 13% (2001) of the GNP.
• Expenditure of individual firms ranges from 5 to 35% of sales.
Therefore, logistics though vital to business is quite expensive.