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Logistics And Supply Chain Management Definitions Business Essay

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Published: Mon, 5 Dec 2016

In modern competitive business world, every organization strives for excellence. To achieve and maintain this, the organization needs to put in all necessary measures to remain competitive within the industry it finds itself. One of such measures is logistics excellence. (Durin et al 2011).

A major contributing function for organizational excellence has to do with the management of its logistics. However in recent times, logistics excellence is taken for granted and presumed to be the norm, but only to be recognized when there emerges some major problem. [1] 

Since the Criminal Libel Law was taken off the statutes books in 2001, the

Ghanaian media landscape is currently touted or hipped as one of the most independent media regimes in the West African sub-region. This has led to the proliferation of print and electronic media to the extent that the media market is currently becoming saturated. [2] According to the National Media Commission (NMC, 2006), Ghana has 106 newspapers made up of 11 dailies, 67 weeklies, 23 bi-weeklies and five tri-weeklies. More than 50% of the news papers currently in circulation have come into existence in recent years.

Many of them have sprung up in the past five years, providing readers with a wide range of new publications.

At national level, among the 11 national dailies, the state-owned Daily Graphic is the oldest and most widely-read newspaper in Ghana, and it is distributed in all 120 districts nationwide. Established in 1950 and 100% government-owned, the Daily Graphic currently has the highest circulation figure. [3] The company’s leadership role in the print media as indicated above began before the advent of the repeal of the criminal libel law. It is interesting to note that Ghanaians casually refer to any media print at first glance as ‘graphic’. This not withstanding demonstrates the strength the company draws from this brand name.

However, due to the proliferation of other print media as a result of the repeal of the criminal libel law, fierce competition has started to emerge within this industry. The state owned and private print media market is becoming saturated to the extent that almost all media prints virtually sell at the same price. An example of such are the, “Ghanaian Times”, “The Mirror”, “The Ghanaian Observer”, “90 Minutes”, “Accra Daily Mail”, and “the Weekly Spectator” which sells at GH 1.50, whilst others like “The Daily Guide”, “The Dispatch”, “Daily Graphic”, “The Guide”, “The Statesman” and” Business and Financial Times” also sell at GH2.00.

One way to retain customers and remain competitive and, at the same time increase bottom-line margins has been to cut down prices. Interestingly, price reduction in this instance may not be very possible because market shares are somewhat fixed and would lead to lesser margins instead. A better way for companies to still make profits and remain viable is to embark on an effective and efficient logistics management system (Christopher, 2011). This is because sales revenue increases would be more difficult to achieve than logistics cost reductions. The effective management of logistics activities such as customer service, distribution and reverse logistics would play significant roles alongside other logistics activities in improving an organization’s stance in such an environment.

Reverse logistics to a considerable extent is not well known and not practiced within the Ghanaian business environment. This is because logistics has been looked at in most instances from only one perspective. It has always been looked at from the point where products are manufactured, packaged, stored in a warehouse, sold, and then shipped to the customer and the process ends. However there are more dimensions to this. In addition to managing outbound goods, logistics managers are also responsible for the flow of returned goods, re-packaging, including customer service and final disposition of returned items. [4] 

Considering the print media for instance, the issue of unsold media prints could be looked at as ‘waste’ since they cannot be sold the next day. The need to manage waste materials and returned goods is fast growing in all kinds of industries. Currently, companies notably Xerox, Eastman Kodak, Mobil, Home Depot, and Ethan Allen Furniture to name just a few, have recycling programs that meet the needs of their individual industries. [5] Although these are foreign companies, they derive numerous advantages and benefits from the relevance of reverse logistics practices. In a way these could be very much applicable to most organizations in Ghana for which GCGL is not an exception.

Undoubtedly, most firms are now recognizing reverse logistics as a component of the total logistics management process. Stock (1998) and Hansen Harps( 2002) advocated that innovative firms that develop an expertise in reverse logistics activities and considers them as a set of business process adds value, generate revenue, improve customer satisfaction, achieve significant cost savings and gain competitive edge in their various markets.

The GCGL stands the chance of gaining all these benefits as well as competitive advantage over its competitors in the area of cost reduction, enhanced quality, branding of their product and maximizing customers loyalty when reverse logistics practices are effectively adopted.

Reverse logistics has the following benefits:

Enhance Customer Service. The customer’s perspective is one key economic element driving organizations to develop reverse logistics strategy. Customers now consider returns policies when making purchasing decisions. If GCGL makes its returns policies more restrictive while its competitors continue to offer liberal returns policies, the firm will have placed itself at a competitive disadvantage. The whole purpose of logistics strategy is to provide customers with the level and quality of service that they require and to do so at less cost to the total supply chain. ( Rogers and Tibben-Lembke 1998)

Distinguish itself with Customers. Embarking on an effective reverse logistics strategy will offer GCGL the opportunity to differentiate or distinguish itself with customers. This is because how a company handles returns is often evaluated by customers as an important factor to choose when a future purchase happens. According to Daugherty et al (2002), a well designed reverse logistics system can promote longer-term relationships. Furthermore, customers are more likely to buy from retailers who outperform other retailers on returns handling.

Knock Off Competition. GCGL management will stands to benefit from the knowledge of the company’s logistical performance which could be used to influence decisions and aid in the formulation of corporate goals and objectives to offset competition.

Achieve Green Image. The GCGL by engaging in reverse logistics stands to gain a good environmental image with the customer which could invariably promote better customer relations. Having such an image can be part of a customer relationship strategy, especially due to the increase of environmental consciousness by society as a whole. The overall reverse logistics programme effectiveness will have indirect benefits for the firm, such as better corporate image or improved levels of customer satisfaction to retain customers and as well stand the competition within the industry. (Jayaraman and Luo2007)

Need to Control Costs. Frequently, manufacturers treat recovery of products and packaging as an afterthought. A well-managed reverse-logistics program, however, can bring enormous savings in inventory-carrying, transportation, and waste-disposal costs. [6] 

Enjoys Goodwill. The goodwill associated with practicing an effective and efficient distribution and reverse logistics strategy has not been fully discovered by most companies in Ghana. The Goodwill that GCGL could earn from acting in a socially or environmentally responsible manner can produce real value. This can create substantial customer loyalty.(Rogers and Tibben-Lembke 1998)

1.2 Research Problem

In Ghana intense competition within the print media industry has to a large extent stabilized the price ceiling of media prints. The situation has been aggravated by political influences as political parties have delved the opportunity of coming up with their own media prints to propagate party agendas. Whilst GCGL media prints specifically the ‘Daily Graphic’ has been acclaimed a national newspaper, and hence mostly report on broad national issues, many others focus and take sides on political issues that would interest party members. As a result market shares are more or less stable and only sway when a particular media print covers a more topical or sensational issue that cuts across a general national interest. The likelihood of dwindling margins cannot be over emphasized in such circumstance. The more convenient means for GCGL to make profits is to embark on an effective logistic management to cut down logistics costs and to remain competitive in business.

On the other hand most organizations have not fully embraced reverse logistics for reasons best known to them regardless of the benefits that could be realized on embarking on effective reverse logistics practices. The issue is that there is little demand for knowledge within the mindsets because it has been presumed that reverse logistics inherently deals with the least favored aspect of organizational activities (Hansen Harps, 2002). This is because most firms do not view reverse logistics as a core competence but as something to be ignored as much as possible (Hansen Harps, 2002).

The print media products normally have life cycles ranging from a day to maximum of about a week. What happens to unsold products and those that are no longer of use to the consumer does not seem to derive much concern from the publishers. This situation does not only create loses but also goes to add filth to our environment causing health and other environmental problems in the long run.

Conducting a research to unearth the best possible means for GCGL to improve upon its current logistics management trends and practices, to improve profit margins and as well create value for their products that have ended their life cycle is the main focus of this thesis.

1.3 Research Questions

In order to identify the extent of logistics management activities that GCGL is currently engaged in and analyze them, the thesis would seek answers for the following questions:

How are the logistics activities pursued in the organization?

What distribution system is the company employing?

How is return flows managed?

1.4 Research Objectives

The study has the following objectives:

To identify the logistics and supply chain activities the company is engaged in

To identify and assess the effectiveness of the distribution system

To describe and assess the impact of reverse logistics practices on profitability

1.5 Significance of the Study

The study will bring out any shortfalls that are inherent in GCGL’s logistics practices and inform management adequately to develop sound logistics plans.

Additionally, it will serve as a reference document for the GCGL logistics department to effectively manage their day-to-day logistics activities.

The study will also be beneficial to the company’s third party logistics providers, as the document will assist them to adopt the appropriate logistics procedures and hence ensure effective communication and integration among them.

The thesis will also be beneficial to other print media organizations as well as those in other industries to focus on reverse logistics strategy as a source of gaining competitiveness amongst others.

1.6 Limitation of the Study

1.7 Thesis Organization

The study will be organized into five chapters. Chapter one is the introduction and will comprise the background, problem statement, aims and objectives and significance of the study.

Chapter two is the literature review and will highlight existing definitions and works by researchers related to the area of study.

Chapter three is devoted to the methodology used in this study. The chapter looks at the study area, design of study, data collection approaches, description of the study, sampling and the constraints/problems encountered and chapter four will summarize the major discussions of the study.

Chapter five will highlight on the important issues in the summary and make recommendations.

CHAPTER TWO

LITERATURE REVEIW

2.1 INTRODUCTION

Fierce competition in today’s marketplace has forced business enterprises and organizations to invest in and focus on supply chain and logistics management to be more competitive and as well, remain in business. Logistics has now been seen as the growth and dynamic functions in the success of many different operations of an organization. Logistics activities such as distribution communication, customer service, inventory management, materials handling, packaging, and traffic and transportation procurement have led to the growth in telecommunication and transportation technologies (Rushton et al 2006).

Whilst logistics is often seen as planning orientation and framework that seeks to create a single plan for the flow of products and information through a business, supply chain management builds upon this framework. It seeks to achieve linkage and co-ordination between the processes of other entities within the pipeline, i.e. suppliers and customers, and the organization itself (Martin Christopher 2011).

A lot of research works on the concepts of logistics and supply chain management and their impacts on the successes and failures in industries and businesses have been carried out. This paper will therefore review aspects of the available literature and research works that view logistics and supply chain management in their definitive contexts with special emphases on activities that relates to customer service, logistics distribution systems and Reverse Logistics.

2.2 LOGISTICS AND SUPPLY CHAIN MANAGEMENT DEFINITIONS

2.2.1 Logistics Management

The term ‘Logistics’ originated from the military and was used basically to describe the movement of personnel and materials during wars and also in emergencies. It was later adopted by businesses and organizations and became a part of commonly used terminology in professional societies and academic programs, and was defined in various ways to satisfy trends and developments (Rushton 2009).

The Council of Logistics Management (CLM), one of the leading professional organizations for logistic uses the term logistics management to describe the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in- process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements (Lambert et-al, 1999).

Alan Ruston et-al (2007) defined Logistics Management by the Council of Supply Chain Management Professionals (CSCMP) as that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements (CSCMP, 2006).

Martin Christopher (2011) stated that logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.

Starting from the first definition, although these authors’ pointed out that the ultimate disposal, recycling and reuse of products should be considered as activities in logistics management, the CLM definition above was silent on them. The definition only took into consideration the forward aspect of logistics focusing on the end product reaching the final consumer according to consumer’s requirement. The questions here are that; what happens to the product if it does not conform to the customer’s requirement and also how will the product be managed after the final consumer has exhausted the full use of the product?

In other words, CSCMP indicated and emphasized on forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

This definition to a considerable extent answers the questions which were ignored by the CLM as it considered reverse flows in addition.

Martin Christopher stressed on how organizations could maximize current and future profitability through the cost-effective fulfillment of orders. Although the definition did not specifically mention reverse flows, it could be implied that such activities if undertaken could contribute to the organization’s profitability.

In summary, it could be mentioned with certainty that all the definitions above place some emphasis on logistics activities to typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers. Additionally the inclusion of sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service were mentioned by Christopher.

It is worth mentioning that logistics must be involved in all levels of planning and execution. This has to do with the strategic, operational and tactical levels. Planning at these levels should not be done in isolation else the synergy to be derived from the various functions would not be realized (Lambert et al 2009). Logistics management is therefore an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance, and information technology (Alan Mckinnon, 2001). It is essential that positive planning approach is adopted by ensuring that the operation is set up to run properly. The two parts of logistics management has to do with inbound and outbound logistics. One way to envisage the two concepts is about ensuring and managing that the operations are set up to run properly by doing the right thing or preparing for and planning the operation. Thus supply and material management represent the storage and flows into and through the production process, whiles distribution represent the storage and flow from the final production point through to the customer or end user.

Logistics management from this view point is the means whereby the needs of customers are satisfied through, the co-ordination of the materials and information flow that extends from the market place through the firm and its operation beyond that to suppliers. To achieve this, there should be a wide integration within the organization and also a synergy between the marketing and manufacturing within the organization rather than a fragment separate activities (Spekman, KamauffJr et al (1998)

Logistics is therefore essentially an integrative concept that seeks to develop a system-wide view point of a firm. It is fundamentally a planning concept that seeks to create a framework through which the needs of the market can be translated into a manufacturing strategy and plan, which in turn links into a strategy and plan for procurement. [7] 

The CSCMP definition laid emphasis of logistics management being part of supply chain management which pre-supposed that other influences on the logistics activities abound to ensure their effective functioning.

A working definition for Logistics Management for this thesis would therefore be the (CSCMP 2006), which states that, “it is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements”.

2.2.2 Supply Chain Management

Supply chain management has been mentioned in the (CSCMP 2006) definition for Logistics Management. It referred to logistics management as a subset of supply chain management. Meanwhile these two terms have been used interchangeably in most literature.

Supply Chain Management has defined supply chain management as the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies (CSCMP, 2006).

Supply chain here is viewed as a single entity rather than series of fragment element such as procurement, manufacturing and distribution. It goes further to talk about the integration of information systems in the supply chain rather than merely acting in isolation for each of the separate component. It was further indicated that supply chain management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model

Also, it included all of the logistics management activities noted above, as well as manufacturing operations, and indicated that it drives coordination of processes and activities within and across marketing, sales, product design, finance, and information technology (Martin Christopher2011)

Christopher (2011) also defined supply chain management as the management of upstream and downstream relationships with suppliers and customers in order to deliver superior customer value at less cost to the supply chain as a whole.

From the author’s point of view, supply chain is the stream of processes of moving goods from the customer’s order through the raw materials stage from the supplier, down to the production process, work assembly, and distribution of products to the customer.

He argued that supply chain management could be termed as ‘demand chain management’ to reflect the fact that the chain should be driven by the market, not by suppliers. Also the word ‘chain’ should be replaced by ‘network’ since there will normally be multiple suppliers and, indeed, suppliers to suppliers as well as multiple customers and customers’ customers to be included in the total system.

Extending this idea it has been suggested that a supply chain could more accurately be defined as a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Christopher 2011).

The CSCMP’s and Martin Christopher’s definitions above both made mention of the fact that supply chain encompasses logistics management which is the supply, materials management and distribution but rather goes further to argue that supply chain incorporates suppliers, suppliers to suppliers , as well as multiple customers which seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline and the organization itself through the sharing of information on demand.

Chopra and Meindl (2007) defined supply chain as consisting of all parties involved, directly or indirectly, in fulfilling a customer request. They went on further to say supply chain includes not only the manufacturer and suppliers, but also transporters, wholesalers, retailers, and even customers themselves. Here the supply chain is referring to the customer’s need or what he or she intends to purchase. This implies that all the stakeholders that are involved in contributing their quota to satisfy the customer should work hand in hand to fulfill that purpose.

Christopher (2011) finally indicated that all firms have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured and managing the chain of events in this process is what is known or referred to as supply chain management. He went further to state that effective management must take into account the coordination of all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down.

In essence, whilst logistics management deals with integration of functions within an organization, supply chain management takes care of this integration and extends it across firms in the supply chain. Figure.1 is a diagrammatic representation of logistics and supply chain management indicating how logistics is integrated in supply chain management.

Raw material

Components

Packaging items

Bought in part

Imported materials

Production process

Work-in- progress

Packaging

unitization

Finished goods

Inventory warehouse

Depots

distribution

End user

Supply

Materials management

Distribution

Suppliers

Logistics

customers

Supply chain

Supply side

Upstream

Inbound

Demand side

Down stream

Outbound

Information

Transport

Reverse

Logistics = Supply +Materials management +Distribution

Supply Chain =Suppliers+ supply +Materials management +Distribution+ Customer (Alan Ruston et al 2007: 5)

2.3 LOGISTICS AND SUPPLY CHAIN MANAGEMENT ACTIVITIES

The domain of logistics activities is to provide customers with the right goods in the right place at the right time. It ranges from providing the necessary subcomponents for manufacturing to having inventory on the shelf of the retailer to having the correct quantity. The major issue that logistics attempts to resolve is to decide how and when raw-materials, semi-finished, and finished goods should be acquired, moved, and stored. [8] 

Ensuring an efficient, effective forward and reverse flow and storage of goods, services and related information as said by Rushton et al (2010) needs an effective and effecient logistics activities to be able to meet customers’ needs and wants at the right time, and at the right.

Lambert et al (2008) and Langley (2009) both outlined the key activities required to facilitate the flow of a product from point of origin to point of consumption to meet the end user as follows:

Customer Service

Demand forecasting/ planning

Inventory management

Materials handling

Order Processing

Packaging

Part and Service Support

Warehousing and Storage

Procurement/ Sourcing

Return goods handling

Reverse logistics

Transportation

Distribution

Manufacturing

2.3.1 Customer Service

Many attempts have been made to define the term customer service. However, depending on the organization’s core business that it’s provides, customer service will differ.

Lucas (1996) defined customer service as the ability of knowledgeable, capable, and enthusiastic employees to deliver products and services to their internal and external customers in a manner that satisfies identified and unidentified needs and ultimately result in positive mouth -to- mouth publicity and return business. Lambert et-al (1999) also used the term customer service to describe the process which takes place between the buyer, seller, and the third party. The process result in a value added to the product or service exchanged. He went on further to say that the value added in the exchange process might be short term as in a single transaction or longer term as in a contractual relationship. He again mentioned the value added is also shared, in that each of the parties to the transaction or contract is better off at that completion of the transaction than it was before the transaction took place.

Lucas (1996) distinguished between internal customers and external customers. The internal customers he said comprised peers, co-workers, bosses, and subordinates, whilst eternal customers constitute vendors, suppliers, walk-in-customer, various telephone callers. Even though Lambert et al (2009) did not mention internal customers, he captured external customers in his definition and went on further to talk about value creation within the transaction period to achieve a cost effective way in the chain of activities. They stated that the value added products or services are enhanced when the time and place utility between the buyer and seller are met and as well expanded and considered. Such conditions are generally considered as the seven right of customer service. These are the right of quantity, cost, product, customer, time, place, and condition (Rushton et al, 2007).

From the above, meeting the needs of customers should be very important in every organization even though it is very difficult in maintaining them and to achieve this is to make sure products and services are rendered at the right time, at the exact place in the right condition, at the right cost to add value to avoid customer complains.

Rushton et al (2007), Lambert et al (1999), Christopher (2011) all emphasized on the element of customer service as, pre-transaction element, transaction element and post-transaction element. Where the pre-transaction element focuses on the company’s policies concerning customer service. Transaction relates to element directly linked to physical transaction such as order cycle time, inventory availability, condition of goods, system accuracy, product substitution etc. Lastly those elements that occurred after the delivery has taken place is referred to as the post- transaction element and these include the installation of warranty, repairs and service part, return policy, customer complaints and claims. Customer service therefore plays a crucial role in organizations as far as growth and profitability are concerned.

2.3.2 Demand forecasting/Planning

Demand forecast is defined as statistically based initial estimate of future demand. It is well indicated that a dem


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