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Logistics is an idea that has been around for a long time. It has been defined in Oxford Dictionary as an art of moving and quartering troops (Hollier, 1988). Logistic as a concept has materialized out of physical distribution, inventory management and transportation in which physical things have become a part of an efficient and effective flow. Logistics management is known to be a flow through or oriented notion with the aim to assimilate resources extending from suppliers to ultimate customers. Logistics has increasingly become more and more important in any organizational set up. It was predicted that by 1990's, whether organizations decide to go global or not, the necessity of logistics will grow. Thus, organizations of all sizes are integrating supply chain management and market place changes into logistics. Because the companies and firms are expanding all over the world, strategies with regard to global logistics has become necessary as well.
MEANING OF LOGISTICS
As defined by Christopher Martin," Logistics can simply be defined in terms of providing the means whereby customers' service requirements are met at lowest costs." (Christopher, 2010)
John E. Sussams in his journal "The Impact of Logistics on Retailing and Physical Distribution" mentioned that "logistics is science which integrates all the activities required to move goods from the original sources of raw materials to the location of the ultimate consumer of the finished product."(John E. Sussams, 1991) He has gone ahead stating that:
Logistics is a holistic science. It does not look at the individual parts of a system in isolation; it looks at the ways in which the parts are connected and suggests better connections. (John E. Sussams, 1991)
Logistics is thus a "green" science. It aims to control the total flow as efficiently as possible, that is, with the least possible consumption of energy consistent with the objectives of the system. It does not, of course, query the objectives themselves. That is a matter for politicians and bureaucrats who are outside the system or, rather, part of a higher level system. (John E. Sussams, 1991)
PRINCIPLES OF LOGISTICS
The principles of logistics were identified by LaLonde and Mason(1993). These principles were able to provide us with the ability to perform evaluations consistently on the logistic activities and strategies undertaken by an organization. There are eight principles of logistics as identified by LaLonde and Mason (Sarkis & Made 1998). They are as follows:
Principle of selective risk
The objective of this principle is to plan logistics systems to directly relate the significance of the product or customer of the organization to the system performance. Then based on the magnitude of service required to be given to a specific customer logistic strategies and actives are to be decided upon. (Sarkis & Made 1998)
Principle of information selectivity
Based on the design of the logistic systems and its implementation, logistic managers are required to provide the appropriate information. Information technology is considered to be the enabling technology for the logistics functions. (Sarkis & Made 1998)
Principle of information substitution
This principle states that information costs are lesser when compared to other resources. Thus whenever possible other production resources for example labor, capital, etc should be replaced with an information resource. (Sarkis & Made 1998)
Principle of transaction simplification
Logistics begin surrounded by varied operational transaction; the purpose of this principle is to help the transactional process of the firm by improving efficiency and effectiveness of the transactions undertaken by the company. This principle is helpful from both technical and managerial point of view. (Sarkis & Made 1998)
Principle of variance reduction
Organizations often face problems of unexpected variances due certain external and internal changes in the customer-supplier chain. The principle of variance reduction helps in reducing these unplanned variances in the logistic system. (Sarkis & Made 1998)
Principle of inventory velocity
Principle of inventory velocity is based on the basic meaning of logistics. This principle's main objective is to facilitate the flow of inventory from raw materials to the ultimate user. (Sarkis & Made 1998)
Principle of postponement
The principle of postponement is based upon meeting the particular and diverse customer service levels by reducing the unnecessary amount of inventory. The main advantages of the principle of postponement is firstly not committing to production to specific customers until a late stage in production activity thereby having increased the flexibility in the demand fulfillment, secondly reducing the requirements of a varied range of components for manufacturing and lastly simplifying the inbound logistics planning. (Sarkis & Made 1998)
Principle of shared/shifted risk
This principle came into existence due to the increasing cost of money, which is causing shift of the logistics cost composition from being a fixed cost base into a variable cost base or shifting the costs upstream or downstream in the supply chain. (Sarkis & Made 1998)
These 8 principles come with each having its set of supporting attributes that helps the better management of the respective principle. The Table 1 below shows the principles along with their supporting attribute.( Sarkis & Made 1998)ÂÂ
Source: Laura Made and Joseph Sarkis. (1998). Strategic analysis of logistic and supply chain management systems using the analytical network process.Â Transpn Res.-E (Logistics and Transpn Rev.). 34 (3), 201-215.
LOGISTICS AND COSTING
As mentioned in the principle of shared/shifted risk, the cost of money has been steadily increasing over the years. And principle of substitution says that cost of information is lesser when compared to any other resource. These are the principle realized by LaLonde and Mason (1993). (Sarkis & Made 1998)
Christopher Martin in his book "logistics and supply chain management" came up with a specific idea relating costs to logistics on a more direct basis. (Christopher, 2010) He stated that there are two basic principles of logistics costing:
The logistic system should be able to reflect the flow of material. This means that the cost which arise due to the services provided to the customers in the marketplace should be verifiable by looking into the logistics system.
The system should be able to separate cost and revenue analysis based on customer type or market segment or distribution channels.
The need for the second principle had arisen due to the inherent dangers of solely dealing with averages, for example average of raw materials, because averages can hide considerable amount of variations in either side of the mean. In order to realize these two above mentioned principles in practices output orientation is required to costing. (Christopher, 2010)
The aim of a Logistics system should be to manage goods, the storage facilities and material movement by directing them correctly from source to its designation, in right quality, quantity and composition at right time along with most favorable delivery services with as much least costs as possible. In order to economically administer any logistic system, appropriate amount of transparency is required which can be achieved through 'information function'. This information function forms an integral part of production feature of logistics (Hollier, 1988).
For many firms and companies, the cost of logistics has immerged as highest constituent of total percentage of costs incurred; which require the business logistic systems to function as effectively and efficiently as possible. Technological advancements in information and communications systems in have helped in reducing costs. One of the best examples can be taken is the standardization of the bar codes which resulted in speedy and accurate data inputs. This further resulted in the usage of commons labels and databases by vendors and consumers (Hollier, 1988).
LOGISTICS AND INFORMATION FACTOR
As discussed above by integrating information factor and information technologies, transparencies can be achieved in a logistic configuration. Also, it can be distinguished by their support in the logistics chain. The main advantage being that the corporations can reduce the costs of production, material movement costs or transportation costs and other logistic related costs. (Hollier, 1988).
By merging the flow of information with the means of production, efficiency can be achieved with reduced costs. This may include automation of monitoring processes of the plant, setting up of data acquisition, transfer and display systems or equipments, by means of paperless transfer of data using highly sophisticated data transferring processes and using LAN or Local Area Network to automate decision level procedure. The automation process in production and logistic business system can be made more efficient by the usage of a flexible, modular and step-by-step procedure. This aids in the development of new techniques of production process more suitable for automation and of technologies with chain of command systems. Flexibility in a logistic system can be achieved by advancing communication technologies. Further trends are: usage of consistent module-type apparatus, automation of suitable supplementary loading equipments and machineries along with packaging technologies. Now-a-days, logistics as a concept being integrated with computers and logistic-oriented information network has helped in increased production activities, quantity and quality. This has been achieved through the usage of simulation processes in predicting the behavior of logistics systems thereby improving effectiveness of the systems, computer-aided software which help in the planning process of distribution, storage and transport systems. Also, it helps in the process of logistically developing a product for the companies offering reduced costs and higher profit margins. The automated processes introduced for better value creating logistic systems must be well connected at information, material and energy source levels (Hollier, 1988).
As a result of the increased information demands, integration of Logistic Information Systems (LIS) and supply chain information systems has been taken place and adopted by many companies. This in turn has resulted in an increase in the usage of e-commerce and enterprise resource planning along with other LIS tools, helping in determining the foreseeable future of a business organization (Gibson et all , 2003).
LOGISTICS SYSTEM - ITS ANALYSIS AND DESIGING
Due to radical changes in the business environment, need for finding an approach which would include necessary aspects of over-all effectiveness of the operations and business processes. This is referred to as 'logistics efficiency'. It has been notices that there exists a strong relation between configurations of product concept, interorganizational relations and process relations within the company (Tryggvason & John Johansen, 1996). These three factors play an important role in the effectiveness and efficiency in a logistic system.
Source : Eggert Tryggvason & John Johansen. (1996). The 'double matrix' business process model and a framework model for analysis and design of logistic systems.Â European Journal of Purchasing & Supply Management. 2 (4), 203-209.
From the above figure, it can be seen that for achieving logistic efficiency all the three factors, viz internal orgaizational and process relations, configuration of product cocept and interorgaizational relations must work together. Concentrating only on any one of the factors, the losgistic system will not be able to contribute towards the company's on the whole logistics efficiencies. (Tryggvason & John Johansen, 1996)
It is often the managers burden to decide upon the selection of a logistic design most appropriate for various activities of an organization. It involves taking decisions such as appointing right person for the right job, the decision making hierarchy and the structure of the logistic desing itself. While designing the logistic system of a firm, its size should also be taken into consideration.(Droge and Richard Germain, 1998) The greater is the size of the organization :
Larger is the span of controle and the number of layers also increase proportionatly.
The decision-making become further decentralized with the increase in the size of the organization
The chances of a formal written logistic syatem and stratecgic arrangement exist.
Mechanisims for intergartion of activities within the organozation are in place whose work is mainly to focus on losgistic strategy.
The number of specialists required increases with the increase in the size.
With the grow of a company, the logistic managers must realise that there is a need for adopting manageable logictic restructuring. (Droge and Richard Germain, 1998)
QUALITY MANAGEMENT AND LOGISTICS
Many scholars in the logistic academic have emphasized upon the relevance of quality management practices in attaining the operational results along with customer satisfaction. There exists a relation between the quality management factors and logistics. It has been found that leadership possess the strongest influence on operational results, even also on achieving maximum consumer satisfaction through its influence on the operational results. Thus, it is assumed to have a prerequisition of the commitment of the top level management toward the quality improvements in logistics systems in order to achieve internal logistic operations improvement along with icreasing the customer satisfaction. (Anderson et all , 1998)
Human resources also play an important role in the customer satisfaction for a company. It has has been noticed that there is a direct link to customer satisfaction throught operational results, morale and team work. The human resources in a company are known to be recognized as the compay's internal customers. Along with the construts, viz operational results, morale and team work, a company also needs to invest in necessary amount of resources and time in information systems, training programs and benchmarking in order to achieve appropriate effectiveness and efficiency in the logistics operations. (Anderson et all , 1998)
These understandings of quality management are essiential in order to achieve a better quality serevices that can be provided by the company.(Anderson et all , 1998)
As discused above human resources paly an important role in enhancing the effectiveness and efficiency of a logistic system. Therefore, it can be said that behavioural-aspect realities have to be taken ito consideration while an organization is preparing its logistic system and its sub-systems. The key here lies in analysing the behaviourial postulations in the logistic model and then test those postulations thoroughly. Next step being the incorporation of the findings by reversing them into the model. This process is repeated untill a strong model is created. It can be noticed that it is a trial and error method but most effective.(Tokar , 2010)
There has been very little research done or published in logistics journals including suppy chain management journals upon the importance of humanitarian logistics and its affect on a logistic model of a company. It has been, recently, noticed that experimentation on the behavior can be used to incorporate the results in the predictive correctness of the logistic models. Logitisians can make adjustments to the model by being able to understand how personnel react to specific stimuli. This enable the decision making level including the managers to achieve required behaviour and results.(Tokar , 2010)
To conclude, logistics refers to planning, execution and managing effectively and efficiently flow of goods and services including information from original sources to the ultimate consumers with least possible costs. Various studies have been made on the effects of costing on logistics and its system and sub-systems during the process of manufacturing, warehousing, selling and distribustion. LaLonde and Mason had identified 8 principles each having their respective attributes that help the management to perform evaluations consistently on the logistic activities and strategies undertaken by an organization. There are have been studies done on the effects of information, information technology and human resoures on logistics along with quality management. Information and information technology go hand in hand. Due to that advancement in the field of technology, the organizations have adopted these advancements into the flow and availability of information at various levels of logistic systems. However, human resource and quality management are comparatively new concepts introduced and integrated into logistics and thus not much studies have been made on their effects on logistics.
Understanding these concepts and their affects help in the designing and development of the logistic systems in an organization with logistics efficiency being at the center. Logistic efficiency with its three factors, viz internal orgaizational and process relations, configuration of product cocept and interorgaizational relations and process relations help in achieving better results for the organization.