Industrial Marketing

Logistics is concerned with the storage and transportation of goods and information from the place of origin to the place of consumption. It is broadly divided into two categories namely physical supply and physical distribution. Physical supply deals with the transportation of the goods from the supplier to the manufacturer and the storage of raw material used for work in progress.

Physical distribution is concerned with transportation and storage of the finished goods from the manufacturer to the customer. Cost is an important aspect in the logistics function. Every sub-function of logistics is associated with some cost and the logistics function as a whole proves to be effective only when its total cost is minimized.

This is the concept behind the application of the total cost approach to logistics. Customer service plays an important role in the overall fulfillment of the logistics function. Elements of customer service in logistics include lead time, inventory availability, order fill rate, and order status information.

Another sub-function, warehousing, is concerned with the effective storage and protection of goods. Warehouses are divided into public warehouses and private warehouses. Public warehouses carry goods of more than one supplier whereas private warehouses are dedicated to only one supplier. Every manufacturer aims at optimizing and in many cases, minimizing the inventory holding level.

Economic Order Quantity (EOQ) is used to identify and carry optimum inventory levels. Inventory can be minimized by applying the just-in-time technique to maintain very thin inventory levels. Effective logistics management aims at minimizing the order processing time and delivering the goods to the customer at an early date and thereby satisfying the customers.

An integrated systems approach would help in managing and coordinating the logistics function. Many firms find it difficult to manage logistics on their own and outsource the function to other third party and fourth party service providers. Finally, the chapter discusses three special topics – logistics in government organizations, logistics in the service industry, and international logistics.

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