Logistic Functions: The storing, handling and moving of products and services so that the customers can get them at the right time, at the right place and in the right assortments is called logistics and function related to such activities are known as a logistic function.
Logistic function or logistic system is designed on the basis of the stated logistics objectives so that minimum cost would incur for the accomplishment of these objectives.
List of Major Logistic Function
Below is the list of the major logistic function, you all must be aware of them all.
- Order Processing
- Inventory Management
- Order Processing
There are many ways of submitting an order like
- By Mail
- By Telephone
- Through Salesperson
- Through Computer and EDI
- In some cases, orders are generated by suppliers for their customers.
When an order has been received, it should be quickly and accurately processed by the organization. When processing is done effectively, both the organization as well as the customer is benefited. Nowadays sophisticated computerized order processing system is used by most of the companies that speed up the cycle of order, shipping, and billing.
For example, a company named General Electric uses a computer-based system in which when a receipt of a customer order is received by the system, it checks the credit standing of the customer as well as the identification of the required stock. Then a set of internal orders is generated by the system like an order to ship, an order to bill and a production order, etc all of these systematic activities happen within 15 seconds.
Almost every organization is bound to store its products because there is some gap in production and consumption. An organization must determine about the important aspects of the functions of warehousing like:
- How many warehouses are required?
- Which kinds of warehouses are needed?
- The locations of the warehouses, etc.
Warehousing can take the following two forms.
- a) Storage Warehouses
- b) Distribution Centers
- Storage Warehouses
Goods can be stored from average to long periods in storage warehouses.
- Distribution Centers
Distribution centers are much more sophisticated in a way that they are involved more in the movement of goods and less in the storage. These distribution centers are highly automated and larger that are designed for the receipt of goods from various suppliers and plants. Orders from customers are received and processed efficiently and quick distribution of the ordered goods is made in these centers.
In the modern technological age, new, highly automated warehousing replaces the older warehousing system. In these latest warehousing, effective computerized material handling systems are used that are centralized. There is a very little number of employees working and most of the work is done through computerized machines and robotics.
- Inventory Management
The inventory is also one of the major logistic functions in which the effective level of inventory is maintained. The major issue in this function is to keep a complicated balance between carrying less inventory and carry too much of it. Carrying too much inventory has resulted in stock obsolescence and higher inventory carrying costs.
On the other hand carrying of little inventory results in costly production & emergency shipment, stock-outs, and finally customer dissatisfaction. So, the management of the organization makes an effective inventory decision by comparing the inventory carrying costs with generating sales and profits.
In recent years new Inventory Management System has replaced the old high cost incurring methods. Just-in-Time is one of the effective inventory systems in which the level of inventory maintained is kept at a very low level. The inventory has been ordered just after receiving sales orders from customers.
The inventory is arriving quickly and the resulting sales order is effectively completed by the organization. In this way inventory maintenance cost is reduced, resulting in the profit increase. This JIT system is effectively used in Japan.
The major logistic function also includes the transportation in which certain decisions about the transportation of goods are made in light of the interests of the organization. Transportation function is important because it affects the delivery performance, pricing of the product, and condition of the arrived goods, etc. This would ultimately affect the satisfaction of the customers.
There are five different transportation modes that can be adopted by the organization in the delivery of their products to the dealers, warehouses, and customers. These five modes of transportation are as follows.
05- Water (Shipping)
The largest carrier of any nation is the railways that deal with the delivery of 26% of total cargo ton-miles. Large amounts of bulk products can be delivered to distant locations in a cost-effective way through railway transportation modes like sand, coal, farm and forest items, and mineral, etc. In recent years certain amendments are made in the railway systems for the effective transportation of goods from one place to another like
- To carry truck trailers by rails, special flat cars are provided.
- Provision of in-transit services etc.
In recent years in the transportation mode of trucks has played a significant role in the transportation of goods from one place to another with a share of 24% of total cargo ton-miles. Within city transportation, trucks are considered as the largest transportation mode. The routing and timing schedules of trucks are highly flexible and their service is much faster than railways. High-value goods of short hauls are effectively transported through trucks.
For the shipment of petroleum, chemicals, and natural gas from source markets, specialized means of transportation are used which is called pipelines. Pipelines are mostly used by the owners for the delivery of their own products.
The air mode of transportation is the least popular among the business organizations and only about 1% of the total cargo is transported through the means of air. But still, in this mode of transportation is becoming very popular. The cost of air transportation is much higher due to high freight rates, but it is the quickest mode of transporting products, especially perishable goods and a smaller quantity of highly valuable products.
- Shipping (Water)
Shipping is the oldest mode of transporting goods from one region to another, but it is time-consuming transportation than other modes. Shipping used together with the other mode of transportation. The following are some of the combinations of intermodal transportation.
Fishy Backs: Water and Trucks
Transships: Water and Rails
Airtrucks: Air and Trucks
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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