Logistics and Supply Chain Management: Key Concepts
Key Concepts in Logistics and Supply Chain Management
Materials Management vs. Physical Distribution
Materials Management: Deals with the initial stage of logistics, focusing on sourcing raw materials and shipping them to part suppliers for the production process.
Physical Distribution: Focuses on the later stage of logistics, managing the flow of goods from the production process to intermediaries and ultimately to customers.
Similarities: Both are integral to the production process and contribute to delivering goods to end consumers. They both involve a network where raw materials/goods move to the next stage in logistics.
Customer Benefits in Logistics
Logistics ensures customer satisfaction by providing the right products to the right customer, in the desired quantity and condition, at the right time and place, and at a price the customer is willing to pay.
The Value Chain
The value chain helps understand how logistics fits into an organization and illustrates the activities a firm performs to benefit its customers. It includes:
- Primary Activities: Inbound/outbound logistics, operations, marketing and sales, and services.
- Support Activities: Infrastructure, human resource management (HRM), technology development, and procurement.
Logistics and Marketing Relationship
Logistics decisions depend on the organization’s marketing strategy. Management must first identify customer needs and wants, then develop an integrated marketing strategy to satisfy those desires better than the competition.
The 4 P’s of marketing (product, price, promotion, place) are crucial. Place, encompassing logistics decisions on how to best supply the product to the customer, is the most important component in the marketing/logistics partnership.
The Role of a Channel Leader
A channel leader controls the behavior of all other channel members, maintaining discipline among intermediaries. The goal is to optimize the overall efficiency of the channel, ensuring all participants are aligned. The objective should be mutual benefit between the manufacturer, customers, and intermediaries.
Supply Chain Management vs. Quick Response Logistics
Supply Chain Management: Integrates organizational flows to create the greatest net benefit for the customer.
Quick Response Logistics: Emphasizes the flow of finished goods from manufacturers to retailers.