WHAT IS LOGISTICS MANAGEMENT?
Logistics is concerned with getting product and services where they are needed, when they are also desired. Logistics is a activity that never stop.
Logistics involves two major operations:
¨ MATERIAL MANAGEMENT.
¨PHYSICAL DISTRIBUTION MANAGEMENT.
Supply Chain Management [SCM] refers to the physical network that begins with supplier and end with customers. Internally SCM involves seamless integration of logistics with the other functional area and externally, works to achieve integration with other trading partners and service company.
®Management of flow of goods from the supplier to the final user.
®System wide coordination of product and information flows. Development of relations and integration of all activities that provide customer value.
The main function of inventory management is to minimize inventory cost, subject to demand and services constraint .It deal with guiding a firm with respect to
«Row materials and finished goods stocking policies.
«Short-term sales forecasting.
«Number size and location of stocking points.
«Just in time, pull push strategies.
Logistics in India
Studies revel that in India total logistics cost constitute nearly 10% of national GNP out of which 40% is due to transportation alone.
The RITES report on commodity flow for total transport system study of the planning commission, government of India, states that import elements of total logistics cost in India are produced inventory at source.
Types of inventory: -
TRANSITION INVENTORY: -
This is inventory currently undergoing transformation and function as a vehicle for profit generation.. It can be either in form of working progress or in the form of finished goods. The finished goods transition inventory can either be undergoing quality checker could be in the process of being transported from the point of consumption.
BUFFER INVENTORY: -
This is the inventory which is waiting to enter a production activitie
MAINTENANCE INVENTORY: -
These are inventories, which are not involved directly in the conversion process but are necessary to manage an organization property, plant and equipment.
FUNCTIONS OF INVENTORY:
§ Inventory allows managers to decouple operation.
§ Inventory protects one part of an operation system from disruptions in other parts of system.
§ Inventory can provide an edge against inflation.
§ Inventory allows firms to meet expected demand.
A company might carry inventory so as to:
§Reduces cost of purchasing by increased order lots
And decreasing number of orders.
§ AVOID STOCK OUTS
§ Allow variability in supply time.
§ Provide for storage space for WIP
There are four main categories of cost associated with inventory.
Costs ¬ Inventory costs ® over costs
Inventory carrying costs
The costs incurred when a customer places, as order and order cannot be filled from the inventory to which it is normally assigned.
They are further divided into two categories:
§Lost sales costs.
§Back order costs.
These costs occur when the customer, faced with out of stock situation, chooses to withdraw his order for the product. The cost id the profit that would have been made if the sale gad occurred and cost of negative affects that the stock out may have on future sales.
BACK ORDER COST: -
Back order costs that customer will wait for his order to be filled so that the sales is not lost but only delayed. These create clerical and sales cost for order processing additional, transport etc. That has to be occurred to fulfill these back orders out of course of normal distribution channel.
Inventory control, production control and warehouse management are the underlying methodologies that affect the industrial success of distribution organizations.
Inventory management is the practice of planning directing and controlling of inventory so that it contributes to the business profitability. Inventory management can help business be more profitable by lowering their costs of goods sold by increasing sales. Inventory managers have to provide for stocks, when needed, utilize available storage space efficiencies so that stocks do not exceed the storage space available. All of this is called inventory control.