Global Logistics Zone

The entire network of facilities and distribution channels that control and perform tasks related to the procurement of materials and their transportation from the  supplier to manufacturer, onward to the distributor, retailer and finally the customer, constitute the supply link whose effective functioning is achieved through supply chain management. This kind of management is essential both in the manufacturing as well as the services sector. The oversight, integration and coordination of the flow of materials, information and finances within and between companies is looked after this type of management.

The concept of supply chain management is based on three types of flows which involve products, information and finances. The product flow  involves physical movement of the goods and products from supplier to manufacturer and thereafter to the retailer and the consumer. The information flow deals with the transmission of orders, directives and instructions related to the management of the entire process. The most important finance flow implies the credit terms, payment schedules, actual money transfers and ownership conditions. Together these three functions ensure the continuous and uninterrupted supply of finished products and services to the end consumers.

The essential decision making process in this sphere of management entails two broad categories of decisions. These are strategic and operational categories of decisions which will affect the short and long term health of the venture. The strategic decisions in supply chain management focus on the policy related issues that have a long term perspective and outline the future growth and expansion plans. The operational decisions are more specific to the day to day functioning of the supply network and involves steps and measures which maintain the efficiency as well as effectiveness of the system and prevent frequent breakdowns of the network. Both strategic as well as the operational decisions regarding any supply network are based in four core areas that include location, production, inventory and transportation. The location decisions relate to the sourcing and stocking options and management of the assets that dedicated towards these areas. The production decisions are oriented towards manufacturing aspects like plants problems,  manufacturing capacity building and enhancement, labor issues and finally the control and coordination of the production facilities. Inventory decisions focus on maintaining and updating inventories that deal with raw materials, semi finished goods and finished end products. All decisions regarding transportation are concentrated on the selection and running of transport means that are cost effective, assured of service and efficient in ensuring timely delivery at each stage of the movement involved in the entire chain.

Currently there are many sophisticated software available which deal with all the above discussed sectors and permit the key executives to simultaneously take decisions both at the operational as well as strategic levels. Being interlinked with all the inventories and operational status data, these software are able to generate analysis regarding the exact nature of shortcomings and limitations that may block the network at any time. The coherent interaction between databases, software and decision making executives is essential to ensure effective and meaningful supply chain management.

It is necessary that materials flow between where they originate and where they need to be used in a manner in which the operations that need to be performed are never interrupted. Managing such flows is called logistics and involves the integrating information collating the requirements, transportation, handling,storage and ensuring security during the process. The science behind this originated with the military where the needs of an army to get the necessary arms and ammunition and other support as they kept moving their positions became as important to battle successes as other strategy and fighting prowess.

In a company logistics are considered a very important part of the functions that affect performance and costs. For a company short delivery times help to keep inventories low and costs under control. Reliability of supplies also ensures high-capacity utilization which in turn reduces the cost per unit of production.
Logistics have two areas to contend with in the operations of a company. For materials that are inbound or coming into a company it is necessary to concentrate on purchase procedures linking raw material and suppliers to manageable or low inventories which can reduce warehousing costs. Outbound logistics has to do with storage and movement of the finished product to the customer. This is quite often linked to sales, which can influence production targets which in turn can affect the logistics of inbound materials.

Logistics in a company’s operations can extend to a number of fields of activity ranging from, procurement, production, distribution, after sale and disposal. As a business concept the importance of logistics grew in the 1950s when the complexity of manufacturing lead to supply chains that called for efficient management. It further led to concepts like JIT or just in time, as well as development of software that can help the scheduling requirements of complex supply chain and distribution chain problems.
The necessity for all links in a supply chain or distribution chain to remain strong is one of the fundamentals of good business immaterial of the size of the company. Many companies, big and small, look at outsourcing their logistics management to third parties. This helps them to reduce delivery costs as then there is no need to maintain a fleet of delivery vans or other transport to ensure inbound and outbound supplies. They are also then relieved of any need to plan routes and delivery stops as this is then the responsibility of the third-party. There is a complete saving in equipment and recruitment costs required for transport fleets which can also add to maintenance and insurance headaches. However it is necessary to ensure that the third-party carries all the necessary insurance and other cover that can safeguard the materials given to the third-party logistics firm.

Automation of warehousing is one aspect that has greatly helped the logistics in any company. The use of RFID or radio frequency identity devices has helped to create updated records of receipts and deliveries from a warehouse. Software further assists the planning processes by warnings on low or high inventories both of which can greatly affect production schedules and costs.