Logistics involves the management of three flows of products and information. Three main types of logistics: • Outbound logistics – controls the movement of products from points of distribution (factories or service delivery points) to consumers. • Inbound Logistics – deals with the flow of products or services from suppliers to manufacturers to service providers. • Reverse Logistics – address the methods consumers use to send products backward through a channel for return or repair. Logistics Managers, or supply chain managers, are responsible for coordinating the activities of all members of a company's distribution channel. Well-managed logistics and supply chains have several benefits. By coordinating activities among channel members, they can reduce distribution costs, which leads to higher profits and potentially lower prices for customers.
When managing logistics systems for a single company or for a supply chain involving a network of firms, decisions must be made in the following five areas: • Production – What kind of products should be produced, in what quantities, and when? • Inventory – What level of inventory is needed, and where should it be stored in the supply chain? • Location – Where should production and storage facilities be located? Where should products be sold? • Transportation – How should inventory be transported between channel or supply chain members? • Information – How much data should be collected at each point in the distribution process? How much information should be shared among independent channel or supply chain members? Instead of handling its logistics systems internally, a firm may hire a Third-Party logistics company (3PL) to manage all or part of its distribution network. At least 70% of companies worldwide are using a 3PL for one or more key supply chain tasks. Initially developed and implemented by Toyota, Just-In-Time inventory management is a technique in which goods are delivered within a predefined time “window”. This time slot corresponds to exactly when goods are needed, so they arrive “just in time” to be used or sold, thus ensuring that the firms storage costs are minimal. Physical distribution (or freight transportation) is the process of carrying goods to customers. Also deals with the transport and storage of everything from raw materials to finished goods. Distribution focuses on outbound logistics by managing the movement of physical products from point of manufacture to customers. Inventory refers to a store of goods awaiting transport or shipping. Because holding inventory can be expensive, marketers try to keep inventory quantities low, but still large enough to satisfy customer demand. Three Parties are involved in the distribution process: • Shippers – who own the goods being distributed.
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