Logistics Management

In a competitive marketplace, the companies that get their products to market fastest, minimize their inventory costs and get the most mileage-literally and figuratively-out of their field-service or delivery fleets are the ones that succeed. (Rettig, 1). And many companies are automating their logistics processes by setting up supply chains that connect them with their customers and suppliers.

Simply defined, logistics is a practice that's used to determine how to move people and materials most efficiently between a source and a destination. The "chain" metaphor is used to describe a group of companies connected loosely, all collaborating on the most efficient and economical delivery of a product.

Logistics management requires that equipment, resources and labor are made available only in the amount required and at the time required to do the job. It is based on bringing product exactly in line with market demand. JIT means making what the market wants, when it wants it.

Even more specifically, logistics management is crucial to companies endeavoring to employ just-in-time manufacturing practices. Efficient logistics management ensures that OEMs (original equipment manufacturers) will have the necessary parts delivered to a given company in a synchronized and timely fashion that enables the company to meet the supply demand for their product in less time than it would take them if they were manufacturing all the parts of their product themselves.

Supply Chains

Outsourcing is one of several elements of supply chain management generally applied toward increasing efficiency in operations. For the most part, many companies see outsourcing as a cost-reduction mechanism and many firms have several third-party contracts.

Many chemical producers are outsourcing supply chain management to logistics companies. Dow Chemical, for example, piloted its first third-party contract with Yellow Freight System located in Overland Park, KS and subsequently signed a $70-million outsourcing deal with Menlo Logistics in Redwood City, CA. in 1995. Under the agreement, Menlo Logistics will dispatch inbound and outbound truckload and less-than-truckload shipments from 45 Dow facilities. (Morris, 1997). The deal with Menlo has led to significant savings in freight shipment.

Menlo now assigns all Dow's shipments to carriers. Dow benefits from the extensive, computerized distribution tracking system operated by Menlo. They use their own technology to ensure that carriers meet quality and service requirements and are the most competent carriers for given lines of traffic.

Manufacturing Directions

One can hardly pick up a business magazine without reading about the challenges posed by the global economy - the need to continually improve quality, customer service, reduce cycle time, reduce costs, etc. (Barkman, 1997). We read about failures of traditional costing systems to provide data in a manner relevant to the decisions to be made. Traditional accounting data is said to be untimely, inaccurate, and misleading. We hear about "reengineering" or rethinking what is done and why it is done. There is product diversity with a myriad of possible configurations. There has been a plethora of acronyms referring to different management and production techniques (just-in-time (JIT), computer integrated manufacturing (CIM), total quality management (TQM), etc.) and many suggestions have been made as to how managers can successfully move to the future in these rapidly changing times.

Which leads us to the question of just what directions are distributors taking toward that much-discussed bridge to the 21st century?(Levine, 1996).

Increased globalization is on virtually everyone's mind, with industry leaders leading the way to new frontiers, including China. A quick look at Distribution Trends 1997's Top 25 list of franchised industrials shows some foreign firms and U.S.-offshore combinations that weren't present just a year ago, and more such collaborations are likely.

It is important to develop a link between the companies so to ensure a long-term business relationship. This provides the companies involved with the stability required to optimize their profit. There are four needs that affect the supplier's ability to perform : trust, communications, linearity of production, and time and visibility to make changes.

Requirements for Logistics Manufacturing

The corporate commitment to developing the internal structures and the customer and supplier bases to support logistics manufacturing is the primary requirement for developing a viable logistics system. To be able to establish a logistics manufacturing system, every department should have some commitment to align with a common goal. This goal must also be supported by the company's top management in order to have resources and time allocated to developing the necessary systems and procedures. The system needs to be methodically developed on a scale that is within the employer's means from both a financial and an applications standpoint. Ultimately, the operation of a logistics system will require the unwavering support and commitment of the entire company.

Partnerships

In the past companies were capable of remaining independent and competitive when they had the capability and resources necessary to produce a product. This is becoming more and more difficult As technology increases in complexity, companies overcome capital limitations or labor intensive requirements by becoming dependent on suppliers to provide services. Many services and Original Equipment Manufacturing (OEM) suppliers have evolved as the result.

Companies now appreciate that long-term success relies on the quality of the customer-supplier relationship established so that they will develop successful partnerships. Therefore, successful partnerships require the development of mutually beneficial programs.

Purchasing

The most challenging area for many manufacturers in achieving JIT is the purchasing of raw materials and parts. This is important because an internal JIT system can only be operated successfully when the material being fed into it are of sufficient quality and delivered on time.

JIT purchasing desires the following goals:

Ð'* Ð'* Secure a steady flow of quality parts.

Ð'* Ð'* Reduce the lead time required for ordering product

Ð'* Ð'* Reduce the amount of inventory in the supply