Provided a group of logistics goals, the business organization is prepare to design a logistic system that will reduce the cost of accomplishing these goals. So what are the four major functions of logistics? Let’s check below them all one by one.
- Order Processing
- Warehousing
- Inventory
- Transportation
Four Major Functions of Logistics
Order Processing
There are several manners in which orders can be submitted. These include either by telephone, by mail, through computer & EDI and through salespeople.
In some situations, orders are actually generated by the suppliers for their customers. Orders must be processed rapidly and correctly, once they have received.
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When order processing is carried out efficiently, both business organization and its customers get benefit. Recently computerized order processing systems are utilized by mot business organizations that that speed up the order-shipping-billing cycle.
For Example, a computer based system is operated by General Electric which when received an order from customer. First customer credit standing is verified along with the location of presence of verified items.
The computer system then releases a command to ship, updates the inventory records, bills the customer transmits a production order for new inventory, and pass along the message back to the salesperson that the order to customer is finishing. And all this occur in less than 15 seconds.
Warehousing
The goods of each business organization must be store in order to wait for sale. Because the manufacturing and consumption cycles rarely matched, therefor storage function is required.
It is decided by the business organization that what kinds of and how many warehouses it requires and where they should be situated. Either distribution centers or storage house are utilized by the business organization.
Goods are stored for moderate to long periods in storage houses. On the other hand goods are moved instead of stored, in the specially designed distribution centers.
These distribution centers are potentially automated and big warehouses designed to get goods from many suppliers and plants, receive orders, fill them properly, and provide the goods to customers on a rapid basis.
In the recent years, equipment technology and warehousing facilities have improved potentially. Competition is faced by older multistoried warehouses having obsolete materials handling-systems from latest one-storiedautomated warehouses with new materials-handling system under the command of central computer.
Only limited number of employees is required in these warehouses. Orders are read by computers which then direct lift trucks, robots or electric hoists to collect goods, transfer them to loading docks and invoices are issued by it.
These warehouses have decreased labor costs, worker injuries, breakage, and theft and have enhanced inventory control.
Inventory
Customer satisfaction is also influenced by inventory levels. The main issue is to keep critical balance betweencarrying too little inventory and too much inventory.
Stock obsolescence and higher-than-necessary inventory carrying costs are the result carrying too much inventory. On the other hand, costly emergency shipments or production, stock outs and customer dissatisfaction are the result of carrying too little costs.
Balance should be made by management in the costs of taking too much inventories against resulting sales and profits, while making inventory decisions.
Through just-in-time logistics systems several business organizations have potentially decreased their inventories and related cost, during the past decade.
Through such systems, manufactures and retailers take little portion of inventories of merchandise or parts, mostly just for limited days of functions. Rather than being stored in inventory and utilized, new stock arrived exactly when required.
Accurate forecasting is required in just-in-time systems which further needs frequent, fast and flexible delivery so that new inventory will be available when required. These systems, however, consequence in solid saving in handling and inventory carrying costs.
Transportation
Interest should be taken by the marketers in their business organizations’ transportation decisions. The selection of transportation carriers influence the delivery performance, pricing of products and status of the goods when they come, all of which will influence customer satisfaction.
The business organization can select among following five transportation modes, while shipping goods to its dealers, warehouses and customers.
- Rail
- Truck
- Water
- Pipeline
- Air
The nation’s largest carriers are the railroads, accounting for 26 percent of entire cargo ton-miles transferred. For shipping large amounts of mass products like sand coal, farm, mineral and forest products over long distance, they are the most cost effective modes.
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Customer services of railroads are increased in recent years by designing new instruments to manage particular kinds of goods, giving flatcars for transporting truck trailers by rail and giving in-transit services like processing of goods en-route and deviation of shipped goods to other destinations en-route.
Thus, railroads appear ready for comeback after decades of losing out to truckers. The share of transportation of trucks has steadily enhanced and now accounts for 24 percent of entire shipment ton-miles.
As opposed to between cities, they account for largest part of transportation within cities. In the routing and time schedules, trucks are highly flexibles and they can generally offer quicker service as compared to railroads.
For small hauls of high value goods, they are efficient. In recent years trucking companies have added several services.
For shipping natural gas, petroleum and chemicals from sources to markets are performed by specialized means referred to as pipelines. Often owners employ pipelines to ship their own products.
Although less than 1 percent of the nation’s goods are transported through air carriers, they are becoming more significant as a transportation mode.
The freight rates of air are much more increased as compared to rail or trucks but air freight is preferred when products are to be transferred to distant markets or when speed is required.
Perishable products (cut flowers, fresh fish) and high value low bulk items (jewelry, technical instrument) are the most frequent air freighted products.
Packaging costs, inventory levels and the number of warehouses required are also decreased by air freight as found by business organizations.
Intermodal transportation is used increasingly by shippers in which two or more modes of transportation are combined. Rail and trucks are specified in piggyback.
Water and trucks are specified in fishyback. Similarly water and train describe trainship. Air and trucks describe airtruck. Advantages are given by combine mode which are not given by single mode.
