Principles Of Logistics Management For Goods And Services

Production

Discuss about the Principles of Logistics Management for Goods and Services.

Logistics management is a part of the Supply Chain Management, dealing in the planning, implementation and control of activities related to the forward and back flow of goods and services, with other relevant information from the delivery point to the point of consumption for meeting the needs and demands of the customers (Agus & Shukri Hajinoor, 2012).

Abbott, the manufacturing company of Singapore, considered for preparing this report   mainly deals in developing locally manufactured nutritional products for babies to have a healthy start, manufacturing pharmaceutical products for aged adults to stay fit and energetic and produce diagnostic tools for the mass healthcare system in Singapore. Through this organization, how the logistics management interface with the different functional areas like, production, accounting, finance and marketing will be discussed and thereby an analysis will be carried out to determine the effectiveness of order cycle and inventory management (Christopher,2016). Then, based on the analysis, the necessary recommendations would be made by applying the relevant concepts and theories related to logistics.

Thus, the report would conclude that for any manufacturing organization to succeed, logistics will have a significant role to play because no matter how the different departments of an organization carry out their duties, they would yield the desired results only if the activities get coordinated with the proper delivery of goods to the right kind of customers in the appropriate time (Dekker et al., 2013)

All the areas work in-tandem with the logistics department and thereby increase the effectiveness of the organization as a whole. Now the report discusses about the possible areas of interface between logistics and the different functional areas like production, marketing, finance and accounting of Abbott.

An organization’s production department is mainly concerned about converting the inputs into finished products, through a series of processes. In case of Abbott, who specializes in manufacturing nutritional and pharmaceutical products, production process would only be successful if the distribution network is strong with the help of an effective logistics department (Dyckhoff, Lackes & Reese, 2013). The goods that are produced, if they don’t get delivered in the same form to the right customer segments in the right time, then the whole purpose of getting the goods produced, goes in vain. As a result of which, the company can potentially suffer heavy losses. Production would only be meaningful, when the goods get passed on to the customers in a swift and efficient manner, without any loss of time (Fernie & Sparks, 2014).

Marketing

Marketing is a combination of many activities starting from identifying the four key components, Product, Price, Place and Promotion and thereby put emphasis on these four aspects. They help cite out the features of the products, their utilities, why should customers purchase the products and how do the products fulfill the customers’ needs and demands (Grant, 2012). Then the prices are strategically kept low initially in order to attract the attention of the customers and persuade them to buy the products. This pricing method is known as penetration pricing. Gradually when the products start getting good response from the customers’ side, the company adopts the strategy of price skimming, thereby increasing the prices to substantial levels for covering up the initial loss (Gunasekaran & Spalanzani, 2012). Next comes, selection of the appropriate place to distribute the products. This where the role of logistics comes into play. For a company like Abbott, who deals in manufacturing of pharmaceutical products and other goods related to health, getting the products distributed through an efficient logistics department is a must (Nam et al., 2013). This helps to uphold the image of the organization which leads to strengthening of relationships with business partners, suppliers and retailers. Last but not the least, the process of marketing is incomplete without promotion. Organizations carry out many promotional campaigns to spread awareness about different kinds of products and thus help people to understand their utilities and effectiveness (Rushton, Croucher & Baker, 2014). Success of any manufacturing company is firmly dependent on an effective logistics department.

Finance department forms an integral part of any organization. They deal in maintaining the accounts of the employees, look after their salary details, take care of the cost of procurement of materials, take into account the delivery charges charged by the logistics provider (Schönsleben, 2016). Here the role of purchasing manager becomes extremely important as he is the one, who handles the cost which the company incurs by paying the required amount to the ones getting the goods delivered to the suppliers. Finance department and logistics do not necessarily go hand in hand. On one side, where Finance is recognized as a controlling function, which does not believe in blocking cash through credit and inventory and speed up the process of process of recovery (Rushton, Croucher & Baker, 2014). On the other hand, logistics always try to expand the business by providing more credit to customers and hold inventory to serve customers better. In case of Abbott, the company’s finance department would help to cut down the inventory expense by lowering the rate of interest for storing, thus saving significant amount for the company (Seuring & Gold, 2013). The emphasis on creating opportunities for the organization to save puts Finance in the forefront. Financial performance of any organization depends upon the ability to manage cash in a profitable manner. For the manufacturing organization Abbott, who deals in pharmaceutical products, economical logistics would work to the advantage for them. Timely delivery is critical but on-time delivery with less cost is always an ideal situation for the company (Schönsleben, 2016).

Finance

The accounting side for any organization takes into account the amount which a company spends on warehousing and transportation and tries to cash on the opportunities for reducing costs through discounts or by persuading the organization to hire less expensive vendors for logistics. The logistics manager for Abbott can look to reduce the cost of storing the pharmaceutical goods, so that they are in a better position to tackle emergency situations, where there is heavy demand for goods from the customers (Stadtler, 2015). Keeping the accounts of the company will help keep track of the proceedings and thus control the expenses. Abbott, who is into manufacturing of pharmaceutical products for people of all ages, demand would always be on the higher side. So the important aspect for the company will be not only to keep sufficient stock of goods but also ensure that the products get delivered to the right customers in the right moment to meet their needs and requirements.

The order cycle maintained by Abbott is an efficient one. Right from receiving the orders to the processing of those orders by keeping in mind, the requirements of the customers, a smooth flow of activities take place, hence take care of the products getting delivered in right time and place. Storing of pharmaceutical products is critical and they are done by checking all the specifications and through following the guidelines (Wang, 2012). Keeping the products in right form by complying with rules and regulations help to meet up the demands and earn the trust of the customers. This is where the Economic Order Quantity gets implemented. EOQ refers to the maximum amount of goods required to be purchased in an instance so as to minimize the total ordering costs or for holding products in stock on an annual basis. Abbott makes sure that their EOQ is up to the mark, so that they can meet up the demands every single time.

AlinIQ Inventory Management System combines innovative RFID technology and streamline the process consulting, which allow the labs to stay ahead of operational needs, help prevent shortages of critical items, lead to reduction of waste and time consumed for manual processes.  AlinIQ Always On services help deliver predictive alerts to laboratories, thereby help to enable, detect and prevent the downtime for instruments, upto three days in advance.  The AlinIQ Analyzer Management System provides hospitals and labs across the country, the ability to integrate different systems of softwares into a single standardized system for optimizing the processing time for samples, bring forth efficiency in the work flow and hence produce quality results (Wisner, Tan & Leon, 2014). Another effective tool is AlinIQ Business Intelligence System helps in providing the tools for optimizing throughout and increase the capacities of the existing systems, so as to help labs absorb volume increases without adding to the budget. Finally, the Inventory Management System of AlinIQ with a combination of RFID technology and a process consulting, which is streamlined allows labs to stay ahead of their operational requirements, thus helping them to keep sufficient stock of critical items and ensure reduction of waste.

Accounting

The above analysis has shown how logistics management integrate with the   different functional areas such as marketing, production, finance and accounting. The importance of this concept, which is a part of supply chain management can be understood from the fact that, without the existence of logistics, the functional aspects would not be able to deliver as per the expectations. Logistics is an integral part through which the planning takes shape. The following are some of the recommendations based on the analysis :

1. a) To further enhance the effectiveness of logistics, Abbott can use the theory of strategic networks for enabling purposeful arrangements on a long-term basis.
2. b) The activities which have comparative advantage should be kept internally while activities related to logistics should be contracted out to efficient outfit so that goods get transported in due time to the concerned persons, with low cost.
3. c)  Abbott, who deals in manufacturing pharmaceutical products could look to increase their stock further, so that they can always meet up the demands of the customers and provide them the essentials in appropriate times.
4. d)  The company can look to cut down their cost of manufacturing, leading to lower down the transporation cost, which in turn would help in fulfilling the customers demands by charging minimal price from them.

Conclusion

The report concludes that for an organization to run their operations in an effective and smooth manner, keeping up all the activities related to marketing, production, finance and accounting, in tune with the logistics is a necessity. Delivering the goods in due time to the right kind of customers to fulfill the customers’ needs and wants is imperative for any business to flourish and be profitable all through. The importance for any company, dealing with logistics, lies in delivering the goods and services, in their appropriate form so that the demands of the customers are met. For a company like Abbott, who deals in the  manufacture of pharmaceutical products, timely delivery of products is essential as people and hospitals require medicines for treatment purposes and even the slightest bit of delay can prove to be disastrous.

References

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Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse logistics: quantitative models for closed-loop supply chains. Springer Science & Business Media.

Dyckhoff, H., Lackes, R., & Reese, J. (Eds.). (2013). Supply chain management and reverse logistics. Springer Science & Business Media.

Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.

Grant, D. B. (2012). Logistics management. Pearson Higher Ed.

Gunasekaran, A., & Spalanzani, A. (2012). Sustainability of manufacturing and services: Investigations for research and applications. International Journal of Production Economics, 140(1), 35-47.

Nam, S. H., Kurata, H., Vitton, J., Park, J., Saen, R. F., Gershon, M., … & Mahalik, D. K. (2013). International Journal of Information Systems and Supply Chain Management.

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Schönsleben, P. (2016). Integral logistics management: operations and supply chain management within and across companies. CRC Press.

Schönsleben, P. (2016). Integral logistics management: operations and supply chain management within and across companies. CRC Press.

Seuring, S., & Gold, S. (2013). Sustainability management beyond corporate boundaries: from stakeholders to performance. Journal of Cleaner Production, 56, 1-6.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Wang, J. (Ed.). (2012). Management innovations for intelligent supply chains. IGI Global.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach. Cengage Learning.