Logistics and it's cost deployment
To define logistics in a simple way we could say " Having right things at right place at right time" . When we look from business viewpoint we can also elaborate that logistics deals with all move- store activities that facilitate product flow from one point of raw material to the final consumption of becoming a finished goods. In between this journey of movement from raw material to finished goods we have cost which needs to be monitored at the adequate level in order to benefit the business.
" It is important to note that customer pay for the finished product only not for your process and sub process you have inside the factory "
Managing logistics internally and externally creates competitive advantages like 1. optimising operations cost and productivity, 2. Efficient utilisation of assets, 3. Facilitating internal logistics fulfillment and it's functions, 4. Integrating external suppliers through refining external logistics approach, 5. Reaching congruity to performance.
The 3 main principles of logistics are
Synchronise production with sales as closely as possible to satisfy customer by producing and delivering in shortest lead time
Minimise inventory by creating continuous flow as keeping the stock will only reduce the capital efficiency and occupying space.
Minimise the material handling to avoid cost of handling the material.
The 3 principles of logistics are very important to address is because of the fact that 1.Minimum necessary amount of physical distribution by intensive basis, inventory reduction and avoiding meaningless inventory movement reduces physical distribution cost. 2. Reduction of sales turnover loss by improving availability will increases sales opportunity. 3. Avoiding losses caused by unnecessary production creating unsold inventory will reduce production related loss. By doing so you will clearly able to see the Improvement in cash flow and also able to create competitive advantage towards your competitors.
The Purpose of Supply Change Management Vision: Operation optimization of short term (from 1 week to a few months) Needs: Synchronize the coordination based on Delivery Forecast, Quick response to demand change (Levelling production and refining internal and external logistics), Establishing a system to supply the goods without delay. Objectives: supply the only demanded goods with the right quantity at the right time without delay. Target: From local optimum to overall optimum Results: Acceptable level of inventory, no shortage of the demanded goods, and reduction of cost.
Why Logistics is so important for manufacturing industries? The major elements required to meet market demand right on time. 1) Analysing and predicting the market demand as accurately as possible from production to stock to production to order. 2) Flexible production lines . 3) Manufacturing lead times with shortest delivery. 4) Purchasing and receiving the necessary materials just in time. 5) Integration of sales, distribution production, purchasing functions by efficient logistic systems
The point 5. is very important to all industries since today if we take a look back on many organisations that has gone backwards in there results is because of the fact that ISC(Integrated supply chain) has become Dis-Integrated supply chain. So ensure that all departments are fully connected with one vision with a motto that it is possible.
Knowing the basics is important but knowing what we need to attack is also very important. when developing the logistics cost deployment please always ensure that you are setting some key milestones.
The main Key performance indicators for building Logistics cost deployment are as follows.
- Easy to collect the data (It is difficult to be simple, but simple to make it difficult)
- Set simple indicators (Should be easily understood by everyone)
- Simple meaning for why and what for we going to use this data (Simplicity)
- Easy feedback to people and to business
- Make data collection in such a way it is possible to collect, extract and reduce the analysing time continuously.
IN MY NEXT EDITION WE WILL CONTINUE MORE ON LOGISTICS COST DEPLOYMENT.
Please remember.......
" Like we say for quality that voice of the customer can be heard inside the plant production, for logistics the voice of the customer must be heard even in warehouse"