Page 156 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

Unit 7: Logistics and Characteristics of Modes of Transportation

Technology has been changing very fast and as a result, the Product Life Cycles have become Notes
shorter. The short shelf life of products has been putting pressure on the Transport Function to
deliver goods as quickly as possible. In addition to all these considerations, the SC Manager
may have to also worry about appropriate storage conditions (cool chain), if the Products need
to be preserved using this facility. What is also important is the mode of transportation to be
used. Also, the Pick-up system (facilities collect drugs) or delivery system (warehouses deliver)
has a bearing on the Distribution.
Another important factor is the decision to outsource transportation or not. One may have to
also worry about aspects such as having appropriate procedures to:

Verify the products shipped and received – type and quantity,
Conduct visual inspection for quality assurance, including expiration dates,
Complete and sign transaction records/vouchers,
Store the products, and
Update stock-keeping records
The main objectives of logistics management are:

Inventory Reduction
Reliable & Consistent Delivery Performance
Economy in Freight
Minimum Damages to the Product
Quick Response
Optimum Contribution towards business excellence

7.2.2 Inventory Reduction

Inventory Reductions have far-reaching implications on Company’s Return On Investment
(ROI). However, really speaking, it is a ‘tight rope walk’! While excess stocks may affect the
Profitability, not having enough inventories may result in ‘Loss of Customers’. Therefore, one
has to exercise proper control over Inventory, by taking appropriate steps at the right moment.

Objective of Inventory Control Systems

The objective of an inventory control system is to ensure the constant availability of products,
by defining:

When products should be ordered.
What quantities of products should be ordered
How to maintain adequate quantities to meet demand, while avoiding overstocks and
stock-outs

Inventory Control Systems

Maximum/minimum Inventory Control System is defined by months of stock. Systems are
designed so that stock quantities routinely fall between the minimum and maximum stock
levels. The minimum stock level includes safety/buffer stock. Any inventory control system
(max/min or other) must take into account safety/buffer stock. (However, in a Just-In-Time
environment, the system of maintaining safety/buffer stock is not practiced.)

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