Page 193 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Retail Business Environment

Notes

Notes Traditionally, when the term logistics is used, the purpose is to reduce the
transportation cost by adding warehousing information system.

Role of Logistics in Production and Sales

Logistics management system plays a significant role in the production and sales process of an
organization. It also serves as a profit center. It helps in collecting customer information,
developing transportation schedules and helps in making a shift from mass production to batch
production to take care of demands of different segments. Logistics is the management function
that controls all departments, but is not a sub-system that connects every department. The
manufacturer can supply or distribute any kind of goods in any place under a good logistics
system. There is a growing importance of logistics management due to increase in competition,
entry of newer methods of distribution and storage and increasing cost of distribution.

!
Caution Emergence of customer service as an important factor for customer satisfaction
has made companies spend millions of rupees in upgrading their logistics and distribution
management system, by adopting newer methods and technologies.
Types of Logistics

There are different kinds of logistics systems or subsystems used in organizations. They can be
classified as supplier logistics, organizational or corporate logistics and customer logistics. The
supplier logistics takes care of the flow of supplies and raw materials from vendor to the
company; the corporate logistics takes care of the flow of goods to the customer point whereas
customer logistics takes care of how customers handle the product from company’s source to his
consumption point.

Supplier Logistics

As explained above, the key issue in supplier logistics is to buy the right things. This needs to
address two critical issues i.e. supplier evaluation and ordering of the final product. The manager
should be able to evaluate the quality of the supplier, prior to issuing purchase orders and he
should be able to clearly describe the products to be ordered in order to make sure that the
supplier knows exactly what the firm wants. For physical distribution management, the product
transportation and delivery services have to be evaluated. The company may procure
transportation and product storage services from the supplier. The suppliers should be evaluated
on their capability to provide required services of acceptable quality level. The marketing
manager should ask the following questions while evaluating the supplier logistics system:

Do they have sufficient and reliable equipment?
Do they have enough resources including manpower, storage space, etc.?
Are their resources and equipment well managed?
Do they have the system to allocate their resources?

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