Page 43 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes
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Caution Even a manufacturer’s agent, which typically does not own inventory, must
depend on inventory availability to perform expected marketing responsibilities. Unless
a proper assortment of products is efficiently delivered when and where needed, a great
deal of the overall marketing effort can be jeopardized.

It is through the physical distribution process that the time and space of customer service
become an integral part of marketing. Thus, physical distribution links a marketing channel
with its customers. To support the wide variety of marketing systems that exist in a highly
commercialized nation, many different physical distribution systems are utilized. All physical
distribution systems have one common feature: they link manufacturers, wholesalers, and
retailers into marketing channels that provide product availability as an integral aspect of the
overall marketing process.

2.4.3 Manufacturing Support

The area of manufacturing support concentrates on managing work-in-process inventory as it
flows between stages of manufacturing. The primary logistical responsibility in manufacturing
is to participate in formulating a master production schedule and to arrange for timely availability
of materials, component parts, and work-in-process inventory. Thus, the overall concern of
manufacturing support is not how production occurs but rather what, when and where products
will be manufactured. Manufacturing support has one significant difference when compared
with physical distribution. Physical distribution attempts to service the desires of customers
and therefore must accommodate the uncertainty of consumer and industrial demand.
Manufacturing support involves movement requirements that are under the control of the
manufacturing enterprise. The uncertainties introduced by random customer ordering and erratic
demand accommodated by physical distribution are not present in most manufacturing
operations. From the viewpoint of overall planning, the separation of manufacturing support
from outbound (physical distribution) and inbound (procurement) activities provides
opportunities for specialization and improved efficiency.

2.4.4 Procurement

Procurement is concerned with purchasing and arranging inbound movement of materials,
parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses,
or retail stores. Depending on the situation, the acquisition process is commonly identified by
different names. In manufacturing, the process of acquisition is typically called purchasing. In
government circles, acquisition has traditionally been referred to as procurement. In retailing
and wholesaling, buying is the most widely used term. In many circles, the process is referred to
as inbound logistics. Although differences do exist concerning acquisition situations, the term
procurement is used here to include all types of purchasing. The term material is used to identify
inventory moving inbound to an enterprise, regardless of its degree of readiness for resale. The
term product is used to identify inventory that is available for consumer purchase. In other
words, materials are involved in the process of adding value through manufacturing, whereas
products are ready for consumption. The fundamental distinction is that products result from
the value added to material during manufacturing, sorting, or assembly.
Procurement is concerned with availability of the desired material assortments where and
when needed. Whereas physical distribution is concerned with outbound product shipments,
purchasing is concerned with inbound materials, sorting or assembly. Under most marketing
situations involving consumer products, such as a grocery manufacturer that ships to retail

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