Ans. LOGISTICS TASKS
The
important decisions in respect of physical distribution are : (1) how orders
should be handled? (2) where should the warehouse be located ? (3) how much
stock should be kept on hand? and (4) how should the goods be transported ? and
(5) how is the logistics information monitored?
Let
us discuss about the components in detail.
Order Processing : The starling point
of the physical distribution activities is the processing of customers' orders.
In order to provide quicker customer service, the orders received from
customers should be processed within the least possible time. Order processing
includes receiving the order, recording the order, filling the order, and
assembling all such orders for transportation; etc. The company and the
customers benefit when these steps are carried out quickly and accurately. The
error committed at this stage at times can prove to be very costly. For
example, if a wrong product or the same product with different specifications
is supplied to the customer, it may lead to calculation of the original order
(apart from loss in the credibility of the firm). Similarly, if the order is
rot executed within a reasonable time, it may lead to serious consequences.
High speed data processing techniques are now available which allow for rapid
processing of the orders.
Warehousing : Warehousing
refers to the act of storing and assorting products in order to create time
utility. The basic purpose of the warehousing activity is to arrange placement
of goods, provide storage facility to store them consolidate them with other
similar products, divide them into smaller quantities and build up assortment of
products. Some of the important decision areas in respect of warehousing are:
1.
how many warehouses should the firm have?
2.
where should these warehouses be located?
3.
what should be the pattern of ownership of the warehouse (owned or rented)?
Generally,
larger number of warehouses a firm has the lesser would be the time taken in
serving customers at different locations, but greater would be the cost of
warehousing, Thus, the firm has to strike a balance between the cost of
warehousing and the level of customer service.
Inventory Control : Linked
to warehousing decisions are the inventory decisions which hold the key to
success of physical distribution especially where the inventory costs may be as
high as 30-40 per cent (e.g., steel and automobiles). No wonder, therefore,
that the new concept of Just-in-Time-Inventory decision is increasingly
becoming popular with a number of companies.
The decision regarding level of inventory
involves estimation of demand for the product. A correct estimate of the demand
helps to hold proper inventory level and control tie inventory costs. This not
only helps the firm in term of the cost of inventory and supply to customers in
time but also to maintain production at a consistent level. The major factors
determining the inventory levels are :
1.
The firm's policy regarding the customer service level
2.
Degree of accuracy of the sales forecasts
Responsiveness
the distribution system i.e., ability of the system to inventory needs to the
factory and get the products in the market
The
cost of inventory consists of holding cost (such as cost of warehousing, tied
up capital and obsolescence and replenishment Cost (including the manufacturing
cost).
Transportation:
Transportation seeks to move goods from points of production and sale to points
of consumption in the quantities required at times needed and at a reasonable
cost. The transport Jon system adds time and place utilities to the goods landed
and, thus, increases their economic value. To achieve these goals, transportation
facilities must be adequate regular, dependable and equitable in terms of costs
and benefits of the facilities and service provided.
Information
Monitoring : The physical distribution managers continuously need
up-to-date information about inventory, transportation and warehousing For
example, in respect on inventory, information about present stock position at
each location, future commitment and replenishment capabilities are constantly
required. Similarly, before choosing a carrier, information about the
availability of various modes of transport, their costs, services and
suitability for a particular product is needed. About warehousing, information
with respect to space utilization, work schedules unit load performance, etc., is
required.
In
order to receive all the information stated above an efficient management
information system would be of immense
use in controlling costs, improving services and determining the overall effectiveness
of distribution, of course, it is difficult to correctly assess the cost of
physical distribution operations. But if correct information is available it
can be analyzed systematically and a great deal of saving can be ensured.
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