Why is it important to have an integrated approach to logistics?

Answer 1

Logistics refers to the system of flow of material across the complete supply chain of an organization. The efficiency and effectiveness of the logistics effects many aspects of business including cost, lead time, customer service levels, product availability and inventories. The logistics function includes three distinct areas, incoming logistics, in plant logistics, and out bound logistics. The distribution network comprises the network of organizations and facilities responsible for the out bound logistics. Thus structuring of distribution is a very important part of improving the integrated logistics performance, and the integrated logistics performance is a major contributor of the total business performance.

Today, more and more companies are adopting the concept of integrated logistics management.

This concept recognizes that providing better customer service and trimming distribution costs

requires teamwork, both inside the company and among all the marketing channel organizations. Inside, the company's various functional departments must work closely together to maximize the company's own logistics performance. Outside, the company must integrate its logistics system with those of its suppliers and customers to maximize the performance of the entire distribution system. In most companies, responsibility for various logistics activities is assigned to many different functional units-marketing, sales, finance, manufacturing, purchasing. Too often, each function tries to optimize its own logistics performance without regard for the activities of the other functions. However, transportation, inventory, warehousing, and order-processing activities interact, often in an inverse way. For example, lower inventory levels reduce inventory-carrying costs. But they may also reduce customer service and increase costs from stock outs, back orders,

special production runs, and costly fast-freight shipments. Because distribution activities involve strong trade-offs, decisions by different functions must be coordinated to achieve superior overall logistics performance. The goal of integrated logistics management is to harmonize all of the company's distribution decisions. Close working relationships among functions can be achieved in several ways. Some companies have created permanent logistics committees made up of managers responsible for different physical distribution activities. Companies can also create management positions that link the logistics activities of functional areas. Many companies have a vice president of logistics with cross-functional authority. The important thing is that the company coordinate its logistics and marketing activities to create high market satisfaction at a reasonable cost.