Supply Chain Management
1 (a) Logistics Management Activities
Logistics involves physical management of the delivery of commodities to various consumers including manufacturing firms and final product consumers (Carter & Liane, 2011). It majorly involves the movement of goods and services to the end user. However, logistics should not be taken to mean transportation since it is a complex process with various other activities. Order processing is one of the core logistics activities. This means receiving and accepting client orders and ensuring payments and delivery is done duly. It entails the systems that are used by an organization to receive customer orders, check status of commodities being brought to stock as well as those that are already in stock and communicating to clients of their existence in stock (advertising). The ordering stage also encompasses involving, customer credit verification process, checking inventory status and recording accounts receivable. For this reason, Order processing can be defined as a complex area that requires to be highly automated to simplify operations. This is also related to material handling at the warehouse and during transportation.
Material handling specifically takes place in a storage area, also called warehouses. Majority of material handling usually takes place at the warehouse and during transportation. However, transporters are advised to reduce instances of material handling during transit to eliminate and reduce the likelihood of changing the form of the items due to breakage, pilferage and wastage. In addition, material handling inside the warehouse and during transit is emphasized upon because the process is rarely a value-addition undertaking. Any losses during this activity is unnecessary cost. It is therefore to minimize material handling where possible. A careful analysis of material management processes and keeping track of material flow can be used as a money saving strategy. The warehousing activity provides room for holding items before they are delivered to their destination. It is imperative to have the right equipment installed at a warehouse to improve handling. Inventory control ensures there is no wastage, especially during production and warehousing. This trickles down to the transportation management function. Transportation is a major activity as it facilitates the physical delivery of goods from the company to the end user. It connects all channels of distribution. Transportation cost can be reduced through better inventory management. Packaging helps avoid breakages and spoilage so that they can be transported easily. Packaging can also be done for items going to the warehouse. Inventory management encompasses the overall objective of inventory management. It entails the tradeoff between the level of inventory in stock and the level of inventory that is required to satisfy customer needs. Inventory management is related to the control of costs that are related to stock movement such as holding cost, storage cost and the risk of items become obsolete while in stock. In essence, these costs account for at least 15 to 50% of the total inventory on a yearly basis. Either much of the merchandize becoming obsolete in the recent times especially technologically affiliated commodities such as phones or computers becoming rapidly obsolete many organizations globally are giving inventory management the priority.
The activities of Logistics management are closely knit as each plays a crucial supporting role on the other for the success of the logistics process. Essentially, the process begins with receiving and accepting orders. Where orders are accepted, the items on the order have to be sorted and packaged for delivery to the client. Packaging takes place at the warehouse where other activities such as inventory control take place. Inventory control is important as it ensures that there is enough stock to satisfy all customers where possible. Packaged good then have to be transported using a select channel of transportation that also allows best practices in material handling. This ensures the company does not incur unnecessary losses from wastage, pilferage and loss of customers due to poor corporate image.
(b) When an increase in one area of cost reduces other costs
Cost reduction is a process by which companies seek to bring down their total costs to a manageable level. Strategies may vary according to the business model of the company but the objective remains the same. Normally costs are brought down by initiating measures that apply downward pressure on costs. However, there are special cases where increasing costs can reduce other costs. For instance, procurement and installation of an inventory management system increase costs in the short-run but has a reducing effect on transportation and warehousing costs in the long-run. Essentially, inventory management is a crucial process in logistics. In addition, procurement and installation of a logistics management system can be a costly endeavor. However, this can be termed as a necessary cost because it improves efficiency and eliminates logistics management problems such as pilferage, damages, wastage and total loss. The cost of procuring and installing such a system has a short run effect of increasing the total operating cost. However, since inventory management improves efficiency and avoiding damages, it helps to bring down other costs such as maintenance and storage costs.
(c ) Market conditions that pressure suppliers to maintain a competitive supply system
Globalization is a major player in today’s economy. The business landscape keeps on changing continuously especially in the current age of technology. Changes in communication and global integration are changing the manner in which business transaction is transacted and closed. Increased competition and market price pressure, Companies are therefore forced to find ways of improving supply chains. This is a source of additional costs such as advertising costs and sale promotion. However companies should not look at product value addition only, other factors such as corporate social responsibility play a crucial role. As the market becomes increasingly demand-oriented, companies must improve production to stay afloat. Outsourcing can be used to increase the level of output. Experts are contracted to produce certain items efficiently. This is also an adequate cost-cutting strategy. Companies operating in today’s market environment are under pressure to produce goods quickly and with fewer lifecycles. This can only be achieved through the installation of a strong supply chain system. Collaboration between stakeholders in imperative for business survival. Good supply system facilitates communication between stakeholders and helps each interested party to execute their role in the supply chain diligently for a common goal. The reason companies must maintain systems that provide them with a competitive edge is that the current business environment is rapidly changing. New business models are emerging every day. It therefore becomes imperative that a company adopts the prevailing technologies in the market to remain relevant and compete effectively with other companies in the industry. In addition, customer perspectives also play a major role in adoption of advanced technologies. In essence, customers perceive a technologically advanced institution better than an institution that is still stuck in the old ways. As such this forces companies to procure and install technologies that ogre well with customers and help to improve the company image in the industry and the general corporate image. In addition, there also exists company standards and government requirements that a company must conform to in order to be certified to operate in a competitive market.
(d) Factors to consider when choosing a private warehouse
Firstly, for an organization to run a successful warehouse there needs to be sufficient human resource to facilitate operations. Human resources are responsible for coordinating and organizing other logistics activity. It is also important to consider the level of control the company will have on the warehouse and its environs. This ensures that the warehouse is not established in a risky area with regard to physical security, risk of legal action and loss of ownership and possession of goods held in the warehouse. The other factor to consider is the availability of handling equipment (Ackerman, 2012). Some items that will be stored in the warehouse will require specialized handling. For instance noxious gases and flammable liquids require specialized equipment such as pressure tanks. These amenities are required for an ample management of the storage function. The cost and availability of the physical building or land to build on is also an issue. The location needs to be assessable with basic infrastructures such as roads and electricity. The cost of the investment must also be reasonable compared to the expected return. Other factors include security of the location and the items that Factors to consider are to be held at the warehouse.
( e) When deciding the level of customer service
The factors to consider include access to customer service agents. Customer service officers should be placed in areas where they will have direct contact with the customer. In addition, a central inquiries desk is important to cater for non-shopping clients. Further its important to procures persons who have the extraversion character trait. This is because extraverts are always sociable people, active, assertive and talkative people. They are therefore approachable, good listeners and willing to help the other person. These character traits are important when deciding the level of customer service expected from customers care personnel. Language and communication skills exhibited by customer service officers can determine whether the client will continue transacting or they may just walk away. Customer service officers should well be trained on strategies for meeting customers’ and engaging them in a hearty conversation even in the face of aggression, knowledge about an organization’s products, services and procedures, the level of personalization. Convenience is one of the strategies that keep client flowing into a business (Cheng et al, 2011). Convenience is a strategy in customer service improvement. It helps to establish a trusting and lasting relationship between the vendor and the buyer. Customers are likely to come back to a store where they were served sufficiently. Customer service strategies also need to be simple. For instance, an officer should be in an accessible location at all times. Conscientiousness is also an important factor to consider. This is affiliated to the behavior and character of customer service officials since they lay an important role in the level of customer service that is settle-on eventually. Conscientious persons are known to be performance oriented. This means that they are dependable, agreeable, open to new ideas and easy to develop a relationship with. The level of customer service that the company will select will require dependable people to run it. It is also important to consider flexibility of the proposed level of customer service. It should be able to allow execution of other important human resource management activities such as training and promotion. This helps to keep to maintain an adequately skilled human resource portfolio capable of producing best customer service.
(f) Determining the best amount of inventory to hold in stock
The amount of inventory to hold in stock is determined by the cost of inventory, both purchasing and holding costs, seasonality and shelf-life, Batch vs. Batch Orders and the availability of special holding facilities such as freezers and lifting apparatus. Keeping track if inventory also ensures that one is aware as stock gets depleted. Calculating the level of inventory can be a tricky affair. Partially because of there are a number of formulas that can be used in the estimation. However it is important as it helps to have a clear understanding of the role of stock taking and warehouse management to the ordering process. Nonetheless, some managers use educated guesses and gut instinct to evaluate the minimum stock level. Though a time saving exercise, gut instinct can result to drastic decreases in revenue, customers, gross profit and market share.
Safety stock level can calculated as follows:
Z × σLT × D avg
Z is the desired service level, σLT is the standard deviation of lead time, and D avg is demand average.
(g) Factors that influence the choice of a public warehouse
The choice of a public warehouse is affected by a number of factors. Chief among them is the proximity of the facility to the intended customer base. The location should be such that it facilitates faster deliveries and reduced transportation costs (Cao, 2013). This makes the logistics system faster and cheaper system which keeps the customer happy and royal due to convenience reduced price. Storage factors are also chief to the final decision. The warehouse owner should consider the goods to be held at the warehouse such as hazardous material, flammable goods, and fragile items. The merchant will therefore have to find a warehouse that is well endowed with the prerequisite tools and equipment for safe handling and storage of hazardous material. Employee skills are also an important factor to consider. The merchant must seek assurance from the warehouse operators that the staff members are skilled enough to handle the expected cargo safely. These skills must also be at prevailing markets to avoid running into unnecessary costs. Longevity of storage facility is also paramount. This ensures that the goods are not moved unnecessarily due to a problem with leasehold agreements.
References
| Ackerman, K. B. (2012). Practical handbook of warehousing. Springer Science & Business Media. | |
Cao, W., & Jiang, P. (2013). Modeling on service capability maturity and resource configuration for public warehouse product-service systems. International Journal of Production Research, 51(6), 1898-1921.
Carter, C. R., & Liane Easton, P. (2011). Sustainable supply chain management: evolution and future directions. International journal of physical distribution & logistics management, 41(1), 46-62.
Chen, J., Wang, C., Zhou, B. B., Sun, L., Lee, Y. C., & Zomaya, A. Y. (2011, June). Tradeoffs between profit and customer satisfaction for service provisioning in the cloud. In Proceedings of the 20th international symposium on High performance distributed computing (pp. 229-238). ACM.
Henke, J. W., & Zhang, C. (2010). Increasing supplier-driven innovation. MIT Sloan Management Review, 51(2), 41.