Chapter 22. The Focused Management Approach in Logistics

The desire of customers to get a large variety of products customized to their needs, in a short lead time, at lower prices, and in high quality, forces firms to constantly improve their logistic capabilities.

What Is Logistics?

Logistics is a managerial system that ensures that the right service or product will be delivered to the right place, on time, in the right quantity. Logistics manages the following aspects of materials, products, and services:

  • Purchasing

  • Raw materials inventory

  • Finished goods inventory

  • Transportation and transfer

  • Warehousing

  • Distribution

  • Integrated logistic support (ILS)

A good logistics function in an organization contributes to its value. The major logistics‐related value drivers are:

  • Proper management of inventories. Logistics focuses mainly on the raw materials and finished goods inventories. Value enhancement on the part of logistics is achieved via:

    • Inventories reduction. Improves the cash flow of the organization, prevents unused inventories, and improves quality. Proper management of inventories implies that their reduction does not damage throughputs.

    • Elimination of lost sales. Usually you are able to reduce the overall level of inventory and yet prevent lost sales by eliminating surplus inventories, increasing to some extent those inventories that were previously too short, and better managing the existing inventories in terms of transportation, batch sizes, and so on (see also Chapter 11 for lost ...

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