The distributor is then responsible for the delivery to the end customer. Generally, companies are involved only till the point delivery happens to the distributor or the dealer. Transportation involves the physical delivery of goods from the company to the distributor or dealer and from the dealer to the end customer. This is why companies spend lakhs to control the transportation expenses because it is one of the highest variable expense to any company. Be it petrol, Diesel or gas, fuel is costly, and it is mostly consumed in transportation activities. There is a single reason that transportation is costly – Fuel. Now we come to one of the major logistics activities which is one of the most resources heavy and revenue heavy segment of logistics. Inventory management is one of the most important functions of logistics especially after the adoption of various production techniques such as Just in time manufacturing, lean manufacturing or other manufacturing processes where the cost of inventory management is brought down. With the above example, you understood the importance of Inventory control in Logistics activities. This is money which can be used as a working capital and it is money on which banks are applying interest.Īlso Read Channel Partner - Definition, Benefits and Types If a firm has 100 units of a product in stock, but the demand is only of 10 units, then the company has uselessly invested in 90 units. When there is a peak in demand or if there is a drop in production, these warehouses can take the pressure of deliveries and they can become interdependent to ensure delivery of goods to consumers. The location of warehouses also reduces the pressure on mother warehouse (large warehouses which stock most of the products). Once a brand establishes itself in a new territory, the first thing it does is to lease a new warehouse so that It can be closer to the territory and closer to the end customers. Thus, it makes sense for the branded company to have a closer warehouse so that can immediately deliver the goods. If there was a product which was from a branded company, but which takes 1 week to deliver, then this product might not move as much in the market as another product which is taking 2 days to deliver even though it is unbranded. The important point in warehousing is that the warehouse should be nearby to the dealer or the distributors’ place and it should facilitate the easy delivery of goods. Imagine the confusion if Amazon did not employ the best material handling equipment and strategies. Which is equal to 70,000 packages every hour. ![]() It is estimated that Amazon ships 16 lakh package a day. Amazon, for example, uses the combination of robotics, AI, and humans for material handling. ![]() This becomes more important as the warehouse grows in size. That is why materials handling is an important function of logistics.Īrranging material within the warehouse properly so as to allow easy movement and dispatch material is an important activity in logistics management. If the warehouse manager does not know where the material is stored and how he is going to bring it to the dispatch center of the warehouse, he will be in big trouble and his productivity and efficiency will take a big hit. Imagine the amount of material stored in the warehouse. Warehouses of large companies are sometimes half a mile or more in size. He will have to search this in all the 100 products that he has and then he will have to move the other products so that he can give the ordered product to the customer. But IF this small shop was not sure WHERE the products are kept, the shopkeeper will have to search for the order and the product every time he receives the order. If there are any returns from the dealer, they have to be accounted too.įor a small shop with 100 products, it is very easy to move one product from one place to another. In between, you also need to ensure that goods are handled in the appropriate manner and they reach in the desired condition to the dealer. Similarly, you need to have entries that the goods have left from your warehouse and reached the dealer. There are many different logistics activities or functions of logistics which are used by a company.įor example – If you have to deliver a good from your warehouse to a dealer, then you need to adjust the inventory that you have in your warehouse (because goods are leaving). However, Logistics does not mean “transport” only. ![]() Logistics is the means to transport the goods from the company to the middlemen or the end consumer. These goods have to be transported to the distributors and dealers and lastly to the end consumer. FMCG, consumer durables, and many other industries regularly manufacture goods. Logistics is an activity carried out by many different companies for the physical distribution of goods. Logistics is also known as Physical Distribution management.
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