At first glance, it seems that the logistics function is to manage material flows from producer to consumer. But it is not so. The concept covers a wide range of activities hidden from the end user.
Logistics process
In order to understand what the logistics function is, let's look at the process of delivering goods to the end user using the example of the first figure.
- Call the call center. An order has arrived.
- The manager checks availability or makes a request to the manufacturer, draws up documents, confirms the order.
- The goods arrive at the company, waiting in the warehouse.
- The goods are transported, packed.
- Weighing in.
- The order is assigned an identification number, the destination address is indicated.
- Loading in progress.
- Transportation.
- Delivery to the end user.
Thus, it is obvious that the process of supplying goods from the manufacturer to the end user is not just a "come-bought-leave", but a hugea cycle covering many individual operations.
The difference between a logistic operation and a function
Operations are individual actions. Loading, clearance, packaging. A logistic function is a set of operations. For example, warehousing. In this process, the following operations can be distinguished:
- Delivery to warehouse.
- Sort.
- Arrangement on shelves.
- Archiving.
- Accounting.
- Packaging.
- Loading
A logistic function is a group of operations combined to achieve certain goals in the management of material flows. The purpose of warehousing is to store the goods in accordance with the standards for quick search and further dispatch to the user.
Material flows
Five basic starting points: raw material base, manufacturing plant, wholesaler, retailer, buyer. At each stage of the interaction of the parties, the movement of material flows is carried out: finance, product, information. And each stage has its own goal: to deliver the goods as soon as possible, to preserve its quality as best as possible and to receive decent payment for it. Materials management and logistics functions help to achieve these goals. The concept of logistics is well represented in the figure.
Examples of logistic functions
There are three big groups:
- Basic.
- Key.
- Supportive.
Basic logistics functions includea complex of operations, without which logistics, as a science, does not exist. These are supply, production and distribution.
Key function group includes: standards compliance, transportation, quality management, purchasing, production procedure management, pricing, physical distribution.
And the third group is supporting functions that give competitive advantages: warehousing, cargo transportation, protective packaging, support for the return of goods, provision of spare parts and services, collection of returnable waste, information and computer support.
Building Models
You can read dozens of smart books, which will contain a lot of incomprehensible phrases and terms, but you will not be able to figure out what the models of logistic functions are. They write in books: all models are divided into two categories: material-informational and abstract. Abstract are symbolic and iconic.
Is everything clear?
Now let's talk about what modeling really is. Let's take an example. There is a wholesale company H that sells household chemicals. So, model No. 1 "Purchase" is being built. This is a kind of detailed action plan that describes who the products will be purchased from initially, how they will be transported to the company's warehouse, who will be responsible for receiving the goods, what documents need to be drawn up if a marriage is detected, how much and how to store the goods, etc..
Model 2 "Delivery". Firm H has retail customers A andB. Once a month they demand to deliver a consignment of goods to them. Firm H creates model No. 2 "Delivery". In this scheme, other issues will be considered: who will draw up the invoice, how we will pack the goods, where we will store them until loading into the vehicle, how the money will be received from the supplier, and so on.
Models can be created in literal terms, that is, they can be described by words (iconic) or symbols (symbolic).
Outsourcing logistics functions
Returning to the "H" example, you can see that one small organization needs to think through hundreds of actions in order to competently manage logistics. Very often, it is impossible to optimize all processes, especially in conditions of a lack of resources and qualified specialists. In this case, it is necessary to use the services of third-party companies. This is called outsourcing, when a company transfers part of its logistics authority to a third party.
Third party help helps the enterprise:
- Reduce the cost of providing logistics functions.
- Focus on what really matters.
- Serving customers at the highest level.
Reasons for outsourcing
External economic factors lead to the fact that many firms in Russia and abroad use the help of third parties. This is due to: economic globalization, complex schemes for the supply of raw materials,long distances to deliver the final product. In addition, maintaining a whole army of high-level logisticians is very expensive. In today's world, success is on the side of the one who best manages the set logistics goals, and the more knowledge, the higher the quality of service, the more customers.
All this has led to the fact that logistics outsourcing has become an integral part of any business. Additionally, we highlight the factors of expediency of attracting third-party organizations:
- Close relationships between transport companies, manufacturers and suppliers. Delivery is present in all links in the creation of the final consumer basket.
- Reason to abandon the extra costs of maintaining the logistics department and expand production.
- Increases the agility of the organization in connection with the freed up resources. You can expand the market, give additional advertising or focus on development.
- Third party organizations tend to have good experience and see what the best thing to do in a situation.
- Outsourcing firms perform their service at the highest level, which leads to an increase in the quality of service to the end consumer.
- The status and image of the company is growing.
Logistics at Magnit (CJSC Tander)
Magnit is the largest retail chain in Russia. Not surprisingly, due to the right logistics, the company's managers managed to reduce the cost of purchasing goods, thereby increasing their profitability.
What is the essence of the logistics system? All chain stores receive goods not from manufacturers, but from their own distribution centers. Back in 2005, only half of durable goods were supplied from Magnit's warehouses, in 2008 this figure increased to 72%, and in 2011 already 85% of products in all regions are supplied not from direct manufacturers, but through huge warehouse centers.
What does it do?
First, fast delivery. The Magnit network is different in that the products are updated every day. Not many firms can boast fresh vegetables or dairy products.
Secondly, the creation of a single center allows you to independently manage traffic flows. The chain has its own trucks that quickly deliver the necessary goods.
Thirdly, the centers are becoming collection points for locally produced fruits and vegetables. In warehouses, they are sorted, weighed, packed and sent to a retail outlet. In addition, there is a huge refrigeration equipment (on an area of 8 thousand m22), where carcasses of animals are butchered.
Fourthly, all small warehouses were liquidated. Products do not need to be stored directly in the store, because this is another cost for a separate room, its maintenance.
How many distribution centers of the Magnit network exist?
There are 37 major centers of the "Magnit" network in Russia. They are dispersed in such a way as to be incenter of adjacent areas. Most recently, the largest storage facility was opened beyond the Arctic Circle in the Murmansk region. The total area of this center is 33,000 sq. m. In the service area - 150 stores. Managed to employ 400 people.
Logistics functions performed by the distribution center:
- Storage and warehousing of products in natural conditions.
- Creating conditions for the ripening of exotic fruits (for example, a banana ripening room).
- Control over document management.
- Recycling.
- Maintenance of own vehicles.
- Monitoring technical performance.
Conclusion
Let's generalize the obtained knowledge and give the definition of the logistic function. This is a complex of logistics operations designed to achieve certain goals. There are three types of functions: basic, key and supporting. There are many more operations. In order to create the right form of logistics that would help reduce costs and improve the quality of service, you need to build a model. Third-party organizations also help optimize the supply chain. This process is called outsourcing.
Magnit chain is an example of the most efficient logistics among retail stores. Thanks to the construction of large distribution centers, they managed to reduce the cost of storing products directly in the retail outlets themselves. It is much more profitable to create a large center responsible for all stages of the delivery of products than to follow the delivery frommanufacturers in thousands of stores. One complex can serve from 150 to 300 outlets.
Thus, it is obvious that building your own logistics system is the way to success and achieve leadership positions in the industry.
