At first glance, it seems that the logistic 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 a logistics function is, consider the process of delivering goods to an end user using the example of the first figure.
- Call to the call center. An order has appeared.
- The manager checks the availability or makes a request to the manufacturer, draws up documents, confirms the order.
- The goods arrive at the company, they are waiting at the warehouse.
- The goods are transported, packaged.
- Weighed.
- The order is assigned an identification number, indicate the destination address.
- Loading in progress.
- Transportation.
- Delivery to the end user.
Thus, it is obvious that the process of delivering goods from the manufacturer to the end user is not just a “come-buy-leave”, but a huge cycle covering many separate operations.
The difference between a logistic operation and a function
Operations are separate actions. Loading, design, packaging. Logistic function is a set of operations. For example, warehousing. In this process, the following operations can be distinguished:
- Delivery to the warehouse.
- Sorting.
- Shelf placement.
- Archiving
- Accounting.
- Packaging.
- Loading
A logistic function is a group of operations combined to achieve specific goals in managing material flows. The purpose of warehousing is to store goods in accordance with the standards for a quick search and further dispatch to the user.
Material flows
Five main starting points: raw material base, manufacturing plant, wholesale company, retailer, buyer. At each stage of interaction between the parties, the movement of material flows: 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 get a decent payment for it. Material management and logistic functions help achieve these goals. The concept of logistics is well represented in the figure.
Examples of logistic functions
There are three large groups:
- Basic.
- Key.
- Supporting.
The basic logistics functions include a set of operations, without which logistics, as a science, does not exist. This is supply, production and marketing.
The group of key functions includes: compliance with standards, transportation, quality management, procurement, management of production procedures, pricing, physical distribution.
And the third group is supporting functions that provide 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.
Model building
You can read dozens of smart books in which a lot of obscure phrases and terms will be written, but you won’t be able to figure out what models of logistic functions are. They write in books: all models are divided into two categories: material information and abstract. Abstract are symbolic and iconic.
All clear?
Now let's talk about what modeling is in reality. We give an example. There is some wholesale company N engaged in the sale of household chemicals. So, model No. 1 "Purchase" is under construction. This is some detailed action plan that describes who will initially purchase products, how it 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 defect is discovered, how much and how to store the goods, etc. .
Model No. 2 "Delivery". Firm H has retail buyers A and B. They once a month demand that they deliver a shipment of goods. Firm N creates model No. 2 "Delivery". In this scheme, other issues will already be considered: who will draw up the invoice, how to pack the goods, where we will store it until loading into the vehicle, how the money will be received from the supplier, and so on.
Models can be created in literal expression, that is, be described by words (symbolic) or symbols (symbolic).
Outsourcing of logistics functions
Returning to the example with the company "N", you can see that one small organization needs to think through hundreds of actions in order to competently conduct logistics. Very often it is impossible to optimize all processes, especially in conditions of a lack of resources and qualified specialists. In this case, you must use the services of third-party companies. This is called outsourcing, when a company transfers part of its logistic powers to a third party.
The help of third parties helps the company:
- Reduce logistics costs.
- Focus on truly important activities.
- Serve customers at the highest level.
Reasons for implementing 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 for the delivery of the final product. In addition, it is very expensive to maintain an army of high-level logistics. In the modern world, success is on the side of the one who best copes with the set logistic 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. In addition, we highlight the factors of expediency of attracting third-party organizations:
- Close relationships between transport companies, manufacturing companies and suppliers. Delivery is present at all stages of creating the ultimate consumer basket.
- The reason to abandon the extra costs of maintaining the logistics department and expand production.
- Maneuverability of the organization in connection with the released resources is increasing. You can expand the market, give additional advertising or direct forces to development.
- Third-party organizations, as a rule, have good experience and see in which situation what is the best way to act.
- Outsourcing firms perform their services at the highest level, which leads to an increase in the quality of service to the end user.
- The status and image of the company are increasing.
Logistics at Magnet (ZAO Thunder)
Magnit is the largest retail chain in Russia. It is not surprising that, thanks to proper logistics, company managers managed to reduce the cost of purchasing goods, thereby increasing their profitability.
What is the essence of the logistics system? All stores in the chain receive goods not from manufacturers, but from their own distribution centers. Back in 2005, only half of the durable goods were delivered from Magnit warehouses, in 2008 this figure increased to 72%, and in 2011 already 85% of production in all regions was delivered not from direct manufacturers, but through huge warehouse centers.
What does it give?
Firstly, fast delivery. The network "Magnet" is different in that the goods are updated every day. Not many firms boast fresh vegetables or dairy products.
Secondly, the creation of a single center allows you to independently manage traffic flows. The network has its own machines 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, packaged and sent to a retail outlet. In addition, there is a huge refrigeration equipment (on an area of 8 thousand m 2 ), where carcasses of animals are cut.
Fourth, 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 are there in the Magnit network?
In Russia there are 37 large centers of the Magnit network. They are dispersed so as to be in the center of the adjacent areas. Most recently, the largest warehouse was opened beyond the Arctic Circle in the Murmansk region. The total area of this center is 33,000 square meters. m. In the service area - 150 stores. It was possible to employ 400 people.
Logistic functions performed by the distribution center:
- Storage and warehousing of products in natural conditions.
- Creation of conditions for the ripening of exotic fruits (for example, a banana ripening chamber).
- Control over document management.
- Recycling.
- Maintenance of own vehicles.
- Monitoring of technical indicators.
Output
Summarize the knowledge gained and define the logistic function. This is a set 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, which 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.
An example of the most efficient logistics among retail stores is the Magnit chain. Thanks to the construction of large distribution centers, they were able 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 product delivery than to monitor delivery from manufacturers to thousands of stores. One complex can serve from 150 to 300 points.
Thus, it is obvious that building your own logistics system is the path to success and achieving leadership in the industry.