Operational Objectives of Integrated Logistics

Operating Objectives In terms of logistical system design and administration, each firm must simultaneously achieve at least six different operational objectives. These operational objectives, which are the primary determinants of logistical performance, include rapid response, minimum variance, minimum inventory, movement consolidation, quality, and life-cycle support. Each objective is briefly discussed.

Rapid Response Is concerned with the firms ability to satisfy customer service requirements in a timely manner. Evolution of information technology has increased the capacity to postpone the logistical operations to the latest possible time and then accomplish rapid delivery of required inventory. This results in elimination of excessive inventories traditionally stocked in anticipation of customer requirements. Here, the emphasis is more on responding to customer requirements on shipment-to-shipment basis rather than anticipation based on forecasting.

Minimum Variance Variance may result due to the following: Delay in expected time of customer order receipt. An unexpected description in manufacturing. Goods arriving in damaged condition at a customer s location Delivery to an incorrect location

Traditionally, the solution to accommodate variances lay in establishing safety stock or using high cost premium transportation. But today, these have been replaced by using information technology to achieve positive logistics control. To the extent the variances are minimized logistical productivity is improved due to economical operations.

Minimum Inventory Involves assets commitment and relative turnover. Total asset commitment is the financial value of inventory deployed throughout the logistical system. Turnover, also known as turn velocity, implies the rate of inventory usage overtime. High over rates coupled with inventory availability mean that assets devoted to inventory are being effectively utilized. The objective is to reduce inventory deployment to lowest level consistent with the achieving customer service goals at the lowest overall logistical cost. Now-a-days, however, zero inventory concepts have become increasingly popular while seeking minimum inventory deployment. On the basis of these a few question can be asked such as:

Can inventory benefit logistical system?

Yes, inventories can provide improved return on investment when they result in economies of scale in manufacturing or procurement.

How, then, to achieve the objective of minimum inventory?

The logistical system must control commitment and turnover for the entire firm and not merely for each business location.

Movement Consolidation is concerned with the transportation cost. Transportation cost is directly related to: the type of the product size of the shipment, and distance

The premium services logistical systems feature high speed and small shipment transportation. Typically, such services are expensive. However, movement consolidation reduces transportation cost the larger the overall shipment and longer the distance it is transported the lower the transportation cost per unit. This is achieved by innovative methods to group small shipments for consolidated movements.

Quality The objective is to seek continuous quality improvement. If a product becomes defective or if promised services are not delivered, little value is added by the logistics. Logistical cost cannot be reversed. When quality fails, the logistical performance needs to be reversed and then repeated. The challenge of achieving zero defect logistical performance is magnified by the fact that logistical operations are performed across a vast geographical area at all times of day and night and most of these activities are performed out of a supervisors vision. Reworking a customers order as a result of incorrect shipment or in transit damage is far more costly than performing it right the first time.

Life Cycle Support Deals with the situations where the normal value-added inventory flow toward customer is reversed. The product recall may be due to: rigid quality standards, product expiry dates, responsibility for hazardous consequences, and laws prohibiting disposals and encouraging recycling of beverage containers and packaging materials.

The operational requirements of reverse logistics range from lowest total cost, such as returning bottles for recycling, to minimum performance solutions for critical results. The importance of service support logistics varies directly with the product and the buyer. In case of consumer durables or industrial equipments the life cycle support constitutes a demanding operational requirements as well as one of the largest cost of logistical operations. Life cycle support means cradle to cradle logistical support.