International Logistics Tutorial | Forms of logistics management

Let’s learn about Forms of logistics management:

Return/Reverse Logistics

• In order to increase the sales as well as the market share, many companies advertise that their goods will perform well over a period of time. The customer is, therefore, led to believe that in case he buys the product of that company, he is assured of satisfactory performance of the product. But at the same time, it is very much obvious that the company cannot assure the satisfactory performance of each and every of its product which is sold in the market. Few of the products sold may not perform as advertised over the specific period of time. This is the first type of Forms of logistics management.
• Such products need to be brought back by the company to confirm good customer service. Multination Companies (MNCs) to protect their market image and to stall its competitors from grabbing its customers, recall immediately the defective or substandard product from the market.
• Product recall is a critical competency resulting from increasingly rigid quality standards product expiration dating responsibility for hazardous consequences
• The company has, therefore, to take into account the defective goods that would be returned while framing the total logistical system network and calculating the total cost of such a system of network. Incorporating the goods returned in the total logistical systems network and cost is called as Return Logistics. Return Logistics requirement’ also result from the increasing number of laws prohibiting random scrapping and disposal on one hand, while encouraging recycling of waste such as beverage containers, packaging materials, etc. The most significant aspect of return logistical operation is the need for maximum control when a potential health liability exists. E.g.: a contaminated drug in the market is extremely dangerous and the company has to recall all the stock of contaminated drug.

Military Logistics

It is the art and science of planning and carrying out the movement and maintenance of military forces. In its most comprehensive sense, it is those aspects or military operations that deal with. This is the second type of Forms of logistics management.

• Design, development, acquisition, storage, distribution, maintenance, evacuation, and disposition of material,
• Evacuation, and hospitalization of personnel,
• Acquisition or construction, maintenance, operation, and disposition of facilities.

Third Party Logistics (3PL)

• It describes businesses that provide one or many of a variety of logistics related services. Types of services would include public warehousing, contract warehousing, transportation management, distribution management, freight consolidation. A 3PL provider may take over all receiving, storage, value added, shipping, and transportation responsibilities for a client and conduct them in the 3PL’s warehouse using the 3PLs equipment and employees or may manage one or all of these functions in the clients facility using the clients equipment, or anything combination of the above. 3PL can be defined as the “Business of proposing physical distribution reforms to a client and undertaking comprehensive physical distribution services.” This is the third type of Forms of logistics management.

The growing demand for 3PL can be attributed to both demand & supply side factors.

• Faced with deregulation & growing competition, transport companies are seeking new business opportunities.
• Clients are seeking to outsource their logistics operations cut costs & focus management resources on core businesses.

Fourth Party Logistics

• Traditionally, suppliers and big corporations have been meeting the demands by increased inventory, speedier transportation solutions posting on-site service engineers and many times employing a third party service provider. Today they need to meet increased levels of services due to e-procurement, complete supply visibility, virtual inventory management and requisite integrating technology. Now corporations are outsourcing their entire set of supply chain process from a single design, make and run integrated comprehensive supply chain solutions.
• This evolution in supply chain outsourcing is called Fourth Party Logistics – the aim being to provide maximum overall benefit.
• Thus a fourth party provider is a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organization with those of complementary service provider to deliver a comprehensive supply chain solution. This the fourth type of Forms of logistics management.

Cost Effectiveness of Fourth Party Logistics

• Revenue growth by enhanced product quality, product availability, and improved customer service -all facilitated by the application of leading technology.
• Operating cost reduction can be achieved through operational efficiencies, process enhancements and procurements. Savings will be achieved by complete outsourcing of supply chain functions and not just selected components.
• Fixed capital reductions will result from capital asset transfer and enhanced asset utilization. The fourth party logistics organization will own physical assets through freeing up the client organization to invest in core competencies.
• Emergence of fourth party logistics is a new concept in supply chain outsourcing. With the rapid advancements of technologies, it will be easier to reap the benefits of fourth party logistics concept. Thus fourth party logistics is the future of supply chain management.
• Inbound Logistics:
• Creation of value in a conversion process heavily depends on availability of inputs on time. Making available these inputs on time at point of use at minimum cost is the essence of Inbound Logistics. All the activities of a procurement performance cycle come under the scope of Inbound Logistics.
• Scope of Inbound Logistics covers transportation during procurement operation, storage, handling if any and overall management of inventory of inputs. Several activities or tasks are required to facilitate an orderly flow of materials, parts or finished inventory into a Manufacturing complex. They are sourcing, order placement and expediting, transportation, receiving and storage. Overall, procurement operations are called inbound logistics. Inbound logistics have potential avenues for reducing systems costs.
• Delivery time, size of shipment, method of transport & value of products involved are different from those of physical distribution cycles. Normally delivery is large as a low cost transportation mode is chosen. As the value of inventory is low, size of shipment is large & transit inventory costs are low.
• Outbound Logistics
• Value added goods are to be made available in the market for customers to perceive value. Finished goods are to be distributed through the network of warehouses and supply lines to reach the consumer through retailers’ shops in the market. During conversion value is added to the raw materials and as a result value of the inventory in this case is very high unlike inputs. Now the size of shipment, modes of transport and delivery time are different as compared to inputs. Activities of shipment, distribution performance cycle come under the scope of Outbound Logistics. They are order management, transportation, warehousing, packaging, handling etc.