CONCEPTS OF LOGISTICS AND DISTRIBUTION (2. Integrated logistics and the supply chain)

SUMMARY

The realization of the need for the effective planning and control of distribution, coupled with the obvious interrelationships within distribution and logistics systems, has led to the development of several new approaches towards integrated systems. The recent advances in information technology have made the practical application of these new approaches feasible. All in all, there has been a very positive move towards an integrated approach to logistics, although for many companies, both large and small, there is still considerable scope for improvement.

The more complex and sophisticated systems and concepts such as DPP and DRP have been adopted by a number of large, generally multinational, companies.

Smaller companies have been slower to adopt these concepts, despite the clear benefits to be gained. The main reasons for this are:

·         a lack of organizational integration that reflects the role and importance of logistics and distribution;

·         a failure to develop adequate long-term plans for logistics strategy; and

·         insufficiently developed information structures and support systems to provide the appropriate databases for good logistics planning andmanagement.

For many small and medium-sized companies, there is also the very pertinent factor that they need to learn to walk the distribution/logistics path before they attempt to run on it. But even for companies such as these, there is a great deal to be gained from taking those first few steps towards recognizing that logistics should be viewed as an integrated system and that there is a strong interrelationship between the different elements of transportation, storage, information, etc. In addition, there is the need to adopt a positive approach to the planning and control of those systems.

Fortunately, in the past few years, companies have, to a greater or lesser extent, realized the importance and relevance of distribution and logistics to their business as a whole. Thus, organizational structures and planning policies are now beginning to reflect this integrated approach.

In this chapter, the 'total logistics concept' has been introduced, and the need to recognize the opportunities for logistics trade-offs has been emphasized. The financial impact that logistics has in a business has been described. The importance of the need to integrate the various distribution and logistics components into a complete working structure that enables the overall system to run at the optimum Finally, a number of recent developments in logistics thinking have been put forward, including the globalization of companies, integrated planning systems, the use of logistics to help create competitive advantage and the concept of supply chain management.