Logistics - Planning

Making the goods available to the customer involves planning, implementation,and controlling the flow of material and goods and this whole process is known as market logistics. To deliver the goods to the customer on time and at the lowest cost, business sets up the places to store the products (warehouse) and chooses the transportation carriers.

The market logistics requires integrated logistics systems (ILS) supported by information technology (IT). Integrated logistics system involves activities like:

•  Materials management
•  Material flow systems
•  Distribution of goods to the end user

Information technology plays a vital role in managing market logistics. IT helps in ordering the required goods online, making payments electronically without any hassle of traveling or moving around. The various activities involve in market logistics are:

•  Sales forecasting - a base for any company to decide how much to produce,distribution of goods, and inventory.
•  Planning - Analysing and understanding market demand and planning for production
•  Inventory management - Managing quantity of goods/product
•  Packaging - Finalising packaging material, printing quality and pack sizes
•  In plant - warehousing : stock of raw material
•  Dispatching - Managing timely dispatch of received orders
•  Transportation - Arranging vehicles at economical price for timely delivery
•  Field warehousing - Managing stocks at locations away from main production unit
•  Final delivery to the end user and providing servicesi.

Importance of Logistics in Dairying

Logistics is one of the most important functions for the effective execution of dairy business plan. Nowadays logistics itself has become a business that fulfills the requirements of moving goods of any company. Logistics is also gaining more importance because of the geographical distances between the production site and the consumer. In case of dairying it assumes even more importance because of perishable nature of the products.

For many companies the market-logistics objective is defined as "getting the right goods to the right places at the right time for the least cost". However, practically it is not true in most of the cases because meeting all the objectives simultaneously is difficult. For example, delivery of goods by train will cost less but at the same time it will take more time comparative to air shipment (which will cost more).

If a company does not have an efficient logistics system, it can loose customers because of not supplying the goods on time. In case of dairying special vehicles are required because milk and most of the milk products can not be transported at ambient temperature. Insulated tankers, reefers and refrigerated vans form an essential part of the cold chain that is needed for an efficient transportation system for dairy products.

Logistics decisions are based on:

 The customer's need and expectation
 The services offered by the competitors
 Nature and type of product

For a customer the things that matter are:

•  On time delivery of products
•  In case of defected item, the product should be taken back and should be re-supplied
•  Careful handling of the product

For a company it is important to know the customers requirement and the competitor's service offerings to improve the company's service level.

Milk is a perishable commodity that is required by everyone on daily basis. It is one of the most essential food items. Because of its perishable nature and almost constant requirement everyday in any household, the logistics of milk assumes a unique character and importance.

ii. Checklist for Efficient Logistics Support

For an efficient logistics, there are some decisions that need to be taken carefully.According to Kotler the four major decisions that must be made with regard to market logistics are:

i.How should orders be handled? (order processing)
i. Where should stocks be located? (warehousing)
i. How much stock should be held? (inventory) and
ii. How should goods be shipped? (transportation)

Let us discuss each of them one by one:

i) Order Processing: the steps involved in this process are:

•  Receiving an order receipt
•  Delivering the product to the customer
•  Payment receiving

The order processing has to be standardized to save time to delivery. It should also be predictable. There should be a standard time from the receipt of the order and the time of dispatch of product from the dairy premises. This can be called as Order Dispatch Time. The lower this time is the better order processing system is.

Order processing should not take much time otherwise it leads to customer dissatisfaction, which can lower the company's profit.

ii) Warehousing: warehouse is a place to store the ready goods. A warehouse helps to manage the gap between the production and consumption process.The company decides number of warehouses to keep its goods. More number of warehouses helps to supply the required product to the customer quickly but in that case warehousing cost will be higher for the company. You need to manage this by efficient and judicious selection of warehousing facility across your markets. Location is a function of cost of warehouse and the cost of transportation from that warehouse. In case of dairy products large cold storage space is needed for intermediate storage of products.

iii) Inventory: Salespeople want that the company should provide the desired stock immediately that means the stock should always be there but that is not always cost-effective. Keeping a more stock requires more space and the maintenance of the stock. It may also result in more damages and storage losses.

According to Kotler, "Management would need to know by how much sales and profits would increase as a result of carrying large inventories and promising faster order fulfillment times, and then make a decision."

Inventory decision involves two important things i.e. when to order (order/reorder point) and how much to order. Management should know at what stock level a new production order for a particular product or product line has to be placed.The second important decision is how much to produce. Large number of ordered quantity reduces the frequency of ordering but increases the inventory and in turn inventory carrying costs.

iv. Transportation: transportation decisions should be taken very carefully because it affects many things that affect customer satisfaction. On-time delivery of a product, product pricing, and the product's condition after arrival; all these things are based on the transportation choice made by the company. There are different transportation modes like rail, truck, ship, and air. Various attributes of these shipping modes that have to be considered before making choice are: speed,frequency, dependability, cost, and availability.