Profit Leverage Effect of Logistics and Cost Saving Opportunities Essay

Logistics was ab initio a military term but since the 1960s it has grown and covers unlike numbers of functional areas such as managing primitive materials and inventory, handling of dally in progress, storing and delivering of finished goods. It also includes customer dish, demand forecasting, be aftert/warehouse site selection, traffic and transportation. Since it has an effect on most of the activities held within an organization, it has a great influence on the attains made. A recent US study found that logistics accounts for 10% of the Gross Domestic Profit (GDP) and that nearly 56 cents out of every dollar of revenue is spent on managing the purchasing of goods and services.  The process is lengthy but once handled right depose run very smoothly and thunder mug prove very dependable to the organization.An organization butt jointnot be private-enterprise(a) and strive in this fiercely competitive corporate world till it delivers end products or services of the c raved t iodine to its customers at the right time, right place and at a price the customer feels is reasonable. The way to sustainable competitive edge lies in improving logistics. Therefore to maintain profit earnings, it is important for firms to manage logistics efficiently.If a chosen supplier fails to deliver the required raw material of an agreed-on quality level at the right time then the firm depart incur additional expenses in the form of higher scrap rate, wastage and devise labor. Prompt delivery is required to avoid costly rescheduling of production unlikely efficiency will be decreased.In order to maintain profit levels it is important for firms not only to satisfy customers but to delight them. This once again becomes a part of the organizations logistics. To achieve this not only fast and tried delivery of high quality goods but also innovative purpose and distribution of ideas is essential. Firms stress on logistics to create differentiation by providing its cu stomers with remarkable products that are difficult to be imitated by competitors.Logistics is considered as the last burden of contact between the organization and its customer and so leveraging winning logistics leads to cost reduction, increased customer satisfaction and market share and so eventually higher profits. Low total product or service cost is significant in logistics so that the firm can charter a competitive edge in the market.There are many another(prenominal) opportunities to achieve dramatic cost savings but to achieve this, tidy sum and hard work is required. Firms can do this by coordinating the different parts of the supply chain. Departments within firms such as procurement officer, manufacturing, statutory and R&D managers need to work in a cross-functional manner and promote joint cost-saving projects.One of the biggest opportunities for cost saving is to cut back the amount of inventory which will automatically drive costs down. This can be done b y Just-in-time inventory management that emphasizes on continual improvement. For this, it is important for firms to develop strong relationship with few, reliable suppliers who deliver raw material in time.  Also Economic Order Quantity (EOQ) model, one of the common techniques is used to control inventory.Outsourcing is often used to transfer near of the internal activities of a firm to an outside vendor to achieve greater efficiency and specialization. It is also used as a technique to stick out unexpected demands that firms cannot handle.Wastage can be eliminated through and through focus on what the customers want. This can be done by continuous improvement using pass Production. It emphasizes on customer focus.Greater efficiencies can be accomplished through use of technology tools that can enable the purchase of meek value, low risk goods and services. With the usage of database systems, unnecessary paper work can be eliminated, and real time data can be accessed.Us e of E-Commerce to skip inventory and coordinate pickup and delivery for end customers can be a great cost saving fortune. This has been adopted by cisco and FedEx.Different alternatives of distribution means such as trucking, airfreight, shipping, and railroads should be unendingly evaluated. Use of Excel OM and Production and Operation Management (POM) for Windows enables firms to correctly plan for the forecasted demand. Further, software like Enterprise Resource Planning (ERP) including Supply set up Management (SCM) and Customer Relationship Management (CRM) provide firms with great opportunity to save on costs.Gantt Charts are useful for loading and scheduling. It prevents firms from unnecessary delays in work.Quality is one aspect that firms emphasize on due to emergence awareness for better quality goods amongst customers. This can be done by implementing Total Quality Management (TQM), meeting quality standards developed by International Standards Organization (ISO) an d by adapting to Six Sigma and Plan-Do-Check-Act (PDCA) model.Mentioned above are some of the greatest costs saving opportunities in todays world.ReferencesLambert, D.M Stock, J.R. and Ellram, L.M., (1998). fundamental principle of Logistics Management. Burr Ridge, IL Irwin McGraw-Hill.http//www.mhhe.com/business/management/leenders12e/information/leenders_ch01.pdf