Business logistics

Equipment that has been sold must be maintained. For example, automakers frequently stock parts for all models of automobiles up to 10 years old. Buyers of capital equipment insist on knowing that their purchase will be kept in running order for many years. Prompt delivery of repair parts also is necessary. Farm implement manufacturers will sometime charter small planes to deliver needed parts to combines that are broken down in wheat fields.

Firms often must find the location for a new facility. Usually this decision follows a process of system analysis and design, wherein a determination is made of how many facilities the firm should be operating. A firm that needs to distribute repair parts overnight within a large country could probably reach nearly all markets by air from a single warehouse location if the firm were willing to use air-express services. If the same firm wished to use trucks to make surface deliveries from warehouses to these same markets, it would probably need to scatter a number of warehouse sites throughout the country. Or a growing firm may decide that it needs a new warehouse to serve a certain region. Several layers of analyses would be performed, each with a finer focus. After a region was selected, then a city within the region would be chosen. Criteria to this point would include markets, availability and wage rates of labour, tax rates, climate, and transportation. Within that chosen city, various sites would be examined, taking into account such factors as land-use controls, street traffic capability, room for expansion, soil stability, water- and sewer-line capacity, police and fire protection, and proximity to rail tracks. Some firms serve contracting, or shrinking, markets. They must decide which production or distribution facilities to close, and the closure must be scheduled in a way that reduces adverse impact upon the firm’s overall operations.

Scheduling of production is done by others in the firm but with the assistance of the logistics staff. Production is scheduled in an attempt to balance demand for products with plant capacity and availability of inputs. Inbound materials and components must be scheduled to fit into the production process. The production process itself is scheduled to fulfill existing and planned orders. Manufactured products must be scheduled for shipment to wholesalers, retailers, and customers. If the firm is running a special advertising campaign to promote its product, then additional products must be available for sale. The logistics staff advises as to the costs of moving materials. They hope to develop back-and-forth hauls of materials in order to better utilize transportation equipment. Just-in-time philosophies call for disciplined, on-time deliveries. On the other hand, scheduling must be flexible to the extent necessary to react to unforeseen events. Shippers and receivers of freight sometime establish “windows” of two to three hours’ length within which trucks must arrive to pick up or deliver freight. Related to scheduling of specific shipments is routing—that is, choosing the exact route that a vehicle should take. Many truck delivery routes are now determined by computers. Routing also is used to avoid areas of anticipated congestion.

Closely related to production scheduling is purchasing, because many of the inputs needed for production must be purchased from outside vendors. The logistics staff advises as to the transportation services that must be used to ensure that the purchased materials arrive on schedule. If the vendor assumes responsibility for the delivery of the inputs, the buyer’s logistics staff monitors the delivering carrier’s performance. The logistics staff also may attempt to consolidate the shipments of various inputs to reduce their overall transportation costs.

There are many categories of returned products. A few are subjects of product recalls, meaning that a safety defect or hazard has been discovered. These products are removed from the shelves, and both retailers and consumers attempt to return them to the manufacturer. This is a form of reverse distribution, with goods moving in the opposite direction of their usual flow. Eventually, the manufacturer must repair the defect, offer a substitute product, or refund the payment. A second form of returned goods are those that have been on the shelves too long and are no longer fresh. In the United States, many food products have a “pull date” code on the package, indicating that the product should not be sold after that date. These “old” items are removed from the shelves and sent to salvage centres, where the goods are sorted. Some are donated directly to local charities and food banks. Goods that cannot be donated are emptied from their packages, so that the packages can be recycled. The food contents are sold to firms that convert it into various forms of animal feed.

A firm’s waste materials must be positively managed. The firm attempts to both sell them at a profit and follow environmentally sound practices. The key to many recycling efforts is to have scrap and waste materials properly sorted, so that they can be sold to various processors who specialize in recycling glass, plastics, and metals. The public is becoming increasingly concerned about each firm’s environmental “scoreboard,” and more and more care is needed to make certain that environmental concerns are addressed in one’s scrap disposal methods.