Profit Leverage Effect of Logistics and Cost Saving Opportunities Essay

Logistics was initially a array term but since the 1960s it has grown and covers various numbers of structural argonas such as managing raw materials and inventory, handling of fashion in progress, storing and delivering of complete goods. It also includes node service, demand forecasting, plant/warehouse site selection, concern and transportation. Since it has an effect on most of the activities held within an organization, it has a great settle on the profits made. A recent US study raise that logistics accounts for 10% of the Gross Domestic Profit (GDP) and that approximately 56 cents kayoed of e very(prenominal) dollar of revenue is spent on managing the purchasing of goods and services. The functioning is lengthy but once handled right send away run very smoothly and can prove very beneficial to the organization.An organization can non be agonistical and strive in this fiercely competitive corporate world till it delivers end products or services of the desired cal iber 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. thence to maintain profit earnings, it is important for bulletproofs to manage logistics efficiently.If a chosen provider fails to deliver the required raw material of an agreed-on quality level at the right time then the firm provide incur additional expenses in the form of loftyer scrap rate, wastage and direct labor. Prompt lurch is required to avoid costly rescheduling of production otherwise efficiency get out be decreased.In order to maintain profit levels it is important for firms not only to satisfy customers but to delight them. This again becomes a come out of the organizations logistics. To achieve this not only fast and reliable delivery of high quality goods but also innovative design and distribution of ideas is essential. Firms focus on logistics to create differentiation by providing its c ustomers with unique products that are delicate to be imitated by competitors.Logistics is considered as the last point of contact surrounded by the organization and its customer and so leveraging successful logistics leads to cost reduction, increase customer satisfaction and market share and so eventually higher(prenominal) profits. Low total product or service cost is material in logistics so that the firm can have a competitive edge in the market.There are many opportunities to achieve striking cost sparings but to achieve this, vision and hard work is required. Firms can do this by coordinating the different parts of the fork up chain. Departments within firms such as procurement officer, manufacturing, legal and R&D managers need to work in a cross-functional manner and promote marijuana cigarette cost-saving projects.One of the biggest opportunities for cost saving is to reduce the amount of inventory which will automatically drive costs down. This can be done by Just- in-time inventory management that emphasizes on continuous improvement. For this, it is important for firms to develop pie-eyed relationship with few, reliable suppliers who deliver raw material in time. in like manner Economic Order Quantity (EOQ) model, one of the common techniques is use to dictation inventory.Outsourcing is often used to transfer some 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 meet unexpected demands that firms cannot handle.Wastage can be eliminated through focus on what the customers want. This can be done by continuous improvement using Lean takings. It emphasizes on customer focus. great efficiencies can be accomplished through use of technology tools that can enable the purchase of low value, low risk goods and services. With the usage of infobase systems, extra paper work can be eliminated, and real time data can be accessed.Use of E-Commerce to track i nventory and coordinate pick-me-up and delivery for end customers can be a great cost saving opportunity. This has been adopted by Cisco and FedEx.Different alternatives of distribution instrument such as trucking, airfreight, shipping, and railroads should be constantly evaluated. Use of Excel OM and Production and Operation care (POM) for Windows enables firms to correctly plan for the forecasted demand. Further, software like initiative Resource Planning (ERP) including Supply Chain Management (SCM) and Customer family 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 side that firms emphasize on due to growing 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) and by adapting to Six Sigma a nd 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). Fundamentals of Logistics Management. Burr Ridge, IL Irwin McGraw-Hill.http//www.mhhe.com/ disdain/management/leenders12e/information/leenders_ch01.pdf