Positioning logistics business in the company
According to the general understanding, the system represents a complex mechanism or process, composed of a number of interconnected parts, with the characteristics of one part significantly affecting the functioning and characteristics of other parts of the system.
The subsystems, in addition, do not require optimization since the focus is on their interconnection within the system. The point is the fact that all individual parts, interconnected in the system, give a more favorable final result than one that would be achieved by the individual, isolated operation of each part of the system. A key factor that connects elements of a logistics system of an economic entity is a material object being moved (it can be materials or goods). The result of the functioning of the logistics system is the transfer of an object, a material asset, and it is realized through a communication and technical system.
The logistics system consists of:
· Inbound logistics – Purchasing subsystem
· Internal logistics – internal traffic subsystem
· Outbound Logistics – Sales Subsystem
As essential characteristics of the logistics concept of business it is possible to recapitulate:
· Flexibility, which essentially implies good knowledge
service users, universally trained workers and teamwork on
preparing and making decisions; in that sense, it is necessary
Enable the provision of traffic services with the lowest possible level
engagement of working capital.
· Cooperativity requires a more complex form of the organizational structure of the given company, as well as the implementation of a cooperative and participatory method as a modern management method.
· Innovation actually means that all operators in the field of logistics must be involved in a continuous process of knowledge innovation, since logistics is intensively developed and continuous monitoring and application of modern logistics methods and techniques is necessary.
Logistic activities are:
· Customer service,
· Predicting demand,
· Communication in the distribution channel,
· Stock control,
· Material handling,
· The process of receiving orders,
· Selection of location of factories, warehouses and shops,
The traditional approach to logistics management was actual until the 1960s; Distribution responsibility was shared between different management structures. This fragmentation evidently negatively influenced the efficiency and rationality of distribution. In general, it can be said that marketing logistics has long been in the background, having in mind the fact that the managers were trying to maintain a certain level of production, as a result of which stock accumulated both on the input and on the output side of the production process. In addition, the sale was trying to deliver goods to customers as soon as possible, regardless of the efficiency of the use of means of transport. One of the key negative effects of the traditional approach should be the dispersion of logistics costs for individual sectors, so that the costs of logistics at the company level could not be considered. Additionally, fragmentation prevented a more rational approach to individual logistics activities (the interconnection of logistics elements was neglected).
Reducing storage and stock costs is possible by increasing the speed of movement of goods, but what happens then with transport costs? Transportation costs are rising!
Observed from the aspect of innovative approaches to logistics, in the last few decades there have been many new ideas and concepts in the field of business management. One of the principles that has become widely accepted and practiced is, for example, Just-in-time, based on a simple idea that wherever possible, no activity should be placed in the system unless there is a need for it; Consequently, no product should be made, no component should be ordered until there are specific requests. Consistent logistical goals of the company inevitably require the establishment of a balance between the desired level of services provided to customers – consumers and the corresponding costs, which is definitely a delicate task. In addition, from the aspect of the level of services provided, the following factors are taken into account:
· Quality refers to the accuracy of deliveries by type and quantity of goods, as well as the condition of the delivered goods; if the quantity ordered exceeds, then the cost of storage increases with the buyer, and if the quantity is less than the ordered, the buyer is short of;
· Delivery time is measured at the moment of order acquisition until the moment of availability of goods at the customer; it is logical that shorter delivery times allow lower levels of inventory at the customer;
· The ability of the system to respond to specific customer requirements determines the flexibility of delivery;
· Reliability of delivery is the ability to realize the agreed (required) time of delivery of the ordered goods; It should be borne in mind that any failure to comply with the agreed delivery deadlines can lead to disturbances or even interruptions in the workflow with the buyer, which costs rise inevitably.
· Providing adequate logistics information is the ability to accurately and promptly answer customer questions after ordering.
It can be said that in modern conditions, theoretically, an integrated approach to marketing logistics is a general-accepted concept because it basically eliminates the shortcomings of the traditional approach. This essentially means that interdependent activities are planned, monitored and controlled as an integral element of a unified system. This approach ensures the use of synergetic potentials available in the given system: more efficient use of rolling stock, warehouse space and manipulation equipment, reduction of commodity stock. Integral approach therefore treats logistics as a unique, complex system. It should also be emphasized that in practice, however, this concept did not come to life, even in many firms in developed countries, given the complexity of the requirements (namely, the main assumption of this approach is the close cooperation between marketing logistics and other management structures in the company, those who care about procurement, sales and production). The focus is, therefore, the problem of coordination, bearing in mind the fact that different objectives are characterized by different logistical activities.
Logistics management from a marketing aspect
The concept of a basic marketing mix implies different marketing instruments systematized in four larger groups – product, distribution, promotion and price (4P model). Therefore, it should be kept in mind that a marketing decision, regardless of which component of the mix applies, must take into account the particular situation or position of the given enterprise. There are no uniform solutions, but each case is individually appreciated. The goal of logistics management has a marketing character and basically reduces to the realization of three basic goals in one company: the integration of marketing mix elements, maximizing profits by lowering the costs that provide an acceptable customer service and customer satisfaction. Logically, the marketing orientation of logistics management is reflected in the realization of all three of these goals. the concept of marketing mix is actually a combination of a large number of decisions within each of these instruments as well as between individual instruments. The mentioned 4P marketing mix model is applicable to most companies, especially in the production domain. However, for the services sector, and in particular commercial enterprises, the 7P model is more acceptable, due to the specific nature of the trade activity. In that sense, three other elements are introduced into the marketing mix:
· Sale of sales space;
· Processing of consumers.
In particular, emphasis should be placed on the fact that distribution in the store is specifically focused on the location of the warehouse and sales facilities. In addition, in conditions of ever-firmer competition in the global market, the price of product and promotion, as the basic marketing instruments, have largely exhausted their capabilities and are increasingly modest effects of improvement in these marketing fields. The entire, distribution-logistics segment is gaining in importance, especially from the aspect of the cost reduction modality. Unlike marketing mixes, the marketing function is characterized by a much wider character. Marketing carries out its activities through a number of marketing functions, implemented by executives.
Marketing functions incorporate various activities:
· Analyzing consumer needs, focusing on choosing the target group of consumers to target marketing efforts;
· Analysis of the marketing environment, which is focused on research and understanding of external factors;
· Planning a production process that involves the organization of production, creation of a merchant product range and product image;
· Price planning (pricing policy);
· Distribution planning (relationships with intermediaries, physical distribution);
· Planning promotional activities (propaganda, PR) in order to communicate successfully with consumers and other market participants;
· Marketing management, which includes planning, implementation and control of marketing programs;
· Wider choices regarding social aspects of marketing as well as marketing strategies in international frameworks.
As key carriers of marketing functions, we should mention the following:
· Manufacturers of products or services (companies or individuals);
· Marketing specialists in charge of specific marketing functions;
· Retail (companies selling goods to final consumers);
· Wholesale (trade intermediaries for the purchase or sale of large quantities of goods);
· Final consumers and consumer organizations.
In modern business conditions, the implementation of a good marketing strategy is of increasing importance, given that different marketing techniques stimulate demand for products; Apart from that, business conditions are becoming more and more complex, and competition in the market is becoming sharper, which determines the necessity of finding ways to reduce the cost of doing business. In doing so, it takes into account that a significant part of the sales price of products goes to the costs of marketing activities. Generally, a marketing strategy involves the choice and detailed analysis of the target market, as well as the creation and maintenance of an appropriate marketing mix (4P) that will satisfy customers as much as possible. consumers.
The role and activities of logistics management
Logistic management is a part, a subsystem of integral composition of the management of a modern company. Within the scope of work of logistics management are: planning goals, organizing resources and activities in the domain of human resources management, as well as controlling the process of spatial and temporal transformation of goods, energy and information. Logistics in management is a set of integrated and controlled logistics activities that provide all the necessary conditions for the development of efficient management of logistics activities, increasing the efficiency of management decisions at all decision levels. In theoretical considerations, there is generally no dispute over the basic structure of logistics management, which relates to operational activities (transport, storage, inventory management, logistic network creation, logistic information management), including supply and demand planning at the enterprise level, while customer service is labeled as the goal of functioning of all logistical activities. Logistics can strategically position the business entity so that it can be successful on the market, with a tendency of long-term competitive advantage. For sustainability in the market, modern companies must be flexible, which means that logistics management must be able to identify changes in the environment in time and enable the company to continuously monitor changes in the environment. Modern companies combine traditional logistic activities with a modern understanding of the importance of logistics, thus providing themselves with a strategic, desired position on the market. In this regard, it is extremely important to know how to prepare an entity for upcoming changes in terms of the necessary transformation. This involves developing the ability to recognize and respond adequately to early signals of changes occurring in the environment or possible unforeseen situations. For this, logically, it is necessary to have quality and skilled staff in a company that will be able to recognize external changes and implement the necessary activities in order to improve logistics processes. It is the creative human potential that is the foundation of a new, non-traditional way of thinking and decision-making, and that creative people are able to realize the strategic goal of the logistic company by increasing various logistics services while simultaneously reducing costs. Human potential, therefore, becomes a key factor in logistics activities in enterprises; the success of the business largely depends on the manager or the logistics management, and the prerequisite for survival on the market is the awareness of the importance of continuous investment in the knowledge of logistics managers. A company with no quality and professional personnel in the field of logistics will be difficult to be able to lower its operating costs and be competitive on the market. Since the logistics sector is perceived as a place with significant potential for rationalization of production, it should be at the very top of the organizational scheme. This is the reason for the abandonment of the traditional organization of logistical activities in enterprises, since such a solution significantly reduces the efficiency of the functioning of certain logistical activities. The key principles of the logistics system that are in line with the concept of modern management are:
· Flexibility and adaptability of the system, which is a prerequisite for integration of environmental factors;
· A focus on the needs of end users (consumers), which implies the efforts of all employees in order to achieve the necessary level of logistics service and quality customer service;
· Continuous improvement of processes and regulations with maximum reduction of errors, inconsistencies and weaknesses in the system. Bearing in mind the above, it is clear that the requirements of all relevant factors in the supply chain should be carefully monitored continuously and should be aligned with their own capabilities; In doing so, responsibility should be decentralized. It is necessary to look at its position on the local and global level. The effectiveness of management depends to a large extent on the choice of a specific strategy in the function of the goal, whereby its efficiency is conditioned by the ability to evolve in line with changes in the environment. In addition, the company must constantly work to improve its own standards in accordance with the changes that have occurred. The main task of the logistics management is to manage all logistical activities of the given company; In this sense, activities take place in several domains – areas:
· The basis for the decision making of managers in all logistic activities is information; when information is accurate and accurate, managers will be able to make quality decisions;
· In the domain of location determination, it is very important for managers to make relevant decisions. In essence, this is about choosing whether activities are centralized to as few locations as possible, or that activities are decentralized to more locations closer to customers, for easier and more accurate delivery. The location decisions fall into the domain of strategic decisions as they relate to significant financial resources, while the consequences of decisions are of a largely long-term nature because, objectively, the locations are difficult to change. Managers must take into account a number of factors related to a particular location (infrastructure performance, plant or representative costs, costs of engaged workers, necessary qualifications of employees);
· In the field of production, the key decisions of managers are related to the ratio of the response rate to demand (production flexibility) and the efficiency of the production process. Namely, if the production facilities have excess capacity, they can be a flexible sense of an adequate response to changes in demand. The problem, however, arises when the capacities of the plant are too large in relation to demand, as then there is a rise in costs based on unused capacity;
· A similar situation is with the decisions of managers in the field of inventory; here is the current relationship between the size of the stock and the efficiency; holding large stocks certainly ensures efficiency in response to demand fluctuations, but the creation of high storage costs is problematic from the aspect of maintaining a high level of efficiency;
· In the domain of transport, logistics managers make very important decisions that primarily relate to the type of transport. Decisions are, at the same time, significantly determined by the type of goods being transported. Rapid forms of transport (air transport, for example) provide fast delivery of products, but therefore the cost of the cost is considerably higher; logically, slower modalities of transport (ship, rail) are cheaper, but delivery is considerably slower.