Scribd
Upload
1K views6 pages

Primary Logistics Activities

The key primary logistics activities that support the relationship between inbound, conversion, and outbound operations are transportation, facility structure, inventory management, materials handling, and information communication. Inventory management involves determining order quantities, storage levels, and use of just-in-time techniques. It balances the preferences of finance/logistics for low inventories with marketing/manufacturing desires for high inventories. Stockouts can result in lost customers and costs, so optimal inventory levels carry costs less than estimated stockout costs. Inventory is also classified by its needs like economic order sizes or its function like raw materials, work-in-process, or finished goods.

Uploaded by

yakmae
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
1K views6 pages

Primary Logistics Activities

The key primary logistics activities that support the relationship between inbound, conversion, and outbound operations are transportation, facility structure, inventory management, materials handling, and information communication. Inventory management involves determining order quantities, storage levels, and use of just-in-time techniques. It balances the preferences of finance/logistics for low inventories with marketing/manufacturing desires for high inventories. Stockouts can result in lost customers and costs, so optimal inventory levels carry costs less than estimated stockout costs. Inventory is also classified by its needs like economic order sizes or its function like raw materials, work-in-process, or finished goods.

Uploaded by

yakmae
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 6

Primary Logistics activities

• The three logistics operations are(inbound, conversion


operations and outbound logistics) relationship can be
sustained by the execution of the five primary logistics
activities. These are;
1. Transportation
2. Facility structure
3. Inventory management
4. Materials handling
5. Information and communication
1.TRANSPORTATION
2. FACILITY STRUCTURE
3. INVENTORY MANAGEMENT
• Refers to the management of product buffers of raw materials,
work in process, and finished goods in the logistics pipeline.
• it involves; -when to order, how much to order, how much to
store and when to use JIT.
• . Finance and logistics prefers low inventories; because high
inventory increases, b/ce high inventory leads;
• - inventory carrying costs
• -warehousing costs
• -packaging costs
• -and materials handling costs
• .marketing and manufacturing wants high inventories to allow
quick response & realize high economies of scale respectively and
lack of inventory may shut down the production line.
Arguments for carrying inventory;
• Economies of scale
• Balancing demand and supply
• Specialization
• Protection from uncertainties
finally if there is shortage of inventory it results to product interruption and this
leads to stock outs, the resulting stock outs leads to loss of customers .
 stock outs leave customers with a variety of options;
- wait - buy elsewhere this time
- back order - buy elsewhere permanently
-substitute
 the frequency of stock outs and the existence of competition influences the
choice. i.e. the customer will wait or back order if stock outs are infrequent.
- repeated stock outs may cause the customer to substitute or seek another
supplier.
Calculating stock out costs
• The three stock out costs are;
- backorders, lost sales and lost customers.
-suppose back order is 20% ,lost sale is 70% and a lost customer is 10%. And
assume the back order cost is $5, lost sales cost is $1o and cost of a lost
customer is $100.now he stock out costs can be calculated as follows;
- cost of back order $5*20% = $1
- cost of lost sale $10*70%=$7
-cost of lost customer$100*10%=$10
total estimated cost per stock out =$18
 if inventory carrying costs per units are equal to or less than $18 , the
firm should carry extra inventory to avoid stock outs.
 Customers, wholesalers, retailers and manufacturers want to avoid stock
outs but it is too expensive.
 For some products such as critical medical supplies stock outs should be
avoided regard less of financial cost. But these are the exceptions.
Types of inventories
• Inventory can be classified based on the following two ways.
-based on their needs
- based on their functions
1. Based on their needs;
a. economic lot sizes; in order to keep up costs of buying ,receiving,
inspection,transport and handling.
b. fluctuation or stabilizing inventories
c. anticipation inventories
d. transportation inventories
2. Based on their functions
a. Production inventories; RM, parts& components
b. MRO inventories; maintenance, repair and operating inventories.
-do not become part of the product.
c. In process inventories; are inventories passing to other step or waiting for
further processing.
d. Finished product inventories. Are completed goods in waiting for sale.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy