Inbound Logistics Essay Example | Topics and Well Written Essays - 1000 words

Inbound Logistics - Essay Example The reason for this is fairly intuitive; if a manufacturer is to produce goods and material for distribution, it must receive the raw materials and other products necessary for production and distribution. Accordingly, the management of inbound products is central to the organizational goals in two obvious ways: First, the procurement of the materials and, second, the potential cost savings afforded by an efficient inbound supply chain system. As the next section of this paper specifically focuses on the ramifications of failing to procure materials for the manufacturing or distribution process, a word about costs is appropriate here. As cited in the case study, "the ultimate aim to achieve total control over inbound shipments would allow the retailer to eke out cost advantages from the supply chain" (Chatur 5). Several aspects of increasing efficiency within the inbound logistics side of SCM are discussed, one of which is the use of a third party logistics company, or 3PL, to manage that part of the supply chain. In fact, the idea of a collaborative environment within a large supply chain is a very popular notion. "Logistics alliances - formal or informal relationships between companies and logistics providers - are rapidly emerging...[where companies focus on their core competencies and outsource other activities" to companies that are more cost effective (Laarhoven, et al. 188). Thus, managing inbound logistics is important enough to companies that they are willing to outsource the entire process in order to save money. Q2: What is the relationship between operations and purchasing, and how does it ideally affect the management of inbound logistics Operations is the process whereby a manufacturer makes its product, but purchasing and procurement are what allow operations to do its job. Accordingly, the relationship is a dependent one where, if purchasing doesn't do its job well, operations can be shut down. Naturally, if procurement is not efficient and unnecessarily cost intensive, the entire company is threatened. The cost efficiencies related to inbound logistics, however, are not as potentially devastating as the failure of purchasing to ensure an adequate supply of material for the process. Consider the fact that if procurement doesn't perform, some manufacturers would have to stop operations until the supplies were received. This can be far more expensive than carrying a little too much inventory. As the case study points out, "...the shutdown of large petrochemical plants may cost as much as $500K to $1M daily - far more than the cost of extra hopper cars used to store product" (Chatur 4). Herein lies the dilemma for inbound logistics; balancing the need to have enough material without having too much material and the need to always have material. In terms of its effects on managing inbound logistics, the impact is clear. Many organizations use just-in-time (JIT) inventory techniques to avoid overstock and the cost of carrying too much inventory. This technique is more expensive than traditional methods due to a higher shipping cost structure, but