The Economy of Scale and Economy of Distance
The economy of scale refers to a decrease in the cost per unit weight of the oil and products transported as the shipment size increases. For instance, a high-capacity vehicle can carry a large amount of oil and products, minimizing trips to transport total capacity hence low cost incurred (Anca, 2019, p. 210). However, economies of distance refer to the reduction in transportation cost as the distance increases. The more range the vehicle covers, the cheaper its transportation cost becomes due to fixed price over long distances (Anca, 2019, p. 212). Therefore, the distinction is that economy of scale results from increasing the shipment size while economy distance stems from long distance coverage.
Goals for Effective Multi-Channel Logistics Operation
Sale increase through inbound and outbound logistics for a firm to increase its marketability. Inbound logistics refers to activities associated with obtaining necessary inputs from the suppliers. The firm needs to keep tracking products to ensure that there are no delays in its timelines (Azmi et al., 2017, p. 73). Whenever delay occurs in delivering the product, unavailability is realized leading to a reduction in the firm’s production efficiency. Outbound logistics involve a firm delivering its products to its customers. For instance, damages, lateness, and wrong products delivery to consumers lead to product rejection leading to incurring extra costs (Azmi et al., 2017, p. 74). Therefore, proper inbound and outbound monitoring is essential to increase the sale of a firm by supply chain managers for effective operations.
Increasing the effectiveness of a company requires its managers to meet the operation efficiency demands in the supply chain. A manager should ensure that the products are innovatively designed to meet the customers’ specifications to avoid the loss associated with returning them (Azmi et al., 2017, p. 74). Moreover, logistics efficiency can be improved by having adequate delivery facilities during all periods. Well-defined procedures between the consumers and the firm should be enacted to avoid the costs that arise due to failure in agreement (Azmi et al., 2017, p. 75). Furthermore, managers can put both their inbound and outbound freight together to avoid incurring different transportation expenses.
Building a good relationship between the carrier and the retailer involved in the supply process is necessary for proper logistics operations. The success of the management results from the time taken to deliver the product, the total cost incurred, and the transporter’s service towards the retailer. Depending on one carrier may result in running a lot of losses by the firm when there is an interruption. Therefore, the company needs to determine whether to use single or many carriers (Azmi et al., 2017, p. 76). The management should also establish a good guideline with the carrier to aid industrial goals’ achievement.
Improvement of the services rendered to the customers for effective logistics operation of the company is essential. The management needs to meet expectations and specifications from its customers to achieve their objectives. In most cases where the customers return the products, the firm should incur the costs of exchanging the commodity. The firm’s goodwill is essential in maintaining the customers, hence the need to guard it well (Azmi et al., 2017, p. 76). Consumers contribute significantly to the firm’s success in achieving the organizational goals hence the necessity for proper service delivery.
Effective flow of the information is essential in achieving the effective operation of the supply chain. The management should know the inventories in possession, the transit of stocks and what the customers require. The flow of information between the company and the customers should be suitable for proper operations. Furthermore, meeting the objective of adequate knowledge ensures that the firm is operating as per the customer’s specification (Azmi et al., 2017, pp. 74-75). Hence, effective logistic management operation by the leaders requires a reliable communication plan.
Decision Areas in Supply Chain
Location is an essential element that the supply chain manager needs to consider while planning. Before creating the supply chain, the manager should determine the specific production areas, storage points, and where to deliver the products. For example, accompanying supplying computers to a research organization should strategically raise its retail shops in the nearest town (Liu et al., 2019, p. 29). Hence it is essential to determine a proper area of establishing activities of the firm.
The managers need to decide on the production process of the company before establishing the supply chain. The managers should clearly state the commodity to be provided by the firm. For instance, industry-producing clothes should identify the supplier of cotton as a raw material (Liu et al., 2019, p. 32). Through making a good decision on the factors of production, the supply chain is easily and effectively operated.
The supply chain deals with the shipment of the products making transportation decisions essential. The managers should determine the process of allocating the firm’s product to different markets. For example, the decision should be made on the reliable means of transport like road, air or ship. The cost incurred in transportation needs to be established to decide on the most convenient means of delivering the product to the market (Liu et al., 2019, p. 35). Thus, the transportation decision for a supply chain manager is important.
The managers need to pay attention to the inventory decision in the supply chain. The managers should ensure that stocks are effectively used and maintained. Through proper usage and management of the inventories, running out of stock is eradicated. The setting of the economic order quantity, reorder level, and stock level safety are critical decisions that the managers should establish in the supply chain (Liu et al., 2019, p. 39). By ensuring proper management, the expected working level of the supply chain is achieved.
Operations decisions are vital to supply chain management. For instance, the firms need to establish how they will deal with their customers on the basis of monthly, weekly, or daily timelines. The duration taken to deliver a product to its designated point need to be considered. Management should make decisions on how to deal with the return products and how to treat their customers (Liu et al., 2019, p. 38). Making proper decisions on the operations of the company is essential for achieving the set objectives.
Functions Performed by Successful Supply Chain
The supply chain plays a vital role in the market among the sellers and buyers. For instance, the purchase of inputs is accomplished through the supply chain. Normally, firms require raw materials to facilitate the production processes. It is hard for the inputs to reach the firm without proper coordination (Ka and Ab, 2019, p. 41). Hence, through the supply chain, the purchase of input is achieved by the firm.
The operation of any company is made easy through the supply chain. For example, forecasting in the supply chain makes the right quantity to be produced for prospective consumers estimable. Approximation ensures that there is neither deficit nor surplus generated by the firm to the market (Ka and Ab, 2019, p. 41). Through proper evaluation in the supply chain, the operations of the firms are made efficient.
A successful supply chain also performs logistics functions. A firm that engages in production does not avail its products to the market immediately. For example, conducive stores should be availed where products don’t get spoiled before being released to the market. Alternatively, customers may not demand all the products at once, forcing the firm to have some in-store (Ka and Ab, 2019, p. 43). It implies that the supply chain ensures that the products are well kept until the consumers’ demand goes high.
Proper management of the resource is a function performed by the supply chain. Through the supply chain, resources are effectively allocated for production and retailing. For instance, the buyers should be identified by their geographical settings and products are distributed according to their preferences (Anca, 2019). Proper allocation of resources results in the reduction of additional expenses that stem from product return (Ka and Ab, 2019, p. 46). Thus, adequate management of the resources by the firm is achieved through the supply chain.
The supply chain also enhances the coordination process of the firm and its customers. Customers need to get in touch with the firm in cases of dissatisfaction with the products delivered. For instance, when a damaged product is delivered, the consumer can return it to the seller through the supply chain (Azmi et al., 2017, p. 74). Moreover, the supply chain coordinates the process from the time the product is issued until it reaches the intended buyer. For instance, in the transportation of oil and gas fuels, the supply chain ensures that the delivery point is reached.
Anca, V. (2019) ‘Logistics and supply chain management: an overview’, Studies in Business and Economics, 14(2), pp. 209-215.
Azmi I., Hamid, N. A., Hussin, M. N. M. and Ibrahim, N. I. (2017) ‘Logistics and supply chain management: the importance of integration for business processes’, Journal of Emerging Economies and Islamic Research, 5(4), pp. 73-80.
Ka, J. M. R. and Ab, N. R. (2019) ‘A review on supply chain performance measurement systems’, Procedia Manufacturing, 30, pp. 40-47.
Liu, W., Wang, D., Long, S., Shen, X. and Shi, V. (2019) ‘Service supply chain management: a behavioral operations perspective’, Modern Supply Chain Research and Applications, 1(1), pp. 28-53.