Logistics And Supply Chain Management Definitions Business Essay

In modern competitive business world, every organization strives for excellence. To achieve and maintain this, the organization needs to put in all necessary measures to remain competitive within the industry it finds itself. One of such measures is logistics excellence. (Durin et al 2011).

A major contributing function for organizational excellence has to do with the management of its logistics. However in recent times, logistics excellence is taken for granted and presumed to be the norm, but only to be recognized when there emerges some major problem. [] 

Since the Criminal Libel Law was taken off the statutes books in 2001, the

Ghanaian media landscape is currently touted or hipped as one of the most independent media regimes in the West African sub-region. This has led to the proliferation of print and electronic media to the extent that the media market is currently becoming saturated. [] According to the National Media Commission (NMC, 2006), Ghana has 106 newspapers made up of 11 dailies, 67 weeklies, 23 bi-weeklies and five tri-weeklies. More than 50% of the news papers currently in circulation have come into existence in recent years.

Many of them have sprung up in the past five years, providing readers with a wide range of new publications.

At national level, among the 11 national dailies, the state-owned Daily Graphic is the oldest and most widely-read newspaper in Ghana, and it is distributed in all 120 districts nationwide. Established in 1950 and 100% government-owned, the Daily Graphic currently has the highest circulation figure. [] The company’s leadership role in the print media as indicated above began before the advent of the repeal of the criminal libel law. It is interesting to note that Ghanaians casually refer to any media print at first glance as ‘graphic’. This not withstanding demonstrates the strength the company draws from this brand name.

However, due to the proliferation of other print media as a result of the repeal of the criminal libel law, fierce competition has started to emerge within this industry. The state owned and private print media market is becoming saturated to the extent that almost all media prints virtually sell at the same price. An example of such are the, “Ghanaian Times”, “The Mirror”, “The Ghanaian Observer”, “90 Minutes”, “Accra Daily Mail”, and “the Weekly Spectator” which sells at GH 1.50, whilst others like “The Daily Guide”, “The Dispatch”, “Daily Graphic”, “The Guide”, “The Statesman” and” Business and Financial Times” also sell at GH2.00.

One way to retain customers and remain competitive and, at the same time increase bottom-line margins has been to cut down prices. Interestingly, price reduction in this instance may not be very possible because market shares are somewhat fixed and would lead to lesser margins instead. A better way for companies to still make profits and remain viable is to embark on an effective and efficient logistics management system (Christopher, 2011). This is because sales revenue increases would be more difficult to achieve than logistics cost reductions. The effective management of logistics activities such as customer service, distribution and reverse logistics would play significant roles alongside other logistics activities in improving an organization’s stance in such an environment.

Reverse logistics to a considerable extent is not well known and not practiced within the Ghanaian business environment. This is because logistics has been looked at in most instances from only one perspective. It has always been looked at from the point where products are manufactured, packaged, stored in a warehouse, sold, and then shipped to the customer and the process ends. However there are more dimensions to this. In addition to managing outbound goods, logistics managers are also responsible for the flow of returned goods, re-packaging, including customer service and final disposition of returned items. [] 

Considering the print media for instance, the issue of unsold media prints could be looked at as ‘waste’ since they cannot be sold the next day. The need to manage waste materials and returned goods is fast growing in all kinds of industries. Currently, companies notably Xerox, Eastman Kodak, Mobil, Home Depot, and Ethan Allen Furniture to name just a few, have recycling programs that meet the needs of their individual industries. [] Although these are foreign companies, they derive numerous advantages and benefits from the relevance of reverse logistics practices. In a way these could be very much applicable to most organizations in Ghana for which GCGL is not an exception.

Undoubtedly, most firms are now recognizing reverse logistics as a component of the total logistics management process. Stock (1998) and Hansen Harps( 2002) advocated that innovative firms that develop an expertise in reverse logistics activities and considers them as a set of business process adds value, generate revenue, improve customer satisfaction, achieve significant cost savings and gain competitive edge in their various markets.

The GCGL stands the chance of gaining all these benefits as well as competitive advantage over its competitors in the area of cost reduction, enhanced quality, branding of their product and maximizing customers loyalty when reverse logistics practices are effectively adopted.

Reverse logistics has the following benefits:

Enhance Customer Service. The customer’s perspective is one key economic element driving organizations to develop reverse logistics strategy. Customers now consider returns policies when making purchasing decisions. If GCGL makes its returns policies more restrictive while its competitors continue to offer liberal returns policies, the firm will have placed itself at a competitive disadvantage. The whole purpose of logistics strategy is to provide customers with the level and quality of service that they require and to do so at less cost to the total supply chain. ( Rogers and Tibben-Lembke 1998)

Distinguish itself with Customers. Embarking on an effective reverse logistics strategy will offer GCGL the opportunity to differentiate or distinguish itself with customers. This is because how a company handles returns is often evaluated by customers as an important factor to choose when a future purchase happens. According to Daugherty et al (2002), a well designed reverse logistics system can promote longer-term relationships. Furthermore, customers are more likely to buy from retailers who outperform other retailers on returns handling.

Knock Off Competition. GCGL management will stands to benefit from the knowledge of the company’s logistical performance which could be used to influence decisions and aid in the formulation of corporate goals and objectives to offset competition.

Achieve Green Image. The GCGL by engaging in reverse logistics stands to gain a good environmental image with the customer which could invariably promote better customer relations. Having such an image can be part of a customer relationship strategy, especially due to the increase of environmental consciousness by society as a whole. The overall reverse logistics programme effectiveness will have indirect benefits for the firm, such as better corporate image or improved levels of customer satisfaction to retain customers and as well stand the competition within the industry. (Jayaraman and Luo2007)

Need to Control Costs. Frequently, manufacturers treat recovery of products and packaging as an afterthought. A well-managed reverse-logistics program, however, can bring enormous savings in inventory-carrying, transportation, and waste-disposal costs. [] 

Enjoys Goodwill. The goodwill associated with practicing an effective and efficient distribution and reverse logistics strategy has not been fully discovered by most companies in Ghana. The Goodwill that GCGL could earn from acting in a socially or environmentally responsible manner can produce real value. This can create substantial customer loyalty.(Rogers and Tibben-Lembke 1998)

1.2 Research Problem

In Ghana intense competition within the print media industry has to a large extent stabilized the price ceiling of media prints. The situation has been aggravated by political influences as political parties have delved the opportunity of coming up with their own media prints to propagate party agendas. Whilst GCGL media prints specifically the ‘Daily Graphic’ has been acclaimed a national newspaper, and hence mostly report on broad national issues, many others focus and take sides on political issues that would interest party members. As a result market shares are more or less stable and only sway when a particular media print covers a more topical or sensational issue that cuts across a general national interest. The likelihood of dwindling margins cannot be over emphasized in such circumstance. The more convenient means for GCGL to make profits is to embark on an effective logistic management to cut down logistics costs and to remain competitive in business.

On the other hand most organizations have not fully embraced reverse logistics for reasons best known to them regardless of the benefits that could be realized on embarking on effective reverse logistics practices. The issue is that there is little demand for knowledge within the mindsets because it has been presumed that reverse logistics inherently deals with the least favored aspect of organizational activities (Hansen Harps, 2002). This is because most firms do not view reverse logistics as a core competence but as something to be ignored as much as possible (Hansen Harps, 2002).

The print media products normally have life cycles ranging from a day to maximum of about a week. What happens to unsold products and those that are no longer of use to the consumer does not seem to derive much concern from the publishers. This situation does not only create loses but also goes to add filth to our environment causing health and other environmental problems in the long run.

Conducting a research to unearth the best possible means for GCGL to improve upon its current logistics management trends and practices, to improve profit margins and as well create value for their products that have ended their life cycle is the main focus of this thesis.

1.3 Research Questions

In order to identify the extent of logistics management activities that GCGL is currently engaged in and analyze them, the thesis would seek answers for the following questions:

How are the logistics activities pursued in the organization?

What distribution system is the company employing?

How is return flows managed?

1.4 Research Objectives

The study has the following objectives:

To identify the logistics and supply chain activities the company is engaged in

To identify and assess the effectiveness of the distribution system

To describe and assess the impact of reverse logistics practices on profitability

1.5 Significance of the Study

The study will bring out any shortfalls that are inherent in GCGL’s logistics practices and inform management adequately to develop sound logistics plans.

Additionally, it will serve as a reference document for the GCGL logistics department to effectively manage their day-to-day logistics activities.

The study will also be beneficial to the company’s third party logistics providers, as the document will assist them to adopt the appropriate logistics procedures and hence ensure effective communication and integration among them.

The thesis will also be beneficial to other print media organizations as well as those in other industries to focus on reverse logistics strategy as a source of gaining competitiveness amongst others.

1.6 Limitation of the Study

1.7 Thesis Organization

The study will be organized into five chapters. Chapter one is the introduction and will comprise the background, problem statement, aims and objectives and significance of the study.

Chapter two is the literature review and will highlight existing definitions and works by researchers related to the area of study.

Chapter three is devoted to the methodology used in this study. The chapter looks at the study area, design of study, data collection approaches, description of the study, sampling and the constraints/problems encountered and chapter four will summarize the major discussions of the study.

Chapter five will highlight on the important issues in the summary and make recommendations.

CHAPTER TWO

LITERATURE REVEIW

2.1 INTRODUCTION

Fierce competition in today’s marketplace has forced business enterprises and organizations to invest in and focus on supply chain and logistics management to be more competitive and as well, remain in business. Logistics has now been seen as the growth and dynamic functions in the success of many different operations of an organization. Logistics activities such as distribution communication, customer service, inventory management, materials handling, packaging, and traffic and transportation procurement have led to the growth in telecommunication and transportation technologies (Rushton et al 2006).

Whilst logistics is often seen as planning orientation and framework that seeks to create a single plan for the flow of products and information through a business, supply chain management builds upon this framework. It seeks to achieve linkage and co-ordination between the processes of other entities within the pipeline, i.e. suppliers and customers, and the organization itself (Martin Christopher 2011).

A lot of research works on the concepts of logistics and supply chain management and their impacts on the successes and failures in industries and businesses have been carried out. This paper will therefore review aspects of the available literature and research works that view logistics and supply chain management in their definitive contexts with special emphases on activities that relates to customer service, logistics distribution systems and Reverse Logistics.

2.2 LOGISTICS AND SUPPLY CHAIN MANAGEMENT DEFINITIONS

2.2.1 Logistics Management

The term ‘Logistics’ originated from the military and was used basically to describe the movement of personnel and materials during wars and also in emergencies. It was later adopted by businesses and organizations and became a part of commonly used terminology in professional societies and academic programs, and was defined in various ways to satisfy trends and developments (Rushton 2009).

The Council of Logistics Management (CLM), one of the leading professional organizations for logistic uses the term logistics management to describe the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in- process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements (Lambert et-al, 1999).

Alan Ruston et-al (2007) defined Logistics Management by the Council of Supply Chain Management Professionals (CSCMP) as that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements (CSCMP, 2006).

Martin Christopher (2011) stated that logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.

Starting from the first definition, although these authors’ pointed out that the ultimate disposal, recycling and reuse of products should be considered as activities in logistics management, the CLM definition above was silent on them. The definition only took into consideration the forward aspect of logistics focusing on the end product reaching the final consumer according to consumer’s requirement. The questions here are that; what happens to the product if it does not conform to the customer’s requirement and also how will the product be managed after the final consumer has exhausted the full use of the product?

In other words, CSCMP indicated and emphasized on forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

This definition to a considerable extent answers the questions which were ignored by the CLM as it considered reverse flows in addition.

Martin Christopher stressed on how organizations could maximize current and future profitability through the cost-effective fulfillment of orders. Although the definition did not specifically mention reverse flows, it could be implied that such activities if undertaken could contribute to the organization’s profitability.

In summary, it could be mentioned with certainty that all the definitions above place some emphasis on logistics activities to typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers. Additionally the inclusion of sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service were mentioned by Christopher.

It is worth mentioning that logistics must be involved in all levels of planning and execution. This has to do with the strategic, operational and tactical levels. Planning at these levels should not be done in isolation else the synergy to be derived from the various functions would not be realized (Lambert et al 2009). Logistics management is therefore an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance, and information technology (Alan Mckinnon, 2001). It is essential that positive planning approach is adopted by ensuring that the operation is set up to run properly. The two parts of logistics management has to do with inbound and outbound logistics. One way to envisage the two concepts is about ensuring and managing that the operations are set up to run properly by doing the right thing or preparing for and planning the operation. Thus supply and material management represent the storage and flows into and through the production process, whiles distribution represent the storage and flow from the final production point through to the customer or end user.

Logistics management from this view point is the means whereby the needs of customers are satisfied through, the co-ordination of the materials and information flow that extends from the market place through the firm and its operation beyond that to suppliers. To achieve this, there should be a wide integration within the organization and also a synergy between the marketing and manufacturing within the organization rather than a fragment separate activities (Spekman, KamauffJr et al (1998)

Logistics is therefore essentially an integrative concept that seeks to develop a system-wide view point of a firm. It is fundamentally a planning concept that seeks to create a framework through which the needs of the market can be translated into a manufacturing strategy and plan, which in turn links into a strategy and plan for procurement. [] 

The CSCMP definition laid emphasis of logistics management being part of supply chain management which pre-supposed that other influences on the logistics activities abound to ensure their effective functioning.

A working definition for Logistics Management for this thesis would therefore be the (CSCMP 2006), which states that, “it is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements”.

2.2.2 Supply Chain Management

Supply chain management has been mentioned in the (CSCMP 2006) definition for Logistics Management. It referred to logistics management as a subset of supply chain management. Meanwhile these two terms have been used interchangeably in most literature.

Supply Chain Management has defined supply chain management as the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies (CSCMP, 2006).

Supply chain here is viewed as a single entity rather than series of fragment element such as procurement, manufacturing and distribution. It goes further to talk about the integration of information systems in the supply chain rather than merely acting in isolation for each of the separate component. It was further indicated that supply chain management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model

Also, it included all of the logistics management activities noted above, as well as manufacturing operations, and indicated that it drives coordination of processes and activities within and across marketing, sales, product design, finance, and information technology (Martin Christopher2011)

Christopher (2011) also defined supply chain management as the management of upstream and downstream relationships with suppliers and customers in order to deliver superior customer value at less cost to the supply chain as a whole.

From the author’s point of view, supply chain is the stream of processes of moving goods from the customer’s order through the raw materials stage from the supplier, down to the production process, work assembly, and distribution of products to the customer.

He argued that supply chain management could be termed as ‘demand chain management’ to reflect the fact that the chain should be driven by the market, not by suppliers. Also the word ‘chain’ should be replaced by ‘network’ since there will normally be multiple suppliers and, indeed, suppliers to suppliers as well as multiple customers and customers’ customers to be included in the total system.

Extending this idea it has been suggested that a supply chain could more accurately be defined as a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Christopher 2011).

The CSCMP’s and Martin Christopher’s definitions above both made mention of the fact that supply chain encompasses logistics management which is the supply, materials management and distribution but rather goes further to argue that supply chain incorporates suppliers, suppliers to suppliers , as well as multiple customers which seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline and the organization itself through the sharing of information on demand.

Chopra and Meindl (2007) defined supply chain as consisting of all parties involved, directly or indirectly, in fulfilling a customer request. They went on further to say supply chain includes not only the manufacturer and suppliers, but also transporters, wholesalers, retailers, and even customers themselves. Here the supply chain is referring to the customer’s need or what he or she intends to purchase. This implies that all the stakeholders that are involved in contributing their quota to satisfy the customer should work hand in hand to fulfill that purpose.

Christopher (2011) finally indicated that all firms have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured and managing the chain of events in this process is what is known or referred to as supply chain management. He went further to state that effective management must take into account the coordination of all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down.

In essence, whilst logistics management deals with integration of functions within an organization, supply chain management takes care of this integration and extends it across firms in the supply chain. Figure.1 is a diagrammatic representation of logistics and supply chain management indicating how logistics is integrated in supply chain management.

Raw material

Components

Packaging items

Bought in part

Imported materials

Production process

Work-in- progress

Packaging

unitization

Finished goods

Inventory warehouse

Depots

distribution

End user

Supply

Materials management

Distribution

Suppliers

Logistics

customers

Supply chain

Supply side

Upstream

Inbound

Demand side

Down stream

Outbound

Information

Transport

Reverse

Logistics = Supply +Materials management +Distribution

Supply Chain =Suppliers+ supply +Materials management +Distribution+ Customer (Alan Ruston et al 2007: 5)

2.3 LOGISTICS AND SUPPLY CHAIN MANAGEMENT ACTIVITIES

The domain of logistics activities is to provide customers with the right goods in the right place at the right time. It ranges from providing the necessary subcomponents for manufacturing to having inventory on the shelf of the retailer to having the correct quantity. The major issue that logistics attempts to resolve is to decide how and when raw-materials, semi-finished, and finished goods should be acquired, moved, and stored. [] 

Ensuring an efficient, effective forward and reverse flow and storage of goods, services and related information as said by Rushton et al (2010) needs an effective and effecient logistics activities to be able to meet customers’ needs and wants at the right time, and at the right.

Lambert et al (2008) and Langley (2009) both outlined the key activities required to facilitate the flow of a product from point of origin to point of consumption to meet the end user as follows:

Customer Service

Demand forecasting/ planning

Inventory management

Materials handling

Order Processing

Packaging

Part and Service Support

Warehousing and Storage

Procurement/ Sourcing

Return goods handling

Reverse logistics

Transportation

Distribution

Manufacturing

2.3.1 Customer Service

Many attempts have been made to define the term customer service. However, depending on the organization’s core business that it’s provides, customer service will differ.

Lucas (1996) defined customer service as the ability of knowledgeable, capable, and enthusiastic employees to deliver products and services to their internal and external customers in a manner that satisfies identified and unidentified needs and ultimately result in positive mouth -to- mouth publicity and return business. Lambert et-al (1999) also used the term customer service to describe the process which takes place between the buyer, seller, and the third party. The process result in a value added to the product or service exchanged. He went on further to say that the value added in the exchange process might be short term as in a single transaction or longer term as in a contractual relationship. He again mentioned the value added is also shared, in that each of the parties to the transaction or contract is better off at that completion of the transaction than it was before the transaction took place.

Lucas (1996) distinguished between internal customers and external customers. The internal customers he said comprised peers, co-workers, bosses, and subordinates, whilst eternal customers constitute vendors, suppliers, walk-in-customer, various telephone callers. Even though Lambert et al (2009) did not mention internal customers, he captured external customers in his definition and went on further to talk about value creation within the transaction period to achieve a cost effective way in the chain of activities. They stated that the value added products or services are enhanced when the time and place utility between the buyer and seller are met and as well expanded and considered. Such conditions are generally considered as the seven right of customer service. These are the right of quantity, cost, product, customer, time, place, and condition (Rushton et al, 2007).

From the above, meeting the needs of customers should be very important in every organization even though it is very difficult in maintaining them and to achieve this is to make sure products and services are rendered at the right time, at the exact place in the right condition, at the right cost to add value to avoid customer complains.

Rushton et al (2007), Lambert et al (1999), Christopher (2011) all emphasized on the element of customer service as, pre-transaction element, transaction element and post-transaction element. Where the pre-transaction element focuses on the company’s policies concerning customer service. Transaction relates to element directly linked to physical transaction such as order cycle time, inventory availability, condition of goods, system accuracy, product substitution etc. Lastly those elements that occurred after the delivery has taken place is referred to as the post- transaction element and these include the installation of warranty, repairs and service part, return policy, customer complaints and claims. Customer service therefore plays a crucial role in organizations as far as growth and profitability are concerned.

2.3.2 Demand forecasting/Planning

Demand forecast is defined as statistically based initial estimate of future demand. It is well indicated that a demand plan is an estimate of future demand derived by a consensus-driven review and approval of forecast to produce physical products in satisfying customers’ needs (Scott F. Githens in Gower 2003). The need therefore to have an accurate demand plan was further emphasized and gave the reasons as follows:

Lead time Imbalance. Lead time imbalance is when the time an order is made and when the product is received. When it is planned well the production process lead time will be reduced to ensure that customers receive their product on time.

Marketing Management. The only way organization can grow effectively is when companies plan well to help increase their profit margins as well their market shares. When this is achieved it will aid in reducing promotion costs, other events and also to achieve the principles of seven right.

Financial planning and budgeting. Without an accurate demand plan the correlation of budget in an organization cannot be achieved. Hence all organizations are required to plan their finances and budgets.

Medium-term operational planning. Acquiring capital intensive equipment needs a longer lead time to transport the equipment in other to fulfill customer’s wants and need, therefore there is the need to plan for accurate demand.

Rushton et al (2007) also gave different approaches that can be used in forecasting as follows.

Judgmental Methods. This is based on opinions of expects, such as suppliers, customers and sales and marketing personnel by brainstorming and making scenario planning when historic data is concerned.

Casual Methods. This is used when the demand of product is dependent on seasonal demand, the state of the economy, as well as under the control of its competitors.

Projective Method. This type of forecast uses historic demand data to identify any trend in demand and project these trends into the future.

From the approaches above, it presupposes that organizations take the necessary practical steps in ensuring that a valid forecast is embarked on when it comes to demand planning.

2.3.3 Inventory management

Managing inventory is one of the crucial aspects of logistics activities that need not to be left when cost is involved. Decisions regarding the amount of inventory a company should hold are very important to meet customers’ needs and wants

Kotler (2002) stated that inventory management refers to all the activities involved in developing and managing the inventory levels of raw materials, semi-finished materials (work-in-progress) and finished goods so that adequate supplies are available and the costs of over or under stocks are low.

Gower (2003) as cited by Danks and Heath stated that inventory management is an essential process for all parties engaged in supply chain activities, from the procurement of raw material through to the delivery of finished goods. Rushton et al (2007) and Danks and Heath in Gower(2003) all established that, there are a number of different stock that can be found throughout the supply chain to enable companies to operate smoothly without any interruption. These are raw material, work-in-progress (WIP), Semi-finished goods, finished goods, Material Requirement Order (MRO) inventory.

Lambert et al 1998 also classified inventory based on the reason for which they are accumulated. They categorized inventory to include cycle stock, in-transit inventories, safety or buffer stock. The direction and control of activities with the purpose of getting the right inventory at the right place, at the right time in the right quantity in the right form at the right cost is known as inventory management. [] It’s very important for management, to monitor their inventory every now and then and to know when to purchase, how to purchase and what to purchase in other not to stockpile material to create or incur additional cost.

2.3.4 Materials Handling

Langley et al (2009) describes materials handling as the efficient short distance movement that usually takes place within the confines of a building such as a plant or a warehouse and between a building and a transportation agency.

They further described materials handling in terms of four dimensions such as movement, time, quantity, and space in terms of logistics system where specially designed equipment most often perform the same functions in terms of manual and mechanical. They grouped equipment in terms of Dock Equipment, Conveyors, Automatic Guided Vehicle System, Oder-Picking and Storage Equipment.

Lambert et al (1998) also describes materials handling equipment and systems as a major capital outlay for an organization and mentioned that the size and location of the warehouse will determine the kind of equipment to use in making movement easier and flexible. They as well grouped the equipment under manual or non- automated materials handling system and automated materials handling system.

Rushton et al (2007) also grouped storage and handling systems into the palletized and non-palletized which included the manual to sophisticated computer controlled equipment for moving goods around the warehouse and for storage of goods.

Although the authors made mention of how the equipment are grouped, Langley et al (2009) went on further to talk about how other companies group their materials handling equipment into three categories. They are flexible-path equipment, continuous-flow fixed path equipment, and intermittent-flow fixed-path equipment.

Some benefits of using the automated system were indicated by Lambert (1998) and Rushton(2007) to include reducing direct labor, increasing materials handling equipment efficiency, increasing warehouse space utilization, improving customer service, lower cost, high speed of throughput, low levels of damage, integrity and security of inventory, and personnel safety. Placing much emphasis on the type and management of handling equipment is therefore essential to support day-to-day operations within the organization.

2.3.5 Order Processing

The availability of stocks which allows the order taker to identify immediately whether or not stock can be supplied off the shelf to customer is known as order processing (Rushton et al 2009). From this definition the order taker must provide accurate information whether or not if there are stocks as requested by the consumer with an agreed delivery date at the time when order is taking. They again made mention of the increasing order ability through the use of automated soft wares such as Enterprise Resource Planning (ERP) which allows for data capture for the whole business into a single computer package and gives information such as customer and inventory financials. Software such as SAP, SSA and Oracle can be used to maximize efficiency of order processing.

2.3.6 Packaging

Langley et al (2009) describes packaging as an interior or consumer package which provides information in selling the product to motivate the consumer to buy or to give the product visibility when it competes with others. Rushton et al (2007) also made mention of the fact that packaging is broadly determined in terms of promotion, product protection, and the later being the function that is pertinent to logistics.

Rushton et al (2000) also talked about packaging as the art, science, and technology of preparing goods for transport and sale and also a means of ensuring safe delivery of a product to the end-user at overall competitive price. Packaging is therefore aimed at providing protection, security, safety and appeal to the product. Besides providing protection, security, safety, and product appealing to the consumer, Rushton et al (2007) also cited some factors that needed to be considered as far as packaging is concerned in logistics operation.

The factors include ease of handling, convenience of storage, readily identifiable, and of shape that makes it best for space and other functions such as production, marketing, and quality control as well as overall logistics cost and performance.

2.3.7 Warehousing and Storage

Traditionally warehousing served the strategic role of long term storage for raw materials and finished goods (Langley et al 2003). Manufacturers produced for inventory and sold out of inventory stored in the warehouse. Warehousing today has taken a different turn with the arrival of just-in-time strategic alliances and logistics supply chain philosophies. It has taken on the strategic role of attaining the logistics goal of shorter cycle times (Langley et al (2003). Warehousing is often defined as the storage of goods. In broad terms this definition includes a wide spectrum of facilities and location that provide warehousing, including the storage in the open field, storage of finished goods in the production facilities, storage of raw materials and industrial goods whiles they are in transport.

Rushton et al (2007) have stated that warehouses are crucial component of most modern supply chains. It is involved in various stages of the sourcing, production and distribution of goods, from the handling of raw materials and work-in-progress through to finished products.

To meet customers demand for shorter cycle times and lower prices, organizations need to critically examine the warehouse process for productivity and cost improvement.

2.3.8 Procurement/Sourcing

Procurement is simply acquiring sufficient goods and services at the right place, of the required quality, in the right place and at the right time for an organization in order to cut down cost Rushton et al (2010). Bowersox et al (2007) also describes procurement as purchasing of goods and services whether from manufacturer, wholesalers, or retailers, to support an organization.

The procurement process enables an organization to gain considerable competitive advantage if carried out effectively and efficiently. It links members in the supply chain and assures the quality of supplies. To effectively carryout the procurement process there is the need to set sound procurement objectives and as well managing suppliers and strengthening buyer supplier relationships (Rushton et al 2007).

2.3.9 Reverse logistics/ Return goods handling

Return goods handling or reverse logistics is one logistics management activity that most organizations turn blind eye upon. Under most circumstances it takes place when there is a problem with the performance of an item which results in a form of customer complaints, damaged products or manufacturer recalling its product as a result of defect.

Rogers and Tibben-Lembke (1999) define reverse logistics as the planning, implementing, controlling the efficient and cost effective flow of raw materials, in- process, inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

Langley et al (2009) defined reverse logistics as the process of moving or transporting goods from their final destination for the purpose of capturing value or for proper disposal. They went on further to talk about reverse logistic involving the process of sending new or used products for repair, reuse, refurbish, and resale, recycle, and scraped or salvage.

Reverse logistics include services related to receiving returns from the field, and the processes required to diagnose, evaluate, repair, and/or dispose of the returned units, products, parts, subassemblies, and material, either back to the direct/forward supply chain or into secondary markets or full disposal (Blumberg 2005).

Reverse logistics has relative importance when it comes to organizations and what they do (Rogers and Tibben-Lembke, 1999).

An objective of this thesis is to describe and assess the impact of reverse logistics practices on profitability hence the literature on reverse logistics would be further reviewed in this chapter.

2.3.10 Transportation

Wide range of transport alternatives has led to the support of supply chain and as a result the value of transport has become greater than simply moving product from one location to another (Bowersox et al 2007). Transportation links product movement whether in the form of materials, component, work-in- progress or finished goods and also as product storage (Bowersox et al 2007).

The five basic modes of transportation as described by most authors are Rail, Road, Sea, Air, and Pipeline (Langley et al 2008; Rushton et al (2007); and Bowersox et al (2007)).

2.3.11 Distribution

Distribution channel has been described as the method and means by which a product or group of products are physically transferred, or distributed from the point of production to the point at which they are made available to the final customer (Rushton et al, 2009).

Lambert and Stock (2006) also defined channels of distribution as the collection of organization units, either internal or external to the manufacturer, which perform the functions involved in product marketing. Langley et al (2009) defines channel of distribution as one or more company or individuals who participate in the flow of goods and services, information, and finance from the producer to the final consumer or user.

All the definitions focus on movement of goods and services in one way or the other. However the strategic role that effective distribution channels play in an organization encompasses the correct mix of intermediaries that are required to integrate and coordinate in the flow of goods and services to reach to the final consumer. In essence, objective of achieving time and place utility is the ultimate. Hence identifying the various channel structures becomes a prerequisite for adopting the most cost effective channel. Langley et al (2009) and Lambert et al, (2006) gave examples as follows:

manufacturer__ consumer

manufacturer __own store __consumer

manufacturer ____retailer ____consumer

manufacturer ____wholesaler ____retailer ____consumer

manufacturer ____sales agent ____ wholesaler ____ retailer ____ consumer.

2.3.13 Manufacturing

Manufacturing is basically providing information to the logistics plan such as location of current, planned production facilities, planned volume, and product mix. (Lambert et al 2006).

Rushton et al (2009) mentions manufacturing in different context. He described it in terms of demand system and the pull system. He again stated that the use of the work cell in the manufacturing is used in lean manufacturing environment where small group of workers are brought together in one part to produce mini products.

2.4 CUSTOMER SERVICE

2.4.1 Building Key Successive Skills

Customer logistics service may mean different things to various organizations. Heavy emphasis in an organization may be placed on having a product available at the time, at the place, and in the quantities desired. In some companies also, it may be desirable to preserve the relative freedom in the manner and timing with which orders can be received from customers for processing. In other organizations, management may concentrate on improving the condition of goods delivered to customers. (James H. Bookbinder, Maureen E. Lynch 1997)

All that customers are looking out for is value for their money hence there is the need for organizations to make an effort to understand their needs and wants by showing empathy especially when the customer has not got what he/ she wants, and also show courtesy and patience when the customer is being unfair.

It is therefore imperative for organizations to build the requisite skills in employees to ensure ultimate organisational success (Lucas 2005). A key element in making your interaction with customers successful is to recognize and ensure a positive communication between the organization and its customer’s decision making.

One of the easiest ways is to ensure effective interpersonal communication. Organizations have to ensure that employees have the requisite training skills to communicate well with its customers because choice of words often lead to either satisfaction or can easily destroy a customer provider relationship.

Customers would not like to hear certain provocative words and what can’t be done but rather how you are going to satisfy them. Positive gesture like thank you, shaking hand and smiling and making sure they are part of the conversation are deem appropriate at this point.

Listening effectively is also a primary means to use in determining the needs of the customers and often these needs are communicated directly through inferences, indirect comment, or nonverbal signals. It is the organizations duty to gather information from customer and as well select the appropriate response to the success of the organization.

Imposition of believes, norms, values, attitudes and needs on others could lead to frustration without considering that human behaviors virtually differs from each other. Customer actions should be understood at all times. Understanding these human characteristics invariably improve and enhance communication, build stronger customer relationship and offer better services to the customer. (Lucas 2005)

2.4.2 Managing Customer Complaints in Distribution

William Wagner (1994) described customer service complaint as universal in physical distribution operations. It is inevitable that even the most efficient of distribution systems occasionally encounter some failures; it is equally inevitable that from these failures will emanate complaints. Only if an active and systematic effort is made to handle these complaints can they graduate to become part of management’s kit of tools in making its distribution system better and more responsive to the company and its customer’s needs (William Wagner, 1994).

He argued that there is the need for management to recognize that only a relatively few sources are responsible for a large percentage of all complaints. Guidelines for working with these habitual should include: listening courteously to every complaint regardless of merit and not having a deaf ear; recognizing that ineffective handling of any complaint can produce the loss of the customer as well as other potential buyers influenced by that customer; realizing that each complaint could be the product of several service failures by the firm, and understanding that complaints may provide opportunities for the firm to recognize and solve many of its own weaknesses and inadequacies.

2.4.3 A Sequential Approach to Handling Complaints

In distribution, customer service level requirements must be incorporated into the design of any sound distribution system. Included in such specifications should be provisions for handling complaints. Complaints stemming from distribution service failure should be transmitted to a customer service division within the central distribution department.

This enables specialists in customer service to concentrate on this all-important function, thereby freeing other distribution specialists from an area to which they cannot devote full attention. Constraints on authority for claim settlement should be established in accordance with corporate philosophy. (William Wagner, 1994)

Typically, the distribution customer service manager should be responsible for the wide spectrum of service activities surrounding the distribution function. Complaints to designated personnel should always be in a written form. Information should be recorded on standardized forms to enable better handling and filing, thus yielding a reduction in long-run time and cost. All plant, branch, and sales offices should possess an adequate number of forms to be completed by whichever employee received the complaint.

There is strong argument that the handling of the distribution complaint in a formal and systematic manner can be taken care of, and normally taken care of best, by the distribution department. The establishment of a separate division to deal exclusively with customer service should be of prime importance to organizations.

The jurisdiction of the service division is naturally tempered by the situation, but commonly should include all distribution service complaints received by the firm. Procedures by which to handle complaints must also be designed. As the complaint is common to distribution management, it is imperative to develop methods by which to prevent it from becoming injurious to the total operations. Those curative methods used should not be superficial but rather in-depth.

Forms of course, should always be readily available and accessible to whoever is mandated to receive the complaint. Standard forms should be used to record all complaints in order to ensure impartiality. (William Wagner, 1994)

2.4.2 The Importance of Customer Logistics Service in Supply Chain

Logistic customer service and business practice have been described in two ways; the provider of a product and the customer who is the recipient of the product (Jan DÅ‚ugosz 2010). Business practice in turn, is usually much more complicated. Company’s suppliers of products to customers have their own suppliers and sub-suppliers, and often also intermediaries in the field of distribution. This means that they are part of the supply chains and hence not independent creators of quality in the end customer service. The reason is that there are also other supply chain participants who are to take part in this service. Some production companies sometimes provide services only to intermediaries in distribution channels. Hence, the quality of customer service is affected by the whole supply chain, i.e. the manner of logistics cooperation among all of its participants, including suppliers of logistics services (Jan DÅ‚ugosz 2010).

Christopher (2000) clearly associates supply chain with customers’ needs, as the management of upstream and downstream relationships with its suppliers and customers in order to deliver superior customer value at less cost to the supply chain as a whole.

He argued that the focus of supply chains on the customer is emphasized in various concepts. The Quick Response (QR) concept consists of recognizing demand and reacting to its changes as quickly as possible. The concept is used to avoid losses related to considerable changes of demand and unreliable forecasts. This in turn makes it possible for customers to quickly provide their suppliers with the necessary information on demand and also suppliers to provide quick deliveries.

Secondly the concepts of time based management (TBM) and total quality management (TQM) refers to customer focus lead time reduction. It is also one of the most important factors in the competition among companies and generates numerous benefits for customers (Ciesielski 2006)

Strategies based on lean management (LM) and agile management (AM) concepts are also useful in implementing demand flexibility. These concepts may be used both by a company and also in the whole supply chain. LM is aimed; first and foremost at reducing cost, generating value for the customer by eliminating all wastage notably stocks of work in progress, manufacturing losses, redundant movements, expectations, excessive production and production shortages.

On the other hand, AM is aimed first and foremost at quick response to changes in demand both in terms of their quantity and nature, in order to achieve perfection in customer service. An integrated logistic strategy is therefore necessary within the whole supply chain. This applies in particular to customized goods and two most important competition factors today, i.e. product quality and delivery time. Hence every supply chain should develop a clear customer service policy depending on the specific nature of a given market. Unfortunately, such situations are quite rare.

2.5 REVERSE LOGISTICS

2.5.1 Benefits/ Importance of Reverse logistics

Reverse logistics is not merely a hiccough in the day-to-day running of a business. It is an integral part of any business that is involved in supply chain, and could bring many benefits to a business or an organization. Some of the benefits that a business or an organization stands to gain in adopting an effective reverse are as follows: (source)

Increased revenues and reduced discount levels. Companies can benefit through the avoidance of markdowns on older product by managing inventories to keep “fresh” product at the point of sale. New stock commands higher prices than old stock. Therefore taking back unsold stock from retailers and replacing them with the new season’s model maintains retail prices to avoid markdowns, thus maintaining profit margins (Mollenkopf and Closs2005).

Additionally, revenue is generated through the sale of reprocessed or remanufactured returned products in alternative channels or markets. Organizations therefore stand to benefit from increased revenues from “secondary” sales and from reducing discounting levels by offering fresh stock in place of unsold or slow-selling stock.

In terms of inventory management, returned goods are no different from new goods. Returns inventory adds assets both in terms of the inventory itself and the facilities required to store it.

Effective returns management can help lower inventory on revenue-generating items, thereby reducing the need to store items which do not generate revenue. Effective management on returns stops non-revenue generating items from being returned, and enable companies to transform returned inventory to saleable products in a timely manner. (Mollenkopf and Closs 2005).

Good- will.

The goodwill earned from acting in a social or environmental responsible manner produces real value. Customers do respond to companies’ behaviors, and the goodwill developed through reverse logistics and proper disposal of products can create substantial customer loyalty. In the Hanna downs programme, customers were asked to mail back their children’s gently worn Hanna Andersson clothes. The company in return gave those customers 20 percent off the purchase price of new Hanna Andersson clothes. This program has been very successful since 1996. 133,000 garments and accessories were returned and then distributed to schools, homeless shelters. Likewise Kenneth Cole in the same industry accepts used shoes from customers and donates them to those in need. Both of those returns programs are costly to manage, but it is believed their actions enhance the value of their brands and also as a marketing incentive to purchase their products. While this strategy may not be the sole reason all customers purchase their products, they are considered a marketing incentive at a real cost to their businesses. ( Tibben-Lembke and Roger 1998)

Cost reductions through reduced cost of goods sold and lower operating expenses

Many products and parts can be easily reclaimed. While the reclaiming process may incur additional costs, every product or component that is reinserted into the forward supply chain for sale is one less unit that must be procured or manufactured. ( Tibben-Lembke and Roger 1998)

2.5.2 Managing returns

Organizations can therefore benefit from reduced procurement costs by recapturing usable parts from returned goods. This process will enable a company to reduce the cost of its service parts as well as purchase expenses on parts to support after sales. Better management of the flow returns also improves returns processing and labour productivity, which also reduces variable expenses, costs associated with storage and congestion including environmental cost (Srivastava, 2006)

Concerns about environmental issues, sustainable development and legal regulations have made organizations more responsive to RL. Increased competition, growing markets and a large base of product users in developing countries imply that buyers are getting more power in the supply chain even in these countries. Thus, managing product returns in an effective and cost-efficient manner is of increasing interest in business that leads to profits and at the same time increases customer service levels and higher customer retention.

An effective and efficient management returns within an organization should develop models to estimate returns flow over a period of time at various collection center locations. This should include period of time based on products-in-use, disposition, capacity and flow decisions for their conceptual reverse logistics network through a set of hierarchical models (Srivastava, 2006).

2.5.2 Process to implement reverse logistics system

Reverse logistics includes handling, storage, transportation, inspection, repair, repackaging, refunds, and customer service. Retrieving the product is the first step in the process. The quality and quantity of products retrieved must be coordinated with other distributors and customers. The product must be efficiently transported to a central location, where it is inspected and sorted. (Scott Hudson, 2004)

In this step, processes must be in place to determine what products can be saved, reworked, remanufactured, resold or disposed. In this process an automated tracking and testing systems is used for the sorting parts. The appropriate products are reconditioned utilizing design for disassembly (DFD) method. This method allows products such as electrical devices to be easily pulled apart, reconditioned, and reused. The products that are not reconditioned are recycled, resold for parts, or disposed (Scott Hudson, 2004)

The final step is distribution and sales of the reconditioned products. Companies must create a market for the refurbished products, which can be sold to the general public at cost or at a discounted price, or sold to foreign markets (Scott Hudson, 2004)

The key steps involved in the return processes are local screening, collection, sorting and disposition. (Schatteman’s (2003) study (cited in Gower 2003, p.272-274) Even though both authors gave the same view of the process, Schatteman gave three ways of how products are disposed as follows: Sell as (resale as new, sell via outlet or discount store, e-auction, and sell to secondary market), Repair or reuse ( repair, refurbish or remanufacture, modify and recycle, and Dispose as (scrap, donate to charity, and dispose in secure manner). For organization to grow further, e-auctioning of goods returned will lead it to focus on maximizing of the prices for their goods and explore innovative ways to sell return goods.

2.5.3 Competitive advantage through Reverse Logistics

Most companies need to have a source of competitive advantage in order to survive and progress, (Donaldson, 1995). Competitive advantage can be defined as the “position of enduring superiority over competitors in terms of customer preference” (Christopher, 2011).

A prominent source for creating competitive advantage is the value that the distinguished features of a product or service brings to the customers of a company (Slater, 1996), i.e. how a company can differentiate itself from competitors through its products and services (Grönroos and Sand, 1993; Donaldson, 1995). Porter’s (1985) value chain model indicates the significance of logistics in value creation, as it considers inbound and outbound logistics operations, marketing, sales and service as primary activities to create value.

Apart from the value advantage related to product and service differentiation, companies can gain competitive advantage by operating at a lower cost and hence maximizing profits (Christopher, 2011). Christopher (2011) distinguishes between two ways of creating competitive advantage, cost reduction and service enhancement, in other words creating a (1) productivity advantage or a (2) value advantage. Companies that combine productivity and value advantages becomes leaders in both cost and service (Christopher, 2011).

However, while both advantages could enhance the competitiv