Logistics management is the field that deals with taking the goods and services from their source and making them reach their ultimate destination. The source is mostly the manufacturer or the producer of the goods and services. The ultimate destination is the customer that makes the purchase. In the simplest terms, logistic management deals with the flow of things from the source to the destination. It starts with acquiring the raw materials, processing of raw materials, transporting the finished goods to a storage facility, and making the final product reach the customer. There are multiple intermediaries in the journey from start to end, such as the suppliers of the raw materials, transportation partners, storage partners, and the distribution channels.
Logistic management is responsible for making the goods reach the customer in a perfect state and storing the unsold goods properly. Businesses suffer huge losses when goods get damaged in transit or get destroyed if not stored properly. Without a good logistics system in place, such losses might take place frequently and might shut down the business. So, a good logistics management system is of great importance.
Some models are used for decision-making in the field of logistics. They are benchmarks for taking important decisions in the functions of logistic management.
Location models are used for determining the best location for setting up the storage unit or warehouse of a business. The ideal location is based on various factors. The most important factor for selecting the ideal location is the cost that is incurred by the business in inbound and outbound logistic costs. Inbound logistic costs are the costs that the business incurs while bringing the materials used for production to the production unit. Outbound logistic costs are the costs that the business incurs while transporting the finished goods to the customer.
Allocation models are used when multiple goods have to be transported from multiple sources to multiple destinations. For example, food delivery companies get multiple food orders every day. They have to collect the prepared food from the restaurant (the source) and deliver it to the customer (the destination). But there are hundreds of food orders, which means that there are hundreds of sources and destinations. So, it is very important to allocate resources so that all the orders are fulfilled properly.
Distribution network design models
Distribution network models are used for selecting the ideal distribution network for the finished goods and services. The selection of distribution networks depends on many factors, such as product durability, transportation costs, storage costs, etc.
Inventory models are the models used to determine the best possible ways to maintain a stock of raw materials, components, and finished goods. Inventory models are used to determine the ideal storage conditions for sustaining the stock for long periods.
Routing models are used for determining the best possible route for transporting the goods from the source to the destination. The ideal routes are selected based on the costs that is incurred on the journey, among many other factors.
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