Introduction to Logistics and Supply Chain Management

Introduction to Logistics and Supply Chain Management

Logistics is the management of the flow of physical materials. In the context of marketing channels, physical distribution and logistics have traditionally been used interchangeably, with the understanding that only finished goods are part of distribution and the proper concern of a marketing channel manager. This, and many other ideas about channel logistics, has changed radically since the mid-1980s.

Logistics has metamorphosed into the concept of supply chain management (SCM), which in turn has come to implicate every element of the value-added chain. Going backward, or upstream, this means channel logistics encompasses not only inventories of finished goods but also work in process (WIP) and raw materials. Indeed,

SCM at its fullest goes back not only to the factory floor but also to the suppliers of the suppliers of the suppliers. At the extreme, SCM means signalling the very beginning of the value-added chain what to do and when to do it, as a function of what is happening at the very end of the value chain. Thus, transactions at the grocery checkout counter could pass through multiple steps, ultimately to be used to suggest to a farmer what to plant —and to the farmer's suppliers what to fabricate. This is the extreme (some would say Utopian, or even ludicrous) version of SCM.

The implications also go downstream. Ever)' player in a channel sends information or places orders that trigger behaviour by any and every other player, including those downstream. This is not just a matter of stockpiling or moving inventories, it may be marketing behaviour. For example, what is going in the warehouse may signal a supplier not to offer a promotion this month, or to offer one price instead of another price. Inventory management may result in a change of assortment, with some SKUs being eliminated and others being added, to be produced to the express specifications of a single customer.

These are...