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Hi Gromit,
Hope you can help me!-
I’ve been looking at inbound and outbound logistics and need to some clarification to ensure I’m not getting the wordings wrong-Is a distributor another name for a logistics company? In the sense they distribute raw materials/finished products to the organisation/customer.
Moreover, would a courier service be classed as a logistics company? I was thinking maybe not because a courier service has to be paid by the customer, whereas the logistics company is paid by the organisation that wants the supplies/sent off to customers?
Any help is greatly appreciated.I think you are getting confused between the terms ‘logistics company’ and ‘logistics’.Logistics can be defined as: The overall management of the way resources are obtained, stored and moved to the locations where they are required.
With inbound logistics: broadly the choice is that either the supplier delivers the material (own transport or a logistics company) or you arrange to get it (own transport or your logistics company). To some extent if the suppliers is doing the organising it will make little difference whether it is being done directly or through a third party logistics company.
The choice facing a company is whether it wants to arrange this directly, through its own logistics company or whether it’s left up to the supplier to organise.
A courier is a type of logistics company which really only transfers goods. However, logistics companies can do much more. For example, when mobile phones (eg Samsung) arrive in the UK it can be the logistics company which customises them to UK standards before they are sent out to mobile phone shops. Sometimes logistics companies will warehouse goods on behalf of either seller or buyer.
Hope that helps.
Hi Gromit,
Many thanks for your explanation. I have one more question. If the supplier arranges to deliver the material, would the supplier themselves pay for this? For example, Tesco could agree to do business with a supplier if they agree to pay the delivery costs. Or is it that, the organisation (e.g Tesco) will always pay for the delivery costs regardless if it’s being delivered by the supplier, by their own transport or by their own logistics company.It’s really up to negotiation. It depends on relative bargaining power.
Right I see! Thanks! In regards to these issues, how would these usually come up in an exam? Would it be where you would make recommendations on having a logistics company?
Thanks gromit! Another question has sprung to mind in regards to value chain analysis! Why is inbound logistics a primary activity in the sense of the customer being interested with this? (I can see why they are interested in the other primary activities like outbound logistics, marketing and sales etc) .If the customer is interested with this, why isn’t procurement considered a primary activity? Cheers
The value chain sets out all process/activities. Some of these are invisible to customers (eg inbound logistics) but nevertheless contribute to the company’s profits. Efficient/inefficient inbound logistics will affect profits.
Porter, who devised the value chain, classified procurement (ordering) as support but the physical receipt of goods (inbound logistics) as a primary activity. Yet both sales and outbound logistics are primary activities.
I must say that I have never been completely convinced by this different treatment, though arguments can be put up both ways. Other models divide processes differently.
My advice is just to accept what he did in his model whilst recognising that models are just models: attempts to simplify or make sense of what’s going on. This is not the sort of exam where you will be required to apply a critique to the value chain.
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