Logistics Management is part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of products, services and related information between the point of origin and the point of consumption in order to meet customer and legal requirements. Logistics management is an integral part of the following.
- Materials Management
- Channel Management
- Distribution (or Physical Distribution)
- Business or Logistics Management
In general, logistics facilities should be designed to take waste out of supply chains: waste as to excess inventory, time and cost. Supply chains are meant to pull, not push, inventory through the supply chain. This is exactly what lean logistics is also about- removing waste and variation from supply chains; it is what Kanban (Pull system) is about with Lean Logistics. Wholesalers, manufacturers, retailers, distributors, suppliers, 3PLs and every party involved in the supply chain feel the pressure to reduce and balance cost, time and inventory-to be lean. This is true with domestic supply chains; but it is especially true with global supply chains.
Lean Logistics has many challenges. Global Lean Logistics especially has the challenge of the additional time required for shipments to move door-to-door over the long distance. In addition, there are many parties involved with each shipment. Some reports say that up to seventeen parties can be involved with one shipment-supplier, truckers, freight forwarders, terminals, customs brokers, railroads, ocean/air carriers and more. Bringing lean across such an extended, multi-transactional supply chain is daunting.
What is Lean Logistics?
Lean Logistics concepts are deeply rooted inside the lean manufacturing of Toyota Production System. Jim Womack summarizes the key principles of the Toyota Production System as Lean Manufacturing in his book "Lean Thinking". In its purest form, Lean is about the elimination of waste and the increase of speed and flow. At the top of the list of known wastes, according to Lean theory is the elimination of inventory. More simply, any inventory should be eliminated that is not required to support operations and the immediate need of the customer.
Lean and the Logistician
Lean also has a vital cultural element to it that is crucial to the logistician. This is the concept of "Total Cost". The Lean practitioner does not focus on individual cost factors such as transportation or warehousing, but rather focuses on "total cost of ownership". With inventory carrying costs representing 15-40% of total logistics costs for many industries, making decisions based on total cost has dramatic implications for the logistician.
Primarily there are three elements of lean logistics, which invite the attention of logisticians.
1.Logistics is basically about managing inventory ( Raw material, Work-In-Process, Finished goods)
2.Lean is about speed, flow and the elimination of waste in inventory
3.Six -Sigma is about understanding and reducing variation.
Therefore, today most of the logistics practitioners highlight the importance of practising both Lean and Six Sigma system in logistics. They have termed it as lean -six sigma logistics. This can be defined as: The elimination of unnecessary inventories through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain.