Trade and Logistics 1 (Logistics and Inventory management)

Why must the ERP have the Trade and Logistics module? Because this module helps people answer these and many other questions:

• Where do we purchase items?
• How will we deliver items from vendors?
• Where are the items stored?
• Whom are we going to sell the items to?
• How will we deliver items to customers?

This module implements the Logistics and Inventory management.

What is Logistics management? Logistics management plans, implements, and controls the efficient, effective 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 customer & legal requirements.

What is Inventory management? The word “inventory” was first recorded in 1601. The French term inventaire, or “detailed list of goods,” dates back to 1415. Inventory management is primarily about specifying the quantity and placement of stocked goods.
In other words, logistics management answers the following questions:

• How can we deliver items to a customer as quickly as possible
• How many items should we buy from vendor so that they are not spoilt in the warehouse?
• Where should warehouse workers pick the goods? What is the optimal path to the item in a warehouse?
• Where should warehouse workers pack the goods?
• What vehicle should load the goods?

As you can see, logistics management controls processes inside a company (warehouse logistics) and outside a company (transport logistics).

Inventory management answers such questions as where an item is stored (aisle, row, shelf, etc.), how many item units are stored in a warehouse and many other item related questions.
Hmm… that’s interesting, if we, for example, transfer an item from one company warehouse to another one, is this Logistics or Inventory management?
My answer is Logistics management.

One more term that also confuses a lot of people is Supply Chain Management (SCM). The thing that may confuse you is the difference between the supply chain management and logistics management.

Supply Chain Management is a system of organizations, people, technology, activities, information, and resources involved in moving a product or service from supplier to a customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable.

So, to extend Logistic management description, we can say that logistics management is the area of a supply chain which plans, implements, and controls the efficient, effective 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 customer & legal requirements.

Logistics is a channel of a supply chain which adds the value of time and place utility.
Actually Logistics is the physical execution part of Supply Chain Management. SCM deals with more strategic aspects at macro level whereas logistics is nuts and bolts of its implementation.
Supply chain consists of the following areas:

1. Transport
2. Finance
3. Health, safety & Environment
4. Information Technology
5. Education & Training
6. Human Relations
7. Warehousing

Logistics is a logical extension of transportation & warehousing to achieve an efficient & effective goods distribution system.
Summary
This lesson answers the following questions:

• Why ERP software has the Trade and Logistics module.
• What is Logistics, Inventory, and Supply Chain Management and what is the difference between them.

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