PRODUCT LOGISTICS CHAIN THEME 1

Business logistics
2. Agents of the logistics chain
3. Supply: functions and objectives
4. Function of stored products
5. Warehouses and the logistics chain

1.-Business logistics
Concept: business logistics is an activity aimed at satisfying
the needs of the customer, providing products and services at the right time and place
and quantity that requests it, all at the lowest cost.
Logistical process: it is the set of activities aimed at approaching or
place in the market goods, merchandise, items, etc. at a minimal cost.

1.1. Functions of the logistics chain

The logistics process consists of a series of phases or stages that occur in succession.
and it depends, on one hand on the nature of the product, and on the other, on the activity
principal of the companies involved; that is, depending on whether it is industrial,
commercial or service. So that the product can reach the end consumer,
usually two ways are used:

Supply channel: when the product is transferred from the center of

extraction (mine, forest, orchard, etc.) to the factory or warehouse.

Distribution channel: when the product is transferred from the factory or warehouse to
the points of sale.

1.1.1. Logistical functions in industrial companies.

Procurement: it involves selecting suppliers to provide to

center for the production of raw materials, the parts or elements that are best
respond to the rhythm and volume of production, so that the minimum is guaranteed
cost.

Production: it involves organizing all the means used for manufacturing

finished products suitable for sale, such as physical media (stores,
facilities, etc.), human resources or the activities of preparation or
transformation (packaging, handling, storage)

Commercial distribution: it involves managing the warehouse and the means of transport. The
warehouse logistics activities focus on studying the optimal location of the premises,

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distribute the spaces, place the products in the appropriate place, manage the stock.
Transport logistics focuses on selecting means and optimizing routes.

After-sales service: it is essential for the company to remain in the market.

Consumer service logistics activities focus on studying their
needs, manage their orders and returns, organize after-sales services
of durable goods, etc.

1.1.2. Logistical functions in commercial companies.

Commercial companies focus their activity on the functions of procurement and

distribution; products or goods are items acquired with the purpose of reselling them
to third parties without prior transformation.

Wholesale companies buy directly from the manufacturer and the resale is directed
mainly towards retail companies or points of sale.

Retail companies can purchase from the manufacturer or the wholesaler, and sales are
they direct to the final consumer.

1.1.3. Logistic functions in service companies.

Service companies focus their functions on meeting the needs of the

clients, through the services they provide. The goods they acquire are to take away
the activity they perform is completed and, since they are in use, they are generally not stored.

1.2. Objectives of logistics

The objectives achieved with good logistical planning are:

Acquire the materials in the most suitable conditions; in this way

we avoid performing unpacking, preparation, and adaptation operations
posterior.
Reduce transportation costs by consolidating loads and
minimizing steps and distances in the journey.
Reduce handling costs by trying to change the goods of
place the least number of times.
Reduce the classification groups of the stock, as well as minimize the
volume, the space and the number of rooms dedicated to storage.
Reduce the number of inspections and inventory control, doing only the
necessary and in the easiest and most comfortable way possible.

2. Logistics chain agents

They are the companies or people (intermediaries) that link each of the links of
the supply chain. For example, in a loaf of bread, there would be: the farmer,

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merchant who sells the wheat to the miller, the transporter, the miller, the bakery,
and the points of sale of bread.

Distribution channels

The distribution channel is the path that the product follows from the origin.
(manufacturer) to the destination (consumer).

The manufacturer chooses the marketing system for their product and selects between sales.
direct or indirect

Direct selling: it involves reaching the consumer with the product through
own sellers or commercial agents. The own sellers belong to the
employee template of the company, while the sales agents act as
individual level and sell by the name and account of the manufacturer, without belonging to the
template, in exchange for a commission on the sales made.

Indirect sales: it consists of delivering the product to the end consumer through
one or more intermediaries who buy the item and sell it at a higher price.
There are two types of intermediaries: the retailer (they buy the product from the manufacturer or the
wholesalers and resell it to the consumer) and wholesalers (buy the product from
manufacturer and sells it to the retailer, who then resells it to the consumer
final).

According to the number of levels involved in the distribution, the following are distinguished
the following types of channels:

Zero-level channel: there are no intermediaries between the manufacturer and the consumer.

One-level channel: the product goes through a wholesale or retail intermediary first.
to reach the consumer.

Two-level channel: between the manufacturer and the consumer, there are at least two
intermediaries (wholesaler and retailer).

Three-tier channel: when other intermediaries such as an importer are introduced,

sales agents, buying groups, etc., in these cases the channel is very long.

The company that manufactures a product must choose the shortest channel, since the product
once it has entered the distribution channel, it maintains the same characteristics
and properties. Storage and transportation costs do not add any value to the
product, but increases the final cost prevents it from being competitive for price reasons.
However, storage and transportation activities are essential, as the warehouse
add the time value, and the transport the situation value. The product until it
consume remains stored or is on its way.

2.1.Retail intermediaries

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Exclusive distribution. It occurs when the manufacturer grants a limited number
from intermediaries the exclusive right to market the product. As
In return, the manufacturer requires the retailer not to sell similar product lines.
of other brands (car dealership).

Selective distribution. It involves using a limited number of intermediaries.

points of sale to reach the consumer, but exclusivity is not required nor is it
The intermediary is granted exclusive territory; it is sold in stores.
specialized (fragrance brands).

Intensive distribution.

With this type of distribution, the manufacturer aims to sell the product in bulk.
number of establishments to achieve maximum market coverage (products
basics)

2.2. Wholesale intermediaries.

Full-service wholesalers offering a very extensive assortment of products

they take on the functions of storing the product, delivering it to the retailer,
grant credits to facilitate payment and also provide advice.

Limited service wholesalers that offer fewer services and

product lines. Among them, cash and carry wholesalers stand out, which are
They are located in large surfaces and sell to small retailers with a wide assortment.
(Macro). The distributors of the path operate only in some lines of
perishable products (IFA). Finally, the cooperative chains of producers,
generally composed of agricultural owners.

Agents, representatives, and brokers who do not acquire ownership of the product,
they act exclusively as intermediaries receiving a commission in return. The
agents act as intermediaries in the transfer of property of the merchandise. The
representatives act on behalf of the seller and operate in an area
defined geographical. The couriers provide information to both the manufacturer and
to the buyer, about competitor prices, market situation, products.

Branches and offices of manufacturers that are forms of wholesale distribution not
independents. Through them, greater pressure is exerted on the process of
distribution (Zara)

3. Supply: functions and objectives

The function of procurement consists of purchasing the necessary materials for the
business activity (production and sales) and store them while the starts
manufacturing or marketing process.

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The function of provisioning consists of three fundamental aspects,
purchasing, storage, and inventory management.

First: the person in charge of making purchases of products that the center needs
production (industrial company) or the sales department (commercial company) must
take into account the price, quality, delivery time, payment terms, service
after-sales, etc. This means making an optimal selection of suppliers that
maximize these variables.

Second: provisioning involves having warehouses to store the

materials purchased, until the production center needs them. The items
manufactured goods must also be stored until they are sold. To carry out these
functions, a physical space is needed to organize and store the products, that is,
an organized system for classifying and managing stored inventory.

Third. It is necessary to apply an inventory management system, whose objective is

determine the amount of stock we should have on hand and the ordering pace
to meet the needs of the company.

The logistics of supply encompasses the planning and management of purchases,

storage of necessary products and application of techniques that allow for maintenance
minimum stocks of each material. The planning of the supply,
from logistics, it must guarantee the flows between one or more factories between platforms
logistics when suppliers are located a distance of 48 or 72 hours away,
in a way that ensures the zero break of the logistics chain.

Functions of provisioning

Acquire the necessary materials for the preparation or marketing of the

products.
Optimize purchase prices and quality
Manage the supply transportation plan and its logistical points.
Apply warehouse management techniques that allow for maintaining stocks
minimize and optimize the resources used.
Control the inventories and the associated costs.

Objectives of procurement

Calculate the needs of the company, achieving a sufficient inventory for

that production does not lack raw materials or other supplies.
Minimize the investment in inventories.
Establish an efficient information system.
Cooperate with the purchasing department

3.1. Functions of the company and provisioning.

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The main objective of the company is to offer products and services to consumers.
the clients; to achieve this purpose, the work is divided into departments and sections
known as business functions.

The main functions of the company are:

Purchasing or procurement function

Commercial or distribution function.
Financial function.
Social or human resources function.
Administrative function.
Research and development function.

To carry out the above functions, it is necessary for there to be a good

communication between the different departments, sections or areas of work of the
company.

4. Function of stored products

Stock or inventory is the set of materials, goods, items, products,

etc. that the company has stored pending its use or later sale.

The materials or products that are most commonly used according to the function they serve within
of the transformation or commercialization process are:

Goods: articles, goods, merchandise or products that the company acquires

commercial and that are stored until their sale and delivery to the customer, without any
during that time they have suffered no transformation.

Raw materials: materials that are used to manufacture other products.

Ongoing products: those that are at a certain point in time, are in process of
production.

Semi-finished products: those that have gone through the manufacturing process, but are not
they are ready for sale as they need some additional element that the company
buy from another manufacturer. Example: Pants that need a zipper.

Incorporable materials: products manufactured, generally, outside the company and

acquired by this to incorporate them into their products. Example: tires

Finished products: Those that have completed the entire manufacturing process

Conditioned products: they are finished products prepared for transportation and the
sale to the consumer. For example, once the oil is processed, it needs to be packaged and
pack it

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By-products: Recoverable raw material remnants for other products. Example:
skin scraps, in a handbag factory

Conditioning materials: containers, packaging, and other materials intended for

packaging.

Recovered materials: those that, due to their value and utility for the company, are returned.
again to the warehouse after having been used, like pallets, baskets, containers
made of glass etc.

Various materials: materials that are not included in the processed but that
they facilitate the production process. Example: fuels, office supplies,
tags.

4.1.Manufacturing and conditioning cycle

The manufacturing of a product involves transforming raw materials into products.

elaborate, which have no resemblance to the materials used. Example:
sunflower seeds that after the process become oil

The conditioning consists of packaging the product and equipping it with the appropriate packaging.

4.2. Supply cycle and stock flow.

Supply cycle. It is the period that exists between the purchase being made
and the moment when the sold products are handed over to the customers.

Stock flows reflect the inflows and outflows that occur between the different
sections or warehouses when manufacturing activities are carried out or
marketing

The supply cycle of an industrial company is as follows:

PURCHASES → INVENTORIES → PRODUCTION → INVENTORIES → SALES

The procurement cycle of a commercial company:

PURCHASES

5. The warehouses and the logistics chain

The word warehouse is defined as the building or place where items are stored or deposited.
goods or materials and where, in some cases, items are sold wholesale
warehouse. The warehouses are regulatory centers of structured stock flow and
planned to carry out storage functions.

The main activities carried out in the warehouse are:

Receipt of goods: it consists of admitting the items sent by the

suppliers. During the reception process, it is verified that the received goods

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it matches the information listed on the delivery note. The quantity is also observed,
quality.

Storage: it involves placing the merchandise in the most suitable area of the warehouse.
in order to access it and locate it easily.

Conservation and maintenance: it consists of keeping the merchandise in perfect condition.

during the time it remains stored.

Management and control of stock: it involves determining the quantity that should be
store each product and calculate the frequency and quantity that will be requested for each
request to generate the minimum storage cost.

Expedition of goods: it begins when the customer's order is received and the
the process consists of selecting the merchandise and packaging and choosing the means of
transportation, according to the type of goods and the destination.

5.1.Types of warehouses
5.1.1 According to the company's activity:

Wholesale and retail merchants only use a warehouse called

commercial warehouse.

Industrial companies use various types of warehouses:

Warehouse of raw materials and auxiliary materials: they are located within the
production plant premises and contains the materials, the supplies and the
containers that are used during the production process. According to the characteristics of
Stored material can be outdoors or covered.

Finished goods warehouse: they are dedicated to storing finished products.

The location can be within the factory or near it, as its function is to make
of regulator for various companies. The finished goods warehouses are the most
abundant and also the ones with higher economic cost, since the main objective is
to achieve that the stored products have the highest possible turnover rate.

General warehouse: it is intended for storing spare parts, tools, and materials
auxiliary production materials such as fuel, batteries, cleaning supplies, etc.
This type of warehouse is usually located in an intermediate area between the plant of
production and the area allocated for other activities.

5.1.2 According to the logistics distribution function or the strategic point of

location between the production center and the sales points, it
classify in:

Central warehouse or logistics platform: it is located near the manufacturing center,

to reduce handling and transportation costs from the factory to the point of

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storage. These types of premises must be prepared and conditioned for
the handling of large-sized load units (complete pallets) and
for loading and unloading of heavy trucks. The central warehouse is usually large
capacity, as the supply source for other regional warehouses.

Transit or consolidation warehouse: it is used to save distribution costs,

when the area that a regional warehouse must cover is very extensive and the route is
superior to a transport day. The transit warehouses are located in places
strategic and are equipped with mechanical means for loading and unloading of the
Merchandise is very fast. The merchandise arrives from the central warehouses on pallets.
completes and is distributed to the regionals. Sometimes a center is established
pickup or loading terminal to consolidate small shipments into larger ones,
which reduces transportation costs.

Regional or area warehouse: supplies to wholesale and retail customers of a

a specific region or area; they are used to supply a specific market and must
to be as close as possible to the points of sale.