History Of Business Logistics

The relatively recent development of business logistics has led, as it has evolved, to the use of a variety of terms to refer to it. In the 1960s and 1970s the terms physical distribution, distribution, materials management, and physical supply were common. Physical distribution and distribution refer to the outbound flow of goods from the end of the production process to the consumer; physical supply and materials management refer to the inbound flow of material to the production process. As the importance of coordinating the entire flow of material from the raw materials to the end consumer became recognized, the term business logistics became widely used to reflect the broadening of the concept. Today, the term supply chain management is

HISTORY AND BACKGROUND

The activities that make up business logistics, such as transportation and storage, are as old as trade itself. The concept of grouping them together and managing them as a system, however, is quite new.

Traditionally, the responsibility for logistical activities has been scattered throughout the organization. For example, transportation might be under manufacturing, with finished goods inventory and warehousing under marketing and sales. Where management of the logistics system is uncoordinated, diseconomies will be found. For example, manufacturing may choose to reduce transportation and manufacturing costs by producing and shipping in very large quantities—and in so doing greatly increase the costs of storage and the investment in inventory well beyond the amount saved in transportation costs. With proper coordination, transportation, manufacturing, storage, and inventory, investment costs could be balanced so that the firm 's total cost would be minimized. The initial development of business logistics began in the 1950s with an understanding of the potential for cost savings if the management of the logistical activities was

The proliferation of new products and variations on existing products is the outcome of the application of the marketing concept and market segmentation. Marketers, attempting to satisfy their customers ' increasing interest in fashion and their changing lifestyles, have offered more and more products to smaller and smaller segments of the market. Examples abound on retailer shelves. Consider such products as large appliances originally available only in white, or plastic trash bags, cereals, frozen prepared foods, athletic shoes, office furniture, cosmetics, and so on. Not only are more and more products available, but the life cycles of the products are shortening. To remain competitive manufacturers must offer a continuous stream of new products.

Product proliferation and shorter product life cycles force logisticians to deal with growing complexity. Each time a new product or product variation is offered, it increases the number of products to be manufactured, stored, transported, and generally kept track of. At the retail level the problem is compounded. A manufacturer may add a new color of a product, thereby increasing its product line by one; but if all four of the manufacturer 's competitors also add the new color, the retailer will be faced