Logistics is Definition, process organization, department responsibilities

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

MTO is an activity characteristic of almost every organization. The abbreviation stands for "material and technical support". This is the main topic of the article. In addition to the definition, we will consider the functions, forms, organization of logistics, management, drawing up supply plans and other important issues on the topic.

Definition

Logistics is one of the types of commercial activities that provide the organization, respectively, with material and technical resources.

And a more detailed definition. Logistics - a system for the use and circulation of fixed, working capital of an organization (raw materials, machines, semi-finished products, etc.), means of labor. As well as their further distribution by business units, structural departments, consumption in the production process.

The main goal of the MTO is to provide material and technical resources to production in the agreed volumes, inspecified location.

Functions

Logistics functions fall into two categories: technology and commercial. Consider them.

The commercial functions of MTO, in turn, are again divided into two groups. The main ones are directly the purchase or rental of technical and material resources. Auxiliary MTO functions are as follows:

• Marketing. Decision on the choice of a particular supplier, justification of trust in this partner.
• Legal. Legal support for the purchase / lease of resources, protection of a range of property rights, as well as support for business negotiations. Making deals and monitoring their execution.

Institutional Logistics Technology Functions:

• Resolving issues related to the delivery and storage of resources.
• Unpacking, harvesting, conservation of resources.
• Pre-treatment of raw materials and other resources.

Main responsibilities of the department

Logistics support of activities is the execution of a series of sequential and interrelated tasks:

• Planning the organization's need for resources. The data on two indicators of production are taken as a basis - capital productivity and material consumption. The information determines the optimal stocks of resources required for a particular production cycle or a particular release of a particular batch of products/services.
• Procurement task. MTO conducts operational and procurement work on the basis of the enterprise in accordance with the needs plans. Also controls the processes of concluding supply contracts, analyzes the "errors" of production.
• Storage of materials and harvested raw materials. Warehouse organization. In addition, the department is responsible for developing instructions and guidelines for the storage and use of stocks.
• Accounting for harvested resources. Strict control over their issuance to structural units.

MTO Forms

Logistics center can be different. It all depends on the specifics of the enterprise or firm.

Let's consider the most common forms of organization logistics:

• Supply of semi-finished products, finished products or technical services through economic direct links.
• Wholesale of certain means for production, goods. Carried out through warehouses, procurement bases, store chains.
• Loan, exchange operations undertaken in case of lack of resources, funds, investments.
• Recycling production waste or using secondary resources.
• Leasing is one of the main tools in the world of finance, through which you can make a long-term investment in the modernization and re-equipment of production. Creates a sustainable material and technological base, promotesincreasing competitiveness, better quality of manufactured goods.
• Purchase of raw materials and resources through special commodity exchanges. Organization of import purchases under relevant cooperation agreements with foreign firms.
• Development of subsidiary plots (example: production of containers, extraction of any raw materials). Implementation of further centralized resource allocation.

Classification of MTO forms

Forms of logistics processes can be divided into two categories.

1. Transit (direct). Products are delivered to the consumer from the manufacturer. Purchased goods from suppliers are distributed to retail outlets. Accordingly, there are no intermediaries here, and the "buyer-seller" relationship is a direct economic connection.

Positive moment: a significant acceleration of the delivery process, strong economic ties, the absence of intermediary, intermediate operations. All this translates into a definite plus: a significant reduction in transit costs. This form of MTO organization is expedient with constant cooperation, with a large amount of resources being sold.

2. Warehouse. Delivery of products is carried out with the help of distribution, intermediate storage terminals and complexes. Convenient for those cases when materials and raw materials are consumed in small quantities. Initially, resources are purchased here at wholesale prices, then they are sent to warehouses, and from there to the final consumer. ProductionInventory starts to decline and turnover increases.

The company gets the opportunity to import resources at a convenient time, in the amount needed "now". This gives intermediaries the opportunity to prepare the cargo for transportation in advance in order to deliver it at the first request of the consumer organization. But for such convenience, the costs are borne by the buyers themselves - the so-called warehouse margins are introduced. With all the advantages, this form of MTO organization still increases the overall production costs.

Organizational structure

Procurement management is the organization of two processes: purchasing and supply management. Let's take a closer look at this.

Procurement:

• Procurement management of certain works.
• Organization of the purchase of the necessary raw materials, equipment. This is the management of procurement of materials, procurement of equipment and procurement of services.
• Procurement management advisory assistance.

Now the second process. Supply management is the following activity vectors:

• Inventory management.
• Supply management of own products.
• Managing the distribution of resources within the same organization.

Forms of management organization

Materials management - choosing one of three proposed forms of resource delivery:

• Decentralized. Workshops, departments of the enterprise themselves export the raw materials they need fromproduction warehouses. Company vehicles are used. This form is more suitable for those enterprises that carry out individual or small-scale production.
• Centralized. On the contrary, it is suitable for enterprises that are already aimed at mass production. Warehouses, according to a pre-compiled schedule, transfer to the shops a certain amount of the required material resources. Such an organization provides an opportunity to prepare in advance for delivery, it is more expedient to use transport, auxiliary working departments that are directly involved in delivering the required raw materials to the shops. The centralized delivery of resources, in addition, greatly simplifies the system of accounting and control over the passage of raw materials, equipment, materials from the main warehouse to a specific workplace.
• Mixed. With this form, there is a sharing of both centralized and decentralized forms. Accordingly, some resources are supplied to certain workshops according to a set schedule. At the same time, raw materials of a different quality are taken out of the warehouses by the organization's subdivisions themselves, using official vehicles.

Governance structures

The enterprise is characterized by the systematization of services, departments of material support. There are three main governance structures:

• Functional. Each division performs its strictly defined function. Such a division is typical for enterprises engaged in small-scale or single-piece production,having a small range and small volumes of materials.
• According to commodity principle. Here, separate subdivisions of the MTO are doing the whole range of work on the supply of raw materials. Such management is most typical for mass, large-scale production, which is distinguished by a wide range of products, large-scale stocks of raw materials.
• Combined. Some specialists of the department are busy with issues of external resource supply. Other employees are involved in the internal movement of raw materials, equipment and other necessary resources.

Flaws in logistics organization

If the logistics program is built incorrectly, it can lead to a number of negative consequences for the entire enterprise. For example:

• Underproduction. This leads to a decrease in profits.
• Increase in systematic costs due to downtime (due to lack of resources for production).
• Release of defective products.
• Reduced competitiveness of products.
• Losses due to spoilage of raw materials unclaimed due to excessive stocks.

MTO plan

MTO planning is getting a basis for making a decision about the purchase of raw materials. Here are the following planning stages:

1. Market research. This is the collection, analysis, processing and evaluation of data on offers, their range, the cost of the necessary materials and raw materials. Analysis of the costs of their delivery.
2. Calculation of the enterprise's need for theseresources based on the MTO balance. Both external and internal sources of collateral are taken into account.
3. Purchasing plans.
4. Analysis of the purchase made.

Operational work on MTO

The following is considered operational work for logistical training:

• Receiving, as well as accounting for various stock notices for distributed products (more typical for centralized enterprises).
• Through MTO, the organization orders the receipt of raw materials from suppliers, concludes cooperation agreements with them, and monitors their implementation.
• Specification of production assets. In other words, determining the need of an enterprise for any raw materials, materials according to a special nomenclature-price tag. There, all resources are distributed by types, sizes, profiles and other characteristics.
• Quantitative and qualitative acceptance of the necessary raw materials.
• The process of organizing the supply of shops, production units.
• Managing the delivery of materials and equipment to the workshops.

Logistics support is both the supply of the organization with the necessary raw materials and equipment, and the planning of internal movements of resources through the shops. The success of the entire enterprise largely depends on its competent organization, the choice of the desired form of supply management.