by When a firm receives an order, it carries out certain activities to complete that order. These activities take a recurring form as they need to be carried out with every order. Thus, a cycle is formed of these activities, which is called Performance Cycle. To sum up, in simple terms, Logistical Performance Cycle comprise of series of activities that are required to receive the orders from the customer, process this order and make the final delivery to him.
Based on the timings of these activities to be carried out, there exist three logistical performance cycles.
- Procurement Performance Cycle
- Manufacturing Support Performance Cycle
- Physical Distribution Performance Cycle
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Procurement Performance Cycle: (Inbound Logistics/Upstream Logistics)
As the name suggest, this cycle is concerned with procuring raw materials
from the vendor and make available for further processing as and when required. It is also called as Inbound Logistics or Upstream Logistics. Procurement performance cycle aims at carrying out logistics elements related to procurement of materials at lower price.
Thus, this cycle involves all preproduction logistical activities. Procurement Performance cycle ensures that firm has sufficient materials to carry out the production activities and deliver to the customer. It is a base of logistical performance cycle. Various activities that are part of Procurement Performance cycle or Inbound Logistics are:
(a) Resource Planning: It aims at planning for the physical and financial resources that are required to be with the firm so as to procure the materials aptly on time.
(b) Supply Sourcing: Supply sourcing means making an effort to find out the right vendor from whom materials can be purchased.
(c) Order Placement: Once the list of vendors is finalized from whom firm is going to buy the materials, a confirmed order is placed to them.
(d) Inbound Transportation: Inbound transportation means transportation of materials from place of supplier to the place of manufacturer. It is also called as carriage inward.
(e) Receiving and Inspection: Once the consignment of materials reaches to the manufacturer, he receives the consignment and transfer these materials in the storage area. As he receives the materials, he also inspects the same and assure that material is received according to the order placed.
(f) Storage and Handling: Till the materials are processes, they require proper storing facility. Also, material handling techniques are used so as to manage the same.
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Manufacturing Support Performance Cycle: (In process Logistics/Production Logistics)
Manufacturing performance cycle is an interface between the procurement performance cycle and physical distribution performance cycle. To meet the production schedule, this cycle plays a significant role. The activities under this cycle, aims at providing basic support in manufacturing. It is not directly concerned with how manufacturing is done but certainly it is associated with how well the support activities are carried out in order to complete the manufacturing. This cycle includes various activities:
(a) Receiving Materials from Stores: Before the actual production take place, materials are stocked in the stores area. To begin with the production, materials are received from stores to shop floor for processing.
(b) Receiving Components: For the production to begin, certain components, loose tools, small equipment’s may be received for operating on machines.
(c) Managing Inventories of WIP: Once the production process has started, materials are converted to WIP or semi-finished goods. Many a times, it becomes essential to manage and store properly this WIP inventory till further processing takes place.
(d) Transfer of Finished Goods: As the production process is over, materials get
converted into final saleable product. This batch of finished goods is then sent to warehouse for packaging and distribution.
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Physical Distribution Performance Cycle:
(Outbound Logistics/Downstream Logistics) This is the 3rd and also the most important cycle under logistical performance cycle. It covers all major activities of logistics and thus it contributes the major cost of logistics. As the goods are transferred from factory to warehouse, it marks the end of Manufacturing support cycle and beginning of Physical Distribution cycle. It includes all those elements of logistics which are necessary to distribute the goods from the manufacturer’s warehouse to the customer’s warehouse. It ensures that goods are delivered to the customer according to his order following 7Rs principle of Customer Service. This cycle provides a support framework for the sales and marketing activities of business. It is also called as Outbound logistics as it includes all post production activities. It includes following set of activities:
(a) Placing of order by Customer: This cycle begins with placing of order by the customer at a selected retail outlet.
(b) Order Transmission to Distribution Centre: Once the customer order is received at the retail outlet, it is further transmitted to the distribution centre without wasting time so that timely delivery can be made.
(c) Order Processing: As soon as the distribution centre receives the order, it is further processed which means an attempt is made to know what kind of goods customer want, in what quantities, how they shall be packaged, how they shall be transported.
(d) Order Selection: Distribution centre checks the availability of goods ordered and based on it select the goods from the warehouse, package the goods according to the customer’s requirement and load the goods in a transportation vehicle.
(e) Transportation: Using the right vehicle and the principles of transportation, goods are finally transported from warehouse to the customer. Right mode of transportation is selecting looking on to the nature of goods and other factors.
(f) Customer Delivery: Once the goods are reached at the customer’s warehouse, goods are unloaded from the transportation vehicles and handed over to the customer which completes the delivery cycle.
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