Tag: University of Mumbai BMS Notes

The history of salesmanship is as old as human civilization. Paul Hermann described Bronze Age’s travelling salesperson’s sample case. The salespeople used a wooden box, 26 inches long, containing, in specifically hollowed compartments, axe, sword blades, buttons, etc.

The salespeople in the past were not held in high esteem by the society. The Roman meaning of the word salesperson is ‘cheater’, and Mercury, the god of cunning and barter, was regarded as the patron deity of merchants and traders. The business and trade of buying and selling goods flourished over centuries and centred only on some specific cities of the world. India was a great destination for traders and resellers in the medieval age for spices, carpets, jewellery, etc.

Many diverse races and religions entered our country with the travelling salespeople. Even the erstwhile colonial rulers of India, the British, came to India for the purpose of expanding their business and trade, though subsequently they satisfied their political interest. They ruled this country to protect their own business interests.

The first salespeople in the US were the yankee peddlers who carried clothing, spices, and household articles from one part of the country to another part. In India they are called pheriwallahs. These pheriwallahs move from village to village and sell sarees, dress materials, and spices mostly in the rural markets of India, because rural housewives have lesser mobility than urban housewives. These people move from the manufacturing bases of the country to different consumption centres in India.

The pack peddlers in India traded with the tribal Indians and exchanged knives, beads, and ornaments for furs, spices, salt, and handicrafts. These people were viewed as shrewd, unprincipled tricksters who would not think twice before practicing product and price manipulations for higher benefits. They sold coloured sugar water as medicine and cheated people for smaller gains. In the beginning of the nineteenth century, these peddlers started using horse-driven carts and wagons, and started stocking heavier goods.

They started storing goods such as furniture, weapons, ammunitions, food items, and grains. Some of these wagon peddlers settled down in villages, and opened stores and trading posts. The community of Baniyas or the trading caste in India has its origin in these settlers and store owners. The big retailers travelled to the nearest cities to replenish their stocks and bought goods to resell in their localities.

Wholesalers and manufacturers hired greeters and drummers who would seek out and invite retailers to visit the display of the owner. The drummers would meet the passengers from incoming trains and ship with great fanfare to beat their competitors. In the next phase, the drummers started visiting the customer’s place of business.

There were fewer than 1,000 travel­ling salespeople before 1860 in the US who were basically credit investigators and took orders for goods. Their numbers increased as the pace and reach of industrial .revolution spread across continents.

The techniques of modern sales management and selling techniques were refined by John Henry Patterson, widely known as the father of modern sales management. He ran the National Cash Registry. He asked his best salespeople to demonstrate their sales techniques to other salespeople. The best sales approach was printed in a sales primer and distributed to all the other salespeople to follow.

This is how the canned sales approach began. In addition to this, Mr Patterson assigned to his salespeople exclusive territories and sales quotas in order to stretch their efforts. He arranged frequent sales meetings that served the double purpose of training and socialization.

He also sent regular sales information on techniques of selling. Thomas J. Watson was trained by Mr Patterson who later founded International Business Machines (IBM). Patterson was the pathfinder who showed the strategy and skill required to transform a sales force into an effective workforce for generating sales and profits.

Today, the process of sales management has undergone numerous changes in terms of strategy, practice, and technological adoption to achieve the desired sales goal. A salesperson is no longer an order taker or information provider; rather he is viewed as a consultant to the customers.

Due to non-personal form of business and increasing distances between the manufacturers and customers, sales organizations are now emphasizing more on quality consulting skills to solve the customers’ problems. The real sales activity now is in retaining customers rather than just closing the sales. This relational approach has changed the scope of sales management, and research has found that it costs five times more to register a new customer than to sell a product or service to an existing customer.

As a pan of sales function, the managerial challenge is to improve the productivity and efficiency level of the traditional sales force. But modern sales management is confronted with challenges that affect both productivity and efficiency of its selling approach. In response, newer and better selling techniques and approaches are being used, such as telemarketing, key account management, use of independent sales force, team selling, electronic data interchange (EDI), and application of technology to provide information and services to the customers.

The domain of sales management has become multidisciplinary in which sales managers have to manage a diverse workforce and complex technologies. Sales managers have to perform duties such as recruiting, training, selecting, motivating, forecasting, controlling, and administering salespeople, while performing the primary responsibility of revenue generation for the firms.

They have to manage and satisfy multiple stakeholders, such as customers, suppliers, sales representatives, and top management with the objective of increasing sales and profitability. There are guiding principles and concepts in the field of sales and marketing that shape the destiny of sales managers and the domain of knowledge in sales management.

A sales department is the direct link between a company’s product or service and its customers. However, a well-trained sales department does more than making sales. Your sales staff builds relationships with your customers. Further, a quality salesperson helps identify a customer’s unique needs and makes sure that those needs are met. Since salespeople have direct contact with your customers on an ongoing basis, they become privy to personal information that helps make sales interactions smoother and friendlier. A highly trained sales professional tailors sales pitches to the individual customer and learns the ins and outs of their needs.

For example, say you own an office supply business. A customer calls your sales team and says that they need printer paper. The salesperson will ask what type of printer the business is using, how long it takes the office to go through a sheaf of paper and whether they need a higher-quality paper for any reason. A design firm printing work samples might need a higher quality paper than a nonprofit that is only looking to print handouts for meetings. Your salesperson ensures that the customer is getting what they need, in the right volume and at the right price.

Further, a sales department promotes the growth of your business as well as customer retention. A quality salesperson builds an ongoing, long-term relationship with your customers. The importance of personal relationships in business can’t be understated. A personal connection makes customers feel valued and encourages them to remain loyal to your company. Plus, a happy customer will recommend your brand to others.

Roles of a Sales Department

The responsibilities of a sales department are varied. Thus, a sales department is often split up into multiple roles, each with their unique functions:

1. Sales Development Representative

Also called business development representatives, a sales development representative is responsible for step one of the sales process: researching, identifying and contacting leads. This person is often a cold caller or the team member who makes the first contact with a prospective client. Once the customer lead has been identified as a “qualifying lead” (one likely to result in a sale), a sales development representative passes that lead to a higher-level sales representative.

2. Account Executive

The account executive is responsible for bringing in new business and making sales, filling the traditional salesperson role. This person must be a closer since the success of the deal ultimately falls on their shoulders. Account executives create presentations, run demonstrations, write proposals, identify any obstacles to the purchase process, negotiate terms with clients and finally, make the sale.

3. Sales Specialist

A sales specialist has in-depth knowledge of the product and the industry. This is the person you want handling complicated issues or difficult customer questions. A sales specialist is also adept at doing product demonstrations and client proposals. In a sales department, this specialist takes on any complex sales or advanced challenges that come up for the rest of the team.

4. Customer Success Representative

A customer success representative is responsible for following up and renewing sales with customers who have already made purchases. This role is crucial for customer retention and ensuring your business isn’t leaving money on the table. A customer success representative keeps your best customers happy and finds new ways to further the relationship, thus increasing your profits.

5. Sales Manager

The sales manager is the leader of the team, and responsible for making sure the team is meeting their responsibilities and hitting their goals. This person is charged with steering the ship as well as measuring and improving outcomes.

Sales Department Responsibilities

The responsibilities of a sales department vary depending on the business, and how large the team is. However, the first responsibility of a sales department is usually searching for and identifying prospective clients. The next responsibility of the sales department is reaching out to those potential clients and making contact, which is when the relationship-building begins in earnest. A sales representative will identify the needs of the client, and find out any relevant information for making a sale.

Next, the sales department is responsible for delivering presentations and proposals that will convert the customer. For example, say a prospective customer tells your sales representative that he is looking for a new office supplier, but what he needs that others don’t have is a selection of specialty inks. Your sales department now puts together a presentation for the customer that illustrates your wide ink selection. Usually, a team member will also put together a proposal for the business. This individualized courting of clients can help convert leads into long-term customers, so it’s important to get this part right.

If the prospective client is happy with the customer service of the sales staff and the bottom line of the proposal, it’s time to close the deal. Successfully closing sales is another responsibility of the sales staff: processing transactions and ensuring payments run smoothly. Finally, the sales department is responsible for managing customer relationships and keeping customers happy long-term. As previously noted, customer retention is crucial to business profitability, which often falls on the sales team as they continue to follow up with and meet the needs of customers. The sales department must maintain customer relationships and manage the satisfaction of all clients.

Objectives of a Sales Department

A sales department has several objectives, aside from just making sales. Since your sales department is often the link between your customers and the product or service your company offers, there are other necessary functions a sales department must meet:

1. Converting sales

Of course, a sales department’s main objective is to make sales. However, they must also do so efficiently and as inexpensively as possible. It is not enough to collect credit card information and process an order. A sales department is always concerned with improving its conversion rate. A conversion rate is the percentage of customers who complete a sale. So if your sales team speaks to 100 potential customers per day and 20 of those conversations result in a sale, then your team has a 20 percent conversion rate. A well-oiled sales department is always looking for ways to improve its conversion rate. A better conversion means the business spends less money converting each customer, resulting in higher profits.

2. Customer retention

Your sales team is responsible for retaining customers, a monumentally important task. It costs a business five- to-25 times more money to attract new customers than it does to keep existing customers. Research further shows that upping your customer retention rate by only 5 percent can result in increased profits of 25-to-95 percent for your business. It makes sense always to keep your customers happy. This is where your sales team comes in. As the direct point-of-contact for your business, your sales department is building valuable relationships with customers. A sales team that follows up with customers and makes sure they are happy with the product or service you are providing is crucial. Most customers who take their business elsewhere do so quietly, without informing anyone. So one objective of a sales staff is to make sure customers remain happy and continue to do business with your company.

3. Business growth

The sales department is one of the most critical sectors of business for growth. Through relationship-building and keeping customers happy, word-of-mouth recommendations increase. Plus, satisfied customers are usually willing to leave positive reviews for your company online. Reviews are critically important in doing business these days. Prospective clients want to see that you have made other customers happy, and are all too willing to go to your competitors if there is no evidence that you’re doing so. This is why your sales team can help you grow your business. Through outstanding customer service, your customers become loyal and sing your praises to others, bringing in new business. What’s more, a quality sales staff will always be searching for new client leads, further growing your business.

Sales management is defined as the planning, direction, and control of personal selling including recruiting, selecting, equipping, assigning, routing, supervising, paying, and motivating as these tasks apply to personal sales force.

Sales management originally referred exclusively to the direction of the sales force. Later the term took on broader significance in addition to the management of personal selling.

Sales management spe­cifically contributes to achieve the marketing objectives of a firm. In fact, sales managers set their personal selling objectives and formulate the personal selling policies and strategies.

According to American Marketing Association, sales management is “the planning, direction and control of professional selling including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating to the personal sales force.” It is also often referred to as management of the personal selling part of a company’s marketing function.

Sales is the only function in an organization that generates revenue or income for a company and hence it needs to be managed properly. The financial results of a company depend upon the performance of the sales department.

There are couple of aspects observed that should be motivating for the potential sales people. The first is that sales people are ‘often the best paid people in the business and sales is often considered the fastest and surest route to top management.

It is important for organizations to develop and maintain an effective sales force. This is because a sales manager is not only entrusted with managing the sales force to derive target-based sales outcomes but also perform managerial functions comprising planning the sales efforts and organiz­ing, directing, motivating, coordinating, and controlling the sales force to achieve sales goals. Sales management operates within the periphery of marketing management. In a broad sense, marketing management decides the role of various promotional activities including personal selling.

Sales management is assigned the task of managing the personal selling activities, the results of which ultimately affect the marketing department. Sales management spe­cifically contributes to achieve the marketing objectives of a firm. In fact, sales managers set their personal selling objectives and formulate the personal selling policies and strategies. They prepare the sales budget as components of marketing plans, taking in confidence the broad objectives of the marketing department.

Sales management covers planning and organizing person­al selling activities. It further performs sales force recruiting, selecting, training, assigning, routing, directing, motivating, remunerating, evaluating, and controlling functions of per­sonal selling. Sales management implements the marketing plan to generate sales performance.

Ingram et al. (2007) noted that sales managers are involved in both the strategy (planning) and people (implementation) aspects of personal selling, as well as evaluating and controlling personal selling activities.

The American Marketing Association (AMA) defines sales management as the planning, direction, and control of personal selling including recruiting, selecting, equipping, assigning, routing, supervising, paying, and motivating as these tasks apply to personal sales force.

Still et al. (1988) illustrated that sales management, originally referred to direc­tion of sales force, later assumed a broader description in addition to management of personal selling to include advertising, sales promotion, marketing research, physical distribution, pricing, and product merchandising. In time, it became more popularly known as marketing management which described the broader concept. So, in simpler terms, sales management is the managerial process of utilizing people and other resources optimally to achieve the goals of an organi­zation in a cost-effective way.

Indeed, the role of sales management becomes more pervasive by finding its importance both within and outside the firm. Within the firm, it builds an organizational structure which allows both formal and informal communication amongst sales and other departments. This also helps in establishing a distribution network outside the company encompassing salespeople and/or intermediaries that serve as a medium to reach target customers.

Sales Management is the planning of a company’s sales strategies and the hiring, training, supervision, and motivation of salesmen to carry out those strategies. As such, it is the key function of the marketing process. Without it, most companies would revert to the simplicities of a hundred years ago, when the emphasis was on manufacturing, and it was considered somewhat immoral for people to buy more than necessary to meet their daily needs.

Objectives of sales management

1. Revenue Generation

One of the main objectives of sales management is to generate revenue for the organization. The sales department is solely responsible to bring in the money.

2. Increase Sales Volume

Through efficient sales management, the organization wishes to increase the number of units sold. This will ensure that the production facilities do not remain idle and are utilized to the fullest.

3. Sustained Profits

Sales management has an objective of improving the profits of the organization through effective planning, coordination and control. Sales management strives to increase sales and reducing costs, this ensures good profits for the organization.

4. Organization Growth

With the sustained and continuous sales management techniques, the organization tends to gain market share and results in growth of the organization.

5. Market Leadership

With increased sales volumes and profits, ‘sales management’ enables an organization to become the market leader.

6. Converting Prospects to Customers

Getting prospects to become customers is an art and a science, it requires good planning and sustained efforts. This is accomplished through sales management.

7. Motivate the Sales Force

One of the core objectives of sales management is to motivate the sales force. Selling is a very stressful task, achieving sales targets can become very challenging. Therefore, the sales management task is to ensure that the sales force is continuously motivated through proper incentives and reward systems.

8. Compliment Marketing Activities

Sales management’s task is to support the marketing functions of the organization. Marketing and sales need to go hand in hand to achieve the desired results.

Sales volume, contribution to profits and growth are the three major objectives the sales function is expected to achieve. Though these are broad corporate functions to be achieved by the top management, sales contribute a great deal in achieving them. Corporate objectives are communicated to the marketing department who in turn passes on the responsibility to the sales department.

These are two approaches to forecasting.

1. Top-down Approach:

In this approach, forecast is done at the corporate level or the strategic level. It starts with a forecast of general economic conditions. It forecasts gross national product, consumer and wholesale price index, interest rates, unemployment level, government expenditures, etc. and estimates the market potential of the product for the entire industry.

Then, it determines its current market share and forecasts success of its product in the market. This forecast is used for operational planning and budgeting the future programmes.

2. Bottom-up Approach:

In this approach, middle and lower-level employees project the business operations in the coming years. For instance, they do customer survey to know what customers want to buy. Such forecasts are made by different sales people which are finally summed up to give the sales forecast.

Usually a questionnaire is mailed or completed through telephonic interview with the prospective customers to make such forecasts. These forecasts are usually reliable for small period of one year.

Channel management involves creating operational strategies that go beyond a single organization. Channel management strategies bring together partners in a supply chain, including material suppliers, manufacturers, distributors and resellers, in an effort to lower costs and increase operational efficiency throughout the chain.

Strategic Partnerships

Developing long-term relationships with your suppliers and retail customers is the first step toward effective channel management. Rather than switching suppliers for price discounts and promotional offers, build a solid supplier base by entering into price/volume contracts, cooperative marketing arrangements, inter-company financing arrangements or other activities designed to strengthen your relationships. Develop a loyal reseller base by helping your resellers to market and sell your product effectively. Provide credit arrangements to loyal retail customers, and offer price/volume contracts to your customers as well.

Technology Leveraging

Technological tools can be used to increase efficiency along a supply chain, but dedication and cooperation is required of all parties. Automatic order systems can instantly place orders along the supply chain when stock levels reach economic quantities. Picking, packing and shipping activities can be tied into automatic order systems to further improve efficiency and decrease delivery lead times. Order tracking technology can help individual companies to provide better customer service by knowing exactly when materials and other orders will arrive.

Vertical Integration

Vertical integration is the act of purchasing or building your own suppliers or customers. This technique can be costly and sophisticated compared to others, but vertical integration can provide the most significant cost savings and quality control of all channel management options. Owning your own supplier or retail customer can allow you to set your own prices along the supply chain and exercise total control over operational procedures and quality standards.

Logistical Support

Acting as a consultant to your suppliers and resellers may be one of the most hands-off channel management techniques, but it can still improve efficiency and productivity across the supply chain. Sharing best practices, technological innovations and managerial expertise can help your strategic partners to get their houses in order, resulting in lower prices and higher quality from suppliers, as well as more reliable orders from resellers. Providing marketing materials and sales training to resellers’ employees can help to boost sales for your brands as well.

Monitoring

Continually monitor and assess the performance and progress of your supply chain. Create thorough monitoring systems to accompany each channel management technique, whether it be something as simple as employee and customer surveys or something as complex as statistical reports from a chain-wide automatic order system. Reassess your supply chain strategies regularly and adjust them to respond to changes in the market or in a particular link in the chain.

Channel integration

Supply chain integration is a process where the all the parties involved with the fulfillment of a product are integrated into a single system. This requires significant coordination and alignment in order to ensure everyone is effectively working toward the same goal at all times.

Having the parts required for a product show up where they are needed, when they are needed, helps to not only prevent delays in the manufacturing process, but also eliminates a lot of wasted time, storage space, and more. When done properly, supply chain integration will bring parties that are often at odds together with a single focus.

All of the materials and components from along the supply chain are needed, and by integrating everything into a single system, it is much easier for effective product creation.

Information Sharing in Supply Chain Integration

The concept of supply chain integration goes back many decades, and it has been used by companies around the world to improve their systems dramatically. While there are many different ways that this type of thing can be implemented into a system, one of the most important things regardless of how it is used is going to be information sharing.

When looking at the information sharing of supply chain integration, most companies go through a series of stages once they begin working toward a full supply chain integration. These stages are as follows:

• Baseline: This is the first stage, and it is when every department or system within a company is managing their own supply chain, and related issues. Companies also refer to this as a siloed approach, and while it can have some benefits, it is quite inefficient.
• Functional Integration: In this next stage, all the different departments within a company will work together to help to improve efficiency and reduce cost. This could be done by combining orders, scheduling jobs together, or other important steps.
• Internal Supply Chain Integration: All the departments within a company are connected using the same systems. This will almost always involve using some type of IT infrastructure solution that allows the departments to work efficiently together, share their needs, and identify collaboration opportunities.
• External Supply Chain Integration: The final stage involves external vendors as well as all of the internal departments. Providing a vendor with system access, and encouraging them to function almost as another department helps to generate the best possible results.

Integrating Supply Chains

When it comes to integrating supply chains within a company, there are quite a few things that need to come together. The following are some of the key steps that most companies will need to take during this process:

• Choosing Vendors: Choosing vendors is more than just finding one that can provide the necessary parts. In addition to that, the vendor must be able to supply their piece at the needed time and place based on the overall supply chain.
• Internal Teams: Working with the internal teams of a company to work based on the needs of the overall system rather than just their department. Having set procedures based on the big picture can help to eliminate waste, and improve efficiency.
• Waste Elimination: While often overlooked, waste elimination should be an important part of an effective supply chain integration. This can happen when either a vendor or an internal team will physically relocate in order to more efficiently complete the work that needs to be done.

There are many other things involved with effective supply chain integration. This can seem like a very complex process, and in many ways, it really is. Once the initial integration is completed, the system should run very smoothly for years to come.

In most cases, the initial integration of the supply chain will require that all parties get together to discuss their abilities, as well as their needs. Going over all the logistics in an open environment will help provide everyone the opportunity to make suggestions, express concerns, and overcome obstacles, before it is ever implemented into a production environment.

Supplier Integration

There are many points along the production process where the suppliers and the producers meet. This would be where the suppliers bring specific parts, resources, or other items to the producer for use. Ideally the supplier will deliver their supplies directly to where they are going to be used, or at least as close as possible.

This requires that those who produce products provide their suppliers with more access, training, and other resources than many companies are used to. In essence, this can move the relationship from a supplier-customer relationship to a true partnership.

This often requires some additional investment on the part of the company, and may even mean higher overall prices for the products because more expected from the suppliers. On the surface, this may not seem to make sense, but the added efficiencies can really make this relationship pay off. In addition, when there is a symbiotic partnership between two companies like this, it is much more likely that the supplier will go above and beyond to meet the producer’s needs when things aren’t going according to plan.

Green logistics has its origin in the mid-1980s and was a concept to characterize logistics systems and approaches that use advanced technology and equipment to minimize environmental damage during operations

As concern for the environment rises, companies must take more account of the external costs of logistics associated mainly with climate change, air pollution, noise, vibration and accidents.

Green logistics is a form of logistics which is calculated to be environmentally and often socially friendly in addition to economically functional. It describes all attempts to measure and minimize the ecological impact of logistics activities. This includes all activities of the forward and reverse flows of products, information and services between the point of origin and the point of consumption. Its aim is to create a sustainable company value using a balance of economic and environmental efficiency.

Importance of Green Logistics:

Green logistics has its importance from the view point of business, society and environment at large. It benefits could be understood with the help of following points:

(a) Better Transportation ideas: Green management endeavors at finding out innovative methods of transporting goods to the customers. In some countries trends have begin of using electric vehicles rather than using traditional vehicles consuming lot of fuel like diesel and petrol.

(b) Lesser Pollution: Greener techniques of logistics also aim at keep the environment clean and green. Pollution free land, air and water is the agenda of green logistics.

(c) Reduction in Company’s Costs: The green logistics is not very much expensive. On the contrary it is cheaper the traditional methods. For instance using electric vehicles in transportation is much cheaper than using diesel trucks. This reduces the overall costs of the company.

(d) Increase in revenues: Green logistics saves energy costs, reduces operational costs, maintains steady supply of materials and creates a safer, secure working environment for the business. This contributes to higher revenues for the company.

(e) Customer loyalty: We are now in an era with highly informed customers who care more about what they use and how it is produced. So when a company communicates its green supply chain, company is bound to retain and attract more customers than a company without a green supply chain

(f) Increases company’s longevity: At times, most companies die prematurely because they cannot survive market competition and innovation. Green supply chain supports sustainability on very important levels for continuous business growth.

(g) Human health: Green logistics help’s to decrease several kind of emissions such as CO2 and CO. For example, using non-fossil fuel such as electric cars help to decrease air pollution which impact on human health when they breathe the air.

(h) Waste Management: Green logistics also aims at waste management and carrying out proper disposal. Waste can create lots of environmental hazards which gets reduced by implementing green logistics.

(i) Better Corporate Image: Companies that follow the green logistical practices are bound to be liked by the public. Efforts of such companies are embraced by the public. Such companies enjoy good reputation in the market and it leads to a better corporate image.

• Inbound Logistics is concerned with pre-production activities of logistics i.e. arranging resources and raw materials for further manufacturing. It constitutes Procurement Performance Cycle
• In Process Logistics is production logistics and provides support activities to the manufacturing. It constitutes Manufacturing Performance Cycle.
• Outbound Logistics includes all those activities which are concerned with physical distribution of finished goods from warehouse to the customer. It constitutes physical Distribution Performance Cycle.

Difference between Inbound and Outbound Logistics

Inbound logistics

The inbound logistics process refers to the inflow of raw materials from suppliers to manufacturing plant. This is the first phase of the value chain. It involves various activities, such as the storage and delivery of raw materials and parts that are going to be used in production. It also includes sourcing the materials, tracking inventory and optimizing the movement of products from suppliers to the store, warehouse or manufacturing unit.

Phases

• Supply flow management. This consists of deciding on and managing the product quantities you need as well as the frequency of procurement to ensure the availability of these goods whenever necessary.
• Procurement of stock. This refers to the purchase of the products required by the production and/or sales department. To purchase goods, you need to select a supplier taking into account factors such as price, quality, delivery date, payment terms, etc.
• Transportation planning. Planning for the arrival of goods is paramount for preventing bottlenecks at your warehouse docks. Everyone involved in this stage should be aware of expected orders and their estimated time of arrival.
• Unloading and receipt of material. This relates to the unloading of goods from the trucks and their movement to the receiving or consolidation area. It’s critical to make sure that the products you receive match those you ordered. The package is also checked in this phase to ensure that it is in perfect condition.
• Choice of unit load. Once the goods have been verified and have undergone quality control, they are placed on/in the appropriate unit load pallets, boxes, or containers which will be used to store, transport, and handle the products.
• Product labeling and consolidation. All information relating to the goods received needs to be recorded in order to add the new products to the existing stock in the system, thus updating the inventory status.
• Storage in the ideal system. Goods that have been labeled and are ready to be stored are moved to the storage system best adapted to their characteristics. The products remain there until they are required in the next stage of the supply chain.

Outbound logistics

Outbound logistics involves the flow of finished products from a company to its end customers. These activities are mainly concerned with the distribution channels and customer service. Outbound logistics, as the name indicate, is the collection, storage, and distribution of the final goods and related information flows, from the manufacturing plant to the end user. It covers all those activities (i.e. selecting, packaging, transporting, etc.) which are involved in the outflow of merchandise from seller to the buyer.

Process:

Storage

The storage process depends on a warehouse using the correct methods to keep the finished goods in a safe environment and ensuring they’re easy for staff to access. Because a customer can order a product at any time, effective organization of the warehouse is essential. It can also be more cost-efficient to store as little product as possible because stored goods aren’t earning a profit, and they occupy space the business can use for other purposes.

Transportation

Transportation is the main process of outbound logistics. Logistics depends on transportation, and companies try to move products from one location to another as efficiently as possible while using the most effective methods. Many factors impact transportation, such as:

• Delays
• Fluctuations in fuel prices
• The dependability of the transport team

Components:

Outbound process

There are numerous essential stages that businesses follow in the outbound logistics process. For example, if a sales department receives a customer purchase order, it first checks the inventory to confirm it can fulfill the order. The department then sends this order to the warehouse, where staff find the product and pack it for delivery to the client. The sales team then charges the customer for the order.

Channels of distribution

Many businesses use channels of distribution instead of working directly with the client. A channel of distribution can be an individual or another business that specializes in distribution. For example, a company that manufactures chairs may have a variety of clients in its distribution channels.

These channels may be websites, shops or other vendors, and they’re responsible for promoting, storing and transporting the chairs. A key part of outbound logistics is selecting distributors that promote the product and have a strong delivery network, which can provide greater reliability.

Inventory system

An effective inventory system is essential for ensuring outbound procedures operate efficiently. Businesses often use their past sales and inventory record to predict future demand and make certain they have enough goods to fulfill orders. Having too much or too little product can cause challenges for a business, whereas having the right quantity can increase the order fulfillment rate and raise profits.

Delivery optimization

Optimizing distribution and delivery is another essential component of outbound logistics. A common approach is to use system barcode scanning for inventory tracking. This helps to keep the client updated on the status of the order, and it helps to prevent errors by making them easily identifiable to both the customer and the fulfilling business. Such a process allows the business to meet its delivery deadlines and increase customer satisfaction.

Differences between Inbound and Outbound Logistics

Inbound Logistics refers to the buying, storage, and dispersal, of the incoming goods, to the manufacturing unit. On the other side, outbound logistics implies the transmission, selection, packaging, and distribution of final goods to the end users.

The inbound logistics is aligned towards the usage of resources and raw materials, within the manufacturing or assembly plant. On the contrary, outbound logistics focused on the outflow of final goods or product from the firm to the end customers.

Inbound logistics, is all about sourcing and receiving of raw material and its management, in the organization. Conversely, outbound logistics is mainly deal with customer service and distribution channels.

In inbound logistics, the relationship is between the supplier and the company. Unlike outbound logistics, in which the relationship is between the company and the ultimate customer.

Integrated Logistics Management can be defined as the process of anticipating customer needs and wants, acquiring the capital, materials, people, technologies and information necessary to meet those needs, optimizing the goods or service, producing a network to fulfill customer requests and utilizing the network to fulfill customer requirements in a timely manner.

Integrated logistics is thus concerned with bringing connectivity in various logistical activities and performing the logistics function as one single chain rather than many isolated functions. This helps in reducing the operational efforts and costs and performance wise it leads to better customer service and higher revenues for the company.

Flows in Integrated Logistics:

As logistical activities need to be integrated in one single chain, efforts are taken to unite two main categories of flows of logistics viz. Information Flow and Inventory Flow.

(a) Inventory flow: It is concerned with how the raw materials are purchased from suppliers, processed and finally delivered to the customer. It represents the Logistical performance cycle encompassing inbound, in process and outbound logistics. Inventory Flow thus, covers procurement, manufacturing support and physical distribution.

(i) Procurement: Procurement is concerned with getting raw materials from the vendor and make available for further processing as and when required. It aims at carrying out logistics elements related to procurement of materials at lower price. It involves all preproduction logistical activities.

(ii) Manufacturing Support: Manufacturing support is an interface between the procurement and physical distribution. The activities under this flow aims at providing basic support in manufacturing. It includes material handling, managing work in progress inventory and transferring finished goods to warehouse.

(iii) Physical Distribution: 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.

(b) Information Flow: Information flow aims at developing coordination among various ends and performs the logistical functions in the righteous manner enabling logistical competency. It includes Planning and Coordination Flow and Operations Flow:

(i) Planning and Coordination Flow: Planning and Coordination is the base of logistics chain that provides an integrated method of working by the participants of value chain. Requirements are consolidated and finally a plan is made to carry out logistical operations in an integrated way to satisfy all the value chain participants.

(ii) Operations Flow: It is concerned with directing operations to receive the order, process it, carrying our functions like warehousing, material handling and transportation and finally distributing the goods according to an order.

Barriers to Integrated Logistics:

Integration of Logistics is not an easy task. There are certain barriers in the whole process. These barriers could be listed as follows:

(a) Organization Structure: Integration of logistical function requires on the part of manager to look beyond the aspects of authority and hierarchy in the organization structure. Traditional perspectives by managers need to be ignored and new integrated approach is essential.

(b) Measurement Systems: Managers generally have a thinking to look their functions individually but integrated logistics require from the part of managers to see their functions as a part of business system. A new measurement system with holistic approach is needed.

(c) Inventory Ownership: Integrated logistics aims at managing inventory in altogether a different way. Whereas, traditionally inventories are managed to maintain sufficient supply and remain in a comfort zone. Integrated logistics aims at modern inventory management techniques like JIT wherein inventory carrying costs are reduced considerably.

(d) Information Technology: Information technology that is required to meet the requirements of integrated logistics is not available easily as it requires cross functional approach. Moreover such technologies are really very expensive.

(e) Knowledge: Competency among the employees involved in integrated logistics is essential Failure to have such competency may not serve the purpose.

Improving service level usually means an increase of costs. The service costs are caused e.g. complaints and correction of mistakes and work phase be done twice. Quality assurance contribute to reducing bad quality and mistakes, but in this case, service level production costs may increase considerably high.

Increasing the number of products stored in warehouse adds more rapid product availability to customer, but increases storage costs and the cost of tied up capital.

Therefore, it is important to find an optimum level, where service is good enough, but at the same time costs as low as possible.
Collection of customer feedback and its processing is necessary in order to identify satisfactory service level for customers.

Customer needs can be met, for example, by packing products for store handling and ensuring their handleability. Customer needs are often associated with delivery time or reliability of delivery and companies give related to them service promises. Well-managed complaint may increase company’s image and ultimately, turn to a clear competitive advantage.

Three principals of service

Service can be planned by three different principals or by a combination of them, depending on customer and product:

• Self-service principal: Customer orientation can be based on self-service principal, if customer doesn’t see service to create delivery process value. Typical to this service is customer’s own participation, use of up to date information networks, low unit cost of the process and ease of service
• Normal service: when share of service increases it is so called normal service, which means traditional customer service and requires service personnel presence. For example, visiting store’s fish desk or pharmacy.
• Tailor-made service: tailored services are characterized by customer fitting room, appointment and expensive process cost. As examples, investment advisory, legal clearance or negotiating mortgage.

The danger of part optimization

In logistics, there is a risk of part optimization. In this case, in one function service level is high, but measures implemented in other functions of the company tears it up. Such situations may arise e.g. between storage and transportation and buying and selling, for example, so that customer’s urgently needed spare parts kept in the stock, but they are transported to customer very rarely then the warehouse operates in vain or sales promises quick delivery but purchase keep deliveries from sub-suppliers with long delivery periods so that the product can not be delivered quickly.

Service may suffer too in connection with, for example, packing or delivery, and it is particularly harmful if carefully planned and implemented supply chain management fails in the final stage of logistics chain, for example, product is damaged during assembly in customer’s premises. In this case, resources being wasted and it will lead to financial losses and failure of customer promises.

Customer Satisfaction

Having good customer service in the transportation industry will ultimately improve your customer satisfaction levels. Customer satisfaction is important, even in the logistics industry in fact, especially in the logistics industry. Why the whole process might seem as simple as picking up a customer’s delivery and delivering it to its destination, customer satisfaction ultimately comes down to what your business can offer them outside of that simple process. Online services to track their shipments can work wonders, but human interaction is just as effective. Keep your customers up to date on their shipments if you can, or explain to them from the outset what will happen with their deliveries. Keeping a customer satisfied will keep them a customer.

Customer Relationships

Customer relationships play a part in customer satisfaction, but will also play a part in the success of your business. A good customer relationship will not only keep them coming back as ‘repeat customers’, but they are also more likely to suggest your business to other people and bring you in more clients over time. They chose your business initially, so make sure you give them enough reasons to come back and not look elsewhere to your competitors. Customer relationships can be a simple way of doing this with minimal, if any, costs so it’s well worth the bit of extra effort.

Brand Image

Good customer service in the transportation industry is going to make your brand look good. Poor customer service is what drives people to leave bad reviews. When someone complains about a company, it’s usually about the customer service they received as opposed to the product. If a product is faulty, customers can be appeased by good customer service whether that’s an apology or a replacement and this works in Logistics too. If your company is apologetic if something goes wrong, bad reviews and complaints are less likely. Showing you care through good customer service will do your business and your brand image a world of good.

Logistics is not just concerned with material or information transitions but it support marketing function, product development, price promotion and helps in bringing new ideas to provide customer service. It ensure that firm should provide fast, accurate and quality service.

Logistical competency leads to increased revenue, create opportunity for major cost savings in operations and simplify complexity of distribution network. Logistics competency includes the ability to analyze and design new distribution networks and optimize existing networks.

It also include management of information required of order processing and demand forecasting. It encompasses managing of all logistical performances in such a manner that it results into optimization.

Thus, summing up, it could be said that Logistical competency is the assessment of a firm’s capability to provide competitive services to the customers at the lowest possible cost.

3 Cs Model of Logistical Competency:

3 Cs model of Logistical competency suggests that the three Cs in Logistics i.e.  Company, Customer and Competitor, all are quite important for the growth and survival of business and economy at large. The 3 Cs model of Logistical competency generates competitive advantage for the firm. The 3 Cs are discussed herewith:

There exists a 3 way relationship between three parties as represented in the above diagram. Customer is one who shows the desire to buy the products. He always search for products with best quality and low price. Company works hard for selling their products so as to satisfy these desires of customers. It utilizes all its assets in the optimum way and always see to it that customers are influenced to buy their products only. Competitor is one that tries to fascinate an magnetize the customer. He also utilizes all his assets in the best possible way and tries to influence the customer.

There exists a 3 way relationship between three parties as represented in the above diagram.

• Customer is one who shows the desire to buy the products. He always search for products with best quality and low price.
• Company works hard for selling their products so as to satisfy these desires of customers. It utilizes all its assets in the optimum way and always see to it that customers are influenced to buy their products only.
• Competitor is one that tries to fascinate an magnetize the customer. He also utilizes all his assets in the best possible way and tries to influence the customer.

Thus Company has to strive very hard in order to retain the customers. They do so by providing cost advantage to the customers and value advantage to the customer. Competitors also tries to bring down their cost and provide value advantage to the customers. Company and competitors strive for cost differentials.

And that’s how in the whole process, wherein company and competitors, both are trying to provide value advantage to the customers by becoming efficient, the logistical competency is achieved.

Parameters to achieve Logistical Competency:

Logistical Competency can be achieved with the help of certain parameters. These parameters stand like five pillars in completing the logistics mission of the company. These parameters are as described as follows:

(a) 1st- Network Design: A manufacturer may have multiple facilities of plant, warehouses and distribution centres. Network design aims at forming a structure so as to perform logistical activities efficiently and effectively. The manufacturing units and warehouses may be located in various geographical areas, far from each other. In the same way distribution centres will be disperse across different areas. Network design tries to establish connectivity among all these facilities for better performance of logistics operations and more importantly to provide better customer services resulting in customer satisfaction.

(b) 2^nd– Information Management: Information Management is essential component here. It is required for demand forecasting and order processing. Logistical performance depends a lot upon how the information is received, shared among the different facilities in the network and ultimately used to make the customer delivery according to the order placed by him. Contemporary technology is used in logistics for the same. Softwares like ERP, CRM, and technologies like EDI, ePOS, etc. are widely used for information management.

(c) 3rd- Transportation: Transportation is required for the movement of goods from one party to another. Transportation accounts for 60 to 70% of the logistics costs. Logistical function of transportation deals with decision like choosing right mode of transport, deciding to have one’s own feet or to outsource, deciding on the total cost, transportation infrastructure, reliability of mode and so on.

(d) 4th Inventory Management: In order to control total cost it is quiet significant to control and manage the inventory. Inventory management is concerned with maintaining the requisite levels of inventory in such a way that there is neither understocking nor overstocking. Sufficient levels of stock are to be maintained to satisfy the customers’ requirements.

(e) 5th- Warehousing, Material Handling and Packaging: Logistics is also concerned with maintaining the storage area wherein heaps of goods are stored till they are demanded by customers. Such logistical function is called as warehousing. Logistical function of warehousing deals with the decision size, number, layout, location and nature of warehousing.

Material handling is an art and science of moving, packaging and storing of substances in a form. It includes lifting and shifting of materials in order to save space, cost and time. The overall productivity of logistics is improved with automation and mechanisation of material handling system.

On other hand, incorrect methods and system of material handling results in high costs. Packaging is required for efficient handling and storage of goods. It is also essential for protection of goods from any loss or damage, specially during transit. Packaging adds to the shelf life of any product and makes it durable for longer time. Packaging, which is quiet attractive, make the goods easily saleable in the market. Packaging is also very much necessary for providing convenience and ease of handling to the end users.

Thus Logistical competency can be enhanced by right logistics mix and proper network design.