Principles of logistics management

Introduction

            Hi-Beau is an aesthetic and healthcare product company with its headquarters in Singapore. The company was founded in 2004 by Mike Zhang and Doris Du who was his partner (Hi-Beau, 2011) Its success was after the great reception of Avalon Aloe Multiple Detox which was its first product. Some of its other products include Avalon Probiotic detox; fat burner; and ginseng slice with honey. Hi-Beau uses the state of the art technology combined with the latest developments and research in healthcare science to produce effective, natural and safe products for its consumers. With the constantly growing demand for beauty and healthcare products, the company surveys the market constantly to ensure that its products are able to meet the customer’s needs. This has made Hi-Beau a recognized and trusted brand in Singapore and has gained the trust of its target market.

            Despite the high level of competition in the field of healthcare products and cosmetics, the company was able to grow from a small medium enterprise company to the recognized brand it is in Singapore today. In order to maintain this position, the company has had to undergo various changes and upgrades so as to adapt to the changes in the market and ensure that the needs of the consumers are met satisfactorily so as to get a competitive advantage. As a result, the company has a large variety of customers ranging from hypermarkets to small family owned shops. In order to maintain its continued success, the company must ensure that it has a working order processing and distribution system to ensure that its products are accessible to all of its target customers (Hi-Beau, 2011).

Interface

            There are various areas where logistics and the three core functional areas may interact in ensuring that the products are available to the customers. The company’s business model is mainly based on business to business. Hi-Beau plays the role of manufacturing the products and ensuring that the products meet the needs of the customers and the target market. It then teams up with other businesses or retailers who are responsible for re-selling the products to the consumers. The interface in the system could therefore occur in the interaction of the company and its retailers for the purpose of marketing and production (Schonsleben, 2007).

            Since other businesses are responsible for making Hi-Beau products available and selling them to customers, they play an important role in marketing them and ensuring that customers prefer Hi-Beau products over those of the competitors. The company’s marketing strategy must therefore take into consideration and produce products that are in line with the information collected by the retailers concerning what the customers want. This will ensure that the customers get what they want and that their supply to meet the existing demand. For this to be effective, the company must therefore try to maintain an efficient order cycle (Schonsleben, 2007).

            Another area that logistic management could affect a core functional is in the area of production. Poor logistic management may result to the company producing more products than there is demand for in the market. Since both distributors and the company are involved in marketing the products to the customers, they may have different ideas of what the customer wants (Logistics management, 2014). Since the distributors relate at a more personal level with the customers, they may have more information concerning the demand for Hi-Beau products. Though this may be the case, there is a possibility that they may oversell the demand, leading the company to produce more goods than the existing demand.

            The result of excess production will lead to the final way in which logistics will interface with finance. The false demand created will lead the company into investing more on production. However, it will not be able to get the expected returns since the products will stay longer in store and thus not collect the predicted revenue. This will affect the company’s finance because the money spent would have been used to fund other projects not to mention loss of capital as a result of products that may be damaged while in storage. A solution for this issue would be well conducted market research of the target market; the level of competition and other factors that affect the customer’s purchasing decisions (Schonsleben, 2007). This research will give relevant information and help the company to decide the appropriate number of goods to produce without being in excess or under surplus.

 

Order Cycle

            An order cycle is the process through which an order is made, processed and then made available to the customer or the person who made the order. This process starts from a sales enquiry which is then accessed, processed and then made available to the customer either by delivery or placing it in a position that is accessible to the customer for purchase. A good order management system plays an important role as it helps to ensure that the production and delivery process runs smoothly. It also helps to cut down expenditure and waste thus improving on efficiency in production and increases the profit margin (Lambert & Stock, 2001). The current order process for Hi-Beau is as shown below,

Order Transmittal: Image retrieved from; Kingscroft Logistics, 2014

The process starts with collecting all the orders that have been received from the various retailers and other businesses that deal with distributing Hi-Beau products. The production will therefore be greatly influenced by these orders when it comes to deciding the amount of products to produce. After collecting, the orders are processed mainly by the sales administrator who assesses whether there is adequate stock to supply the orders. He is responsible for logging in the transaction into the company’s system so as to create a pick list and also create a notification that there was a deduction in the stock. After the pick list has been generated, the products are packed and made available to the distributors and retailers who in turn make them available to the customers in their premises (Hi-Beau, 2011).

            Since Hi-Beau operates on a business to business model, most of its products are purchased at other business stores displaying them. Though this helps them to reach customers in different geographical region, it creates an issue when it comes to storing the products before delivery. Hi-Beau is responsible for manufacturing the products and then making them available for sale. Because of this, it has to ensure that it has enough products to meet the demand. However, it incurs a lot of cost in storing the products before they are delivered to its distributors. It not only incurs inventory holding costs but also lack of revenue from the goods that stay in storage awaiting delivery (Sharma, 2009).

            To solve this problem, the company could invest in various practices that will create a good flow in its order cycle. One way to create flow is to ensure that all the departments that are involved in production and supply are working in harmony (Ismail, 2009). This will ensure that all departments are aware of what products are required, the amount that is available and whether the available products will be enough or others ought to be manufactured. Having good flow will help to avoid waste and loss incurred in cases where there is overproduction.

            Another approach to enhance the order cycle is by ensuring that all the relevant departments are made aware of the rate at which customers are using up the products. This will help the departments to plan their work in a way that is geared towards meeting the need created without going overboard. The consumers needs will be met and the organization will have a nice flow in its order cycle where there is little surplus and there are no excess products stored for long in warehouses (Coyle et al, 2012). The company could also focus on improving its lead time. This is the process that is taken from the time the order is made to the time the product that was ordered is delivered. By improving the lead time, Hi-Beau will be able to ensure that goods are not only made available to the customers but also in adequate time to ensure that little or no products stay in its storage warehouses.

Inventory management

            Inventory management is essential in any organization. If done correctly, it ensures that the goods stored are sufficient enough to meet the demand created by the target market without oversupply and undersupply of goods. In the case of Hi-Beau, the inventory will comprise of raw materials needed to create the products and also the already finished products. The company’s daily activities involved taking stock of the activities that take place in the warehouse, noting down any discrepancies. Some of the duties of the personnel in the warehouses involved making records of transactions that took place and presented them for auditing. This helped in identifying the raw material that was used and the end goods that were produced (Muller, 2011). 

            There was however an issue where there was no accurate description of the demand for the company’s products. As a result, the company would produce products to meet a not well estimated demand. As a result, products often stayed in the warehouse if in excess and this exposed the company to various issues. The company incurred extra cost when catering for labor for managing their inventories (Muller, 2011). There is also the cost that will be incurred in refurbishing or repackaging products that may have been damaged in storage and lastly, the company had to deal with the issue of expanding warehouses used to store these products as they await delivery. To solve this issue, the inventory manager ought to first know the amount of stock that is available in the warehouses. This will help them to determine whether the stock will be able to meet the current demand or that new products will need to be manufactured. In doing so, the manager will help prevent the manufacture of new products when they are not needed and thus prevent over surplus and maintain the inventory at appropriate levels (Sharp & Voorhees, 2000).

Another way to tackle the problem will be to learn to identify warning signs. Some factors that show a problem in inventory management include discrepancies between the physical goods and the inventories kept in the books. As a result, the staff will find difficulty finding actual products even though they are indicated in the book records because of these discrepancies. Another indicator is as simple as the amount of dust that accumulates on the products while they are in storage. A lot of dust will indicate that the products have stayed in storage for too long and thus indicating a problem in inventory management. Knowing what signs to look out for will help the inventory manager to know when there are problems in the inventory and thus try to correct it before experiencing serious problems (Muller, 2011).

Conclusion

            Hi-Beau is not only a well established and recognized company, but also deals with products that are trusted by the consumers. This gives it a competitive advantage over other companies in the market because it is able to attract and retain customers thus ensuring a steady demand for its products. Though this is, to a large extent, an advantage, it may cause problems for the company if not dealt with properly. The constant demand for Hi-Beau products may create a scenario where production of products is done without the proper amount of research and planning due to the misconception that there will always be a demand for them. This however may not always be the case because the nature of the market is constantly changing and various factors may hinder customers from purchasing the products. The customers may develop a different taste and thus seek new products; new entrants in to the market or already existing ones may create products that are favored thus reducing demand for Hi-Beau products. To deal with these and other scenarios, Hi-Beau must invest in better principles of logistic management. They ought to identify with areas that may interface within the organization and ensure that the interaction runs smoothly. This will ensure that the order cycle for the company’s products runs smoothly and that the goods produced are only meant to meet the actual demand created. This can be enhanced by keeping good inventory so as to ensure that what is produce is what is needed. By sticking to good principles of logistic management, the company will be able to competitive in its current market.

 

 

 

 

 

 

 

 

 

 

References

Coyle J, Gibson B, Langley J, and Novack A, (2012) “Supply chain management: A logistic perspective” Cengage Learning

Hi-Beau, (2011) “Who we are” retrieved from, http://www.hibeau.com/index/Who-We-Are

Ismail, R. (2008). Logistics Management. New Delhi: Excel Books.

Kingscroft Logistics, (2014) “image of order cycle” retrieved from, http://www.fulfilmentpackaging.com/offer.html

Logistics Management, (2014) “Inventory management 101: Time to revisit the principles” Peeerless Media

Müller, M. (2011). Essentials of inventory management, New York: AMACOM.

Schonsleben P, (2007) “Integral logistic management: Operations and supply chain management in comprehensive value added networks” CRC Press

Sharma, K. (2009). Logistic management: A competitive advantage for the new millennium. New Delhi: Global India Publications.

Sharp K. and Voorhees D, (2000) “The principles of logistics revisited” JSTOR Journal

Stock, J. R., & Lambert, D. M. (2001), Strategic logistics management, Singapore: McGraw-Hill.