118 SUPPLY CHAIN MANAGEMENT DeMYSTiFieD

The Basic Function of Logistics

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As defined in Chapter 2, logistics moves and stores products and materials. This
includes all inbound, outbound, internal, and external movements. Logistics
manages the flow of inputs from suppliers, the movement of materials through
different operations within the organization, and the flow of materials out to
customers. It also handles the reverse flow, or reverse logistics, required for
cus tomer returns. The basic function of logistics is to manage the means by
which an organization fills the gaps between members of the supply chain. A
simple way to illustrate it is shown in Figure 6-1

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Professor Donald J. Bowersox is credited with the logistics concept known as
the 7-Rs: assuring that the right customer gets the right product, in the right
quantity and the right condition, at the right place, at the right time, and at the
right cost. There is no single way for a firm to design its logistics network to
meet those seven objectives. To accomplish those goals, a firm might rely on the
oversight of a sometimes multifaceted system of distribution centers, ware
houses, and stockrooms or something much more modest.
Creating a logistics structure that satisfies an average customer is not the
answer. Neither is designing a strategy to meet the needs of the toughest cus
tomers. As shown in Chapter 3, not all customers' needs are the same, and a
firm needs to implement strategies that cost-effectively meet the differences in
customer segments. Designing a logistics network to do that can be a complex

Inbound Outbound

2nd Tier 1st Tier Production /

~ ~ ~ Distributor ~ Retal
Supplier Supplier Ma nufacturing

~-".

Downstream Flow - Materials and Products

Upstream Flow - Returned Goods

FIG U RE 6-1 • Logistics fills the gaps.