7 Rights Of Logistics

 

Logistics come with a history. A history starting from the military. I prefer to start from its origin which conveys the importance and the value of the Logistics. The victory of a war does not depend only on the skilled soldiers in the force. The continuous supply of arms, food, medicines are like the backbone of the soldier to keep going forward in a war.  Not having the right supplies at the right time could kill skilled soldiers. Hence, the hard work behind the scene was combined and marked the birth of “Logistics”.

“Leaders win through logistics. Vision, Sure. Strategy, yes. But when you go to war, you need to have both toilet papers and bullets at the right place at the right time. In other words, you may win through superior logistics” said Tom Peters. It’s not about the toilet paper and the bullet, it’s about your need. Despite the value of it, despite who needs it, logistics is a must for you to have materials to fulfill your needs.

The chartered institute of Logistics and Transport UK has compressed Logistics into 7-Rights. It says, getting the right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer at the right place is “Logistics”. Of course... It looks simple, yet, looking simple does not mean it is easy. Let’s elaborate 7 rights in more detail.

Right Product

The product delivered should be identical on what the customer has ordered. Which means, you should not mix up orders and should have a proper system to send the correct product to the customer. Earlier stages, demand deepened on the push strategies which are not valid anymore. Demand changes with pull strategies, so you should be smart enough to cater to such demand with the right product. Looking in another perspective, if the demand is for black tea, sending green tea to the customer or to the market does not make sense. If you only have green tea, you have done a wrong market analysis and sent the green to the black tea market and you need to find out the correct market for green tea, where green tea becomes the right product.

Right Quantity

Exact ordered quantities should be sent to the customer. Specially, if the customer practices lean inventory, he/she will be in trouble by delivering less than the ordered quantity. Customers should have ordered the EOQ. Sending a different quantity may increase the customer’s production costs, which is not economical to him/her. Or if the customer demands the right quantity, you may have to bear an additional cost and send it to the customer. If the product is sent to the market to reach consumers, supply should be according to the demand. Demand surplus is a missed opportunity to the supplier while the supply surplus becomes a cost to the supplier. Cost of supply surplus can be defined as an inventory holding cost, product expiry, opportunity cost of a high demanded product, or lack of ability to liquidate. Right quantity could also be defined as the equilibrium. Market forecast may not be 100% accurate due to the uncertainties. Yet, achieving the right quantity could be done through proper market studies.

Right Condition

Obviously the product or the material should be in acceptable condition. Sending expired products to the market is not logistics, as the product is not consumable or not fit for use. Condition speaks on the quality. If you consider the right condition of the final product, sourcing material should be in its quality for the final product to be a quality product. Proper quality checks (QC’s) should be in place throughout the process to make sure defects are not reaching the customer. Product should be properly packed and labeled to assure the quality during transit. Make sure the product is transported under the correct temperature to make sure the product/ material is fresh and not damaged.

Right Place

If the delivery should be done to the customer’s factory in America, no use of sending it to the factory in Canada. If the demand for the product is in the UK, the product should be delivered to the UK. Sending the product into the niche anywhere does not say you have sent the product to the right place. Further, it will become a burden or a cost to your company instead of generating a revenue.

Right Time

Time is very important. The customer places the orders by calculating the lead time and the safety stock. If the supplier fails to deliver within the agreed period, the customer may not need the product/material anymore. For example, winter jackets should be sent to the market before winter. If the jackets reach the market after winter, customers are reluctant to buy it due to opportunity cost even if the product is in its best quality.

Right Customer

Targeting the old generation to sell a tech product will not be worth the same as focusing the young generation. Wrong audiences will not be a benefit to your business. So, the market analysis should be carefully done and target the correct audience to sell the product.

Right Cost

The product should be produced with the right cost. It does not mean the product cost should be cheap yet reasonable. To have the right cost, material utilization should be at a higher end, procured price, transportation cost should be reasonable. The cost includes all the fixed and variable costs pertaining to the product. Unless the cost component of each contributor is not in the acceptable range, the product will not have the right cost. Digging into the cost components in detail, material procure cost, freight cost, holding cost, opportunity cost, documentation, packing cost, ordering cost, and administrative cost are some costs under the fixed and variable costs.

 

The simple brief on 7-rights alarm the depth of each right. 7-Rights focus to maximize the customer satisfaction, minimize the cost, and maximize the return on investment as well as to increase the customer base or the market share of a firm. From the point of material purchasing to manufacturing, warehousing, inventory managing, sourcing, transporting, clearance to delivering to the customer logistics has a big impact, looks simple yet vital and not easy. With a little touch of the technology, logistics could upside down a business. The IoT and the blockchain are supporting to improve the logistics industry by improving its transparency, information flow and the better management of logistics activities. Thus, the depth of the logistics is the same, simple and not easy!