STUDENTS CORNER -50

Last session, we tried to understand what logistics is. To put it simply, movement of goods or services from the place of origin to the place of consumption is logistics. Now, we shall go a little deeper into the process of logistics slowly, step by step.

When you go to a shop or a mall to buy a product, say, for example, soap and you get it by paying the price, you are satisfied that you got what you wanted from the mall. This simple act of purchase you will see has a lot of steps earlier to your purchase. Let us begin from the immediate context. When you ask for a particular brand of soap, a good mall must have it to give it to you. It means the mall must know that the particular brand has a demand. If the mall fails to know the demand, it will not have the soap of that brand and it will not be able to sell you one. This is what we call demand forecasting. This is a very important fact in any business. What happens when the mall does not know anything about demand forecasting? Usually, no business man will fail to attend to the demand forecasting because business depends largely on demand forecasting.  

 If demand forecasting is not effectively done, what are the consequences? To say it directly, it affects your financial position and strength in business. Let us continue with your visit to the mall. When you visit the mall with the purpose of buying particular brand soap, two choices are there generally. Either you get it since it is available or you do not get it since it is not available. If you do not get it there, and if you do not wish to change the brand, you will try another shop and get it ultimately. It is as simple as that. Now, what happens to the mall which does not have the brand you want? First, it fails to make one sale and thereby loses the little money, profit it could have got it. Again, if the mall has a brand that does not have a demand, the money the mall has put in the purchase of that brand lies idle bringing no margin of profit. Money is ill-spent and therefore money is not generated out of it. If, for example, the mall has failed to forecast the correct demand of the products, it loses generally and slowly business. Its money remains locked up in the products that do not have demand. If the situation continues, the mall loses market and incurs loss.

Now, you can see a business man must buy those products that he can sell fast and frequently too so that he can see some real profit and remain in the business. We can see now that demand forecasting is integral to any business; no business is possible without movements of goods and services and the movements of the goods and services from the seller to the consumer make the essence of logistics.  Goods must be there for transport and getting the right goods is demand forecasting. This makes it clear that demand forecasting is part of logistics in terms of material acquisition. So, logistics includes demand forecasting, one step of evolution, growth of logistics concept.

Demand forecasting is a growing concept with complexity. It is not easy to have a correct and exact demand forecasting which involves too many factors like competition, brand promotion and popularity, different kinds of customers with different attitudes to products and services, inventory, distribution of products, suppliers of products and so on and on. On each subject many books have been written and still books are being written. We will not go into all these facts now. It is enough to understand now that logistics has evolved into a magnificent and at the same time massively challenging subject. We will see almost steadily all the phases of evolution of logistics, one phase after another.