Keep reading to answer the question of “what are logistics” and how it ties into your company!
What Are Logistics?
Logistics refers to the process of moving and coordinating resources such as people, inventory, materials, equipment, and information from their point of origin to the desired destination. This term originated within the military during wartime. They used it in reference to the movement and of troops and supplies.
Since the 1950s, logistics has evolved vastly. With rising consumerism and growth, supply chains have become much more complex. The supply chain is an important part of this process which includes transportation, storage, shipping, receiving, and management.
Logistics includes things such as transportation, packaging, warehousing, material handling, disposal, information flow, and security. The goal is to meet customer expectations and requirements in an efficient, timely, and cost-effective way.
Components of Logistics
There is a wide range of components dealing with logistics. It may include all or a few depending on the structure of your business.
- Inbound Logistics: Receiving raw products or materials from supplier to warehouse.
- Outbound Logistics: Actions taken to get goods delivered to the end-user.
- Fleet Management: Managing commercial vehicles such as trucks, special vehicles, forklifts, trailers, cars, rail cars, aircraft, and so on.
- Warehousing: Managing storage space and optimizing for the ultimate efficiency including placement and other processes.
- Materials Handling: Protection and control of products and materials in manufacturing, warehousing, distribution, consumption, and disposal.
- Inventory Management: Tracking inventory levels, sales, deliveries, and orders. Software is often developed for a more efficient process. Can also create production-related documents.
- Demand Planning: Creates demand forecasts to predict needs in terms of processes, inventory planning, production, and revenue.
- Order Fulfillment: Receiving, processing, and delivering goods or services to end-users.
- Green Logistics: Approach to logistics that involves minimizing the ecological impact of activities.
- Reverse Logistics: Operations that relate to the reuse of materials and products. This includes getting the product back from a customer if there are issues or retrieving for disposal.
Digital logistics deserves a whole section because of its importance. With the ever-growing dependence on technology, we as humans have found a way to make processes much more efficient with the utilization of software and tech. Globalization has had a hand in the need for logistics to come into the digital era.
Rapidly growing e-commerce and the emergence of competition requires that the logistics process for businesses shift from paper to digital. This smooth process of sharing information saves time, is cost-effective, and eliminates human error. It is a wonderful way to connect all parts of the process and share information.
Digital plays a key role in streamlined logistics and gives customers better insight and transparency when it comes to certain processes. Furthermore, digitized logistics offers additional benefits such as analytical data, forecasting, data security, integration, cost savings, tracking, and automation. Incorporating software or technology into the logistics process adds to a competitive advantage.
Technology is evolving at an incredibly fast rate. Logistics companies who create software and platforms can assist businesses in transforming their logistic processes.
Types of Logistics Management
There are four major types of logistics management. Each of which is related to a different part of the process.
Supply management involves planning and coordinating materials and products for a specific time and location. This includes transportation and storing. Also, it includes evaluation of inventory levels at different stages to ensure that supply is adequate. The goal is to balance supply and demand.
Distribution involves getting stored materials to where they are needed. This type of management involves material movement such as unloading, loading, and transporting. It also includes tracking inventory and taking accountability for how materials have been used.
This involves managing how materials are combined into products and its stages. It includes assembly processes, manufacturing, and coordinating space. This fits into product management.
Reverse logistics handles reclaiming supplies and material. It may involve the return of an unwanted, unused, or faulty product from a consumer. In construction, this would involve taking excess materials and putting them back into stock.
7 Rs of Logistics
For a further understanding of the goals behind logistics, there are 7 Rs of logistics:
- Right product
- Right quantity
- Right condition
- Right place
- Right time
- Right customer
- Right price
Notice that everything starts with the word right. This reflects the goal of efficiency.
Logistics and Supply Chain Management
Sometimes these terms are used synonymously. However, to clear things up a bit, these are two different aspects of a business. Logistics refers to the activities occurring in one company, business, or organization.
A supply chain is a much more complicated and broad network of activities. A supply chain can include many different companies. Some of the key players in a supply chain are suppliers, manufacturers, retailers, and distributors. For example at the very foundation of a supply chain, you can consider the farmer who produced the raw materials to make a product.
As you can see, logistics and supply chain management are concepts that are widely integrated but are separate.
Why Are Logistics Important?
The entire goal of logistics is to create the most efficient and effective ways of moving resources from start to finish. This goal is inspired by meeting the consumer’s expectations and therefore satisfying their needs.
Customers demand a certain level of quality, quickness, service, and so on. As we meet those needs, we gain customer retention and recognition. Keeping the customer happy is the driving force of any business and through enhanced logistical practices, we can achieve just that.
Beyond the customer, there are plenty of benefits worth mentioning when it comes to the question of are logistics important. Logistics help to create visibility throughout the supply chain. Through tracking and data, managers can have a better understanding of how their processes are working as a whole. This helps avoid any disruptions.
Here is a quick recap of what you get out of efficient logistical processes:
- Increase revenue
- Accurate supply levels
- Smooth flow of information
- Increased brand reputation
- Cost savings
- Time savings
Overall, logistics can make or break a business. In short, the answer is yes! Logistics are incredibly important for all businesses.
What Does a Logistics Company Do?
There are ways that you can seek help for your processes. Logistic services are available. A logistics company can be a great help since they have tried and true processes to help you maximize potential.
Now that you have an understanding of what logistics are and you’re aware that there is help, what exactly does a logistics company do?
A logistics company can help with one or multiple different aspects of the logistics process. It may be in your best interest to partner with multiple to ensure that you are getting the best service in each particular area.
If you’ve heard of 3PL or 4PL, you’re probably wondering what that means and what the difference it. For example, 3PL stands for third party logistics. To understand this terminology, we will start at the most basic level and work our way up.
- 1PL, or one party logistics, includes a business that moves one good or product from one place to another. An example would be a local farm that transports milk directly to a store for sale.
- 2PL, or two party logistics, adds another enterprise to the process such as one that owns vehicles. For example, the local farm hires a 2PL to transport their milk from farm to store for sale.
- 3PL, or third party logistics, includes outsourcing of operations and transportation. The business still maintains management but works with other companies to optimize the logistics process. Some services may even be subcontracted out by the other companies. The local farm may get a 3PL to carry out packaging tasks and transportation from farm to store.
- 4PL, or fourth party logistics, outsources management, and activities of logistics. This can help get an expert opinion about the business’ supply chain. In 4PL, logistics are entirely outsourced. A 4PL would communicate with the farm to let them know when the store needed more milk and when to produce.
- 5PL, or fifth party logistics, develops the entire supply chain for a business. This means from production to delivery, the chain can be optimized for max potential.
Different Types of Logistics Companies
There are many different types of logistics companies. They may vary greatly depending on the industry you are operating in since each business has different needs. Generally, you can break them down into four categories.
These companies move your business’ resources from one place to another. Size ranges depending on needs. They could only operate in a domestic territory or offer international shipments. Some of these may specialize in certain types of freight like air, ocean, rail, pipeline, and road. They may also offer multimodal and intermodal transportation options meaning they use multiple forms of transportation.
While these companies indirectly handle the transportation of resources, they don’t actually own any modes of transportation. They are simply the facilitator and have established networks to which they can optimize solutions. Documentation such as imports and exports are handled by them as well. Since they have such great connections, they are often able to save your business time and money.
Carriers directly handle your shipments. They might be an air cargo company or a rail company.
As we’ve already discussed, a 3PL is a third party logistics company. They might specialize in all or a certain aspect of your logistics. Some of the areas in which they may play a part is warehousing, transporting, order picking, packaging, ordering, or delivery.
Tips for Logistics
Logistics is all about planning. You’ll need to consider every single stage of the product cycle. You must be prepared to deal with everything that could potentially arise. There are a few tips to ensure that you are optimizing your business’ logistical potential and in the end making your business a success.
- Plan Strong: Successful management depends on a strong plan. The more planning, the less last-minute decision making when problems or issues arise. Getting an established plan helps you avoid delays so that you never miss a beat in your logistics process.
- Contingency Plan: Even when you start with a strong plan, things happen that you didn’t expect. That’s why contingency plans are important. Stay flexible and realize when it’s time to switch to a new way of operating.
- Learn: We are constantly learning when it comes to business and life. There will be hiccups in your process and that’s okay. As long as you take the experience and use it as a way to avoid future issues or develop new ways of thinking.
- Hire a Capable Manager: Put the right people in the right seats. Make sure that you have qualified and competent individuals in areas that they promote the most success. This goes for anyone that you work within your business including when you outsource.
- Automate: Incorporate technology and processes that streamline your logistics. As previously mentioned, you can save time and money by implementing digital into your business.
Logistics and Your Business
Logistics is ever-evolving in our fast-paced world and if you don’t move with the times, they will leave you behind. With your new understanding of everything logistics, you’re ready to optimize and reach full potential.
Now that you’ve read the article, what are logistics? Simply put, the foundation for a successful business.
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