WHAT IS LOGISTICS?
Logistics is the detailed organization and implementation of a complex operation. In a general business sense, logistics is the management of the flow of things between the point of origin and the point of consumption to meet the requirements of customers or corporations. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security.
Logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet customer’s requirements. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation in all logistics fields. A professional working in logistics management is called a logistician.
Logistics activities and fields
It is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores.
It is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end-user.
Given the services performed by logisticians, we can break the major fields of logistics down into:
Procurement logistics comprises activities, such as market research, requirements planning, make-or-buy decisions, supplier management, ordering, and order controlling. The targets in procurement logistics might be contradictory: maximizing efficiency by concentrating on major strengths, outsourcing while maintaining the autonomy of the company, or minimizing procurement costs while maximizing security within the supply process.
Advance Logistics comprises the activities required to set up or establish a plan for logistics activities to occur.
Distribution logistic has the primary task, the delivery of the finished products to the customer. It comprises order processing, warehousing, and transportation. Distribution logistics is necessary because the time, place, and quantity of production differ with the time, place, and quantity of consumption.
Disposal logistics has as its primary function to reduce logistics cost(s) and enhance service(s) related to the disposal of waste produced during the operation of a business.
Reverse logistics denotes all those operations related to the reuse of products and materials. The reverse logistics process includes the management and the sale of surpluses, as well as products being returned to vendors from buyers. Reverse logistics stands for all operations related to the reuse of products and materials. It is planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin to recapture value or proper disposal. More precisely, reverse logistics is moving goods from their typical last destination to capture value or proper disposal. The opposite of reverse logistics is forward logistics.
Green Logistics describes all attempts to measure and minimize the ecological impact of logistics activities. This includes all activities of the forward and reverses flows. We can achieve this through intermodal freight transport, path optimization, vehicle saturation, and city logistics.
RAM Logistics combines both business logistics and military logistics since it is concerned with highly complicated technological systems for which ‘Reliability,’ ‘Availability,’ and ‘Maintainability’ are essential.
Asset Control Logistics companies in the retail channels, both organized retailers and suppliers, often deploy assets required for the display, preservation, promotion of their products. Some examples are refrigerators, stands, display monitors, seasonal equipment, poster stands & frames.
Emergency logistics (or Humanitarian Logistics) is a term used by the logistics, supply chain, and manufacturing industries to denote specific time-critical modes of transport used to move goods or objects rapidly in the event of an emergency. The reason for enlisting emergency logistics services could be a production delay or expected production delay, or an urgent need for specialized equipment to prevent events such as aircraft being grounded (also known as “aircraft on ground”—AOG), ships being delayed, or telecommunications failure.
Production logistics describes logistic processes within a value-adding system (ex: factory or mine). Production logistics aims to ensure that each machine and workstation receives the right product in the right quantity and quality at the right time. The concern is with production, testing, transportation, storage, and supply. Production logistics can operate in existing as well as new plants: since manufacturing in an existing plant is a constantly changing process, machines are exchanged and new ones added, which allows for improving the production logistics system accordingly.
Construction Logistics has been known since ancient times when the various human civilizations tried to build the best possible works of construction for living and protection. Now the construction logistics emerged as a vital part of the construction. In the past few years, construction logistics has emerged as a different field of knowledge and study within the subject of supply chain management and logistics.
Digital logistics is driven by a new generation of web-based enterprise logistics applications that enable collaboration and optimization. They leverage a central logistics information backbone that provides visibility across the enterprise and extended supply chain.
What is logistics and supply chain management?
Logistics ordinarily alludes to exercises that happen inside the limits of a solitary association and Supply Chain alludes to systems of organizations that cooperate and arrange their activities to convey an item to advertise. Customary coordination’s concentrate their consideration on exercises, for example, acquirement, conveyance, upkeep, and stock administration.
Supply Chain Management
Supply chain management (SCM) is the dynamic streamlining of a business’s supply-side exercises to expand client esteem and pick up an upper hand in the commercial center. SCM speaks to exertion by providers to create and actualize supply chains that are as effective and sparing as would be prudent. There is also software for supply chain management. Supply chains cover everything from creation, to item advancement, to the data frameworks expected to coordinate these endeavors.
What does the logistics department do?
This is usually a department of the company that takes responsibility for the movement of goods in several areas, in the usual order of development:
negotiating with carriers, scheduling, route planning, …
making sure there is enough room and handling capacity and making optimal use thereof
scheduling deliveries, optimizing by defining policies and processes
Logistics is a very interesting area because it is primarily about keeping the cost down (logistics is the cost!)
It is more and more also part of the service (logistics is valued!) and so takes part in purchasing (defining how the goods need to be delivered to minimize cost) and sales (defining how and when goods will be delivered, to minimize cost or provide greater value for a better price).
The logistics department thus employs people that negotiate with external partners (suppliers, carriers, and other transporters), people that analyze and think about improvements, and operations people, who make the internal logistics run.
Logistics is used more broadly to refer to the process of coordinating and moving resources – people, materials, inventory, and equipment—from one location to storage at the desired destination. The term logistics originated in the military, referring to the movement of equipment and supplies to troops in the field.
Logistics vs. Supply Chain Management
Logistics and supply chain management are terms that are often used interchangeably, but they refer to two aspects of the process.
Logistics refers to what happens within one company, including the purchase and delivery of raw materials, packaging, shipment, and transportation of goods to distributors, for example.
Supply chain management
It refers to a larger network of outside organizations that work together to deliver products to customers, including vendors, transportation providers, call centers, warehouse providers, and others.
Different types of logistics
Procurement Logistics: Procuring Raw Materials and Parts
Procurement logistics is the flow of goods when the raw materials and parts necessary for manufacturing are procured from suppliers. This field attracted little attention before, but now that small-lot production of a variety of models is the main type of production, many firms are actively pursuing production by procuring the materials in only the amounts at the times (the shift to just-in-time production) because it is directly connected to reducing inventory costs.
Production Logistics: Materials Management, Distribution in Factories, Product Management, Shipping
Production logistics is the flow of goods that includes the management of procured parts and materials, distribution inside a factory, product management, packaging, and shipping to the warehouse. Delivery management, warehouse dispatch management, and shipping management can be optimized and the state of delivery vehicles can be managed by smoothly linking procurement logistics and sales logistics described later.
Sales Logistics: Delivery from Warehouse to Wholesalers, Retailers, and Consumers
Logistics typically refers to sales logistics. In the past, it mainly delivered this from delivery centers and logistics warehouses to distribution points, such as wholesalers and retailers. But now direct delivery also makes up a large amount of this volume because of online shopping and e-commerce. Whether delivery through delivery centers and logistics warehouses or direct delivery from production sites, higher efficiency in transportation and delivery and shrinking inventory are indispensable for delivering the necessary goods to the people in the quantities. This also contributes to improving customer satisfaction.
Recovery Logistics: Recovering and Recycling Products, Containers, and Packaging
If the flow of goods from production to consumption by procurement logistics, production logistics, and sales logistics is described using the circulatory system of the body, I would say it to be forward logistics. Recovery logistics or reverse logistics is the flow that recovers and recycles products, containers, and packaging that have fulfilled their role. Similar to recycling logistics described later, the emphasis is being placed on this flow in recycling-oriented societies.
Recycling Logistics: Recovering and Recycling Recyclable Products and Containers
Typical examples of recycling logistics are recovering and recycling empty cans, plastic bottles, and old paper.
Containers, packaging, old computers, and inkjet cartridges can also be recovered and recycled in the same manner. The importance of recycling logistics has been increasing in recent years as a measure for the environment and to effectively utilize materials such as minor metals.
Why is logistics management important in the supply chain?
Logistics is like the oxygen which makes the supply chain breathe and live because, without proper logistical support, the movement of goods across a chain wouldn’t be smooth.
Let us inspect how logistics become the rock solid foundation on which any supply chain stands:
Taking the Order.
The purchase order is central to any transaction between the parties in a supply chain. This document contains all the details, such as the technicalities of the product and commercial terms. Proper logistics ensure that they process this document in time to ensure an effective performance cycle and to clear out any doubt about the availability of materials and payment terms.
An ideal inventory has effective storage capabilities to ensure smooth supply but can also cut down cuts. Logistics ensures this minute balance between market opportunities and budgeting. More than often a poorly managed inventory can eat away a major chunk of the profit in a supply chain because it includes expenses for pilferage and insurance as well.
The War is the Warehouse.
The warehouse is the central nervous system in a supply chain and acts as the control room for everything logistical. An organization’s merit is determined by its effective warehousing decisions. Factors like location, number, size, layout, and design play a huge role in how the logistics of a supply chain will pan out.
The Tricky Nature of Transport!
Transport keeps the supply chain moving literally and figuratively, and it is the single most important component in the logistical side of supply chain management. The physical transfer of goods is the actual supplying process and it cannot falter by any means. They should carefully study the transport infrastructure to ensure a fast delivery, which is not too expensive. Determining the urgency of a supply is also important.
Mastering Material Handling.
Material handling is an often ignored aspect for the role of logistics in supply chain management since lack of proper material handling often leads to damages and delays and incidental costs. The automation in the material handling process has been a boon for logistical productivity. The volume, speed, and level of service all must be taken into consideration to ensure that the material handling process goes smoothly.
Packaging Must Be Perfect.
Logistical or industrial packaging is central to ensure the effectiveness of the actual physical distribution of a product. This directly affects the logistical side of a supply chain as opposed to product packaging which is governed by what the market needs. Logistical packaging can ensure minimal damage during material handling and save on important storage space. The packaging cost often depends on the utilization of the load.
Information is Incredibly Important
Logistics helps in transferring information across a supply chain and therefore an information system plays a crucial role in ensuring superior service to customers. Information technology tools are constantly used to identify access, store, analyse and retrieve important data which can help a firm strengthen the function of logistics in its supply chain.
What are the key challenges in logistics management today?
One of the highest costs contributing to the ‘cutting transportation cost’ concern is fuel prices. Higher fuel prices are likely to increase transportation costs for US shippers this year by pushing up fuel surcharges. Rising US diesel fuel prices are escalating surcharges added to freight rates, which is reversing a two-year trend that cut into the revenue and earnings of truckers as fuel prices plummeted.
Business Process Improvement
Notwithstanding the need for new technology, which we discuss in number eight on this list, it has become an increasing challenge for the logistics industry to stay on top of new advances in business processes. Taking advantage of these new opportunities sounds enticing, but adoption and onboarding can be overwhelming.
Improved Customer Service
Customers want full transparency into where their delivery is at all times. These days, someone as interconnected with the location of a package as your social network. As customer expectations have increased, their willingness to pay for fast shipping has decreased with just about 64 percent of consumers unwilling to pay anything extra for less than two-day shipping.
High fuel prices come at a greater credit crisis and rising inflationary demands that take a greater toll on the US economy. This industry is then pressured by increasing compliance regulations, declining demand, additional capacity with additional increases in key cost centers.
Driver Shortage & Retention
Hiring and retention remain an issue despite the lower demand mentioned above.
Carriers face significant compliance regulations imposed by federal, state, and local authorities.
The anti-idling and other emission reduction regulations brought about by state and local governments have created concern that the compliance costs could exceed benefits.
Technology Strategy & Implementation
While the industry understands and supports many of the benefits of these technologies, some questions remain about how they will pay for it and who will help implement the improvements.
What are the logistics-related challenges faced by e-commerce companies?
With time and technological developments over the years, the dynamics of the logistics industry have changed and transformed the industry over the years. Every logistics organization likes to focus on the bright future of a highly interconnected and productive logistics provider that meets growing customer requirements.
Companies must redesign their organizational structure while the stakes are high. Being too late to respond to developments will also compete with your competition and lower your corporate growth. Speedy infrastructure transformations along with growing consumer expectations can pose many logistics challenges.
Here are some of the key challenges faced by eCommerce companies:
Adoption of new technology
‘Change Management is the greatest challenge eCommerce companies face during customer acquisition. A new mechanism leads to drastic improvements in the business strategy and day-to-day practice of an organization, as well as the aversion to on-ground resources that alter aversively and require stability in the method. It’s difficult to develop a level of confidence and see the benefit before wider implementation.
Moving towards a more consumer-centric market
Now that the e-commerce markets are more consumer-centric, the emphasis on sustainability has turned to inorganic development rather than survival. Given the increasing market demands, e-commerce firms see logistics as an aid to pleasing consumers and recognize that offering excellent customer service proves fruitful. With delivery systems such as delivery within 2 days and delivery within an hour, global success is increasing, consumers can now experience incredibly quick deliveries and demand the same from others. While Amazon proved to be the change of the game, smaller players cannot match that level of competition. Although they also rely on logistics from third parties because of the lack of capacity to deploy their own expanded logistics arm.
Last-mile delivery remains a big logistics challenge. Despite a radical shift in the use of distribution services and networks, e-commerce has not allowed creativity to come up with a competitive advantage among logistics companies. While many players act, the only way to solve profound challenges, including inadequate infrastructure and unorganized car ownership, is to apply a technical layer to conventional processes.
What are essential elements in logistics planning?
There are some important elements or components of logistics planning which influence the activities and procedures taking place in a supply chain. Let us study them:
To ensure the supply of goods during every market condition, proper planning is required. It required planning to maintain and function warehouses. It also involves material handling, wherein computerized frameworks enable the smooth flow of the supply chain. It synchronizes all the activities taking place in a supply chain.
Packaging and Unitization
The packaging is important for the care and conditioning of the product. During transportation, packaging shields the product and protects it from many harm when the product waits in the warehouse or storage unit. Attractive packaging encourages more customers to buy the product.
It is the method of packing a product in a cuboidal shape. It is the method of combining several things into one huge delivery unit. It helps in handling the product in an easier way.
It refers to the process which ensures the right quantity of stock is kept by the company ready as per requirement. It determines the following decisions: how much stock to store, where to store, and how much quantity is to be stored. It involves the study of demand-supply in the market as well as forecasting the same.
It is an important connecting link between all the logistics activities. It involves planning, implementing, and controlling the effective forward and reverse flow of goods. A good Transportation Management System (TMS) is required to track shipments and ensure timely delivery of goods and also to reduce the heavy emissions and thus lead to sustainable logistics management.
Information and Control
It refers to a system that supports management that helps the smooth functioning of activities in a company. It helps to improve business efficiency and reduce waste produced.
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