Simply put, logistics is the movement of goods from one point to another. However, its precise explanation would be “organized and detailed implementation of a complex operation.”
At its core, logistics deal with the transportation of products from one place to another. It is one of the core components of supply chain management.
What is Logistics Management?
Logistic management is a part of supply chain management. The objective of logistic management is to plan, control, and manage the movement of goods, information, and workforce from origin to a destination. The goal is to meet the customer needs by maintaining an effective flow of all logistics related operations.
Another important responsibility of logistic management is to find cost-effective and highly efficient ways to keep running the logistic operations and enhance the consumer experience.
Logistic management is a highly engaged department of any company. Its contributions begin right from the start and continue until the delivery of goods to consumers. From the accumulation of raw material, delivering to the manufacturing unit, packaging, inventory, warehousing, and delivering to the consumers. Hence, logistic management is not a one-time activity.
Logistics Functions:
Let us learn about a few core functions of logistics.
1. Transportation
Being a core component of supply chain management, logistics is responsible for transportation operations. The movement of raw material or necessary goods is performed through transportation. Logistics is responsible for picking the goods or raw material from the supplier and delivering them to the manufacturing unit.
Once the product is ready, it is transported to the warehouse. When the consumers request the products/goods, the logistics department transports it from the warehouse to the consumer.
In short, from the movement of goods from suppliers to dealers, transportation plays a fundamental role.
The mode of transportation can vary depending on the destination or urgency of goods at the buyer end.
2. Warehousing
Once the product leaves the manufacturing unit, it is stored in the storage house or warehouse. When the buyer purchases the products, it is moved from the warehouse and sent to the buyer. Warehousing is a key aspect of logistics and plays an important role in a company’s logistics operations.
Due to an increased demand for goods, warehouses sometimes play the role of switching facility only. The logistics department needs to make some important decisions on warehousing like the number of warehouses, location, size, design, and structure.
3. 3PL (third party logistics)
Sometimes, firms decide to keep their logistics operations limited to shifting products from manufacturing units to warehouses only. This requires them to hire services of third-party logistics companies.
Third-party logistics deals with all kinds of logistics operations, including transportation of products from origin to destination, packaging, inventory management, warehousing, freight forwarding, and all other operations. 3PL enables companies to keep their operations limited and focus on product improvement and business expansion.
3PL comes with certain pros & cons. Therefore, analysing what’s best for your business plays a critical role.
4. 4PL (fourth-party logistics)
Fourth-party logistics handles the complete supply chain network of a firm. 3PL purely focuses on logistics only. However, 4PL manages the entire supply chain network. Just like 3PL, 4PL is also outsourced by a firm.
Rather than own logistics or outsourcing 3PL, firms decide to sign a long-term contract with a separate entity that offers a complete range of supply chain management services.
5. Reverse logistics
Once the product has finished its lifecycle, reverse logistics come into play. The objective of reverse logistics is to perform various activities to gather the product from the dealers and return it to the manufacturer. Then, the product is recycled or refurbed to enter the market for one more time.
Reverse logistics is like running the supply chain network in the opposite direction.
Logistics Value Proposition
Every department of a firm has the same end goal, which is to improve the consumer experience and deliver the promised results. The logistics value proposition is critical to your business.
It consists of commitments to consumer expectations. Without having the right logistic value proposition, improvement in logistics operations is difficult to achieve. Its two major components are service & cost minimization.
The logistics value proposition is a firm’s promise to the market. While designing a logistics value proposition, make sure that it fulfills the following criteria.
- The promise should be believable.
- It should be valuable and touch the pain point of your consumers.
- It should set you apart from the competition.
- It should be easily digestible and memorable.
Logistics Goals & Strategies
Logistic management without goals and clear strategies is like walking in the dark with too many hurdles in the way. The chances of success are much lower. Therefore, logistics should have some goals and strategies as listed below:
Logistics Goals
- Better efficiency- A company must focus on improving efficiency of its logistics. Several steps can be taken to improve efficiency. These steps include warehousing operations, processes, layout, and having the vendor perform services like marking, packaging, and quality check.
- Better customer service- Logistics should work to improve customer service. Improving supply chain efficiency and the use of technology can help improve customer service.
- More sales- Being a core part of the company, logistics should play its part in increasing sales. Working efficiently reduces the cost, which enables companies to offer shipping promotions to buyers. It eventually results in more sales.
- Relationship-building- Logistics should establish strong relationships with retailers. A true collaboration between the carrier and the buyer can build strong relationships.
Logistics Strategies
- Transportation
- Outsourcing
- Logistics systems
- Competitors
Difference between Logistics and Supply Chain Management
The whole network that design, manage, and control the flow of product creation and distribution is called supply chain management. One component of supply chain management is called logistics. Supply chain management is a broader department that manages the connection with suppliers and consumers and ensures that all the operations in-between are performed effectively.
Logistics deals with the movement or transportation of goods from its origin to its destination.
Supply chain management is a complete process, which controls the entire flow that brings products to a stage where it is capable of being sold. However, logistics is a segment of this process that moves the product from one place to another.
A logistics manager reports to a supply chain manager and present details of operations. Supply chain management is a big puzzle, but logistics is a piece of the puzzle, and both are incomplete without each other. Hence, both rely on each other for the efficient working of an organization.
