LOGISTICS MANAGEMENT

What Are Logistics?

Logistics refers to the overall process of managing how resources are acquired,
stored, and transported to their final destination. Logistics management involves
identifying prospective distributors and suppliers and determining their effectiveness
and accessibility. Logistics managers are referred to as logicians.
"Logistics" was initially a military-based term used in reference to how military
personnel obtained, stored, and moved equipment and supplies.1
U.S. Army Maneuver Center of Excellence. "Maneuver Self Study Program."
The term is now used widely in the business sector, particularly by companies in the
manufacturing sectors, to refer to how resources are handled and moved along
the supply chain.

KEY TAKEAWAYS

 Logistics is the overall process of managing how resources are acquired,

stored, and transported to their final destination.
 Poor logistics in a business can impact its bottom line.
 Logistics is now used widely in the business sector, particularly by companies
in the manufacturing sectors, to refer to how resources are handled and
moved along the supply chain.

Special Considerations

The tasks for which a logistician is responsible vary depending on the business.
Primary responsibilities include overseeing and managing inventory by arranging for
appropriate transportation and adequate storage for the inventory.

A qualified logistician plans out the logistics process and coordinates the steps as
inventory and resources move along the supply chain.

Specialized training in supply chain management and logistics often includes core or
elective courses, or even discrete programs of study, in business education. A
business degree that emphasizes these skills—or in some cases, a technical degree
in systems analysis or database management—is usually necessary to begin what is
often a well-paid career as a logistician.

What Is Logistics in Business?

In business, logistics is the process of transporting and storing raw materials,

finished goods, inventory, and other resources. Logistics in a business is typically
made up of many components, including customer service, demand forecasting,
warehousing, material handling, inventory control, order processing, and
transportation.

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Why Is Logistics Important?

Logistics is critical to a company's bottom line. It enables the movement of

materials or goods, the satisfaction of contracts, and the fulfillment of services.
Effective logistics management ensures smooth movement along the supply chain
and can provide a competitive advantage.

What Jobs Are Available in the Logistics Industry?

Careers in logistics can include truck driver, customer service representative,

dispatcher, freight agent, supply chain manager, transportation analyst,
procurement manager, logistician, and operations manager, among others. A
degree in logistics or business administration will be helpful for many roles in
logistics, including logistician, a career that is expected to grow much faster than
average.

What is the main point of logistics?

Transportation and warehousing are the two major functions of the logistics
industry. Transportation management focuses on planning, optimizing and executing
the use of vehicles to move goods between warehouses, retail locations and
customers. The transportation is multi-modal and can include ocean, air, rail and
roads.

Importance of Logistics
Logistics centers on the movement of goods, but its effects extend much further. In
business, success in logistics translates to increased efficiencies, lower costs, higher
production rates, better inventory control, smarter use of warehouse
space, increased customer and supplier satisfaction, and an improved customer
experience.
Each of these factors can significantly move the needle on a company’s success. Note
that logistics also extends to managing returns to extract the most revenue from
these goods.

The Role of Logistics

The very essence of a business is to exchange goods or services for money or trade.
Logistics is the path those goods and services take to complete the transactions.
Sometimes goods are moved in bulk, such as raw goods to a manufacturer. And
sometimes goods are moved as individual disbursements, one customer at a time.

No matter the particulars, logistics is the physical fulfillment of a transaction and as

such is the life of the business. Where there is no movement of goods or services,
there are no transactions—and no profits.

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There are seven pillars of effective logistics:

1. Material sourcing:

Material sourcing involves more than finding the lowest-cost supplier for a raw
material used in manufacturing. Logistics includes calculating and managing
contributing factors and costs, such as back order delays, competitor priority
rankings and lockouts, add-on services costs, extraneous fees, increased shipment
costs due to distance or regulatory environments, and warehousing costs. Finding
the right source for any given material requires a good understanding and
management of all contributing factors. This process is called strategic sourcing, and
logistics plays an important role in that planning.

2. Transportation:
At the core of logistics is the act of physically transporting goods from Point A to
Point B. First, a company needs to select the best mode of shipment—air or land, for
example—and the best carrier based on cost, speed and distance, including
optimizing routes that require multiple carriers. In the case of global shipments, the
shipper needs to be up to speed on customs, tariffs, compliance and any relevant
regulations. Transport managers need to document and track shipments, manage
billing and report on performance using dashboards and analytics.

3. Order fulfillment:
To complete a transaction, items must be “picked” from the warehouse per the
customer order, properly packaged and labeled and then shipped to the customer.
Collectively, these processes comprise order fulfillment and are the heart of the
logistics sequence in customer distribution.

4. Warehousing:
Both short- and long-term storage are common parts of logistic planning.
But warehouse management systems also enable logistical planning. For example,
logistics planners must consider warehouse space availability and special
requirements such as cold storage, docking facilities and proximity to modes of
transportation such as rail lines or shipyards.Further, organization within the
warehouses is part of logistic planning. Typically, goods that move frequently or are
scheduled for transport soon are placed at the front of the warehouse. Lower-
demand items are stored toward the rear. Perishable goods are often rotated so the
oldest items are shipped out first. Items that are often bundled are usually stored
beside one another, and so on.

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 5. Demand forecasting:

Logistics relies heavily on inventory demand forecasting to ensure that a business

never runs short on core or high-demand products or materials—and never ties up
capital unnecessarily in warehoused goods with sluggish sales, either.

6. Inventory management:

By using inventory management techniques to plan ahead for increased demand in

seasonal or trending products, companies can keep profits higher and make
inventory turns faster, meaning the ratio of how many times you sell and replace
inventory in a set period. Conversely, by noting slowing inventory turns on other
products, a company can better determine when to offer discount pricing or other
incentives to free capital to reinvest in goods that are in higher demand.

Further, retail sales often differ store to store, region to region and country to
country. Good inventory management enables the business to decide to ship
products that are performing poorly in one store or region to another rather than
take a loss via discount pricing to be rid of the stock. Logistics is key to moving
inventory where it is likely to get the best price.

7. Supply chain management:

Logistics is an important link in the supply chain as it facilitates the movement of

goods from suppliers to manufacturers and then to sellers or distributors and
eventually to buyers.

A supply chain is essentially a series of transactions. If logistics fails, the supply chain
fails and transactions grind to a halt. A prime example: bare shelves in grocery store
dairy aisles even as farmers dumped milk as supply chains broke during the
pandemic.

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The elements of logistics further help to explain what logistics activities and
processes are being undertaken in a supply chain.

There are five elements of logistics:

 Storage, warehousing and materials handling

 Packaging and unitisation
 Inventory
 Transport
 Information and control
Let’s break this down:

1. What is the role of storage, material handling and warehouses in logistics?

It is to enable a steady stream of products to be supplied by manufacturers. Why is

this important? Manufacturers need to operate at peak efficiency, but consumers
tend not to demand goods at the same rate as a manufacturer supplies them.

There tends to be an imbalance between supply, which is steady, and demand,

which can be unpredictable. The answer is to store the surplus goods produced by a
manufacturer until they are demanded by consumers. To achieve this, warehouse
buildings are required. These need specialist storage equipment such as shelving or
racks and material handling equipment to move them around the warehouse and to
load and unload delivery vehicles.

2. What is the role of packaging and unitisation?

A key definition and one of the Rs of logistics is the care and condition of a product.
Packaging is an essential part of that. Unitisation is also important as this assists
storage and transportation. The easiest product to move and store is a cube, so
packaging and unitisation attempts to take all different sizes and shapes of product
and pack them as near as possible into a cuboid shape.

3. What is the role of inventory?

Inventory is a logistics element that is closely related to storage and warehousing. It

is concerned with what stock to hold, where the stock is located and how much
stock to hold. In effect, inventory is controlling the flows of goods going into and out
of a warehouse. How is this achieved? By looking at sales data of past orders and
using various mathematical and statistical tools to attempt to predict how much
goods will be demanded by consumers. Inventory management is not an exact

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science, but depending on how variable demand can be, it is a useful tool to help
manage the flows of goods through the supply chain.

4. What is the role of transport?

A major element of logistics that most will recognize is transport. This includes all
modes of transport including road vehicles, freight trains, cargo shipping and air
transport. Without transport, goods would be unable to move from one stage to
another within a supply chain. Some goods with short supply chains, such as foods,
do not travel far. Other more complex products consist of many components that
can be transported from all over the world.

5. What is the role of information and control?

The element of information and control is needed by all the elements to act as
triggers to various operational procedures. We have mentioned the information
needed for inventory. Order levels help decide what orders need to be picked and
packed in warehouses and enable the planning and organization of transport.
Information and control’s role is to help design information systems that can control
operational procedures. They are also key in the forecasting of demand and
inventory as already mentioned.

If you are attempting to identify what parts of a supply chain are logistics, the
elements of logistics is an essential tool.

Benefits Of Good Logistics Management

From the above sections, it is apparent that streamlined logistics is indeed a good
strategy for succeeding in business. However, we need to understand various
dynamics before discussing its advantages. Here, we will analyze the benefits of
good logistics management from multiple angles to help you understand its
importance.

1. Enhanced Traceability
With streamlined logistics and tech-enabled operations, you can enhance traceability
of all products for all internal and external stakeholders. For instance, you can
display the order shipping status to your customers on a real-time basis. At the same
time, your logistics partner should also be sent instant updates if the customer
decides to reschedule or change the delivery location. Hence, enhanced traceability
will allow you to implement cost optimization across all verticals and operate in a
productivity-focused manner.

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2. Manpower Management
Another major advantage is increased manpower management efficiency since
logistics directly impacts material supplies. All human resource planning can be
implemented with proper planning, from unloading the received inventory to
packing it for shipping. On the other hand, proper logistics also allows for planning
your human resource allocation for production and other departments.

3. Better Customer Experience

You will benefit from an improved CX by leaps and bounds if you have a robust
fulfillment infrastructure. Logistics play a huge role in streamlining your production
and warehouse management, which impacts go-to-market time. In fact, providing
the ability to track shipment status is no longer an option – your customers expect it
to be in place by default.

4. Boost Your Bottom Line

Due to the above-mentioned benefits, you will be able to make calculated decisions
that will help boost your bottom line. Systematic risk mitigation and well-planned
operations will help you maximize your profitability without compromising on
customer experience. The availability of detailed analytic is another reason behind
effective cost optimization.

How Logistics Impact Overall Operations

In this section, we will have a look at the various aspects of your company’s
operations that overlap with logistics:

Sales Forecasting
The ability to manage the material sourcing and order fulfillment cycles allows you to
respond better to seasonal demand fluctuations. Supplier feedback is a valuable
input that can help you avoid the bullwhip effect, swings in inventory in response to
shifts in consumer demand.

Procurement
Having an idea of how long your inventory will stay in transit and if there’s an
emergency on the transporter’s end will allow you to understand how to proceed
with your procurement plans. Also, accurate know-how of lead times enables you to
schedule your production budget more efficiently..
In case of any unforeseen delay, you can procure the problem item from an
alternative source depending on the pricing and delivery schedule along with other
constraints. Thus, procurement is an area where logistics provides you with an
advantage in the decision-making process.

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Warehouse Management
Warehousing is closely associated with logistics since it acts as an anchor where the
goods are stored for extended periods when not in transit. Thus, having a clear idea
of when, what, where and how much inventory will arrive or need to be dispatched
gives you an advantage at managing your storage facility. Not can your warehousing
space be utilized preemptively, but you can also prevent bottlenecks and situations
like overstocking and under stocking.

Inventory Management
Here comes the most relevant operational area for logistics – inventory management.
Inventory management is focused on the entire value chain of goods, from the
moment an item is procured to the successful completion of last-mile delivery.
Logistics can also help smooth your inventory turnover ratio, reassigning returning
inventory to a center that can sell it faster and reducing the losses caused due to
mishandling of goods. Logistics helps control the movement of inventory to keep
your cash flow at optimal levels.

Order Fulfillment
Order fulfillment can be considered the customer-facing aspect of logistics and can
have an impact on your brand image. Your customers will probably never visit you in
person, so receipt of your products is the only point of physical contact. Thus, good
logistics are paramount to ensure that your orders are shipped on time and not lost
in transit.