Unit 1

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 logisticians.

"Logistics" was initially a military-based term used in reference to how military personnel
obtained, stored, and moved equipment and supplies.1 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.

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.

Logistics Management: definition, types, tips, importance,

components, and benefits

Definition: Logistics management is defined as a set of multiple

processes that facilitate the efficient movement of raw materials,
goods, parcels, finished products, and freight from their point of
origin through to their end-consumer.

Depending on the degree of digital adoption within an ecosystem

and the stakeholders and companies within it, these processes can
be manual or automated. Today’s logistics management methods
have rapidly adopted new-age technologies like Cloud-Tech, Internet
of Things, Artificial and Predictive Intelligence, Machine Learning
(etc.).

Core activities of logistics management include order fulfillment,

warehousing, inventory management, packing, predicting patterns
of demand and supply, and fleet and driver management, to name a
few.

By deploying such powerful tools to manage the logistics function,

today’s businesses have become empowered – they have been able
to identify new revenue streams, improve profitability, and achieve
high levels of customer satisfaction.

Since logistics form the core of supply-chain management, this has

created breakthrough improvements in the overall methods and
operational efficiencies achieved by supply chains all over the world.

What are the various types of Logistics

Management?

Following are the main types of logistics management:

1. Supply-Chain Management: This type is focused on the

planning, procurement, and coordination of raw materials that are
required at specific locations and destinations to facilitate the
production of goods and products. This also includes the
warehousing, storage, and movement of materials and inventory.

Importantly, supply management needs to ascertain demand

patterns so that the corresponding supply of materials can be
organized. Poorly planned or executed supply chain management
will surely result in disruptions and losses along the entire supply
chain.

2. Material Handling and Distribution: This relates to the

movement of material and supplies from a central location e.g. a
centrally located warehouse, to several other points of its
requirement in an organized and timely manner wherefrom further
production or distribution can continue.

As is natural with materials handling and distribution, this type of

logistics involves a lot of tracking, stock-keeping, loading, and
unloading of materials.

3. Production Management: This refers to the planning,

execution, and monitoring of the various stages of production in a
company.
It handles all the coordination required in the assembling or
manufacturing process, production areas, warehouses, and
factories, per the production and delivery schedules required.

Importantly, efficient production logistics enable a company to

operate with capital efficiency.

4. Customer Service Management: The strategies, practices,

and technologies used by firms to analyze and manage customer
interactions and the data generated across the customer lifecycle
process are referred to as customer service management.

Transparent communication and damage-free deliveries made on

time form the cornerstone of good customer service management.
In addition to building strong business relationships with all
stakeholders, it ultimately results in a most critical metric i.e.
customer retention.

5. Reverse Logistics Management: This is also called Returns

Management, and refers to the handling of order returns.

This includes reclamation of supplies and materials from the

supplier (e.g., manufacturer, agent) for products returned from the
end-customer due to damage, unwanted, or unused (for a
legitimate, acceptable reason).

Through standardized inspection, sorting, replacement, re-stocking,

and timely decision-making with regard to returned products,
companies can reduce their losses.

Efficient Logistics Management

With effective logistics management, companies ensure increased

revenues, reduced errors and wasted resources, achieve optimum
communication, and build strong business relationships.

Given below are some top tips for efficient logistics management.
1. Automation: By automating core logistics operations such as
route planning, scheduling, roster management, task-allocation
(etc.), companies not only save a significant amount of time and
money, but are also able to achieve much higher levels of
operational efficiency, plan better for the future, and maintain a
robust, profitable operation.

2. Maintain control of on-ground operations: With logistics

management, companies can maintain an integrated view of their
resources, departments, and teams, and monitor their operations in
real-time.

This transparent and real-time view helps in achieving optimum

efficiency, minimizing disruptions, and making the best use of its
resources.

3. Route-optimization: An important part of logistics management

is optimizing delivery routes with the services of modern systems
like last-mile software. Such advanced optimization techniques
balance out numerous elements that are forever fluctuating—such
as traffic, weather, empty miles, tonnage (etc.)—and come up with
optimal route(s).

4. Bring inventory nearer to customers: With customers

demanding faster and cheaper delivery times every day, the
distances that parcels have to travel from their storage point to the
final destination need to be minimized. Therefore, storage locations
assume great importance.

Logistics management must identify such inventory locations that

not only achieve the shortest delivery times but also minimize
operational costs.

5. Minimizing carbon-footprint: It should hardly be a surprise

that transportation is a leading cause of environmental damage due
to its carbon emissions!
By adopting modern technologies—e.g. electric vehicles, green fuel,
digital documentation, and route optimization—companies can
reduce the carbon footprint of their logistics operations significantly.

6. Empowering customers: Driven by their need for ‘control” and

‘instant gratification,” today’s customers want to know exactly
where their parcels are, want to be updated throughout the process
with real-time communication about ETAs, any delays or changes
(etc.).

Companies must manage their logistics operations so that they offer

enough options to their customers and make it ‘customer-centric,”,
especially in the last mile.

7. Mitigating operational risk: By adopting digital processes and

logistics tools, companies can achieve a robust supply-chain
operation. This, in turn, mitigates risk exposure by making sure best
practices are established, ultimately leading to healthy margins and
building customer loyalty.

8. Using a 3PL: Using third-party logistics (3PL) companies enables

client companies to outsource all their fulfillment and distribution
functions completely. These 3PLs are global behemoths that ensure
all-around efficiency and optimize the use of resources.

The major components are:

1) Inventory management: A most crucial part of logistics

management is managing inventory. This has a far-reaching impact
including managing an efficient order fulfillment process, an
organized warehouse operation, and optimizing the use of time and
money toward improving productivity.

It also ensures that the requisite amounts of stock quantities are

maintained, customer demand-supply patterns are studied, proper
planning is used, and carrying costs are minimized.

2) Inbound logistics: Inbound logistics sits at the dynamic point of

interaction and exchange of goods and services between suppliers
and buyers. It includes the movement/transportation, receipt, and
storage of goods by a firm.

A well-planned and executed inbound logistics operation helps no

end to increase sales, improve production-line efficiency, reduce
wastage of precious raw materials and resources, and reduce
company overheads, to name a few.

3) Outbound logistics: Extending the point above, outbound

logistics is the process by which companies transport their finished
goods from a distribution center, or warehouse, to the customer
delivery address.

There are numerous stages, including storage and warehousing,

transport, distribution, and importantly, the last-mile delivery
operation. It determines the success or failure of a company’s
customer relationship management.

4) Fleet management: Fleet management is an area that goes a

long way to determining the success and profitability for logistics
and distribution companies.

It is the management of fleet vehicles and drivers to transport goods

in the most efficient manager, by minimizing risks involved, by
balancing out all the numerous dynamic elements (e.g. traffic,
weather, nature of cargo, tolls and taxes, safety protocols, driver
and vehicle availability, labor costs) and aiming to increase the
number of deliveries by reducing costs, improving profitability, and
achieving customer satisfaction.

5) Warehouse management: Storing, and managing raw

materials and goods in a warehouse, is known as warehousing.
Efficient logistics management isn’t possible without a sound
warehouse management policy – remember that warehouse
capacity and its proximity form the two most important elements in
managing an efficient supply chain.

6) Order fulfillment: As the name suggests, order fulfillment is

moving a product from its point of purchase to the point of final
delivery to the customer. Since it is not only the final stage of the
supply chain process but also the part where companies interact
directly with their customers, it is a crucial part of generating, and
maintaining, customer satisfaction.

7) Demand forecasting: Studying demand pattern and using it to

predict future demand trends is called demand forecasting.

It is an extremely complex process that takes into account

numerous ever-changing factors and is responsible for ensuring
sufficient inventory at all times. It predicts future market
opportunities, consumer and market trends, and how suppliers can
use this to grow their businesses.

What are the top 5 benefits of effective Logistics

Management?

An effective logistics management strategy equips businesses to

predict consumer demands, provide for the supply side, and run a
profitable concern. Without it, a business would not be able to stay
competitive.

Let’s look at the top 5 benefits:

1. Minimized operating costs: A strong logistics management

program analyzes historical trends and data to not only understand
the business and its eco-system deeply but also to predict future
demand-supply requirements. It can improve asset utilization, and
business productivity, and optimize operational costs.

2. Better customer experience: An effective logistics operation

makes a direct and positive impact on Customer Experience. It
ensures improved transportation, minimizes disruptions (if any),
makes for the smooth movement of raw material as well as finished
goods, and operates as quickly and reliably as a fulfillment service is
required to. This, in turn, creates a stronger brand and better
company reputation.
3. Improved profitability: Logistics management provides
companies with a clear view of all key areas including customer
dynamics, competitive scenario, capital ROI, technological
innovations, operations, supply-chain management (etc.) thus
helping them to boost company profitability.

4. Optimized routing: In the end, logistics companies need to

move raw materials and finished goods efficiently and safely across
the supply chain, within the promised timelines and costs.

Route planning ensures route optimization by taking into

consideration several variables – including weather and traffic
patterns, type of cargo to be transported, the drivers and types of
fleet vehicles available, reducing “empty-miles” traveled – to
achieve solid order fulfillment rates. All this is geared toward
meeting customer demand and achieving customer satisfaction.

5. Intermodal operations: Improved intermodal operations are

environmentally friendly, safer, more reliable, and reduce costs. An
intermodal operation involves the use of two modes (or, more) to
move goods from manufacturer to customer. It uses specialized and
standardized containers to eliminate risks connected with cargo
handling and movement.

Logistics Interface with Production and

Marketing
What does production logistics
mean?
Production logistics as a business discipline is a part of the logistics chain. Alternatively, it is
also known under the synonyms “internal logistics” or “intralogistics”; sometimes it is referred
to as “manufacturing logistics”. Production logistics is located between procurement and
distribution logistics. There are also overlaps with these areas.

Production logistics comprises the planning, management and control of internal storage,
transport and handling processes to ensure the flow of materials within the company. If there are
several production sites, production logistics also covers inter-company logistics within the
entire company.
 What is part of production logistics?
Production logistics manages and controls all goods inventories and movements within
manufacturing sites to ensure the optimal flow of materials throughout the value chain: from raw
material storage to production and finished product storage.

There are two main aspects to this area of production and logistics:

 Warehousing: planning, control, monitoring and execution.

 Internal transport: stored goods, materials, articles, raw materials, auxiliary materials, operating
materials, production parts and semi-finished and finished products.
The aim is to keep inventories low in incoming and outgoing goods. This reduces storage costs,
accelerates the rate of turnover, increases the flexibility of the value chain and promotes
optimization and savings in the production area.
What are the production logistics tasks?
Due to its broad objectives, the tasks of “productions logistics” are extremely diverse. These
include:

 Selecting internal production locations

 Concluding contracts with suppliers
 Determining material requirements
 Establishing and expanding production segments
 Planning production logistics based on customer requirements and capacities
 Control internal transports
 Control of transports between different production sites, if needs be
 Plan inventories, e.g. to compensate for seasonal fluctuations

This gives production logistics a great deal of scope within the company and makes it crucially
important for the company’s success and competitive advantages.