Logistics Demystified: Key Functions and Strategic Purpose
What Is Logistics?
Logistics is defined as the comprehensive process of planning, implementing, coordinating, and controlling all activities necessary to achieve desired levels of quality and service at the lowest possible cost.
Logistics in the Past: Military Origins
Logistics has its origins in military engineering, which historically dealt with organizing the movement of troops in the field, including their accommodation, transport, and supplies.
Modern Logistics Evolution (Since 1965)
The modern era of logistics began around 1965, marked by the maturation of material handling and physical distribution. A key factor during this period was the growing emphasis on customer service. Furthermore, physical distribution managers started to gain influence in inventory decisions.
This period also saw the integration of material handling. There was a recognized need to coordinate the movement of products and information, both within and beyond organizational boundaries. This resulted in more effective organizational structures and enhanced response capacity.
Core Logistics Functions and Scope
The logistics function is responsible for managing physical flows (e.g., raw materials, finished products) and considers its operational environment. This environment includes:
- Resources: Staff, supplies, electricity, etc.
- Assets: Properties essential for delivery completion, such as workshops, proprietary tools, company-owned trucks, and computer systems.
- Services: Contracted transport or storage services.
The logistics function directly manages physical and financial flows, and indirectly, associated information. Physical flows are typically divided into:
- Purchasing: Between a supplier and its customer.
- Distribution: Between a supplier and the end customer.
- Returns: Reverse logistics.
Purchasing Logistics
Purchasing logistics involves managing the following physical, informational, and administrative flows:
- Planning sourcing from suppliers in accordance with production and sales forecasts.
- Implementing supply, transport, and other related import operations.
- Managing supplier relationships, aiming to improve service and reduce logistics costs.
Distribution Logistics
Distribution logistics encompasses the management of the following physical, informational, and administrative flows:
- Forecasting the activity of logistics centers.
- Storage and warehousing.
- Transferring goods between storage locations using appropriate resources and equipment.
- Preparing orders or executing cross-docking (transit operations).
- Sometimes undertaking minor product processing activities (e.g., kitting, labeling).
- Managing distribution transport to the customer.
Reverse Logistics
Reverse logistics involves managing the following physical, informational, and administrative flows related to product returns:
- Collecting the product from the customer.
- Processing returned items for compliance, repair, reintegration into stock, destruction, recycling, or storage.
The Purpose of Logistics: The “Rights”
An effective logistics system aims to deliver:
- The right product
- In the right quantity
- In the right condition
- To the right place
- At the right time
- At the right cost
Conclusion: Advantages of Global Logistics
Implementing global logistics is a highly effective strategy that can yield significant competitive advantages. Key benefits include:
- Optimization in the production of products or articles.
- Attainment of high-quality products.
- Lowering costs across all processes.
These improvements ultimately allow businesses to offer products at competitive prices.