“Behind every great leader there was an even greater logistician” – James M. Cox
Logistics is one of the top priorities and functions within a company and is necessary for managing the global supply chain with its complexity and the fragile nature of its independent yet interconnected parts. Direction and vision are essential for success in any competitive industry, but having a strong team to manage the minutiae of your operations is too.
What is Logistics?
The term ‘logistics’ originated within the military, referring to the process of delivering weapons and other supplies to troops over difficult terrain with many constraints. It has evolved into a business concept since then and now refers to the efficient coordination of procurement, forecasting, inbound and outbound physical movements and the storage of materials and finished goods in an increasingly complex and globalized supply chain. Logistics emphasizes the efficient storage and flow of goods from their point or origin to their point of consumption in order to best meet the customer’s requirements.
There are four main fields within logistics which can be remembered with the helpful PPDD acronym: procurement, production, distribution, and disposal. Procurement logistics is the selection process during which suppliers are chosen and contracts for the delivery of goods and services are negotiated. Activities such as market research, make or buy decisions and order controlling fit under this category. Production logistics refers to the streamlining and controlling of the supply chain flow, or distribution logistics. Organizational concepts, layout and product planning are typical at this stage. Distribution logistics focuses on the delivery of finished products to the customer from order processing, warehousing to transportation. The integration of sub-sectors such as air, water and rail trail is the concern. Disposal logistics AKA reverse logistics covers all operations which reuse products and materials, and it prioritizes reducing costs and enhancing service.
For project managers, logistics degrees (often called operations management degrees) are essential, since such programs cover every sphere of operations. External companies, however, can help you avoid the financial and opportunity cost of independent education and the risks of independent management. Modern logistics confers several advantages.
Superior Storage Management
Logistics can aid warehouses in achieving superior storage management. Businesses with complicated procedures typically consult, hire and/or contract third-party logistics (3PL), fourth-party logistics (4PL) and/or various consulting services. 3PL uses external organizations to perform logistical activities typically done within the client’s organization itself, e.g. hiring a company to manage the distribution logistics for your exports. There is, however, increasingly a movement toward 4PL, which integrates several 3PL competencies to design and run collaborative and thereby comprehensive supply chain solutions. 4PL general contractors take responsibility for the complete process by managing 3PLs and all custom house agents, truckers etc. associated with them. The larger and more complicated the operation, the more helpful and cost effective the 4PL option is.
Logistics consulting services are a specialty industry for firms which specialize in the production and distribution of goods. They provide advice on the streamlining of the manufacturing process in terms of inventory management, product quality control, order processing and so on. They often suggest improvements on the basis of their analysis to assist the more efficient use of inputs and curtail excess inventory, as well as providing cutting edge information about the latest technologies which link customers to producers.
Procurement capacities are expanded with the correct logistical techniques, as sourcing local or international suppliers and transporting merchandise is streamlined. More efficient technologies are sourced and utilized throughout your supply chain, be they to do with improving fuel efficiency or speeding up transportation with portable scales and other top-end industrial equipment. Small business handling their own distribution logistics with inventory and warehousing encounter several common problems, such as returned merchandise and refusal of services. These problems can be minimized or avoided all-together with proper education, consultation or contracting of logistics experts.
Proper logistical management enables a business to have not only a global reach but a truly global information network in order to compete with giants like Amazon who have the most exhaustive databases in the world. The technical abilities of logistical management are constantly growing as algorithms become smarter. It helps overcome typical constraints in project management such as determining the scope of what must be done, allocating time to complete the project and budgeting/accounting. A company’s supply chain is utilized more efficiently by minimizing wasted time, materials and money by cutting costs where appropriate.
If you care about your bottom line, help is out there for optimizing your supply chain management, and even smaller businesses can benefit from the technologies used by larger firms.
About the author
Bethany Wallace is a warehouse manager and enjoys writing about warehouse operations and logistics in her articles. These appear on niche as well as general business blogs.