Logistics by itself is a vast subject and it confounds beginners and veterans alike. Logistics is considered as a very complex activity, and it gets worsened when it is confused with transportation. It should be noted that logistics is the primary activity whereas transportation is a function of that activity. This gets reflected when companies hire a Transport Manager instead of a Logistics Manager to deal with issues related to logistics. A Transport Manager will deal with a fleet of vehicles and ensure proper and efficient use of the fleet whereas a Logistics Manager is responsible for introducing a logistics information system, integration of ERP, telematics, scheduling and routing, continuous improvement, and similar peripheral activities. Here is a short guide for beginners on fundamental concepts of logistics.
Origin of Logistics
In current times, the term â€˜logisticsâ€™ is used with respect to almost all aspects of a business, regardless of the type of business. But, history reveals that the concept of logistics is more of a military term and dates back to as early as the Greeks era. The Greek Generals like Alexander the Great and Leon the Wise used it to describe readiness of their army in terms of all the procedures and procurement of food, clothing, ammunition, etc. Similar planning on logistics was seen in successive kingdoms and generals too and it was witnessed that those with well-defined and strategic logistics were the victorious ones in the war.
It was only since the mid-1900s that many contributing factors such as profit leverage, deregulation, information technology, globalization, competitive pressures, and the like led to the development of structured logistics sector of the present times.
Logistics and Supply Chain
Logistics is widely defined as the structured process of supply, materials management, and distribution. On a more scientific light, logistics is defined as â€œthe process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.â€ (Council of Logistics Management)
The Supply Chain is the entire process of flow of goods right from the stage of being a raw material till the stage of reaching the end user. Generally, supply and distribution logistics have four key players: suppliers or vendors, manufacturers, wholesalers or retailers, and customers.
Classification of logistics activities
The activities of logistics can be broadly classified into two:
- Core activities â€“ These activities are a part of every supply chain and include the following: customer service, transportation, inventory management, and information flows and order processing.
- Support activities â€“ These activities vary from company to company. Warehousing, materials handling, purchasing, protective packaging, coordination with production/operations, and information maintenance are components of support activities.
Scope of Logistics in Business
Logistics management in any business aims to achieve the 5 Râ€™s i.e. to have the â€œright productâ€, in the â€œright quantityâ€, at the â€œright placeâ€, at the â€œright timeâ€, with the â€œright costâ€. It must balance two basic targets of providing quality service and maintaining low cost along with the flexibility to adapt the constant changes in the market.
Significance of Logistics in an Organization
Logistics play a critical role in any organisation and affects all aspects of business including sales, marketing, customer service, corporate profit, human resource, health and safety, compliance, and finance. As logistics professionals, it becomes their responsibility to connect the logistic operation to all these departments through effective communication. It is required to make every department realise the impact and benefits they can harness by integrating their respective functions with the logistics department.
Finally, it is about time to realise the importance of logistics, without which companies will simply be unable to achieve optimum efficiency in various aspects of their business. To do this, companies must shift their focus from basic fleet management and start paying due attention to logistics strategy, logistics system design and planning, distribution network, and transportation. An efficient and practical logistics management system can certainly do wonders for the profit of a company.