Logistics is defined as the process of planning, implementing and controlling the efficient, cost effective flow and storage of raw materials, in process inventory, finished goods and related information from point of origin to point of consumption for the purpose of confirming consumer requirements.
Logistics can also be defined as the design and operation of the physical, managerial and informational system needed to allow goods to overcome time and pace.
Many organizations or industries that need huge quantities of materials (raw materials or/and ready to use products) are required to be transported and stored in warehouses located at various locations. Vendor’s supply points are sometimes very far away from the production centers and have to move long distances to supply the commodities or raw materials. Industries and organizations have to store the materials some time as raw materials and later as finished products. The finished products are transported to its market area, where fluctuations found in market consumptions, thus making storage of some goods inevitable.
The movement of goods from the beginning, like bringing raw materials to supply finished products or commodities to market areas or consumption points that have to be finished will have very less error. This error less activities from origin of product to consumption of product is designed by and looked at by the logistics department.
In another way you can say that the main function of the logistics department in any organization or industry is that the department has to ensure that the right products are available at the right place, at the right time, in the right form at the right price.
So you can say that the logistics department is the backbone of any organization or industries. But logistics needs connectivities and transportation provides the connectivities to logistics activities. Transportation plays a significant role in logistics. Some organizations think that the storage part of logistics activities are more complex but some organizations and industries find that transportation areas are more complex. To ease these complexities the role of the logistics department is more important.
In the making of commodities, usable goods or finished goods the three states are very important.
While transformation is dealt by the engineering and production department. The storage and movement parts are dealt with by the logistics department.
Simply the following activities are happening in a very simple way the minimum activities in any distribution management are as the following image.
The raw materials are received from various vendors and transported to the plant. At the plant the raw materials are kept in a warehouse. The raw materials are transferred and fed into the production process. In the production process the raw materials are transformed into a finished and usable product or commodities. The usable goods or commodities are then sifted or transported into the channel warehouses. From the channel warehouses the commodities are placed to wholesaler and then retailer as per the demand and need of the market. Finally the commodities are placed to its consumer or end user.
Logistics department is not only responsible for distribution or movement and storage of goods but the logistics department is highly responsible for placing goods at the right time, in the right form, at the right place at the right price. Logistics departments are responsible for cost effective flow of goods and better inventory methods in warehousing. Managing traffic at warehouses and keeping forecasts about product flow as per demand and supply relation is another important work of the logistics department in distribution management.
It is evident that the management of logistics is a complex process which involves a whole range of physical, managerial and informational issues related to the following listed decision areas.
- Product design & Production Structure
- Plant Location & Warehouse Location
- Distribution Network Design
- Production Planning & Allocation Decision
- Inventory Size and Inventory Management
- Mode & Routing of Transport
- Shipment Size & Shipment Value
- Material Handling & packaging
- Warehouse Operations & Order Processing
Logistics departments are responsible for cost effective logistics activities. But logistics activities in distribution management are adding its logistics cost to product price.
An important issue which any business operations has to be concerned about is the question of total logistics cost.It is also important to appreciate that many of the cost elements are related unless a total view of coat is taken, any attempt at cost reduction may prove deceptive. So it is important to reduce waste from logistics activities but not remove any action from logistics activities.
We can not ignore the role of key actors in logistics. Their roles are highly important for proper, smooth and cost effective logistics operations. The main key actors involved in logistics system are as follows:-
Shippers or users of logistics services have a very important role in logistics management. The shippers or the manufacturers ship commodities from the point of production or point of origin to the point of consumption. For this shipping activity they hire logistics service providers.
Logistics Service Providers
Logistics Service Providers are those who provide the services of logistics to their clients or shippers or manufacturers. They are,
- Carrier (Rail, Road, Air, Ship, Inland Waterways, Pipeline, etc.)
- Warehousing Companies
- Freight Forwarders
- Terminal Operators
- Insurance Companies, etc
Regulators of Logistics
Regulating authorities has a very important role for smooth logistics operations. Either they are government authorities or any corporate authorities. All regulating authorities have to work properly to support smooth and cost effective logistics operations.Main services provided by regulating authorities are.
- Pricing/Taxing Infrastructure
- Freight Equalization Policy
- Policy with Regard to Packaging Materials
- Carriers Act
- Hazardous Shipment and simple Shipment Policy
- Infrastructure Provisions and Maintenance.
- Degree and Nature of Regulations
- Encouragement program, etc.
Lean Logistics is the process by which many logistics professionals are removing the waste from logistics activities and the logistics department will keep product movement, distribution and supply in a very cost effective way. The cost effective logistics process will keep the product in market competition and help to increase in sales also.
Finally we can say that the logistics activities are a very complex and important part of distribution management and an expert logistics department will provide a cost effective logistics process to win the market for any product or commodities.