What exactly is logistics you ask the council of supply chain management professionals defines logistics
as that part of supply chain management that plans implements and controls the efficient effective forward
and reverse flow and storage of goods services and related information between the point of origin and
the point of consumption.
In order to meet customer’s requirements.
That is a lot to take in.
So let’s break down this official definition into terms that makes sense to you and your organization.
So first logistics is a crucial aspect of supply chain management and supply chain management.
In brief describes how businesses conduct their business.
Businesses sourced from suppliers make products or provide services and then deliver those products
and services to customers.
Next logistics moves goods and services from the beginning of that supply chain to the end.
We transport supplies and materials from the supplier to the factory for example and then move finished
goods from the factory to the customer logisticians plan.
These activities in advance and manage these activities as they are being performed along the way those
materials or products might have to be stored temporarily.
Incoming materials to the factory are sometimes held in warehouses so that individual items can be put
into kits to make the manufacturing process more efficient.
If your company takes advantage of price discounts for large quantity purchases you’ll store material
here until the factory needs it.
Your finished product sometimes goes directly to the customer but other times may go to your warehouse
until the customer places an order.
This is very common for seasonal items like snow skis or fishing equipment.
You may also use distributors for your products especially in international markets.
So we will ship to those distribution centers as well.
We are also responsible for the return function taking back products that do not work properly or correcting
order delivery errors.
So we are moving in finished goods and materials in the opposite direction through our supply chain.
Also this whole time we certainly want to manage and control our inventory levels and make effective
use of information technologies to ensure we can meet our business plan and our customers expectations
This is very much a part of logistics as you continuously strive to deliver the right product to the
right place at the right time.
Note that the CSC impy definition includes the words effective and efficient a good logistics program
must ensure that you are doing the right things to meet your business goals activities that are adding
value to your business strategy and creating customers who want to do business with you.
That is being effective.
Sometimes that means you outsource specific aspects of logistics like delivery or international distribution
to ensure you have the right person performing that activity like most of us you probably include cost
in your definition of efficient as materials and products move throughout the supply chain.
It is critical to manage control and wherever possible reduce your costs.
Let’s look at Amazon for a pretty good example of effectiveness and efficiency.
When I order from Amazon.com the package is normally delivered to my home by U.P.S. Amazon outsources
the delivery function to U.P.S. for two pretty good reasons.
U.P.S. is an expert at the delivery function and gives Amazon peace of mine that my package will be
delivered properly and I as their customer will be satisfied.
Amazon is being effective by outsourcing here and they are also being efficient because they do not
have to bear the cost of owning and operating a fleet of trucks and airplanes and a network of transportation
Additionally U.P.S. most likely gives Amazon a discounted price based on the high volume of their business
which is another indicator of efficiency.
Not long ago noted a memory card from Amazon later that day I received the shipping notification from
U.P.S. with an expected delivery date and a tracking number.
You know that standard email they send out but two days later that package was not at my doorstep.
It was in my mailbox delivered by the US Post Office.
This is another example of efficiency.
You calculated that it was cheaper for them to subcontract with the post office rather than send the
truck out to my house.
With this one small package of course U.P.S. had to also calculate that they could get my memory card
to the post office in time for my mailman to deliver by the promised delivery date.
Right otherwise they would have been efficient but not effective.
Of all the aspects of that official definition I believe being efficient and effective drives your logistics
What do you think makes logistics operations at your company both efficient and effective.
Is it your transportation and delivery system.
Or perhaps your distribution network the better you understand these activities the easier it is to manage them.