Logistics can mean a lot of different things to different people, but at its heart it is anything having to do with the movement of goods, energy, raw materials, or information from their point of origin to their final consumer, and all the stops they make along the way. The consumers can be private customers, large corporations, or organisations of any size. Logistics deals with the flow of almost any kind of goods.
The logistics of physical objects (including food, materials, and products of all kinds) most commonly integrates materials handling, the flow of information, production, inventory control, transport, packaging warehousing, and often security as well. The complexity of this entire network often requires the use of specialised simulation and modelling software in order to be visualised, analysed and managed. The goal of this kind of management is usually the minimisation of expense, or the maximisation of overall process efficiency.
Still, ‘what is logistics’ cannot be answered quite so glibly. Logistics can be divided into a few broad categories, starting with inbound and outbound logistics. Whether a process is inbound or outbound depends on your point of view on the network. Your outbound procedures are almost always someone else’s inbound.
What is logistics? Categories of logistics processes
Inbound logistics is focused on purchasing and arranging the delivery and storage of finished inventory to sell on, or parts and raw materials for manufacture.
Outbound logistics deals with moving or storing finished goods, assembled parts, or refined/worked materials to the people or organisations who can use them (as part of their own inbound logistics process).
This is a type of inbound logistics, involves conducting market research, doing requirements planning, deciding between make or buy options, managing your supply chain, ordering and managing inbound goods. Procurement logistics is often about managing trade-offs: optimising build quality while reducing costs, outsourcing key processes while maintaining control of your processes, and simultaneously improving the security and accessibility of your warehouses.
Distribution logistics is a type of outbound logistics, focuses on delivering finished goods to end customers. It incorporates transportation, warehousing issues, and order processing. Distribution Logistics seeks to overcome the different times, places and manners of goods production and consumption.
Production logistics seeks to optimise your practical production capacities to make the resources you need for your distribution logistics functions. These activities are closely related to organizational concepts, planning process layouts, and production control.
Disposal logistics is another type of outbound logistics. It aims to minimise the cost and maximise the effectiveness of waste disposal, while maintaining regulatory compliance. Many businesses require secure disposal of sensitive waste, like old documents and records.
Reverse logistics is comprised of any process that seeks to reuse products and materials rather than procuring them again, or to optimise your stock of reusable materials. This includes the purchase and sale of surpluses, and reworking or repackaging items or shipments returned by customers. It includes all control, implementation, planning and optimisation of the movements of material, partially finished and finished goods (as well as all related information) from the buyer or consumer back to the vendor or producer, whether the purpose for the movement is reuse rather than specialised disposal, so there is substantial overlap with disposal and inbound logistics.
Green logistics focuses on measuring and minimising or optimising the carbon footprint and ecological impact of your logistics processes, both forward and reverse.
RAM logistics uses complicated automated systems to maximise the Reliability, Availability and Maintainability (RAM) of key logistical systems, especially in a military or civil engineering context.
What is logistics management?
Logistics management is a sub-unit of supply chain management that tries to ensure your customers’ demands are met by planning, controlling and implementing effective storage and movement of goods, services and information from one point to another on the supply chain. Good logistics management can improve your customer experience while reducing the costs of your logistics functions.
Logistics management encompasses all movement of goods from the raw material stage to delivered, final products. A logistics manager or management facility often handles the entire logistics function, including planning, implementation, and strategy.
Its components can include
- Choosing vendors and transportation options
- Planning effective transportation routes
- Determining and implementing optimal delivery methods
- Managing your IT-based logistics infrastructure
Poor logistics management can cause deliveries to fail, shortfalls to occur and customers to become dissatisfied. Goods can be damaged in transportation, and overall expenses can increase substantially. Ineffective or poorly implemented logistics software can cause efficiency problems as well. Organisations should strive to implement best practices to avoid these problems. Work towards collaboration instead of competition, and toward building up a good network of partners. Many businesses turn to an outsourced logistics management provider to improve their logistics processes.
What is logistics outsourcing?
Logistics outsourcing means forming a partnership between a company and a type of 3PL called a logistic service provider or LSP. Retaining third party logistics services involves contracting with a separate company to perform some or all of your logistics functions. As an example, a company which traditionally relied on in-house transportation and warehousing resources could outsource either or both to a 3PL.
LSPs usually offer more customized services than other 3PLs, and focus on providing long-term, strategic services. An organisation can outsource all or just part of their logistics processes.
There also exist 4PLs, or fourth party logistics providers. They work as integrators, combining their own capabilities and resources with those of 3PLs to provide more efficient, more comprehensive supply chain offerings. Usually a logistics management 3Pl will only offer a single, isolated function, whereas a 4PL would offer to manage the overall process. Some liken 4PLs to general contractors, in that they manage and optimise the functions of various 3PLs.
As you can see, ‘what is logistics’ is a complicated question. Perhaps a better one is ‘what is logistics to you?’