What Is Logistics Involved In?
Logistics is the coordinated movement of goods, materials and information from source to destination based on customer requirements. Logistics involves a wide range of activities, from transportation to inventory management and warehousing.
A third-party logistics (3PL) company handles warehousing, order processing and shipping for merchants. For example, when Sit Still sells comfy chairs and couches online, its logistics provider processes the orders and runs cost comparisons among various carriers to select the best rate.
Supply Chain Management
Supply chain management encompasses the entire network of activities involved in converting raw production materials into final products. It includes coordinating planning, sourcing of materials and labor, facilities management, producing, distributing and shipping goods to customers. It also includes managing returns. Logistics is a subset of supply chain management that involves the movement of inventory throughout an organization’s stakeholder network.
While there are similarities between the two, they have very different scopes and focus. Logistics aims to ensure that every customer gets the product they want at the right time and place, while supply chain management looks to improve overall operational efficiency through more transparent processes.
For example, logisticians can implement warehousing and transportation systems that make it easier to move large, bulky or heavy items through the supply chain. Warehouses can use unitization methods to optimize space and storage, and transportation systems can streamline the movement of materials from one point to another through a network of cars, trains, trucks, planes and ships.
SCM focuses on improving these functions through better processes and reducing friction along the way to create competitive advantages. It encompasses a vast network of stakeholders including suppliers, distributors, wholesalers, retailers and end consumers. It can be thought of like a flywheel that requires a lot of effort to logistics inc start spinning, but once it does, it accelerates faster and faster with each subsequent push.
Warehousing is a large part of logistics, where raw materials and products are stored in a warehouse until needed to make a final product or ship to customers. Traditional warehousing is based on shelves, racks and automation systems to maximize storage capacity and ensure efficient inventory management. Cold storage is another type of warehousing that uses refrigeration and freezing systems to preserve products such as food, drugs and chemicals. High-volume warehousing utilizes specialized equipment to handle products such as construction materials and machinery.
Warehouse management is the process of tracking and monitoring how products are sent into and out of a warehouse. It also includes ensuring that all product information is accurate and complete in the warehouse system. This is crucial for reducing wasteful operations, such as re-picking items that have already been picked, and for improving picking accuracy.
Other warehouse management functions include setting performance targets for a facility and identifying areas that need improvement, such as receiving efficiency or productivity. These targets can then be used to help improve overall warehouse operation and increase customer satisfaction.
Other warehouse functions involve preparing orders for shipping, generating packing lists and invoices for customers, and coordinating distribution of products via trucks, air or rail transportation. Some warehouses may have their own shipping and freighting departments, while others rely on third-party logistics (3PL) companies to handle these tasks. 3PLs often have multiple warehouses across the country, which can save on shipping costs and speed up delivery times for customers.
Logistics is the coordination of the movement of goods and services from a point of origin to a point of consumption based on specific customer requirements. It encompasses warehousing, inventory management, and transportation. It is an essential function for global businesses that must operate at a low cost with high reliability and flexibility. Logistics companies also provide customer service and support to create positive experiences.
As part of their logistical management, logistics companies must ensure that the right product is available at the correct place and time. This requires the use of a warehouse management system and other software that can track and manage the location, condition, and status of products. It also includes route management systems that optimize shipment routes to reduce costs and delays.
Another critical element of logistical management is data collection and analysis. This information is used to enhance supply chain management with new insights. It is also useful for predicting future needs and trends in the industry. This data helps to make more accurate decisions and improve the quality of logistical services.
While there are a variety of logistics companies, some specialize in managing a particular aspect of the process. Others, known as fourth-party logistics (4PL) providers, manage the entire process from start to finish. They work with 3PLs, truckers, forwarders, custom house agents, and other suppliers to design and run a comprehensive logistics solution for their customers.
Inventory management, or stock control, involves managing a company’s supply levels to meet customer demand and maximize financial performance. This includes ensuring the right amount of stock is available and optimizing the balance between purchasing, storage and shipping costs.
Four types of inventory are typically recognized: raw international freight forwarding company materials/components, work in process, finished goods and MRO (maintenance, repair and operation supplies). Manufacturers buy and store raw materials to transform into finished products for sale to consumers. Nonmanufacturing companies may also stock and sell raw materials to wholesalers or retailers, depending on their business model.
The best way to manage inventory is through an effective demand planning system that considers the specifics of a product and its distribution, including order fulfillment and warehousing operations. Ideally, this plan should use the concept of safety stock to account for fluctuations in orders and sales forecasts.
Other important factors in effective inventory management are setting par levels and ensuring that all warehouse employees are trained on the proper handling of products. Lastly, bundling goods is an efficient way to move slow-moving or aging inventory, and can be used to provide a better customer experience. For example, a retailer may include a free gift with each purchase to keep inventory moving and improve customer satisfaction. Ultimately, a good inventory system helps minimize the cost of inventory through the effective use of warehouse space and other resources.