LOGISTICS – What is it and why is it so important?
The world we know wouldn’t function as smoothly without the logistics industry. Everything you buy in the store had to get from the supplier to the retailer at some point. Building material had to be transported to site before a structure was built and food is transported from the supplier to the retailer.
The term “logistics” was originally used by the military to describe how it obtained, stored and moved its equipment and supplies. The term as we know it remains the same but with the rise of consumerism and subsequent growth of more complex supply chains, it has evolved. It refers to the process of coordinating and moving resources such as equipment, food, inventory, materials and even people from one location to another.
Inbound vs. Outbound logistics
The two main categories of logistics are inbound logistics, which refers to all the processes of the gathering, handling, storing and transportation of inbound materials, and outbound logistics, which involves the collection, maintenance and delivery of products to the customer.
The other categories of logistics are:
- Third Party Logistics: a company’s use of third-party businesses to outsource elements of its distribution.
- Fourth Party Logistics: a company’s ability to outsource the entire management of its supply chain to another company.
- Green Logistics: the process of minimizing environmental damage done by logistics operations
- Digital Logistics: digital logistics management systems that enable the optimisation, visibility and collaboration between stakeholders in the end-to-end supply chain.
Logistics management vs supply chain management
Even though the terms “logistics” and “supply chain management” go hand in hand, they refer to two separate aspects of the process. As mentioned above, logistics is concerned with the process of coordinating and moving resources, but supply chain management uses a more holistic approach. CTMC defines supply chain management as “all collaboration between companies that connect suppliers, partners, manufacturers, wholesalers, retailers, and customers to optimize efficiencies that improve competitive advantage”.
Read: 6 Important tips for effective logistics management here: https://cerasis.com/effective-logistics-management/
Types of logistics management
There are four main types of logistics management: supply, distribution, production and reverse logistics. Each type focuses on a different aspect of the supply process.
Supply management involves the planning and coordination of materials or products that are needed at a certain place and time to support the receiving company’s production or activity.
Distribution manages how a supplied and stored material is distributed to its required recipient. It involves the loading, unloading and transportation of material, the tracking of stock and accountability of use, which is the recording of how the material is used and by whom.
BizFluent says that production logistics manages the stages of combining distributed supplies into a product. This can involve the coordination required in a manufacturing or assembling process.
Lastly, reverse logistics involves the return of material and supplies from a production process. It plans for the removal of excess material and its re-absorption into a stock supply. For example, if there are bricks left over on a building site, it will be removed and returned to the supplier and reclaimed as stock.
Why logistics is so important
Logistics is an integral part of any company, especially those that produce and distribute products and materials. Having said that, the logistics industry is important for the following reasons:
It helps to create value. Providing value extends further than the quality of a product, it also refers to its availability. Effective logistics management ensures the continued availability of products and materials to consumers, thereby creating and increasing the value a business offers.
It helps to reduce costs and improves business efficiency. By partnering with other businesses that offer transportation and storage, companies can reduce their operational costs while maintaining and increasing business efficiency.
It ensures the timely delivery of products to the correct location. Good logistics management ensures the quick and safe shipping, storage and delivery of products to customers.
In short, logistics is about providing the right goods to the right recipient in the right quantity at the right place at the right time. In an article by NHFS, a shortage of skilled workers is cited as one of the challenges in the South African freight industry along with climate change and regional connectivity.
The IMM Graduate School’s supply chain and export management believe the future could be in the hands of the young logistics professionals. Find out more about our logistics short course here: https://www.immsc.co.za/online-course/logistics-short-course/