What is business logistics? Logistics is a general description of the management of transportation from one place to another. The definition of business logistics refers to all those actions that are involved in the movement and storage of products. This is from the sourcing of raw materials to the final destination – and can sometimes be beyond to disposal or recycling.
Business logistics involves many processes and carrying them out with the utmost efficiency and cost-effectiveness is the goal. The job of the logistician includes ensuring the availability of the right product at the right time for the right price.
Why business logistics are vital?
The importance of business logistics is highlighted within both manufacturing and service firms. This process of planning, implementing, and controlling the efficient flow and storage of raw materials to the point of consumption is only accomplished by careful management of activities. This in turn creates value for customers and suppliers.
Logistics research indicates that strategic planning and design of the network to establish customer service levels is key. The utilisation of inventories, the location of facilities, and the modes of transport offered all play a huge part in getting the balance right. A solid network design can save a company up to 15% on annual logistics costs.
More business logistics data
See a brief logistical activity guide here:
- Customer places an order with the business
- The product is produced or shipped from an inventory to the customer
- More raw materials need to be acquired from suppliers
- Customer service levels and satisfaction must be met
The inventory is basically a detailed list of products or goods within warehouse facilities, or on-site. Both retailers and manufacturers will have goods in excess of what is needed or used currently. By keeping a supply of raw materials fluctuations in incoming orders can easily be accommodated. Without this back-up inventory, materials would have to be ordered and received before further production could begin.
In large manufacturing facilities machinery must also be regularly serviced and repaired with an inventory of spare parts kept reducing any loss of production time. This type of inventory is known as MRO meaning the components are used for maintenance, repair, or production process operation.
Warehouses holding a backup of merchandise gives the retailer opportunity to continually restock merchandise on store shelves. And retailers can offer online purchasing filled directly from the warehoused inventory. Proper inventory control minimises the need to backorder, resulting in an efficient selling and shipping process.
There needs to be a balance on how much inventory is on hand. Too much could cause considerable loss if the warehouse is damaged by fire or flood. Insurance fees and dealing with claims can be costly and time-consuming. Having reliable suppliers will ensure that excess inventory doesn’t prove to be an issue.
The selection of the right transportation services is essential and needs to be based on the size and type of order when ready for delivery. Transportation is categorised into five modes – air, sea, truck, rail, and pipeline. An experienced logistician will select the most cost-effective method which also delivers the best customer service.
Each transportation mode will be identified in terms of reliability, speed, and route flexibility. Air transport is normally the fastest but also the most expensive. Trucks may be used for direct short distances, with railroads used for carrying large quantities over long distances. Transportation by sea or pipeline is slower but relatively inexpensive.
Often multimodal transportation services will be chosen to take advantage of individual strengths. For example, pickup and deliveries can be performed by truck with the long-haul terminal to terminal carried out by rail.
A logistics manager will have a choice of common, contract, or private carrier depending on the requirements for an as needs basis, or a longer contractual arrangement. The business may be recommended to buy its own trucks and set up a transportation company to meet the unique service requirements of customers.
The benefits of business logistics
Logistics has evolved as a business concept that is a vital part of supply chain management to meet customer requirements. Benefits include:
- Improved efficiency – a logistician will use analysed data to track movements of goods in and out to optimise management systems and avoid any potential delays or disruptions.
- Continuous delivery – professionally organised logistics will guarantee fast and secure shipping, warehousing, and delivery of goods to the right destination and within deadlines.
- Increased profits – a successful supply chain will help escalate sales and boost the value of the business as goodwill will be created with timely deliveries of desired goods.
The business logistics future
Logistics managers will be expected to maintain supply within an electronically linked international business community. Globalisation will be enhanced by regional trade agreements and via the internet, resulting in greater demand from around the world. New technologies and software tools will provide better ways of performance analysation, and the ability to meet greater demands for simplicity and speed. The increase of outsourcing logistics will undoubtedly continue as the pace of business accelerates, and business logistics remain a vital area of management.