What is logistics?

Logistics impacts the economy at different levels; global, national, and corporate. It is a $4.3 trillion industry, too important that the World Bank releases annual Logistics Performance Index (LPI) to determine challenges and opportunities countries are facing in trade, infrastructure, technology, visibility, and speed. These components are the pillars of economic growth. Highly efficient logistics improve international trade, reduces product costs, and increases corporate profits.

The Council of Supply Chain Management Professionals (CSMP) defines logistics management as;

“Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements”

The definition clearly describes the role of logistics that is to manage both the forward and reverse flow of assets efficiently and effectively. Managing the flow entails strategic planning, monitoring, and resources management. That means the company needs to carry out key decisions, operations strategies and processes to achieve a high performing and efficient product flow.

Logistics needs infrastructure to enable movement and storage of physical good, services, and information. Asking the following questions will help determine your logistics requirements.

–  How many distribution centers we need? Where to locate them?
–  What is the best mode of transportation?
–  Do we need to make products in-house or outsource?
–  What technology best advance our capability?
–  How inventory is managed optimally?
–  How reverse logistics is handled?

Answering those questions reveals insights to structuring your logistics process and capability. It helps you understand how to meet customer requirements with the highest quality of product and service at a minimal cost. Logistics aims to reduce costs across processes while delivering the right products to customers with speed and quality.

Moving a product from point A to B implies cost and facilities. That is why logistics is concerned with the efficiency of transportation and distribution, warehousing, material handling, inventory management, customer service, and reverse logistics.

Figure 14. The inbound, outbound, and reverse logistics flow.

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