What is Logistics? Function, Types, Physical Distribution

What is Logistics?

Logistics refers to the overall method of dealing with how resources are acquired, stored, and transported to their very last destination. Logistics management includes figuring out prospective distributors and providers and figuring out their effectiveness and accessibility. Logistics managers are called logisticians.

Logistics manages the efficient forward and reverse flow of products and services from the point of origin to the ultimate recipient. This further infers that logistics bears an impact on the movement of goods and how swiftly products reach the target consumer. In this manner, logistics enables organisations to gain a competitive edge over their competitors.

Logistics adds value to the organisation by fulfil the needs of the customers in terms of time and place of availability of the product.

The logistics function in an economy aims to contribute to a business in the following ways:

• ensures high customer service levels.
  
  
• It maintains high-quality product delivery.
  
  
• It helps minimise costs for transportation of products.
  
  
• It facilitates to have flexibility and swiftness in changing market environment.
  
  
• It assists to maintain a balance between the quality of service and low costs.

Functions of Logistics

Transportation and warehousing are the two main features of logistics.

Transportation management specialises in making plans, optimising and executing using automobiles to transport items among warehouses, retail places and customers. The transportation is multimodal and might consist of ocean, air, rail and roads.

Not surprisingly, transportation management is a complicated procedure that includes making plans and optimising routes and shipment loads, order management, freight auditing and payment. It also can amplify yard management, a procedure that oversees the movement of automobiles through the yards outdoor production plants, warehouses and distribution facilities.

Carrier control is a critical component since the price, availability and capability of transportation companies can range widely. Logistics corporations normally use Transportation Management System (TMS) software programme to meet the needs of transport-related logistics. There also are an area of interest applications, including backyard control systems.

Warehousing, or warehouse control, consists of such capabilities as stock management and order fulfilment. It additionally entails dealing with warehouse infrastructure and processes — for example, in a fulfilment centre, wherein orders for items are received, processed and fulfilled (shipped to the customer).

Most corporations use Warehouse Management System (WMS) software programme to control the float and storage of products and identify stock. Most carriers of organisation useful resource making plans (ERP) software programme provide TMS and WMS modules, in addition to greater specialised additives for stock control and different logistics features. Meanwhile, self-sufficient vehicles, consisting of driverless forklifts, shipping vehicles and drones, are probably to come to be greater common in warehouses, in warehouse yards and on highways.

While on-time shipping of intact packages has usually been essential all through the supply chain, it has come to be even greater mission-important in current years as Omni channel commerce, with its sameday domestic or retail shipping of custom designed merchandise ordered from smartphones, turns into greater common. Suppliers, manufacturers, vendors and shops have needed to enhance their logistics strategies to satisfy the demand for quicker, greater convenient shipping of a greater variety of goods.

They additionally have needed to higher integrate their strategies and structures to enhance supply chain visibility. Logistics management is an essential aspect of Supply Chain Management (SCM). While the phrases are occasionally used interchangeably, logistics specialises in shifting merchandise and substances as efficiently as possible.

In contrast, SCM encompasses a miles wider variety of Supply Chain Planning (SCP) activities, consisting of demand making plans and income and operations making plans (S&OP), and Supply Chain Execution (SCE), which include strategic sourcing and transportation management.

Types of Logistics

Return Logistics (Reverse Logistics)

In order to increase the sales as well as the market share, many companies advertise that their goods will perform well over a period of time. The customer is, therefore, led to believe that in case he buys the product of that company, he is assured of satisfactory performance of the product. But at the same time, it is very much obvious that the company cannot assure the satisfactory performance of each and every of its product which is sold in the market. Few of the products sold may not perform as advertised over the specific period of time. Such products need to be brought back by the company to confirm good customer service.

Multination Companies (MNCs) to protect their market image and to stall its competitors from grabbing its customers, recall immediately the defective or substandard product from the market. Product recall is a critical competency resulting from increasingly rigid quality standards product expiration dating responsibility for hazardous consequences.

The company has, therefore, to take into account the defective goods that would be returned while framing the total logistical system network and calculating the total cost of such a system of network. Incorporating the goods returned in the total logistical systems network and cost is called as Return Logistics. Return Logistics requirement’ also result from the increasing number of laws prohibiting random scrapping and disposal on one hand, while encouraging recycling of waste such as beverage containers, packaging materials, etc.

The most significant aspect of return logistical operation is the need for maximum control when a potential health liability exists. E.g., a contaminated drug in the market is extremely dangerous and the company has to recall all the stock of contaminated drug.

Military Logistics

Military logistics is the art and science of planning and carrying out the movement and maintenance of military forces. In its most comprehensive sense, it is those aspects or military operations that deal with: Design, development, acquisition, storage, distribution, maintenance, evacuation, and disposition of material, evacuation, and hospitalization of personnel, acquisition or construction, maintenance, operation, and disposition of facilities.

Third Party Logistics (3PL)

3PL, Third Party Logistics describes businesses that provide one or many of a variety of logistics related services. Types of services would include public warehousing, contract warehousing, transportation management, distribution management, freight consolidation. A 3PL provider may take over all receiving, storage, value added, shipping, and transportation responsibilities for a client and conduct them in the 3PL’s warehouse using the 3PLs equipment and employees or may manage one or all of these functions in the clients facility using the clients equipment, or anything combination of the above. 3PL can be defined as the “Business of proposing physical distribution reforms to a client and undertaking comprehensive physical distribution services.”

Third party logistics (3PL), a new business model for physical distribution, originated in the U.K. & became highly popular in U.S. in the 1990s. 3PL providers offer innovative alternatives to clients in the form of comprehensive logistics services. Because 3PL requires that providers have intimate access to the corporate strategy of their clients, relationships are based long term contracts as a rule.

The growing demand for 3PL can be attributed to both demand, & supply side factors. (1) faced with deregulation & growing competition, transport companies are seeking new business opportunities, & (2) clients are seeking to outsource their logistics operations cut costs & focus management resources on core businesses.

Fourth Party Logistics

Traditionally, suppliers and big corporations have been meeting the demands by increased inventory, speedier transportation solutions posting on-site service engineers and many times employing a third party service provider. Today they need to meet increased levels of services due to e-procurement, complete supply visibility, virtual inventory management and requisite integrating technology.

Now corporations are outsourcing their entire set of supply chain process from a single design, make and run integrated comprehensive supply chain solutions. This evolution in supply chain outsourcing is called Fourth Party Logistics- the aim being to provide maximum overall benefit. Thus a fourth party logistics provider is a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organization with those of complementary service provider to deliver a comprehensive supply chain solution.

It leverages the competencies of third party logistics providers and business process managers to deliver a supply chain solution through a centralized point of contact. As the fourth party logistics provider caters to multiple clients, the investment is spread across clients-thus taking the advantage of economies of scale.

Inbound Logistics

Creation of value in a conversion process heavily depends on availability of inputs on time. Making available these inputs on time at point of use at minimum cost is the essence of Inbound Logistics. All the activities of a procurement performance cycle come under the scope of Inbound Logistics. Scope of Inbound Logistics covers transportation during procurement operation, storage, handling if any and overall management of inventory of inputs.

Several activities or tasks are required to facilitate an orderly flow of materials, parts or finished inventory into a Manufacturing complex. They are sourcing, order placement and expediting, transportation, receiving and storage. Overall, procurement operations are called inbound logistics. Inbound logistics have potential avenues for reducing systems costs.

Delivery time, size of shipment, method of transport & value of products involved are different from those of physical distribution cycles. Normally delivery is large as a low cost transportation mode is chosen. As the value of inventory is low, size of shipment is large & transit inventory costs are low. Value added goods are to be made available in the market for customers to perceive value. Finished goods are to be distributed through the network of warehouses and supply lines to reach the consumer through retailers’s shops in the market.

During conversion value is added to the raw materials and as a result value of the inventory in this case is very high unlike inputs. Now the size of shipment, modes, of transport and delivery time are different as compared to inputs. Activities of shipment, distribution performance cycle come under the scope of Outbound Logistics. They are order management, transportation, warehousing, packaging, handling etc.

Total Cost Approach of Physical Distribution

Physical distribution includes various features to be carried out like warehousing, inventory management, acquisition, transporting, packaging material, and customer services. Traditionally, entrepreneurs considered those activities impartial and traded them in isolation however now the selections are taken in coordination with different activities.

Total fare method ambitions at lowering the full cost involved in physical distribution system. Various fares incurred in physical distribution of products like stock cost, warehousing cost, packaging, etc. Total fare method means that marketer needs to attempt to reduce basic distribution cost, now no longer any precise cost.

The overall cost of distribution includes the expenses of numerous factors including expenses of storage, stock maintenance, transportation, etc. The general fare method is a corollary of the structures method.

Total price method envisages using overall cost (and now no longer the price of every man or woman aspect) at the same time as deciding on the opportunity route of movement in recognise of bodily distribution of the products.

In case the general price is not always analysed, there may be each chance of taking a wrong decision. It is obvious that a discount withinside the price of one aspect can be viable on the cost of the other element. If the transportation price is reduced, the price of warehousing and stock is going up.

Therefore, in any try to enhance the physical distribution performance and decrease price, the entire price of appearing the physical distribution characteristic needs to be taken into account. Management needs to suppose in phrases of exchange off in decreasing opportunity expenses to maximise profits. By doing this, the company can maximise potential profit.