Procurement Glossary & Terminologies

Glossary / Letter L / Logistics

Logistics

Definition

Logistics is the process of effectively organising and carrying out the storage and transit of products from the start to the end. Meeting customer demands efficiently and on time is the aim of logistics.

Moving military troops, supplies, and equipment was a crucial function originally performed by logistics. Despite its continued importance in the military, logistics is now more frequently used to refer to the movement of commercial items along the supply chain.

Many businesses offer this service to factories, retailers, and other sectors with significant transportation needs. Some people own the entire infrastructure, including everything from trucks to warehouses to software and jet planes, while others only focus on one or two components. Large manufacturers or retailers typically own the majority of their logistics network, however, most businesses delegate the task to outside logistics organizations (3PLs).

Functions of Logistics

Transportation and warehousing are the two primary responsibilities of logistics. The main objectives of transportation management are planning, maximising, and using vehicles to transport items between warehouses, retail establishments, and clients.

Transportation management is a complex process that entails route and shipment optimization, order administration, freight auditing, and payment. It can also include yard management, which regulates how cars move around the yards outside factories, storage facilities, and distribution centers. Since the cost, availability, and capacity of transportation carriers can vary greatly, carrier management is crucial.

To help satisfy the demands of transportation-related logistics, logistics organisations frequently use transportation management system (TMS) software. There are specialised uses as well, such as yard management programs.

Most businesses utilise warehouse management system (WMS) software to control the movement, storage, and inventory tracking. Inventory control and order fulfillment are two examples of the tasks included in warehousing or warehouse management. Additionally, it oversees warehouse operations and infrastructure, such as fulfillment centers where product orders are collected, processed, and delivered (shipped to the customer). Most enterprise resource planning (ERP) software providers provide TMS and WMS modules and more specialised parts for logistics tasks like inventory management.

Since the documentation necessary to demonstrate compliance with governmental requirements frequently needs to be completed where commodities cross international borders or enter shipping ports, customs management, also known as global commerce management, is commonly regarded as a logistics component.

Artificial intelligence (AI) and autonomous vehicle technology will significantly impact future logistics operations. To more accurately track parcels and anticipate transport-related issues in the supply chain, some logistics firms already employ AI.

Importance of Logistics

While timely, intact package delivery has always been crucial for the entire supply chain, it has recently become even more critical as omnichannel shopping, with its same-day home or retail delivery of personalised goods ordered from smartphones, has grown more popular.

To meet the need for faster, more convenient delivery of a greater variety of goods, suppliers, manufacturers, distributors, and retailers have had to enhance their logistical procedures. They also had to connect their processes and systems better to increase supply chain visibility.

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