Logistics

By 
WILL KENTON

Updated December 29, 2020

Reviewed by 
MARGARET JAMES

What Are Logistics?

Logistics refers to the overall process of managing how resources are acquired,
stored, and transported to their final destination. Logistics management involves
identifying prospective distributors and suppliers and determining their
effectiveness and accessibility. Logistics managers are referred to as
logisticians.

"Logistics" was initially a military-based term used in reference to how military

personnel obtained, stored, and moved equipment and supplies. The term is
now used widely in the business sector, particularly by companies in the
manufacturing sectors, to refer to how resources are handled and moved along
the supply chain.

Understanding Logistics in Management and Business

In simple terms, the goal of logistics management is to have the right amount of
a resource or input at the right time, getting it to the appropriate location in
proper condition, and delivering it to the correct internal or external customer.

KEY TAKEAWAYS

 Logistics is the overall process of managing how resources are acquired,

stored, and transported to their final destination.
 Poor logistics in a business can impact its bottom line.
 Logistics is now used widely in the business sector, particularly by
companies in the manufacturing sectors, to refer to how resources are
handled and moved along the supply chain.
For example, in the natural gas industry, logistics involves managing the
pipelines, trucks, storage facilities, and distribution centers that handle oil as it is
transformed along the supply chain. An efficient supply chain and effective
logistical procedures are essential to reduce costs and to maintain and increase
efficiency. Poor logistics lead to untimely deliveries, failure to meet the needs of
clientele, and ultimately causes the business to suffer.

The concept of business logistics has been transformed since the 1960s. The
increasing intricacy of supplying companies with the materials and resources
they need, along with the global expansion of supply chains, has led to a need
for specialists known as supply chain logisticians.

Logistics
From Wikipedia, the free encyclopedia
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"Logistics Management" redirects here. For the magazine, see Logistics Management
(magazine).
For other uses, see Logistics (disambiguation).
Logistics is generally the detailed organization and implementation of a complex
operation. In a general business sense, logistics is the management of the flow of things
between the point of origin and the point of consumption to meet the requirements of
customers or corporations. The resources managed in logistics may include tangible
goods such as materials, equipment, and supplies, as well as food and other
consumable items.
In military science, logistics is concerned with maintaining army supply lines while
disrupting those of the enemy, since an armed force without resources and
transportation is defenseless. Military logistics was already practiced in the ancient
world and as the modern military has a significant need for logistics solutions, advanced
implementations have been developed. In military logistics, logistics officers manage
how and when to move resources to the places they are needed.
Logistics management is the part of supply chain management and supply chain
engineering that plans, implements, and controls the efficient, effective forward, and
reverse flow and storage of goods, services, and related information between the point
of origin and point of consumption to meet customers' requirements. The complexity of
logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation
software. The minimization of the use of resources is a common motivation in all
logistics fields. A professional working in the field of logistics management is called a
logistician.

Nomenclature[edit]
The term logistics is attested in English from 1846, and is from French: logistique, where it was
either coined or popularized by military officer and writer Antoine-Henri Jomini, who defined it in
his Summary of the Art of War (Précis de l'Art de la Guerre). The term appears in the 1830 edition,
then titled Analytic Table (Tableau Analytique),[1] and Jomini explains that it is derived
from French: logis, lit. 'lodgings' (cognate to English lodge), in the terms French: maréchal des
logis, lit. 'marshall of lodgings' and French: major-général des logis, lit. 'major-general of lodging':
Autrefois les officiers de l’état-major se nommaient: maréchal des logis, major-général des logis; de
là est venu le terme de logistique, qu’on emploie pour désigner ce qui se rapporte aux marches
d’une armée.

Formerly the officers of the general staff were named: marshall of lodgings, major-general of
lodgings; from there came the term of logistics [logistique], which we employ to designate those who
are in charge of the functioning of an army.
The term is credited to Jomini, and the term and its etymology criticized by Georges de Chambray in
1832, writing:[2]
Logistique: Ce mot me paraît être tout-à-fait nouveau, car je ne l'avais encore vu nulle part dans la
littérature militaire. … il paraît le faire dériver du mot logis, étymologie singulière …

Logistic: This word appears to me to be completely new, as I have not yet seen it anywhere in
military literature. … he appears to derive it from the word lodgings [logis], a peculiar etymology …

Definition[edit]
Jomini originally defined logistics as:[1]
... l'art de bien ordonner les marches d'une armée, de bien combiner l'ordre des troupes dans les
colonnes, les tems [temps] de leur départ, leur itinéraire, les moyens de communications
nécessaires pour assurer leur arrivée à point nommé ...
... the art of well-ordering the functionings of an army, of well combining the order of troops in
columns, the times of their departure, their itinerary, the means of communication necessary to
assure their arrival at a named point ...
The Oxford English Dictionary defines logistics as "the branch of military science relating to
procuring, maintaining and transporting material, personnel and facilities". However, the New Oxford
American Dictionary defines logistics as "the detailed coordination of a complex operation involving
many people, facilities, or supplies", and the Oxford Dictionary on-line defines it as "the detailed
organization and implementation of a complex operation".[4] As such, logistics is commonly seen as a
branch of engineering that creates "people systems" rather than "machine systems".
According to the Council of Supply Chain Management Professionals (previously the Council of
Logistics Management),[5] logistics is the process of planning, implementing and controlling
procedures for the efficient and effective transportation and storage of goods including services and
related information from the point of origin to the point of consumption for the purpose of conforming
to customer requirements and includes inbound, outbound, internal and external movements.[6]
Academics and practitioners traditionally refer to the terms operations or production management
when referring to physical transformations taking place in a single business location (factory,
restaurant or even bank clerking) and reserve the term logistics for activities related to distribution,
that is, moving products on the territory. Managing a distribution center is seen, therefore, as
pertaining to the realm of logistics since, while in theory, the products made by a factory are ready
for consumption they still need to be moved along the distribution network according to some logic,
and the distribution center aggregates and processes orders coming from different areas of the
territory. That being said, from a modeling perspective, there are similarities between operations
management and logistics, and companies sometimes use hybrid professionals, with for example a
"Director of Operations" or a "Logistics Officer" working on similar problems. Furthermore, the term
"supply chain management" originally referred to, among other issues, having an integrated vision of
both production and logistics from point of origin to point of production.[7] All these terms may suffer
from semantic change as a side effect of advertising.

Logistics activities and fields

Inbound logistics is one of the primary processes of logistics concentrating on purchasing and
arranging the inbound movement of materials, parts, or unfinished inventory from suppliers to
manufacturing or assembly plants, warehouses, or retail stores.
Outbound logistics is the process related to the storage and movement of the final product and the
related information flows from the end of the production line to the end user.
Given the services performed by logisticians, the main fields of logistics can be broken down as
follows:

 Procurement logistics
 Distribution logistics
 After-sales logistics
 Disposal logistics
 Reverse logistics
 Green logistics
 Global logistics
 Domestics logistics
 Concierge service
 Reliability, availability, and maintainability
 Asset control logistics
 Point-of-sale material logistics
 Emergency logistics
 Production logistics
 Construction logistics
 Capital project logistics
 Digital logistics
Humanitarian logistics
Procurement logistics consists of activities such as market research, requirements planning,
make-or-buy decisions, supplier management, ordering, and order controlling. The targets in
procurement logistics might be contradictory: maximizing efficiency by concentrating on core
competences, outsourcing while maintaining the autonomy of the company, or minimizing
procurement costs while maximizing security within the supply process.
Advance Logistics consists of the activities required to set up or establish a plan for logistics
activities to occur.
Global Logistics[8] is technically the process of managing the "flow" of goods through what is called
a supply chain, from its place of production to other parts of the world. This often requires an
intermodal transport system, transport via ocean, air, rail, and truck. The effectiveness of global
logistics is measured in the Logistics Performance Index.
Distribution logistics has, as main tasks, the delivery of the finished products to the customer. It
consists of order processing, warehousing, and transportation. Distribution logistics is necessary
because the time, place, and quantity of production differ with the time, place, and quantity of
consumption.
Disposal logistics has as its main function to reduce logistics cost(s) and enhance service(s)
related to the disposal of waste produced during the operation of a business.
Reverse logistics denotes all those operations related to the reuse of products and materials. The
reverse logistics process includes the management and the sale of surpluses, as well as products
being returned to vendors from buyers. Reverse logistics stands for all operations related to the
reuse of products and materials. It is "the process of planning, implementing, and controlling the
efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related
information from the point of consumption to the point of origin for the purpose of recapturing value
or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical
final destination for the purpose of capturing value, or proper disposal. The opposite of reverse
logistics is forward logistics."
Green Logistics describes all attempts to measure and minimize the ecological impact of logistics
activities. This includes all activities of the forward and reverse flows. This can be achieved
through intermodal freight transport, path optimization, vehicle saturation and city logistics.
RAM Logistics (see also Logistic engineering) combines both business logistics and military
logistics since it is concerned with highly complicated technological systems for
which Reliability, Availability and Maintainability are essential, ex: weapon systems and military
supercomputers.
Asset Control Logistics: companies in the retail channels, both organized retailers and suppliers,
often deploy assets required for the display, preservation, promotion of their products. Some
examples are refrigerators, stands, display monitors, seasonal equipment, poster stands & frames.

A forklift truck loads a pallet of humanitarian aid to Pakistan on board a C-17 aircraft, following devastating

floods in the country in 2010.
The Logistics Centre of the Finnish Red Cross in Tampere, Finland

Emergency logistics (or Humanitarian Logistics) is a term used by the logistics, supply chain,

and manufacturing industries to denote specific time-critical modes of transport used to move goods
or objects rapidly in the event of an emergency.[9] The reason for enlisting emergency logistics
services could be a production delay or anticipated production delay, or an urgent need for
specialized equipment to prevent events such as aircraft being grounded (also known as "aircraft on
ground"—AOG), ships being delayed, or telecommunications failure. Humanitarian logistics involves
governments, the military, aid agencies, donors, non-governmental organizations and emergency
logistics services are typically sourced from a specialist provider.[9][10]
The term production logistics describes logistic processes within a value-adding system (ex:
factory or a mine). Production logistics aims to ensure that each machine and workstation receives
the right product in the right quantity and quality at the right time. The concern is with production,
testing, transportation, storage, and supply. Production logistics can operate in existing as well as
new plants: since manufacturing in an existing plant is a constantly changing process, machines are
exchanged and new ones added, which gives the opportunity to improve the production logistics
system accordingly.[11] Production logistics provides the means to achieve customer response and
capital efficiency. Production logistics becomes more important with decreasing batch sizes. In many
industries (e.g. mobile phones), the short-term goal is a batch size of one, allowing even a single
customer's demand to be fulfilled efficiently. Track and tracing, which is an essential part of
production logistics due to product safety and reliability issues, is also gaining importance, especially
in the automotive and medical industries.
Construction Logistics has been employed by civilizations for thousands of years. As the various
human civilizations tried to build the best possible works of construction for living and protection.
Now construction logistics has emerged as a vital part of construction. In the past few years,
construction logistics has emerged as a different field of knowledge and study within the subject of
supply chain management and logistics.

Military logistics
Militaries have a significant need for logistics solutions and so have developed advanced
implementations. Integrated Logistics Support (ILS) is a discipline used in military industries to
ensure an easily supportable system with a robust customer service (logistic) concept at the lowest
cost and in line with (often high) reliability, availability, maintainability, and other requirements, as
defined for the project.

Business logistics
One definition of business logistics speaks of "having the right item in the right quantity at the right
time at the right place for the right price in the right condition to the right customer".[18] Business
logistics incorporates all industry sectors and aims to manage the fruition of project life cycles,
supply chains, and resultant efficiencies. The term "business logistics" has evolved since the
1960s[19] due to the increasing complexity of supplying businesses with materials and shipping out
products in an increasingly globalized supply chain, leading to a call for professionals called "supply
chain logisticians"

Number 2
Logistics management has been evolved since the term logistics used for the 1st time in the
1960s. 

Nowadays the logistics management mission is to manage and coordinate the flow of the
products from the supplier point to the consumer's hand. Taking into consideration delivering
service and quality at the desired level at the lowest possible cost.

Logistics activities have major rules to make the business succeed or fail as logistics have a
direct impact on having the products on the shelf. Logistics activities started from managing and
sourcing the raw materials up until delivering the final product to the hand of the consumer. 

Logistics management system from holistic viewpoint leading the co-ordination of the products
flow to the consumer and capturing the flow of the information and fund from the market. 
 For example, many years back Marketing and Manufacturing known as two separate
business units and activities both activities have an opposite interests. Manufacturing focusing on
reducing cost by  

1.   Long production runs.

2.   Reduce the number of set-ups needed.

3.   Produce standardized products.

While marketing trying to highlight an organization competitive advantage by

1.   Offering a wide variety of products.

2.   High service level.

3.   Frequent product changes. 

In today's business environment and the pressure on pricing from competitors, it is not
acceptable to have Marketing and Manufacturing acting independently of each other.

Nowadays Marketing and Manufacturing must understand and meet customer

requirements is essential to survive. While reducing manufacturing cost by using different
manufacturing approaches: 1.   Flexible manufacturing systems (FMS)

2.   Material requirement planning (MRP)

3.   Just-in-time (JIT)

In the context of the example, Marketing and Manufacturing above logistics

management will play the rule of planning and framing the process and the flow of material
which will be an input for the manufacturing plan and the output of the manufacturing plan will
be managed by the logistics to satisfy customer requirement which claimed by the marketing
plan. This is quite simply, is the mission of the logistics management. 
What are the 6 logistics goals?
These business goals include:
 Increasing Efficiency.
 Rapid Response.
 Fewer Unexpected Events.
 Minimum Inventory.
 Reduced Transportation and Logistics Cost.
 Quality Improvement.
Number 3
Logistics activities or Functions of Logistics
 1) Order processing.
 2) Materials handling.
 3) Warehousing.
 4) Inventory control.
 5) Transportation.
 6) Packaging.
 Logistics activities or Functions of Logistics
 1) Order processing
 The Logistics activities start from the order processing which might be
the work of the commercial department in an organization. The
commercial department is the one who ensures that the payment terms
and the delivery terms have been met and then processes the order
from within the company.
 2) Materials handling
 Material handling is the movement of goods within the warehouse. It
involves handling the material in such a way that the warehouse is able
to process orders efficiently. Although it may sound a mundane task, it
is an important one and an ongoing activity in any warehouse.
 3) Warehousing
 If we take the example of LG or Samsung, these are consumer durable
companies which are present in multiple countries. Their manufacturing
might be at one point, but the distribution is all across the world. Thus,
warehousing plays a huge role and is one of the important Logistics
activities. The important point in warehousing is that the warehouse
should be nearby to the dealer or the distributors’ place and it should
facilitate the easy delivery of goods. If there was a product which was
from a branded company, but which takes 1 week to deliver, then this
product might not move as much in the market as another product
which is taking 2 days to deliver even though it is unbranded. Thus, it
makes sense for the branded company to have a closer warehouse so
that can immediately deliver the goods. Once a brand establishes itself
in a new territory, the first thing it does is to lease a new warehouse so
that It can be closer to the territory and closer to the end customer
 4) Inventory control
 If a firm has 100 units of a product in stock, but the demand is only of 10
units, then the company has uselessly invested in 90 units. This is
 money which can be used as a working capital and it is money on which
banks are
 applying interest.


5) Transportation

Now we come to one of the major logistics activities which is one of the most
resources heavy and revenue heavy segment of logistics. There is a single
reason that transportation is costly – Fuel. Be it petrol, Diesel or gas, fuel is
costly, and it is mostly consumed in transportation activities. This is why
companies spend lakhs to control the transportation expenses because it is
one of the Transportation involves the physical delivery of goods from the
company to the distributor or dealer and from the dealer to the end customer.
Generally, companies are involved only till the point delivery happens to the
distributor or the dealer. The distributor is then responsible for the delivery to
the end customer. However, transportation is a cost to the dealer as well and
reduces his profit – due to which the company has to give higher profits to the
dealer – to negate his costs. highest variable expense to any company The
better the warehousing and the inventory management of a company, the
lower is the transportation cost for the company. Economies of scale play a
major role in the cost-effectiveness of transportation. FMCG adopted
“breaking the bulk” method to reduce the cost of transportation and also to
improve functions of logistics as a whole.

6) Packaging

There are two types of packaging – One which the customer sees on the shelf
of supermarkets or hypermarkets where the package appears attractive and
makes the customer buy the packages. The other is transport packaging
where the products are packed in bulk so as to avoid any breakage or spillage
and yet allow them to transfer huge volumes of the product safely from one
place to another. In one way, management looks at logistics as
interdependent systems. So transportation may be one system and
warehousing may be other. In this case, the cost of systems as individuals is
controlled and they are calculated as individual costs in the books of
accounts.
In other management styles, possibly where the products are large and robust

and not small units, the management considers logistics as a whole and it is

given its own individual header in the books of accounts. The different

logistics activities are clubbed together as one cost and the cost is brought

down as the whole.

Inbound Logistics
What is Inbound Logisti cs?
Inbound logistics refers to the transportation , the storage and
the receiving of goods into a business. It relates to goods
procurement for offi ce use or for the production unit. In a
manufacturing company, the production unit purchases raw
materials or components from its suppliers  for the production
of other goods.

In summary, the process of bringing in purchased goods into the

company is known as inbound logistics. However, if the
movement of goods is from the manufacturing company to its
customers or other companies, this process is called “outbound
logistics “. Inbound logistics, therefore, focuses on the incoming
goods i.e. the inflow of goods from suppliers into the
warehouse.
What is the inbound process?
 Inbound Process is where 'customer calls in'.. or in other words calls are received.
Most inbound processes may be Customer Service or Tech support where customer
calls in to get their queries answered or issue resolved.Sep 22, 2014

What Is Outbound Logistics?

Outbound logistics focuses on the demand side of the supply-demand
equation. The process involves storing and moving goods to the customer or
end user. The steps include order fulfillment, packing, shipping, delivery and
customer service related to delivery.

Outbound Logistics Activities

 Warehouse and Storage Management: A company keeps a certain quantity
of goods on hand to meet demand. Outbound logistics processes store these
goods securely in the right conditions and organize them. Inbound and
outbound logistics overlap in warehouse management. But outbound logistics
deals with outgoing finished products. For companies that sell finished
products they receive from suppliers, inbound logistics concentrates on
product acquisition and outbound logistics fulfills orders sent straight to
customers and distributes the products to retail outlets.

 Inventory Management: Software often plays a central role in inventory

management, a process that determines the best place to store goods in the
warehouse for fast order fulfillment and the order picking and packing
operation. Inventory management goals include inventory and order accuracy
as well as maintaining product quality by preventing damage, theft,
obsolescence or spoilage.

 Transportation: The modes and methods of shipping products vary

depending on the type of goods. For example, huge items like heavy
machinery may ship in small order quantities by truck. Perishable items like
fresh flowers may need to be transported by plane in refrigerated containers.
 Delivery: On-time delivery is critical to success. Moreover, the customer’s
order must have the correct items and quantities, and the package can’t get
lost or damaged in transit. Outbound logistics takes responsibility for this step.

o Distribution Channels: The ways your product reaches the customer, called

distribution channels, affect how you organize outbound logistics. Distribution
channels can be broadly categorized into direct (when you sell directly to your
customers) and indirect (when you sell through an intermediary such as a
wholesaler or retailer). There are many distribution methods, including direct
to consumer, value-added resellers, dealer networks, dual-distribution,
omnichannel and drop shipping. When choosing distribution channels,
consider logistics complexity, cost, speed, quality, customer satisfaction and
control.

 Last-mile Delivery: The final step in an order’s journey covers the last

shipping leg and delivery. The last mile is usually the most costly and
inefficient part of delivery. The term comes from the early days of telephone
service, when wiring homes to the mainline was slow and expensive. Last-
mile logistics includes services such as home grocery delivery from a local
store and package delivery by a common carrier. Before the last mile,
shippers can handle lots of orders at the same time in the same way (for
example, they can load dozens of orders going to the same city in one truck).
But in the last mile, each delivery requires individual handling because it goes
 to a single address. Deliveries to addresses get spread over a suburban
region or packed within a gridlocked city center where parking is difficult—last-
mile services account for 41% of overall supply chain costs.
 Delivery Optimization: Optimizing delivery involves not only reducing costs
but meeting ever-increasing customer expectations for speed and visibility.
Often, these two things go hand-in-hand. Route planning software groups
orders more efficiently for delivery, sorts packages by route, plots the best
course with an eye to traffic, fuel consumption and other variables, and
assigns routes to drivers.

These are some specific outbound logistics challenges:

 Coordinating Operations: Outbound logistics teams must monitor

production, storage and distribution—coordinating the optimal movement of
goods is no small task. If production rises, the logistics team needs to free up
more warehouse space, and as production increases to meet customer
demand, shipping and delivery need to scale. Software and automation can
help close the information loop by connecting production to storage capacity
and demand.
 Achieving the Seven Rs: Coined by John J. Coyle, professor emeritus of
logistics and supply chain management at Penn State University, the seven
Rs are: getting the right product, to the right customer, in the right quantity, in
the right condition, at the right place, the right time and at the right cost.
Consistently hitting these targets requires an integrated management process
that uses data to assess performance, identify areas of weakness, and track
and foster continuous improvement.
 Inventory Costs: Keeping enough inventory to meet fluctuating customer
demand without creating unnecessary holding costs requires careful planning.
Keeping a close eye on inventory planning metrics such as sell-through rate
and inventory turnover and tracking numbers like safety stock and shifts in
demand is important. See the comprehensive list of inventory management
metrics for a list of key formulas.
Outbound Logistics Example
Customer order

Order processing

Replenishment
Picking

Packing, staging and loading

Shipping and documenting:

1. Customer order: A national boutique chain, Picture Perfect, has 37

stores. The company orders a collection of women’s pants, blazers,
skirts, blouses, dresses and scarves in various quantities in women’s
sizes 0 to 18 on Sorina’s website. Picture Perfect uses internal data
about shopper preferences, past sales and trend forecasts to decide the
quantities of each product and size to purchase.

Sorina’s staff needs to pay close attention to the order’s details because
of the variations in patterns (paisley and chevron), colors (burgundy and
blue) and sizes. Sending the wrong item or quantity can result customer
complaints and lost sales for products that did not arrive in time for
seasonal shopping.

2. Order processing: Sorina’s order processing team checks Picture

Perfect’s order by confirming Sorina has the right number, sizes,
garment types and colors available. They send an order confirmation to
Picture Perfect. Sorina’s inventory management system allocates these
items so the clothes are no longer available for sale to anyone else. The
system sends an order manifest and picking tickets to the warehouse.
3. Replenishment: Workers move clothing from remote storage to the
shipping warehouse to replace purchased product as necessary.
Sorina’s planners note that a particular blazer is selling faster than
expected and ask the garment makers to sew more.
4. Picking: Warehouse staff uses a zone strategy to pick garments for
multiple orders. Workers hang Picture Perfect’s blouses, for example,
on electric garment racks along with blouses that are part of orders from
two other retailers. They use barcodes to distinguish the orders.
5. Packing, staging and loading: All the clothing items in Picture
Perfect’s order come together at the packing station. A staff member
scans barcodes on the hangers to confirm the order is correct. Packers
box the order with tissue, so the garments do not wrinkle. They put
boxes together on pallets, shrink wrap the pallets and affix destination
and manifest labels.

The packers split Picture Perfect’s order into two batches, one for its
distribution center in the West and the other for its distribution center in
the East. Each one joins other orders heading in the same direction with
similar service levels. Picture Perfect’s order will travel by ground
shipping since they’re not rush shipments. Workers load the pallets onto
outgoing trucks.

6. Shipping and documenting: The order departs. Sorina’s system logs

the shipment and sends tracking information to Picture Perfect’s
purchasing department. Sorina’s system also sends arrival information
to the chain’s distribution centers.