Logistics is the management of the flow of resources between the point of origin and the point of destination in order to meet some requirements, for example of customers or corporations. The resources managed in logistics can include physical items such as food, materials, equipment, liquids, and staff as well as abstract items such as information, particles, and energy.
The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. Minimizing use of resources and time are common goals.
Main logistics targets
Logistics is one of the main functions within a company. The main targets of logistics can be divided into performance related and cost related. A few examples are high due date reliability, short delivery times, low inventory level and high capacity utilization. When decisions are made, there is a trade off between targets.
Given the services performed by logisticians, the main fields of logistics can be broken down as follows:
- Procurement Logistics
- Production Logistics
- Distribution Logistics
- After sales Logistics
- Disposal Logistics
- Reverse 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 – maximize the efficiency by concentrating on core competences, outsourcing while maintaining the autonomy of the company, and minimization of procurement costs while maximizing the security within the supply process.
Production Logistics connects procurement to distribution logistics. The main function of production logistics is to use the available production capacities to produce the products needed in distribution logistics. Production logistics activities are related to organizational concepts, layout planning, production planning, and control.
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 differs with the time, place, and quantity of consumption.
Disposal Logistics’ main function is to reduce logistics cost(s), enhance service(s), related to the disposal of waste produced during the operation of a business.
Reverse logistics stands for all operations related to the reuse of products and materials.The reverse logistics process includes the management and the sale of surplus as well as returned items of products.
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”. As the science of process, business logistics incorporates all industry sectors. Logistics work aims to manage the fruition of project life cycles, supply chains and resultant efficiencies.
Logistics as a business concept evolved in the 1950s 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 experts called “supply chain logisticians”.
In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply-chain management). The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation, and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions to coordinate resources in an organization.
There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes; the other coordinates a sequence of resources to carry out some project.