Have you ever wondered the journey a piece of bread takes to end up on your kitchen counter. Think about the trains, semi-trucks, pallets, warehouses and more that a piece of bread travels through to get to you. Businesses use logistics to move materials along the supply chain to get to you. Logistics is the process of handling how resources and materials are acquired, stored and transported to their final destinations.
What is Logistics?
Logistics is a military term that explains how a military acquires, stores and transports equipment and supplies. This term is now used throughout business to describe how resources move along the supply chain.
Logistics in Business
Businesses and companies need logistics to transport the right number of resources and materials to the right place, at the right time. Proper logistics saves businesses money and keeps customers happy. Inadequate logistics equates to unhappy customers and a failing business. Logistics is increasingly complex as businesses become more global and need resources from different parts of the world.
Benefits to Business
A proper logistics department can profit a business or company. A business or company will have increased customer satisfaction. It will have the materials it needs to make a product. Customers receive a product when they want it. Another benefit of proper logistics is cost savings. Logistics managers handle goods and transportation to find cost-effective ways to move them from place to place.
Anyone handling the supply chain of materials need to understand how inbound transportation, outbound transportation, fleet management, warehousing, materials handling, order fulfillment, inventory management and demand planning are all part of logistics. Quality logistics management helps a company reduce costs and improve efficiency.
Software and Technology
Business has dramatically changed in the modern era. Logistics is now a complex process. Many companies use sophisticated software and firms that handle the movement of resources along the supply chain.
Amazon and Walmart are leaders in logistics. They use cutting-edge processes to transport resources and materials.
Amazon and Walmart
Amazon stores millions of random items in warehouses. An associate picks a wanted item from storage, loads it on a conveyor belt and a computer system scans and tracks it. The packages are then sorted based on shipping method, delivery speed and location. Amazon uses UPS, FedEx and the U.S. Postal Service planes and trucks for deliveries.
According to Supply Chain Digest in 2018, Walmart operates 11,700 stores, has 2.3 million employees and handles $32 billion in inventory.
Walmart has a fleet of trucks that deliver and receive goods from distribution centers. The company consistently uses “cross-docking.” Cross-docking happens when an inbound truck’s goods are loaded directly onto an outbound going truck. Walmart also relies on technology to help manage their supply chain. They have the largest information technology infrastructure of any private company in the world.
There are a number of challenges facing the logistics industry. A few of these are listed below.
- Rising fuel costs: The higher cost of fuel increases transportation costs, which increase the costs of consumer goods.
- A Constant Improvement of Customer Service: Customers want to know where their items are at all times. Logistic managers need to think up new ways to better track their items.
- Environmental Issues: Many fear that fines for not complying to state and federal regulations may outweigh the monetary benefits of transporting resources and materials.
Logistics managers must find solutions to these problems.
Poor logistics management is detrimental to a business. A few reasons how poor logistics management can hurt a business are listed below.
- Increased Costs: Costs will increase if a company’s supply chain is not well managed. It will have higher shipping costs because of rushed orders.
- Difficulty Tracking Inventory: A business loses money if it can’t keep track of inventory. The business will end up either over buying or under buying.
- Lower Productivity: When a business does not have a good handle on the materials or resources they own, the company makes too little or too many products. Employees have little to no work to keep them occupied.
The following terms logistic managers commonly use.
Freight: Palletized cargo ready for shipment.
Carrier: A commercial business that transports freight to and from customers and suppliers.
Reefer: A trailer for transporting temperature sensitive goods and materials.
Consignee: The final stop of a shipment.
Why Logistics Matters
Logistics is an important part of every business or company. Proper logistics management helps a company reduce transportation costs and inefficiency. Poor management leads to higher shipping costs, difficulty in tracking inventory and unproductive employees. Companies like Amazon and Walmart have revolutionized logistics with the help of technology.
Imagine. . .
The next time you eat an apple, think about the amount of people it took to bring that apple to you. Imagine the many trucks and roads the apple traveled on. Without logistics, you may never have the items you want, when you want them.