Logistics is an important part of business, especially if you sell physical products.
As such, understanding what it means and how it works in business will be beneficial to you.
So, let’s dive into this important business concept.
Meaning of Logistics in Business – What is Logistics in Business
Logistics is a word used in business to describe the entire process of acquiring, storing, and transporting a company’s resources to its final destination.
Some people tend to use supply chain and logistics interchangeably, but this is not right.
This is because logistics are just a fraction of the whole supply chain.
Logistics is simply how a business moves its goods and other resources from one point to the other.
This word was originally used by the military.
Military personnel used it to describe the process of getting, storing, and moving their supplies and other resources like equipment.
However, with time, the business world adopted this word and it has since been used to describe the whole process of transporting and storing a company’s resources.
Logistics is a common process in a lot of businesses; however, it is more common in the manufacturing industry.
Manufacturing companies have to move a lot of their resources during the manufacturing process.
And even when this is complete, they have to move out the final product for distribution.
However, regardless of the type of business you run, as far as you have to move your resources through the supply chain, you would have some logistics needs here and there.
Logistics Management – What is Logistics in Business
One term you will likely hear regarding logistics is logistics management.
You can take a quick guess and say it is how a company manages its logistics, and you would not be wrong.
However, there is more to logistics management.
This term involves how a company oversees the entire logistics process.
Logistics as a process is made up of several different processes.
Likewise, logistics management is all about ensuring that all of these processes work seamlessly to ensure smooth operations at all times.
It also involves how a business identifies potential suppliers and distributors and also vets them to be sure that they’d be able to meet up with the business’s logistics needs.
Logistician or a logistics manager is an expert in this field .
These professionals are typically in charge of overseeing a company’s logistics and all its complexities.
They know the importance of paying attention to every little detail, because one mistake can end up causing significant damage to the whole process.
A good logistics manager knows to pay attention to routes, potential obstacles, industry regulations, packaging, shipping factors, and so on.
A company’s logistics team will be responsible for any mistake that happens to a good or resource while in transit or storage.
This is why a company needs to pay proper attention to its logistics management sector, and only employ competent logisticians for the job.
Why Logistics is Important in Business – What is Logistics in Business
So, logistics is all about transporting a company’s resources.
Big deal, right?
Well, yes, it is a big deal.
This whole process is very important in the business world.
It is a major business facilitator.
If you were to compare a business with proper logistics management and a business that is lacking in this area, you would find that the former is doing a whole lot better than the latter.
The major importance of logistics is that it helps a company move its resources and products.
However, the effects of this process extend to several aspects of a business.
A business that prioritizes its logistics and is successful at it will be more effective than a business that doesn’t.
Effective logistics can help a company reduce costs, increase its production rates, use its warehouse space more effectively, have better control over its inventory, and even increase its customer satisfaction.
All of these will make a significant impact on the company, and help it grow at a faster pace.
Just how important is logistics in business?
Well, you most likely can’t have a business without it.
If you can’t move your products, you won’t make transactions, and if you do not make transactions, then you won’t get any profits.
How well you handle your logistics can either make or break your business.
Roles of Logistics in Business – What is Logistics in Business
The whole logistics process serves the function of moving goods and/or services through the supply chain.
For this to happen, logistics have to play several roles.
All these roles would then come together to make up the ultimate function of this process.
Material Sourcing
A manufacturing company would first have to source its materials.
Logistics management’s role in this aspect is to help the company get the best supplier in terms of costs, availability, and efficiency for the job.
It also helps to calculate and ensure certain costs in this process are kept to a minimum.
To do this, the logistician will have to evaluate factors like hidden fees, warehousing costs, backorder delays, shipment costs, and so on.
When it comes to material sourcing, a company has to find a good source.
And to do this, they must understand every contributing factor in the entire process.
This is known as strategic sourcing.
A company’s logistic team has a big role to play in ensuring everything goes on the way it should for the success of this process.
Order Fulfillment
When a customer makes an order, logistics is how the customer gets the product or service they ordered.
This is the only way to complete the transaction.
Once the company confirms an order, they have to take the item from their warehouse, package it, and then ship it to the customer.
This role of logistics is made up of several other processes.
When it comes to customer distribution, all these processes have to come together for the order to be fulfilled.
Transportation
Another core role of logistics is transportation.
The whole process is all about moving resources from one point to the other
So, it is only normal that transportation is a major function of this process.
When it comes to transportation, logistic management is all about choosing the best shipment mode, selecting the best carrier, and using the best routes.
To choose a carrier, the logistician has to consider several factors including cost, distance, and the carrier’s efficiency and availability.
If it is an international shipment, then the logistician has to consider several other special factors like customs, tariffs, and other relevant regulations to ensure the transportation process is seamless.
Inventory Management
Logistics is also about storing a company’s resources.
Therefore, it also plays a significant part in a company’s inventory management.
Inventory management involves keeping up-to-date inventory records, predicting demand rates, keeping inventory safe, and reordering stock.
This is another reason why logistics is very important for any business because, through it, a company can keep a tab on its inventory.
It allows a company to forecast demand and then adjust its processes to get the best out of the demand forecast.
For example, if a company forecasts that it will have an increase in demand, it can use this information to increase its profit and stock up more goods to meet up with its demand needs.
Likewise, if the company forecasts a decline in demand, it can offer discounts so that it can sell out the goods they already have in store.
They can then use the capital gotten from the sale to invest in a product that has more demand.
Or they can move the goods to a region or store where there’s still a high demand rate.
This will prevent the company from taking a loss just because they want to sell out their stock.
Logistics is how these goods will be moved from one region or store to the other.
Warehousing
Most people tend to lump inventory management and warehousing as one process.
But doing this won’t be technically accurate.
Sure, inventory management and warehousing are similar in that they both involve storing resources.
However, they are not the same.
Where inventory management is concerned with managing stored products, warehousing is the actual process of storing these products.
Due to the fact that, a major factor of logistics is storage, it plays a major role in the warehousing process.
Logistic planning covers a company’s long-term and even short-term storage needs.
A logistician must think of the available warehouse space.
Depending on the business needs, the logistician may also need to consider other special factors like cold storage, the warehouse proximity to transportation facilities, docking facilities, and so on.
Logistic planning also goes a long way in determining how goods are stored in the warehouse.
Goods that have to be moved frequently or that will soon be moved will be stored in the forefront.
Equally, goods that are not in high demand are stored in the back.
They also have to rotate perishable goods.
This way, the oldest goods will be shipped first so that they do not stay and get spoilt.
Cargo Handling – What is Logistics in Business
This is a very important logistics function that you cannot overlook when discussing the roles of logistics.
It is one of the factors that determine costs in logistics.
Cargo handling is all about ensuring the safety of goods and resources in transit.
It also involves ensuring that customers receive the right item they ordered.
If your company does not get its cargo handling process right, your shipping costs will definitely increase.
A customer that gets a wrong or damaged item will send it back and you would have to send the order to them again.
This is why cargo handling is very important in the logistics process.
Packaging – What is Logistics in Business
Packaging is all about preparing goods for transportation and cargo handling.
How you package the item is how it will get to your customer.
This is what makes packaging a very important logistics operation.
Poor packaging can adversely affect delivery success.
A company’s packaging must comply with customs and safety regulations.
If it does not, it may cause a delay in the delivery service.
Packaging must also match the company’s vehicle and storage standards.
Advantages of Logistics Management – What Is Logistics In Business
Logistics as we have seen is very important in business.
When a business properly manages its logistic processes, it is bound to enjoy certain benefits.
The following are some major ways proper logistics management can be advantageous for your company.
Helps to Reduce Overhead Costs
There are several logistics strategies that a good logistician can use to reduce storage and handling costs.
Companies can use demand forecasting, inventory management, and other logistic management strategies to enhance their shipping methods, schedules, routes, and so on.
All of which will help them cut some overhead costs in the whole logistics process.
Aside from reducing overhead costs, logistic management can also help a company improve its cash flow and overall profits.
Improves Visibility
Good logistic management will give a company better supply chain visibility.
This would in turn help the company to become more efficient in its logistic processes.
It will make it easier for them to identify potential supply chain issues, control their costs better, and also identify opportunities faster.
Improves Customer Satisfaction and Experience
Good logistics management will help a company increase its order fulfilment rates.
And this will help improve customer experience.
No one wants to order an item and get the wrong item or get a damaged item.
This experience can be very frustrating and can make a customer never want to patronize a business again.
When a customer orders an item from your business and gets the right item in good shape and on time, their experience with your company will be positive.
Your customer service will satisfy the customer and bring more patronage for your business.
Good logistics practices will improve customer satisfaction which would then make your company have loyal customers.
Ultimately, this will go a long way in increasing sales.
Helps you Manage your Resources Better
Warehousing and inventory management are two functions of good logistical practices that will help you manage your company’s resources better.
Properly managing your resources will also bring several other benefits to your business.
For example, it will make your storage process more cost-effective.
Storage issues like perishable goods going bad, items getting damaged, and so on won’t cause you to experience losses.
You will always know where your goods are by tracking them.
This way, no one can just divert them without your notice.
It will also prevent them from getting lost.
Aids Expansion – What is Logistics in Business
Logistic management aids expansion through demand forecasting.
You can determine when there will be an increase in demand.
This would help you stock up on inventory accordingly.
You can use the forecast information to scale your business during the high-demand period and maintain a great order fulfilment rate despite the demand increase.
Gives Your Business a Better Competitive Edge – What is Logistics in Business
Customer experience and satisfaction are key elements that can significantly improve your competitive edge.
Good logistical practices will help improve your customers’ satisfaction and experience.
This would in turn improve your brand image.
People would come to trust your business and see it as a reputable brand.
Customers will want to patronize a reliable brand and this would make that brand stand out among the competition.
Rs of Logistics – What Is Logistics In Business
When it comes to logistics success, you have to get the Rs right.
These Rs are the main goals of logistics.
Right Product
You have to deliver the exact product that your customer ordered.
The product must be the right colour, brand, and size.
Right Quantity
You also must deliver the right quantity.
Sometimes, there could be some misunderstanding on the part of the customer when choosing the quantity of their order.
For example, let’s say a customer can buy an item as one unit and can also buy a pack containing 12 of that same item as a unit.
If it is not clearly stated in the listing, they may not know the difference.
So, you have to make sure you are as clear as possible when listing inventory.
This way, you’d be sure to get the quantity right.
Right Condition
Products must get to the customer in pristine condition.
So, you need to ensure that a product does not have any flaws before you ship it out.
Also, ensure your return policy and process is simple.
In case the product gets to your customer in a bad condition despite your efforts, they can easily send it back to you to get a replacement.
Right Place
Delivery must be to the right address.
If the item goes to the wrong address, it most likely will result in a loss because you would have to replace it.
It can also damage the relationship you have with your customer.
Right Time
You should ensure that the product gets to the customer on or before the expected delivery date.
Do everything possible to eliminate delays.
Right Customer
Mixing up orders and sending the wrong items to your customers will cause logistical issues.
You have to be sure that every order goes to the right customer.
Conclusion on What Is Logistics In Business
Logistics is all about moving a company’s resources from one point to the other.
it also involves storing these items.
Logistics is very important in business because it is what makes it possible for a business to deliver its orders and complete transactions.
Properly managing your company’s logistical needs is key to promoting business success.
Effectively managing your company’s logistics will bring you numerous benefits.
