In the most universal format, logistics is the process of planning and organizing the flow of material values, services and information from the places of their origin to the places of their consumption in order to ensure the operation of the enterprise.

Such a comprehensive definition requires some clarification.

Modern logistics from the point of view of structure includes two large-scale processes:

1. Formation of the parameters of business relationships with resource suppliers and management of the movement of resources in the process of creating products.
2. Building a mechanism for the delivery of products created by your company to its consumers.

The logistics process is multifaceted.

In practice, it contains:

• contracts with suppliers;
• inventory management policy;
• organization of cargo transportation;
• interaction with customs authorities;
• analysis of market needs;
• features of concluding contracts with buyers and much more.

Individual stages of the logistics process can be optimized in different ways, according to the general logistics model adopted. Some functions are located on the “border” of logistics and marketing. However, their ultimate goal is the same – to improve business efficiency.

It was the complexity of the cargo transportation process itself that led to the fact that such activity was separated into a separate direction.

Therefore, in today’s world, companies very often resort to the services of logistics companies, and the training of logistics and supply chain management is a special field of knowledge.

Historically, logistics appeared early. Back in the period of an agrarian society, it was closely intertwined with international trade in luxury items (the logistical structure of caravans on the Great Silk Road or Phoenician trade flotillas was quite complex) and military craft (the first treatises on military logistics appeared before our era).

Everything changed with the entry of industry to a new level of modern economic relations and the role of logistics increased.

Now, every enterprise knows what logistics is.

Fact

General logistics costs are a large item in the cost structure of industrial products. Here, logistics precedes wage costs and is second only to material costs.

2. Features and key problems of logistics in

The state of logistics is far from ideal. Unfortunately, such a situation was observed in the past. The well-known saying that bad roads are one of the two main national problems was not born yesterday.

According to the results of the world rating of the efficiency of the logistics system, Russia is in 95th place in the world (out of 155 evaluated countries).

The share of transport costs in our country in the structure of GDP reaches 20%, which significantly exceeds the world average (in fairness, it should be noted: this is partly due to the fact that the Russian Federation is one of the largest suppliers of oil, as well as the significant size of our country).

Among the problems of logistics, it is worth highlighting:

• the underdevelopment of the logistics infrastructure, which, according to experts, limits the growth of the Russian economy to 3-4% per year (under other optimal conditions);
• high costs for warehouse services, storage, unloading and loading;
• instability of markets and low quality of sales plans;
• limited number of suppliers for a number of positions;
• opacity of a large list of expenses;
• low quality of contract execution;
• difficult climatic conditions in many regions;
• personnel shortage and unsuccessful models of logistics management.

An example from practice

Minor violations of supply contracts are almost impossible to challenge in court. In the conditions of the domestic legal system, the size of the amounts to be recovered does not justify the effort spent.

In case of problematic situations with natural monopolies (Russian Railways, electricity suppliers), lawsuits are absolutely hopeless.

In times of crisis, most logistics systems begin to contract. This may lead to the fact that a number of branches of the domestic economy will lose an acceptable level of profitability.

The reverse side of the situation opens up opportunities for logistics companies. With a competent organization of such a business, it is possible to penetrate into market niches with an extremely low level of competition.

3. Theoretical aspects of logistics: subject, goals, tasks and logistic models

The subject of logistics as a science is the state of resources in some system (both micro and macro level) and flow management.

The goal of logistics is to increase the economic efficiency of the system by optimizing the logistics process.

The main tasks solved by logistics:

• goods movement management,
• control over flows of material values, services and information by creating a developed system,
• analysis of demand for materials and goods, forecast of these indicators.

Logistics examines a number of objects :

1. Logistics operation – an action to transform a material flow or a flow of services.
2. A logistics system is a set of principles for planning and implementing the entire set of logistics operations. Modern logistics systems are adaptive and use feedback from their environment. There are logistics systems that function on the basis of direct connections (flows are directly extended from producers to consumers) and echeloned (multilevel systems that include at least one intermediary).
3. Logistics function is a set of actions pursuing a common goal, corresponding to the stage of the logistics process. Logistics functions include: transportation, warehousing, procurement, stock formation.
4. A material flow is a physical product undergoing a logistics procedure. The material flow is measured by quantitative indicators (volume, mass) presented in time.
5. Logistics costs – costs for ensuring the logistics process. In accounting, they can be partially included in the cost of production, and partially be sales costs.

In practice, the construction of a logistics system involves finding a balance between the interests of production” and “liquidity optimization”.

The system of “work from wheels” (one of the extreme points of the dual model mentioned above) is good from the point of view of intensifying the use of working capital. In this case, there are no funds tied up in stocks of raw materials or finished products, and warehouse costs are minimized.

The downside is a high risk of production downtime or violation of the terms of contracts concluded with counterparties. The system becomes very fragile.

Fact

The industrial enterprises of the Russian Federation are forced to form reserves that exceed the similar indicator in the EU and the USA by 18%.

A comparison with Japan shows that the volume of reserves in this country is 64% lower than in Russia. The reason for this situation is the low quality of the domestic logistics system.

The post Logistics and types appeared first on Logistic-Hive.

Furthermore, being the in the thick of the digital era too, the logistics and supply chain industry has caught up and has taken strides towards digitizing internal and external processes. As mentioned in our The State Of Today’s Competitive Supply Chain: Digital, Smaller and More Resilient article, 90% of the supply chain execution expenditure will be in support of logistics digital applications and software by 2020. The IoT has already started allowing companies to digitally connect physical assets and enable flow of data across the value chain, linking every piece of the product lifestyle.

Digitized supply chains have also given customers insight and transparency into the logistics process where they have been allowed feedback into their transactions. Every user now feels like they are in control of the process, eventually leading to consumer satisfaction; a factor every business should be striving for. Technology has offered numerous benefits and opportunities when it comes to the supply chain and logistics field and these include advanced data analytics, ease of scalability, data security, cost saving, integration of multiple platforms, real-time tracking and automated procedures.

When speaking of logistics management joining forces with technology, software leads the conversation because logistics processes cannot be highly optimized without the appropriate software systems. Logistics Management Software aims to plan, implement, and control the flow and storage of goods, services, and related information. It optimizes this process, allowing for a larger bottom line through an increase in automation, visibility, communication and process efficiencies.

Different Types Of Logistics Management

Supply

Supply management deals with the planning and coordination of materials needed in a specific location at a specific time in order to provide support to production or activity. Supply logistics must have transportation of the materials and storage along with plans in place for evaluating the level of supply during different stages of the process; making sure that the flow of materials aligns with the need.

Distribution

Distribution is about managing how a supplied and stored material is then sent out to the locations where it is needed. The process includes issuing of material movement (loading, unloading and transportation), tracking of stock, and accountability of use (noting down how the supply is used and by whom).

Production

This type of logistics management oversees the stages of combining distributed supplies into a product. This can entail coordination of a manufacturing or assembling process and in the case of applications such as military production, the logistics of coordinating space and areas for production to take place. In construction, production logistics will include the staging of material to coordinate with the phase of building taking place.

Reverse

Reverse logistics management handles the recalling of material and supplies from a production of assembly process. In the logistics management of a construction project for example, reverse logistics plans for the removal of excess material and re-absorption of the material into a stock supply.

The post The Transformation of Logistics Management appeared first on Logistic-Hive.

The different categories of logistics are:

• Third Party Logistics (3PL)
• Fourth Party Logistics (4PL)
• Inbound Logistics
• Outbound Logistics
• Reverse Logistics
• Green Logistics
• Construction Logistics
• Digital Logistics
• Military Logistics

Logistics Management

Logistics management focuses on the efficiency and effective management of daily activities concerning the production of the company’s finished goods and services. This type of management forms part of supply chain management and plans, implements and controls the efficient, effective forward, and reverse flow and storage of goods. This process, as mentioned, happens between the point of origin and the point of consumption in order to meet requirements set by customers.  The main aim of logistics management is to allocate the right amount of a resource or input at the right time. It is also ensuring that it gets to the set location in a proper condition while delivering it to the correct internal or external customer.

Effective supply chain and logistical procedures are important as they reduce costs and maintain & increase productivity. Substandard logistics on the other hand lead to late deliveries, failure to meet consumer requirements and in the end, ultimately causing the business to crumble. Consumers consistently demand better service, and this has prompted supply chain role players to aim to provide fast, accurate and quality service. Logistics management is responsible for making certain that this aim materializes, and that customer satisfaction is established.

Logistics management is also crucial for creating visibility into any company’s supply chain. As historical data is analyzed and the movement of goods is tracked in real-time by advanced transportation management systems (TMS), logistics uses this information for process optimization and the avoidance of potential disruptions.

Additionally, supply chain visibility creates ground for major cost savings in operations. Proper logistics management procedures increase revenue and give businesses control over inbound freight; allow for the organization of the reverse flow of goods; keep inventory at optimal levels; and utilize freight moves on the proper transportation modes. These factors all contribute to cutting costs.

The post What Is Logistics? All You Need To Know About Logistics Management appeared first on Logistic-Hive.

“Logistics” was initially a military-based term used in reference to how military personnel obtained, stored, and moved equipment and supplies.1 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.

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 cause 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.

In the modern era, the technology boom and the complexity of logistics processes have spawned logistics management software and specialized logistics-focused firms that expedite the movement of resources along the supply chain. One reason large online retailers like Amazon have come to dominate the retail landscape is the overall innovation and efficiency of their logistics along every link of the supply chain.

Manufacturing companies may choose to outsource the management of their logistics to specialists or manage logistics internally if it is cost-effective to do so.

The post What Are Logistics? appeared first on Logistic-Hive.