by Team Lapaas | Aug 21, 2020, | Strategy | 0 comments

2 Minute Summary

Logistics is basically a process of transporting goods (either raw material or finished products) from one point to another point. The two major functions of logistics are transportation and warehousing. now you should also know what are the types of logistics. Following are the major types of logistics Like Inbound Logistics, Outbound Logistics, Reverse Logistics, Third-Party Logistics (3PL). Also, there are steps of processing Logistics Cycle which is Serving Customers, Product Selection, Quantification, Inventory Management, Logistics Management Information System. The efficiency in any work a major role whether it is logistics or any other service. Some of the key logistics efficiency metrics are the following like Warehouse Capacity, Shipping Time, Order Accuracy, On-Time Delivery, Transportation Cost, Damaged Products, Inventory Turnover Ratio. Full Detail in Blog.

Do you want to know what is logistics? So, Do you want to know what is logistics meaning? Do you want to know how to do logistics management? So, Do you want to learn how to do logistics tracking and how to make your business a successful logistics company? If yes, then you must read the whole blog written here.

So, Let’s know everything about the supply chain of products and their management.

Also, The person selling a product or offering a service is a seller or service provider, and the one who is purchasing the product or the service is the customer.

The end person who finally consumes the product is called a consumer. Also, The supply chain of a product ends here.

What is Logistics?

Logistics is basically a process of transporting goods (either raw material or finished products) from one point to another point. So, The two major functions of logistics are transportation and warehousing.

The operations include planning, implementing, and maintaining the transportation and storage of goods that include service as well as information of the initial point and the endpoint. (Easy to understand, right?)

Basically, it is an activity that comes under the supply chain system. If a person works in the field of logistics management, then we can call him a logistician.

Types of Logistics

Since you have known the meaning and definition, now you should also know what are the types of logistics. Following are the major types of logistics-

• Inbound Logistics
• Outbound Logistics
• Reverse Logistics
• Third-Party Logistics (3PL)

There are many more types apart from these also but the most used ones are these four.

Inbound Logistics

It is one of the primary types of Logistics. Basically, inbound logistics means transportation, storage, and the receiving of the incoming resources (such as raw material or other goods) that you require to manufacture a product.

Moreover, it can be the delivery of goods that you will procure in your inventory.

The below diagram shows the placement of inbound as well as outbound logistics in an organization. For example- If you are dealing in footwear, then the inbound logistics in your company will be the rubber for your shoes, the thread to be used for knitting the shoes, etc.

Outbound Logistics

Outbound logistics is a process of delivering the product to the customer on the committed time.

Customer satisfaction is the main objective here and the logisticians take care that the product should reach the customer safely in minimum cost

For example- If you are dealing in footwear, then the outbound logistics in your company will be the shipping of the final product which are shoes, sandals, slippers etc to your customers.

 Reverse Logistics

Reverse logistics is a process of transporting product from the end customer to the seller. It includes the collection, inspection, sorting, refurbishing android distribution.

You have undoubtedly faced it at least once that you have ordered a product online and it did not match your requirements. Then you raise a request for a replacement or refund regarding the product.

The company picks up that product from your address. So, the process of reaching the product from your side to the company is reverse logistics.

Third-Party Logistics (3PL)

The third-party logistics are focused only on the transportation of products from one end to another end and nothing else.

It doesn’t matter whether it’s a seller to consumer or consumer to the seller. They take the responsibility of delivering the products two right places at the right time.

It helps the businesses to focus on their primary operations instead of engaging their time in monitoring the delivery services.

 

Importance of Logistics

Whether you are a manufacturer or a reseller, you can reach to your customers by marketing techniques or by word of mouth. But, your product can reach them by a proper distribution network.

It depends on the seller whether they want to manage the delivery system by themselves or outsource the logistics to a reliable company to handle their supply chain management.

Many distributors, dealers and retailers depend on logistics for the delivery of products they require. The major responsibility of any logistics is to deliver the right product in the right quantity to the right customer at the right time.

Process of Logistics Cycle

Now let’s talk about the logistic cycle. Following are the processes involved in a logistic cycle-

• Serving Customers
• Product Selection
• Quantification
• Inventory Management
• Logistics Management Information System

 

Serving Customers

The main objective of the logistics is to serve the customers by providing them with the products they need. The logisticians continuously monitor the demand for the products in different locations.

Product Selection

Selection of the right products is very important in any logistics system. It directly impacts the supply chain system.

If you are a logistician, then it depends on you that which category products you want to move from one point to another point. It is essential to define this so that you can plan your transportation methods, your warehouse and your place of establishment accordingly.

Quantification

Quantification means the procurement or sourcing of the material from the manufacturer or the supplier. It focuses on the calculation of the estimate of the quantities.

You know that sometimes it happens that you get an unexpected demand for material or sometimes an order in large quantity. For this, either you have to import it or you have to procure it to get ready for fulfilling future demands.

Inventory Management

In the logistics management system, the role of inventory management is the storage and distribution of goods.

When the goods are procured in sufficient quantity, they are stored until a customer places a purchase request.

Logistics Management Information System

The logistics management system of the supply chain system runs on the communication between the sender, the supplier and the receiver.

It is very important to establish proper coordination among them to make the process smooth and free from errors.

This process is defined as the Logistics Management Information System (LMIS) that plays a significant role in the delivery of right products, in the right quantity, at the right place, on the right time.

Logistics Management

Basically, Logistics management is a process in the supply chain system that majorly focuses on moving goods to different locations in order to meet the requirements of the customers.

It is crucial to decide the amount of different products logistician needs to store. He can make a calculation on the basis of demands in the previous seasons.

Logistics Efficiency Metrics

Now you clearly know that logistics management is an essential activity that focuses on the efficiency and effectiveness of the daily operations.

The efficiency in any work a major role whether it is logistics or any other service. Some of the key logistics efficiency metrics are the following-

• Warehouse Capacity
• Shipping Time
• Order Accuracy
• On-Time Delivery
• Transportation Cost
• Damaged Products
• Inventory Turnover Ratio

Warehouse Capacity

The capacity of the warehouse is an important factor to monitor the inventory and calculate the logistics operations.

 

Shipping Time

When a customer places an order to you, then it is important that you ship the order as soon as possible and acknowledge the customer.

The speed of your response create a good impact on the customer and shows the agility of your service.

 

Order Accuracy

It is easy to calculate and maintain stocks in the warehouse. But, it needs extra efforts and extra focus to maintain the accuracy of the products.

The delivery of wrong products to any customer will lead to return them and please send the right ones. So, finally, it will cause a loss to the logistician.

On-Time Delivery

Whenever you accept an order from any customer, it is very important that you deliver it to them at the time that you committed.

The delay in delivery of the order ruins the customer experience. To maintain customer relationships, the delivery should be completed on time.

Transportation Cost

Main logistics make a mistake in calculating the right transportation cost. In order to increase the efficiency in your logistic service, you must choose the shortest path possible that will reduce the cost of the fuel.

Damaged Products

Sometimes it happens that the products reach to the customer in the damaged condition due to various reasons. Hence you should always define your terms and conditions to the customers.

Always define that if any product damages in the way and the customer receives it in that condition, then who will bear the loss regarding that damage.

Inventory Turnover Ratio

Inventory turnover ratio is the ratio that tells how many times the inventory sold in a particular time period.

It is also called stock turnover. You can easily calculate it by using the following formula-

Inventory Turnover = Cost of Goods Sold / Average Inventory

where Average Inventory = (Opening Inventory + Closing Inventory) / 2

 

Difference Between Logistics and Supply Chain

You can say that logistic is basically is a subset or a portion of the supply chain. Let’s understand the basic difference between them with the help of the following comparison table-

Criteria	Logistics	Supply Chain
Objective	Customer Satisfaction	Competitive Advantage
Concept	Evolved Earlier	Modern Concept
Number of Organizations	Single Organization Involved	Multiple Organization Involved
Process	Flow and Storage of Goods	Control and Management

Conclusion

If you imagine that a manufacturer or distributor is the heart, then the logistics are the veins that flow the blood and reach it to all the different parts of the body according to the requirements.

The efficiency of the delivery service depends on the vehicles and their drivers. Hence, if you are running or planning to start a logistics service, then you should remember the key metrics of logistics. 

FAQs

1. Which one is greater between the logistics system and supply chain system?

Basically, the Logistics system is a part of the supply chain system. So, we can see that the supply chain system is bigger between both.

2. How to start a logistics business?

To start a logistics business, you need to have your own vehicles and also your complete the licensing formalities required to start that business.

3. How to improve logistics management?

Logistics system includes many activities such as product selection, inventory management, transportation etc. All these activities should be executed in a balanced manner for proper logistics management.

FAQs