What is Logistics Exactly?

What is Logistics

Logistics has been in the news a lot lately, and it will continue to be for some time to come.

In March of 2021 we heard about Logistics when a ship blocked passage through the Suez Canal. In the second half of 2021 we heard about the enormous log jam for overseas shipping in ports around the world.

By now everyone should understand the incredible importance of Logistics to our economies and to our lives. But aside from these disruptive events, does everyone really understand what it actually is?

Let’s explore. What is Logistics exactly?

Definition of Logistics

The first distinction to be made is that Logistics management is different from Freight management. Simply put, Logistics management is a much more all encompassing and overarching term with a vast scope which includes Freight management.

Investopedia defines it as “the overall process of managing how resources are acquired, stored, and transported to their final destination.” Shopify says it is “the process of coordinating and moving resources – people, materials, inventory, and equipment – from one location to storage at the desired destination.”

Merriam-Webster defines Logistics as “the things that must be done to plan and organize a complicated activity or event that involves many people.” The Cambridge Dictionary states that it is “the process of planning and organizing to make sure that resources are in the places where they are needed, so that an activity or process happens effectively.”

And finally, Wikipedia calls Logistics “the detailed organization and implementation of a complex operation (and) is the part of supply chain management and supply chain engineering that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information between the point of origin and point of consumption to meet customers’ requirements.”

It is clear from these definitions that Logistics transcends not only Freight management, but it goes far beyond just the notion of moving goods. The coordinated planning, organization, management and deployment of any resources (not just materials) is considered Logistics.

Examples of Logistics Management

Historically the term Logistics was created and used in reference to the Military. The organized movement, deployment and replenishment of goods, equipment, food, soldiers, supplies, ammunition for Military operations were considered Logistics. Wikipedia defines Military Logistics as “planning and carrying out the movement, supply, and maintenance of military forces.

In its most comprehensive sense, it is those aspects of military operations that deal with: Design, development, acquisition, storage, distribution, maintenance, evacuation, and disposition of materiel; Transport of personnel; Acquisition or construction, maintenance, operation, and disposition of facilities; Acquisition or furnishing of services; and Medical and health service support.”

Manufacturing logistics involves the planning and execution of all processes associated with: equipment procurement, setup, installation and maintenance; people recruitment, training and scheduling; inventory storage, dispersal, movement; process tracking, management and optimization; quality management; product flow and scheduling; testing; and shipping.

Retail logistics includes the merchandising of goods for sale, and the planning, scheduling and movement of those goods from manufacturer through to distributor or distribution centre and on to the retail channel (eg brick and mortar stores) and includes the last mile delivery solution.

Further store set up, whether that be physical store merchandising or online store creation, customer experience management (from marketing through to order management and returns management) is also a part of the retail Supply Chain.

In healthcare logistics has been on display for everyone to see during the pandemic. The planning, procurement, ordering, manufacturing, supply and distribution of masks, PPE (personal protective equipment), equipment (eg. ventilators), and finally vaccines are all a part of the healthcare Supply Chain network. The refrigeration requirement for some of the vaccines further complicates systemic demands.

And service companies even manage logistics to support their customers, even though they are not moving physical goods or products. Services companies still need to coordinate and move resources, such as people or information, for their customers. The movement, provision and flow of these resources does require logistics management.

The Importance and Impact of Logistics

If you didn’t understand the importance of this function before our examples should certainly underscore that importance now.

The economies, and in turn our personal and professional lives, of virtually every company would come to a complete standstill without trucking, rail transport and shipping.

In 2021 we saw the extent of disruption caused by logistics and transportation delays throughout the entire year. Early on the Suez Canal ship blockage caused pervasive delays in the delivery of goods.

As the year progress container ship unloading constraints at ports around the world wreaked havoc on the supply of goods in all industries. And even as ships were unloaded, truck driver and trucking equipment shortages impacted the movement of goods to their final destinations.

Without logistics our standard of living would be irreversibly stunted and impeded.

Ensuring Adequacy of Logistics Management and Risk Mitigation

Given its importance it should be apparent that any and every company needs to have a comprehensive and exhaustive Logistics strategy and risk mitigation plan. Without these plans companies will be left scrambling each and every day to figure out how to move their goods and services.

With constraints in infrastructure and capacity bottlenecks constricting the supply and flow of goods we see many companies rethinking their fundamental strategy and tactical operation.

Companies have used more air cargo transportation for instance. Additionally larger companies have chartered their own container ships, looking for shipping containers for sale, and rerouted those ships to ports with the capacity to support timely unloading of goods. And some companies, like Amazon, have looked to vertically integrate the entire logistics infrastructure into their owned operations.

Experienced leaders, also in short supply, are in high demand to make all of this work. You can have the best products, the best marketing, and the best brand, but if you can’t move your goods to market the rest of it doesn’t matter. Seasoned leadership is the backbone to make any logistics strategy, and the out-of-box day to day tactical management, work.

Given that everything stops when logistics operations don’t work, companies will need to make the investments required in strategy, resources, processes, systems, infrastructure, and supplier partnerships.

Any company that fails to make these investments will continue to perpetuate the problems they are experiencing until they ultimately go out of business.

That is what we call Logistics!

Originally published on February 1, 2022.
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