Logistics: An Overview

Originally, logistics referred to the process of military personnel obtaining, storing, and moving supplies to aid soldiers on the battlefield. But the word is not just limited to the military anymore as it has become an integral part of any business, especially an e-commerce business.

3pl delivery guy loading his van with boxes for delivery

Logistics : An Overview

3pl delivery guy loading his van with boxes for delivery

Originally, logistics referred to the process of military personnel obtaining, storing, and moving supplies to aid soldiers on the battlefield. But the word is not just limited to the military anymore as it has become an integral part of any business, especially an e-commerce business.

A similar logistics meaning applies to business. The term logistics refers to the movement of products inside a supply chain and includes two processes: warehousing and transportation. As a new e-commerce business owner, you must pay attention to your logistics.

Inventory management is an integral component of e-commerce today as it adds value to your business by offering a range of perks. Some of these benefits of inventory management are listed below:

LOCAD warehouse fulfillment service shipping 3pl
LOCAD warehouse fulfillment service shipping 3pl

What is Logistics?

Before diving into the details, we must understand logistics. As we already mentioned, in the military, entails acquiring, storing, and moving supplies and personnel according to need. In business and management, logistics involves the movement of goods and products from one point to another.

In short, logistics uses processes like warehousing and transportation to get products from one point to another. The process starts from the procurement of supplies and ends when the product is delivered to the customers.

Understanding Logistics in Management and Business

Logistics

The logistics process is relatively simple to understand but not as easy to handle and manage a company’s logistics. In business management, logistics is a prominent part of a system called Supply Chain Management SCM. SCM refers to overseeing the entire supply chain network from the beginning to the end, ensuring the constant flow of goods and products through various entities and organizations.

Logistics is a part of that management process and secures the proper storage and transportation of products, goods, and services from the point of procurement to the point of consumption—the end buyer. It also facilitates the reverse flow of the same. Logistics helps the supply chain meet customer expectations and maintain efficiency. You will find differences between Supply Chain Management and Logistics explored later in this article.

monitoring-inventory

What Can Inventory Tell You About a Business?

Logistics

Many people think the supply chain and logistics are the same and use the terms interchangeably. They are only half right, as logistics is a part of the whole supply chain, but they are not the same.

The supply chain refers to the network or pathway a product must go through from procurement until it reaches the end customer. It is a system that includes many personnel, entities, and processes. Logistics, on the other hand, refers to the physical movement of a product from one point to the other until it reaches the customer. It mainly includes two processes: warehousing and transportation.

Logistics is a massive part of the supply chain, but the supply chain consists of many other processes and entities than logistics. The supply chain connects many organizations and businesses in a system that procures materials, manufactures the products, and stores and transports them to the final customer. This highly complex system is the main driving force behind a business.

If a company's supply chain is not working correctly, then the company will not be able to provide ideal service to their customers, which will make them lose face and even lose customers.

That is why it is imperative to put a lot of capital and effort into making a supply chain that is communicative, smooth, and fast. And a big part of that depends on how you handle the logistics of your business. For that, you need to improve the logistics management capacity of your company. 

LOCAD warehouse fulfillment service shipping 3pl

Logistics vs Supply Chain Management

As mentioned earlier, people often tend to use the terms logistics and supply chain interchangeably. However, the two concepts are pretty different. The supply chain refers to the movement of a product from its point of origin (material sourcing), to the end where it reaches the final customer. It is a more holistic term to describe the network of entities, organizations, and people a product must pass through to reach the consumer.

On the other hand, logistics is the storage and flow of products from the supplier to the manufacturer to the customer. And there are, therefore, some differences between logistics management and supply chain management processes.

  1. You must remember that logistics management is a part of supply chain management. SCM manages the entirety of the supply chain, while logistics management looks over the flow and storage of goods and items in an organization. 
  2. The main goal of logistics is customer satisfaction, while supply chain management focuses on both customer satisfaction and competitive advantage. 
  3. Logistics only involves the flow of goods to and from one organization. But supply chain management looks over many organizations and connects them in a single network. 
  4. SCM focuses on the proper management and flow of goods from the point of procurement to the end, where it reaches the customer. But logistics’ primary goal is to ensure that the customer gets the product on time with zero damage. 

Finally, you should remember that logistics is an old term that originated in military science but has been used extensively in business management over time. On the other hand, supply chain and SCM are relatively new terms. The supply chain is a concept that evolved as an improvement over logistics.

Logistics
Logistics

Main Components of Logistics

A logistics process entails a wide variety of different elements. If you want your logistics process and supply chain to run smoothly, then you need deep knowledge of all crucial components that exist in the logistics process. Knowing these will help you identify the gaps in your logistics and help improve them, and stay ahead of your competitors. Let’s look at the five main components that make up the logistics management process.

Planning

Planning is the first stage of any good logistical process. You must remember that tracking the demand and supply flow is extremely important while running a business. Even if the supply of materials and products is constant and steady, the customer demand can change at any time as it is susceptible to any sort of imbalance in the market. That is why you have to plan a good logistics strategy to ensure a healthy flow of products from the manufacturer to the customer no matter what happens.

If the demand suddenly becomes high or low, you must change your manufacturing process and inventory to manage that quickly if you do not want to fall behind your competition. New data tracking and analyzing technology can help you predict the market flow, and an experienced logistics man

Storage and Handling

Storing and packing the products is an essential part of the logistics system. The market is constantly changing, and to keep up with the rise and fall in demand, you must make sure that ample materials and products are available in storage at all times.

You also have to ensure that the products are handled and packaged correctly. Different products require different packaging types to ensure they can avoid any kind of damage during transit. You must use good logistics partners who use ample new technology and human resources to ensure that your products are handled and appropriately packaged before they go out to the customer. It helps minimize the chances of a return as well.

Inventory Management

Inventory is very closely related to warehousing and storage. Simply put, inventory is the flow of products in and out of a warehouse, stock in-store amount, and where and how to store the goods for optimal customer satisfaction. Inventory management is when a company predicts the change in the demand for products based on data analytics and statistical tools.

The process might not be too accurate, but it will give you a pretty good idea about what the market’s future will look like based on previous data. You can, then, manage your inventory based on it. Inventory management is an essential tool to make sure the flow of goods in the supply chain runs smoothly.

Transportation

Transportation is one of the costliest parts of supply chain logistics. Studies show that businesses spend almost 50% of the logistics budget on transportation. Therefore, companies must find the most cost-effective and fastest ways to deliver the products to the customers. Inbound and outbound logistics depend on transportation, meaning the inward flow of materials from the suppliers and the outward flow of products to the customers. Transport is an integral part of the logistics system.

There are many transportation platforms like planes, freight trains, trucks, and ships that are all used to carry goods all over the world. Other than perishable items, any other item can be shipped anywhere in the world. So if you want to scale up your business, you need to focus on finding cost-effective transportation that can reach your customers in the shortest time.

Controlling Information

In the competitive market of e-commerce, data is power. There are so many new technologies that can retrieve and analyze data to help you improve your business. It is proven that the more detailed information you have about your whole logistics process, the better you can manage it.

That is why it is imperative for you to not only use the traditional business modules but also incorporate modern tools in your logistics management system to reach new heights. It is also not enough to only have information about your own business but also about your competitors. Retrieving, analyzing, and using data to improve logistics can be very profitable for your business. 

Logistics

Why Is Inventory Management Important?

Logistics planning and management are crucial to any e-commerce business. In this competitive market, a wide array of excellent products will not be enough to win you a loyal customer base. Your services must also be immaculate, efficient, responsive, and fast. A well-established logistics process can help you achieve customer satisfaction and much more.

If you can implement some good logistics tactics in your supply chain, it will help you increase the value of your business. Customers will be more interested in your products if they can easily access and receive them. If you hire a third-party logistics partner, they will also be able to take a load of logistics management off your shoulders, and you can focus on the other core aspects of your business instead.

If your transportation logistics process runs smoothly and efficiently, your products will reach customers quickly and without hiccups. It also makes the returns process much easier for you and your customers. Planning a good logistics strategy will cut business costs in the long run and also improve your supply chain’s efficiency. This results in your customers being happy with your products and services. That is why a business must have a streamlined logistics process.

woman with a hard hat inspecting a warehouse

Why Is Inventory Management Important?

woman with a hard hat inspecting a warehouse

Warehousing is a process within the supply chain very closely related to logistics. The logistics of a business depend significantly on it. Warehousing is a process that ensures the safe storage of inventory within specific buildings. Logistics, on the other hand, handles the operative aspect of storage and transportation of goods and information throughout the supply chain until it reaches the hands of the customer. 

Warehousing is the process of storing goods in a warehouse for safekeeping. Many small e-commerce businesses cannot afford their warehousing place to keep inventory. That is why they hire warehousing spaces and services. These warehouses are large commercial buildings equipped with the technology and workforce to handle small and large inbound and outbound shipments, proper storage, and even pick and pack ordered items as necessary. These warehouses also handle returns on behalf of the business that hires them. It is a key process in the logistical chain.

In comparison, logistics ensures the safe storage and delivery of raw materials and products to the right customers. It is a much more nuanced process that needs constant overseeing. It keeps control of the flow of goods within the supply chain while ensuring services are optimized, and the company is profiting from the business.

Logistics management also looks over the warehousing and inventory processes as they are critical to maintaining the optimal flow of products. The main difference between the two is that warehousing focuses on safely storing inventory in a building. In contrast, logistics focuses on optimizing the flow of goods within the supply chain for maximum customer satisfaction. 

What Is an Inventory Tracking System?

an warehouse employee moving inventory items and boxes

As we have explained throughout this article, logistics is the supply chain’s storage and flow of goods and information. There are three types of logistics depending on whether the goods are directed towards the main organization from a different source or from the organization to the customer. They are inbound logistics, outbound logistics, and reverse logistics. We are going to explain in detail what each of them entails.

an warehouse employee moving inventory items and boxes

Inbound Logistics

The movement of goods from the suppliers to production is known as inbound logistics. This logistics mainly deals with the inbound flow of raw materials and information sourced from the suppliers, which are stored in warehouses and then transported to the manufacturers who manage the processing and production of these goods.

Implementing a solid inbound logistics management system will help you make a more efficient cycle. You can also implement various new technologies like automatic ordering to make the process faster. 

Outbound Logistics

Outbound logistics refers to transporting the finished products from the production facility to the next point in the supply chain. This is usually the warehouses or fulfillment centers, and from there to the end customer. This process is also known as order fulfillment as the products’ picking, packing, and shipment all happen in this part of the supply chain logistics. 

The outbound logistical flow is essential because this is the part where the consumer has any direct link to the business when they get their products delivered. You have to ensure that your fulfillment process is flawless so that the customers receive their products faster and without causing any damage. The shipment and delivery methods also have to be reliable so that the customer does not face any complications.

Reverse Logistics

The term reverse logistics refers to the backward movement of products from the customers back to the business again. This happens when the customer chooses to return a product that was either damaged or the customer did not need it anymore. In the apparel business, when the product size or color is not to the customer’s liking, they return it.


All returned or damaged products have to be dealt with sustainably and cost-effectively. This is the last part of any company’s logistical chain. Reverse logistics is most common in the electronics and automobile industry. You need enough resources and workforce to properly handle your returns without causing your customers problems.

asian online sellers packing items ready for shipping

E-Commerce Logistics

The e-commerce market has changed a lot since its beginning only a few years ago. This means that e-commerce logistics or e-logistics has also changed to keep up with the market. Logistics innovation and cutting-edge technology have allowed many companies to offer next-day or even same-day delivery through various 3PL and 4PL companies.

Unlike the logistics in an offline business, the logistics of an online business are much more complex and nuanced. You must thoroughly understand your customer base, the conditions of roads and location, the inventories and fulfillment facilities. As a result, you can run your business smoothly, get the ordered items to the customers in mint-condition, and do it swiftly and efficiently.

The transportation and delivery costs are much higher in an e-commerce business compared to a store-based business. They also have to gain the upper hand in data analytics and accuracy. The companies must manage inbound and outbound logistics and their reverse logistics to ensure a smooth returning process.

It is imperative to build a trusting relationship with your customers. This can’t be achieved only with good products, but you also have to provide them with efficient services. All vastly depend on the logistical process of your company. Because of this, e-commerce businesses must appoint a logistics management team that can ensure efficiency in your supply chain while reducing business costs.

Third-Party Logistics (3PL)

3PL delivery man with clipboard and boxes

3PL or Third-party Logistics is a well-known term in the e-commerce market. A third-party logistics provider offers various logistical solutions for your business, so you do not have to carry the weight of all the logistical management. They can look after the fulfillment and procurement activities on behalf of your business. 

3PL providers can work in many ways. They can be a company that manages your fulfillment process or your transportation. Or the 3PL company can provide you with all the logistical solutions under one roof.

3PL delivery man with clipboard and boxes

For example, if you hire a fulfillment center that processes and fulfills all your online orders and a transportation company that will ship and deliver your products to the customers. They are both 3PL solutions. You can also hire a 3PL fulfillment company that will take care of the entirety of the logistical process, starting from order processing to picking, packing, and delivering your products to the customers.

3PL services have been around for a long time, but they have become increasingly more popular with the rise of online marketplaces. Small companies with no technology or staffing to handle all order fulfillment and transportation by themselves often hire these 3PL companies to take care of the logistical part so they can focus on the other core business aspects. 

Another popular term associated with 3PL is 4PL. They are slightly similar, but you need to understand the difference. Fourth-party logistics providers or 4PLs are also known as Lead Logistics Providers. Businesses hire these companies to manage all the 3PL providers for them instead of hiring these services themselves. 4PL providers have more responsibility in the whole supply chain process and handle all the required management practices to ensure that the 3PL providers are running smoothly. 

an warehouse employee moving inventory items and boxes

Differences Between Logistics and Transportation

The two terms, logistics and transportation, are very often used interchangeably. Understandably, these two processes are closely related in the supply chain. But they differ in many ways. Firstly, transportation is only a part of a business’s logistics process. Logistics deals with transporting goods and storage, handling, cataloging, and packaging raw materials, goods, and products.

Logistics is the process of planning, managing, storing, and transporting several products throughout the entire supply chain until it reaches the hands of the end consumer. It also deals with the return of products, known as reverse logistics. On the other hand, transportation refers to getting the products from one place to the other until they reach the customer.

Transportation makes up a vast and vital part of the logistics process. Without a proper transporting system, the products your business makes will not be able to make it to the hands of the buyer. It is also the most expensive part of the logistics process. But logistics is more than just transportation. It includes keeping an inventory, picking, packing, and storing materials and products before they are out for shipment to the customers. So even though these terms are closely related, they do not have the same meaning.

Logistics Management and Tech Revolution

Logistics

The two primary goals of any business are meeting the customers’ needs and ensuring high-quality service. How you plan your logistics management can have a massive effect on both. But your business also has to turn a profit. The good news is that logistics is a field, like many others, where you can use new technology to ensure optimum service.

Over the last decade, technology has advanced dramatically. Even the whole e-commerce market was essentially a result of technological advancements. You can use these cutting-edge technologies to automate many logistical processes and analyze big data to increase the quality of your company’s services.

manual-inventory

Through new business software, you can analyze a vast amount of data regarding your supply chain in a matter of minutes, which would have been impossible a few years ago. But now, through data governance, you can easily keep track of all the activities in your supply chain. These technologies allow companies to process a massive amount of data and analyze it quickly and with high accuracy, resulting in increased efficiency and precision across the supply chain. It also helps companies cut logistics costs and improves the administrative processes.

Through artificial intelligence and machine learning, combined with business intelligence, new pathways have opened in e-commerce logistics. If you want to stay ahead of your competition and improve customer service, implementing new technology throughout your logistics management process will allow you to do both.

What are the Functions of Logistics?

Logistics

We talked about the components of logistics. It is time to understand the functions of logistics based on those components. Planning and transportation are only two parts of the logistics process. We are going to talk about the roles of logistics in a business.

Designing

The design and planning of a proper and precise logistical network are one of the most important jobs of any logistical professional. They plan the various locations of the supply chain in a way that results in optimum speed and reduction of costs at the same time. Optimizing the routes between warehouses, manufacturers, transportation services, and the customer is one of the most important functions of logistics to ensure efficient service.

Procurement

To provide your customers with high-quality products, you must procure the best raw materials at the best price. A sound logistics management system can help you contact suppliers that will provide you with the best raw materials and secure a reasonable price. This way, you can save money on procurement and offer the products to your customers at a good price. As a result, your customers will be satisfied and your profits will go up.

Order Processing

In any company, order processing also plays a vital role in logistics. You need an efficient system that can process the customers’ orders fast and without any error. Not only that, but processing an order also means fulfilling the order correctly and swiftly for optimum customer satisfaction. All of these processes fall under logistics. After fulfillment, the products must be shipped and delivered to the correct address. Order processing and fulfillment make up two significant functions of logistics.

Reverse Logistics

Performing reverse logistics is a vital part of every company’s logistical process. The returned or excess products must be disposed of or reused cost-effectively and sustainably. You need a sound logistics management system to work correctly and efficiently for your reverse logistics process. This is one of the critical functions of logistics.

robot carrying boxes inside an automated warehouse

What are the Roles of Storage, Material Handling, and Warehouses in Logistics?

Material and cargo handling, along with storage, is a crucial aspect of warehousing. The storage of ample inventory ensures the steady supply of products in the supply chain even if there is a gap in production and consumption. It ensures that customers do not have to wait too long for products, even if production lag occurs.

Through demand forecasting, companies can now easily predict how market and customer demand will change in the future. Through proper storage and inventory, they can keep a steady supply of products in the market even if the demand suddenly rises. Material handling and cargo handling ensure that all the products are carefully picked, sorted, packed, and transported in the supply chain. This part is essential because most products get damaged during handling or shipment. 

Warehouses are large industrial spaces that help store, pack, and ship products that are to hit the market. All of these are integral to a company’s logistics. If you are a small e-commerce business owner, you also need to improve your logistics management to stay ahead of your competition.

Conclusion

It’s no secret that logistics are the backbone of the supply chain management system. It ensures the efficient storage and movement of materials, products, and goods within the supply chain. There are many aspects of a company’s logistics, and each has to be organized and managed to ensure cost efficiency and customer satisfaction. Logistics deals with transportation, which means that it is directly linked to the customers of the business.

If the logistics system of your company is not efficient, then it may result in the customers being disappointed in your services and ultimately the loss of customers. Unlike the supply chain, whose primary goal is to ensure keeping you ahead of your competitors, the primary purpose of logistics is customer satisfaction, which every e-commerce business seeks to achieve.

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LOCAD offers premium e-commerce fulfillment services for businesses of all sizes. Connect with our logistics and to our fulfillment expert today to reduce your shipping costs, boost your transit times, and improve overall customer satisfaction. 

Frequently Asked Questions

Delivery is a vital part of the logistical process of any e-commerce business. But logistics covers a more vast and complicated field than delivery. Businesses pay delivery partners or courier services to deliver their products to the customer on time and in perfect condition. On the other hand, logistics encompasses all movement of goods and information in and out of the supply chain.

The job of a logistician is to analyze, organize and coordinate all the movements of goods, products, and information within a supply chain. They look over inbound, outbound, and reverse logistics. They also analyze data to predict the rise and fall of demand so that the company can keep ample products ready in their inventory.

The main function of logistics is to properly and efficiently manage the flow of resources, raw materials, manufactured goods, and important information throughout the supply chain until the final product reaches the hands of the customer. It can continue even further if the customer returns the product back to the business. Logistics partners can help your business deal with the bulk of the logistical nuances and improve your services.

The name is pretty self-explanatory with this one. International logistics refers to managing the fulfillment and transportation of products through one or more international territories. If your company sells its products in the global market, you will need an efficient global logistics management system to provide optimized services to your international customers.

Logistics centers are very similar to warehouses. You can hire companies to offer you ample storage and inventory space to store materials and products to ensure a proper supply of products to your customers. Many logistics centers provide more than one storage location in one network.

The three types of logistics are:

  1. Inbound logistics- Transporting, storing, and transferring information and items from distributors to warehouses and manufacturing facilities is known as inbound logistics. The manufacturing and processing are usually handled by the manufacturers of the manufacturing facilities.
  2. Outbound logistics- The process of transferring information and finished items from a warehousing facility to the next link in the supply chain is known as outbound logistics. The order-fulfillment process refers to the movement of items from warehouses to the hands of customers.
  3. Reverse logistics- The practice of transferring information or items from customers back through the supply chain is known as reverse logistics. This may occur with objects destined for proper disposal, recovery, recycling, resale, refurbishment, repairs, or service. If a product cannot be recycled owing to specific components, it should be securely broken down.

No, logistics is not the same as courier. The primary distinction between a courier and a logistics firm is that logistics is concerned with the management of goods, information, capital movements, and customer services. Courier firms are typically involved in the administration and dispatch of small parcels, but they have recently begun to expand their business by engaging in large freight enterprises.

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