Logistics: Definition

What is logistics?

The term "logistics" comes from the Greek word logistikos, meaning "relating to calculation". The term "logistics" is also related to the Greek word logisteuo, meaning "to administer". And it's true that when it comes to transport and warehousing logistics, "administration" and "calculation" are two words that could not be more relevant. "Calculation" because logistics costs have to be kept under control. "Administration", because we need to ensure that the logistics chain is properly managed The aim of logistics is to optimize the management of the supply chain, from the routing of raw materials, semi-finished and finished products from their sources of supply to their distribution to the end customer, via order picking, warehousing, packaging and labeling of goods, etc. The supply chain thus represents the entirety of the logistics chain, from the supply of raw materials, semi-finished and finished products to their distribution to the end customer. The supply chain thus represents all the players involved in "making a given product or service available at the right time, in the right place, at the lowest cost and with the best quality", according to the trade association France Supply Chain.
There are several types of logistics: internal logistics, external logistics and distribution logistics.

The different types of logistics

Internal

Internal or intralogistics refers to the organization of all inventory and information flows within a company or logistics warehouse.
Internal logistics covers various activities, including :

• The internal transport of materials refers to transport within storage infrastructures and between the company's various production sites and warehouses.
• Inventory and information flow management: physical movements of goods must be recorded in a WMS-type information system.
• Warehouse management covers activities such as order picking, warehousing, packaging, labeling and shipping.

External

External logistics involves, on the one hand, organizing raw materials procurement, coordinating supply and production requirements, managing suppliers and optimizing purchasing (upstream logistics) and, on the other, optimizing distribution schemes, organizing the transport of goods to the end customer, and managing returns and recycling (downstream logistics).

Distribution logistics

Distribution logistics refers to the activities involved in getting finished products to consumer markets. These activities include receiving customer orders and planning deliveries, as well as preparing and dispatching orders.

The 3 missions of logistics within the company

Logistics fulfills three missions within the company.

Defining supply, production and distribution strategies

Firstly, it defines the company's procurement, production and distribution strategies.
Procurement strategies aim to determine the most efficient modus operandi for supplying the company or logistics warehouse with raw materials, semi-finished products and finished goods. According to one author, "strategic sourcing is the process of identifying and selecting the sources of supply that make up a network ensuring stable supply at the lowest total cost".
Production strategies aim to produce a good or service to meet a specific customer need. There are four production strategies: "Engine to order", "Make to order", "Assemble to order" and "Make to stock". Engine to order" production is used for goods requiring either a high level of customization, or the production of unique parts. In this configuration, the customer is involved in every stage of production, from design to delivery. Make-to-order" production refers to production that is triggered solely by the customer's order (pull configuration). Assemble-to-order" production involves producing a stock of standard products and then assembling the components for the finished products according to each customer's needs. Finally, "Make to stock" production consists of producing a stock of goods, which is then sold off according to demand; this type of production is suitable for standard products that do not require any form of customization.

The company can adopt an intensive, selective, exclusive or franchise distribution strategy. Intensive distribution consists of distributing a product to as many points of sale as possible. Selective distribution refers to the exclusive marketing of a product in a given territory or at a single point of sale. Exclusive distribution concerns high-price, high-margin products with low production volumes. Finally, franchising involves distributing a business model to franchisees.

Managing the flow of goods and information

The flow of goods and information must be managed in such a way that the physical movement of goods matches the information recorded in the company's or logistics warehouse's information system. To achieve this, the company or logistics warehouse can use a Warehouse Management System (WMS). The WMS is an indispensable tool for optimizing logistics warehouse management. The WMS software package assists with goods-in, order-picking and shipment planning tasks. It also enables data on incoming and outgoing goods to be collected much more rapidly.

Controlling logistics costs

The term "logistics costs" covers all the costs incurred by a company in transporting raw materials, semi-finished and finished products to and from its warehouses, as well as inventory management costs, the cost of purchasing equipment (forklift trucks, shelving, pallets, etc.) and logistics personnel.
Logistics costs make up a significant proportion of a company's costs. When left unchecked, these costs can be onerous. Various strategies can be put in place to reduce logistics costs.

Firstly, to optimize logistics costs, a company can apply the Lean Logistics method. The aim of this method is to eliminate waste and thus control costs. Lean Logistics identifies seven types of waste to be eliminated, namely over-stocking or excess inventory, waiting times faced by the various Supply Chain players, empty transports or unnecessary inventory movements, unnecessary inventory linked to poor demand anticipation, unnecessary processes, unnecessary operator movements, non-quality.
Let's take the example of overstocking. It contributes to increasing the company's fixed and variable costs. Excess stock means greater investment in storage space, equipment and human resources to manage the warehouse. Excess stock also reduces the company's profit margins, as it has to reinvest in storage facilities to increase its logistics floor space. The costs incurred for overstocking also impact capital expenditure. In fact, each product stored reduces the company's cash flow.

Nor does under-stocking benefit a company's financial health. In fact, under-stocking reduces the company's sales Improving logistics traceability can also help keep logistics costs under control. Good logistical traceability will enable the company to make savings and reduce its overheads. Logistics traceability involves identifying the various stages a product goes through, from manufacture to delivery to the end consumer.

Logistics costs can be reduced by adopting the following four strategies:

• Filling containers as full as possible not only saves significant costs, but also reduces CO2 emissions.
• Choose your carrier carefully, and put it out to tender regularly
• Create synergies with company subsidiaries or with other companies in order to pool transport costs
• Implementing a Transport Management System (TMS) enables you to identify the most suitable transport schemes for your company. The TMS is a software package designed to manage and optimize transport operations.

It is also possible to control logistics costs by reducing the costs incurred by Reverse Logistics. Reverse Logistics, also known as reverse logistics or returns management, generates significant costs: shipping costs for the first shipment, transport costs for the returned parcel, processing of the returned parcel, reshipment of a new product. To limit these costs, e-retailers need to simplify their return policy as much as possible, and limit the number of interactions between the consumer and customer service.

Logistics involves managing everything to do with the transport and storage of a company's products, optimizing their circulation with a view to minimizing costs and lead times. It is used in sectors as diverse and varied as agri-food, events, forestry, humanitarian aid, industry, etc.