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Sunday, April 11, 2021

Trucking, Transportation or Logistics? by Dara Nagra

The word “Logistics” is very vaguely understood in the transportation industry. It is very often mixed up with transportation. By definition, Logistics means having the right thing, at the right place, at the right time. According to the Council of Logistics Management, Logistics is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements, and return of materials for environmental purposes. With today’s fast-moving global marketplace, companies who provide transportation and logistics services play an integral role in the supply chain.

Today, the geographical boundaries are disappearing for global trade. But, this globalization has brought in many challenges, one of which is the free flow of goods and services across boundaries. Managing these, in a cost-effective manner is the key to growth in business. In this context, logistics management and supply chain management (SCM) have come into sharp focus in the industry, as an opportunity to gain an edge in the market. The need to keep the chain lean and responsive is a major priority. The ever-changing landscape of the logistics field makes it one of the most dynamic and complex industry niches present in today’s business environment. Inefficiencies in physical distribution in the supply chain management system can often pose significant threats to overall business performance and undermine organizations against leading contenders. A manager’s ability to integrate coordination between various channels of distribution, including transportation, storage of products, and the seamless implementation of data processing systems is vital to the growth and development of logistics firms.

Effective logistics managers must posses excellent analytical skills, coupled with a firm aptitude to solve problems within the finance, marketing, production, transportation, inventory control, and quality control sectors. An in-depth understanding of algebra and financial mathematics are also a key corner stone in the development of logistics decision modeling.

Logistics managers must ensure they are able to adapt to rapidly changing work environments, especially when focusing on the transport component of an organization. Individuals in this field must have a concrete understanding of the cost structures of various carriers and their respective modes of transportation and how to adequately allocate resources and make beneficial pricing decisions under pressure. Managers are also required to have a firm understanding of the legislation and policies governing the transport sector. Ultimately, the goal for Logistics managers is to lower logistics and transportation costs; increase asset turnover; reduce inventory carrying costs; decrease customs fines and penalties through better trade compliance; and strengthen customer service.

Modern Logistics primarily focus to fulfill customers’ needs. It involves management of the various activities required to move benefits from their point of production to the customer. These benefits can either be in the form of tangible products which are manufactured, or intangible such as services provided to the customers. Each organization’s approach to Logistics management is different from one another. Some of these firms are more focused to produce these benefits on their own. Their strategy is more aligned towards capturing raw materials. Alternatively, other companies’ logistics strategy is more inclined towards the distribution of the end products into the hands of the consumer. Regardless of the strategic alignment, logistics system is made up of many functional activities such as:

Customer Service: is the ultimate goal of any logistics strategy. It involves complaint handling, special order requests, damage claims, returns, billing problems, etc. A well organized customer service set up ensures continuous business from satisfied customers.

Inventory Management: is about carrying enough stock to ensure the best customer service without losing money by storing excessive and dead inventory. This is important at both sides – finished goods as well as raw materials.

Transportation: addresses physical movement of goods from a point of origin to a point of consumption. In dealing with international logistics, a well planned transportation architecture is required which involves having a integrated means of transportation through ships, air, rail and road. Knowledge about import and export rules and regulations also play a great role in this area.

Storage and materials handling: address the physical storage requirements of holding inventory. It is the management and acquisition of the proper space required and handling the materials within that space. Different options need to be analyzed in finalizing the storage strategy like Buy vs Lease options, or Public vs Private warehousing.

Packaging: is about protecting the product while it is being shipped or stored. It is also about presenting the products to the ultimate consumer. There are various government labeling rules that need to be followed and adhered to.

Information Processing: links all areas of the logistics system together. Various software packages are available to manage different activities in logistics management.

Demand forecasting: helps in preparing for meeting the customers future demands. Historical sales statistics, seasonal trends and planned future events are considered to accurately forecast future demands.

Production planning: is another component of the logistics to ensure that customer’s orders are fulfilled on time. Manufacturing needs components and raw materials in order to make finished goods. Proper planning is required to account for machine, labor and capacity constraints.

Purchasing: In order to manufacture and deliver orders to customers, internal purchase and procurement of raw materials are very important. Lead times for each supplier also need to be taken into proper consideration.

Facility location: addresses the strategic placement of warehouses, manufacturing plants, and transportation resources. These decisions are not made very often, but once made directly reflect the company’s ultimate success or failure.

In addition to the above activities, logistics tasks also include, but are not limited to other activities such as after-sales parts and service support, maintenance contracts, return goods handling and recycling operations. An organization’s strategy guides the way the individual activities are performed. A well coordinated and executed logistics strategy plays an important milestone in any organization success.