Logistics is the overall management of the way resources are obtained, stored and moved to the locations where they are required. Logistics management entails identifying potential suppliers and distributors; evaluating how accessible and effective they are and establishing relationships and signing contracts with the companies who offer the best combination of price and service. A company might also choose to handle its own logistics if it is cost-effective to do so or hire one of the experienced logistics companies .
Transportation is the driver of logistics, but logistics is what drives transportation. Logistics requires planning, transportation is just the mode to execute the planning, when getting freight from point A to point B. Clearly, they are not the same thing, but transportation is just simply a part of logistics. When it comes to logistics, executives must make further decisions beyond the mode of transportation to include:
- Importing and Exporting Regulations
- Freight Damage Claims
- Working & collaborating with other executives within the supply chain
- Managing vendors and partners
- Responsible for mitigating risk and mitigating expenditures
Why is Logistics Important to every company?
Even small businesses deal with finding suppliers, if not with transporting merchandise to a store. Small business owners also conduct distribution logistics with inventory and warehousing. And, every small business owner can tell you about how they handle reverse logistics, with returned merchandise or refusal of services. Larger businesses may deal in all four fields
In the business environment, logistics either have an internal or external focuses (inbound or outbound). Depending upon the business involved, this part of the chain can be simple or complicated. For more complicated procedures, third parties often are hired to conduct any one of the four fields within business logistics.
Third party logistics (3PL) involves using external individuals or organizations to execute logistics activities that have traditionally been performed within an organization itself. If, for example, a company decides to export its product, it may hire a person or organization to help with distribution logistics. Today, logistics companies are operating as fourth party logistics (4PL), which integrates 3PL competencies and other organizations to design, build, and run comprehensive supply chain solutions. A 4PL general contractor would manage other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.