Introduction to Logistics

Understanding Supply Chain, Distribution, and Logistics are to understand how materials move from one point to another, are transformed, stored, and delivered to the point of consumption. The following introduction is intended to provide a foundational understanding of the organizations, roles, individuals, assets, and processes.

Supply chain management is the overall process of organizing the movement of the raw materials and parts from the beginning of production through delivery to the consumer. Operational supply chain decisions are often best made as close to real-time as possible, often affecting how products are developed, manufactured, moved, and sold. The complexity of the supply chain varies with the size of the business and the intricacy and quantity of items manufactured. Still, most supply chains have elements in common, such as the following:

  • Customers: Customers start the chain of events when they decide to purchase a product that has been offered for sale by a company. If the product has to be manufactured, the sales order will include a requirement that needs to be fulfilled by the production facility.

  • Planning: The planning department will create a production plan to produce the products to fulfill the customer’s orders. To manufacture the products, the company will then have to purchase the raw materials needed.

  • Purchasing: The purchasing department receives a list of raw materials and services required by the production department to complete the customers’ orders.

  • Inventory: The raw materials are received from the suppliers, checked for quality and accuracy, and moved into the warehouse.

  • Production: Based on a production plan, the raw materials are moved to the production area. These raw materials are used to manufacture the finished products ordered by the customer and then sent to the warehouse, where they await shipping.

  • Transportation: When the finished product arrives in the warehouse, the shipping department determines the most efficient method to ship the products so they are delivered on or before the date specified by the customer.

Logistics

When used in a business sense, logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet the requirements of customers or corporations. The resources managed in logistics can include physical items such as food, materials, animals, equipment, and liquids, as well as abstract items, such as time and information. The logistics of physical items usually involve the integration of information flow, material handling, production, packaging, inventory, transportation, and warehousing.

There is often confusion over the difference between logistics and supply chains. It is now generally accepted that logistics refers to activities within one company/organization related to the distribution of a product. In contrast, the supply chain also encompasses manufacturing and procurement and therefore has a much broader focus, as it involves multiple enterprises, including suppliers, manufacturers, and retailers, working together to meet a customer's need for a product or service.

One way to look at business logistics is "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer." An operations manager who focuses on logistics will be concerned with issues such as inventory management, purchasing, transportation, warehousing, and the planning and organization of these activities. Logistics may have an internal focus (inbound logistics) or an external focus (outbound logistics).

Inbound Logistics

The manager in charge of inbound logistics manages everything related to the incoming flow of resources that the company needs to produce its goods or services. These activities include managing supplier relationships, accessing raw materials, negotiating materials pricing, and arranging quicker delivery.

Outbound Logistics

A manager working in outbound logistics will be focused on two issues: storage and transportation. They will use warehousing techniques to keep the finished goods safe and accessible. Since the products may need to be moved out to a customer at any moment, proper organization is crucial. Having as little product stored as possible can be advantageous since stored products are not making money, so the outbound logistics manager often has to balance company cost savings with consumer demand. The transportation function is by far the most complex part of outbound logistics. Without transport, there simply is no logistics. For that reason, it's critical to be able to move the product from one location to another in the fastest, most cost-effective, and most efficient way possible. Since transportation involves fluctuations, factors such as delays and changes in fuel costs need to be taken into account to cover all possible scenarios that might jeopardize the efficient movement of goods.

Logistics Businesses

  • Freight Companies: A freight company generally describes a business that moves goods or freight from point to point without providing other value-added services. While some companies may move goods across country lines, most companies only move goods domestically. Not all freight companies are the same, with many specializing in the type of goods, the mode of transit or transport, and customer base services. Freight companies operate by air, sea, railroad, trucks, and other on-road vehicles. As the industry evolves, freight companies diversify to offer as many modes of transportation and specializations as possible.

  • Freight Forwarders:
    Freight Forwarders provide a more optimal way to move products from distribution to consumption, often measured in monetary cost, human capital, load utilization, and environmental impact. Freight forwarders, contrary to the term, do not move freight themselves but rather connect those who do with those who need freight moved to create a more optimal movement plan. In recent years freight forwarders have gained notoriety for moving goods internationally. Freight forwarders are valuable to businesses shipping goods overseas. Their knowledge and access almost always save time and money for their customers. Freight forwarding operations will typically consolidate and offer the following value-added services:
    - Customs paperwork
    - Import/export paperwork
    - Rate negotiation
    - Coordination of handling and delivery requirements

  • Carriers:
    Unlike freight forwarders, the carrier will handle the freight shipment directly. Carriers make money by moving products around the country and the world. Trucking companies, rail services, ocean freight, and air freight are all examples of carriers. In most cases, shipments require multiple carriers to reach their final destinations.

  • 3PLs:
    Third-party logistic providers or 3PLs provide outsourced logistics for all or part of a business's supply chain logistics function. The services and depth to which a 3PL can integrate into your supply chain will vary. Some will offer transportation and storage services for freight, while others will integrate technology products or be the logistics department of a business. 3PLs will typically customize their services to meet the ever-evolving needs of a business. Depending on the size, type, and services offered through a 3PL, they may be able to handle international shipping, but the majority are focused on domestic freight shipping and management.

Many 3PLs offer other services that assist with the product or procurement of goods. You can count on a 3PL to schedule in and outbound deliveries, take care of your documentation and ensure deliveries are on time and free of hassles. A 3PL may allow your business to focus on your core competencies and provide you with the peace of mind of knowing your supply chain functions are in good hands.

Logistics Roles

While the roles in any organization are commonly defined by the type of business and services provided, the nature of logistics dictates a specific value chain to be present in most organizations despite their size, complexity, and maturity:

  • General Manager: Often the most senior member of the operations organization, the General Manager organizes, directs, and is ultimately responsible for the end-to-end lifecycle of the operation, the operational overhead, operational efficiency, and many times profitability.

  • Facility Manager: The individual who leads the under-roof or onsite operations staff, their processes, and leads any integrations and changes necessary to accommodate changes necessary in operation. This is one person who can make unilateral decisions on how things should be done inside a facility bearing the responsibility for the results.

  • Field Operations Manager: The individual who leads the on-road or off-site operations staff, their processes, and leads any integrations and changes necessary to accommodate changes necessary in the operation. This is the one person who can make unilateral decisions on how things should be done in the field, bearing the responsibility for the results.

  • Vehicle/Fleet Manager: The individual who leads the vehicle maintenance and operations staff and their processes and leads any integrations and changes necessary to accommodate changes necessary in the operation. This is the one person who can make unilateral decisions on how things should be done with the fleet bearing the responsibility for the results.

  • Supervisor: The individual who directly manages the day-to-day workers, their work, and their processes. This individual has significant intraday decision-making ability but is limited in their ability to affect change outside of this shift or daily activities. Their primary assignment is to help align the resources with the work and ensure the tasks are appropriately assigned and work is progressing correctly.

  • Dispatcher: Often a specialized form of supervisor in most logistics operations who manages the coordination of activities from the facility's dock or door to the customer door, as well as in reverse. The dispatcher provides operational guidance to the field staff, in many cases, delivery associates, to help them accomplish their assigned work. They may extend their responsibilities and take on the task of preparing delivery routes, assigning workers, and coordinating the activities for vehicle load up and return to the station. This individual is responsible for discharging work to workers and the updates necessary to the work queue for any exceptions.

  • Under-Roof Operations Associate: This position is responsible for handling goods and performing value-added services within a facility. The associate is often hired to work in a specific area of the operation. They will receive task-specific hands-on training in a matter of minutes or hours with the expectation that they can complete the task and be quickly retrained to perform any other task onsite. There are many exceptions to this for other highly specialized tasks such as those requiring significant training and certificate or license, for example, a forklift operator or a safety auditor.

  • On-Road Operations Associate: This position is responsible for handling goods and performing value-added services in the field or on-road. The associate is often hired to perform specific tasks, often pickups and deliveries. They will receive task-specific hands-on training in a matter of minutes or hours with the expectation that they can complete the task and be quickly retrained to perform any other task onsite. There are many exceptions to this for other highly specialized tasks such as those requiring significant training and certificate or license, for example, a delivery or installation associate or operating a vehicle requiring a commercial driver's license.


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