What Is Logistics? A Quick Guide | Did you know that businesses in the United States spend approximately $1.6 trillion on logistics each year? Having good logistics is an essential part of running a successful business.
Logistics can influence your business’s profit, customer satisfaction, and quality. Because logistics is so important, you are probably wondering “what is logistics?”
Keep reading to learn more about logistics, the difference between logistics and distribution, and the supply chain.
What Is Logistics?
In simple terms, logistics is the process of obtaining material, moving material from one location to another, and storing the material. For a manufacturing business, logistics is relevant in almost every part of the process.
When a business obtains raw materials to make products, there are logistics involved in getting the material. Then, when it is time to sell the product, there are the logistics of getting the product to the end-user.
Here are some factors that are part of the logistics process:
- Inbound shipments
- Outbound shipments
- Material handling
- Fleet management
- Inventory management
Because there are so many different elements to logistics, it is essential to optimize the logistics as much as possible. Doing so can save businesses money and make them more efficient.
While many companies decide to keep their logistic processes in-house, others decide to outsource using third-party logistics (3PL) or fourth-party logistics (4PL). Understanding 3PL and 4PL is an important part of logistics.
The point of 3PL is to oversee the transportation and logistics part of the supply chain process. 4PL oversees the entire supply chain process.
What Is the Difference Between Logistics and Distribution?
While logistics is the process of obtaining, moving, and storing material, distribution is a more specific term. Distribution means moving materials from the initial source to one or multiple destinations.
Distribution is one part of the logistics process. Logistics is the overall planning of the movement of materials, while distribution is where the products are actually located at any given point.
What Is Supply Chain?
To understand the basics of logistics, you also need to understand supply chain management. Supply chain management is the process of producing and selling products to the end-user.
Here are some of the elements of supply chain management:
- Obtaining raw materials
- Inventory planning
- Demand planning
Different parties included in the supply chain process are suppliers, transportation companies, planners, warehouses, distributors, and retailers.
Like with logistics, it is important to optimize your supply chain as much as possible. Doing so can lower costs and speed up the process of producing finished products.
Now You Know the Basics of Logistics
Logistics, distribution, and supply chain are all essential elements of a business’s success. Without a solid supply chain strategy, businesses will have a difficult time satisfying customers and making a profit.
Did you enjoy learning about what is logistics? If so, be sure to check out our other articles in the business category to learn more about best business practices.