Here on EasyLogistics.site we approach the most different aspects of logistics, but we seldom stop to think and define what logistics really is. More importantly, we now describe what types of real-life problems companies can solve through good and integrated logistics management.
Today, logistics is an art and a science, dedicated to doing whatever it takes to deliver the right products in the right place at the right time. The origin of the word logistics comes from the Greek and means calculation skills and logical reasoning. Therefore, by doing the right things and acting logically and intelligently, logistics delivers the products efficiently, involving much more than simply transporting stuff around.
The definition of logistics
In this post you will find a historical evolution of logistics. The use of quantitative techniques (as opposed to qualitative ones) has dramatically increased over the last 20 years thanks to the greater availability of data, the power of computers, and the possibility of creating models and algorithms to deal with real problems with sufficient speed and realism. This is particularly true in logistics, where we find a very large number of complex and quantifiable decision problems that fit well with mathematical models and optimization. You’ll see how these tools help companies reduce their costs and improve the quality of their services.
Before that, we need to understand what logistics is and why it exists. By definition, logistics manages the flow of products from the points of supply to the points of consumption, in order to satisfy customer demand at the lowest possible cost. Thus, logistics exists because we see a spatial and temporal separation between production and consumption. If we could produce everything we wanted at the time and place of consumption, there would be no need to transport and stock these products. Logistics groups all the activities related to the ownership and movement of the products in the organizations: forecast of the demand, inventory management, transportation, warehousing, design of distribution networks, etc.
Logistics is an important source of costs (and value!) for many companies: transportation, storage and cost of inventories typically account for more than 10% of the cost of a product, and this proportion can easily reach 30% in some sectors, such as food. For customers, logistics is part of creating value by making products available at the time and place desired for consumption.
Success and failure stories
With globalization and the growth of e-commerce, logistics plays an increasingly important role for many companies, both related to goods and services. It is present all the time in modern societies, but just like other support areas, it usually only appears to the general public when a problem occurs. This was the case, for example, in December 2010 when a lack of the product used in the defrosting stations caused the cancellation of numerous flights just before Christmas in Paris, France. At the same time, UPS, which has a world-class logistics network and a large fleet of cargo planes, delivered nearly one million parcels per hour around the world.
For some companies, logistics is not just a source of competitive advantage – it represents the company’s reason for being, its core competency.
Stay tuned and you’ll soon see how logistics has evolved into what we now call supply chain management. Subscribe to our newsletter so you will not miss the next posts.