Logistics may be defined as the planning, putting into practice and regulating of procedures for the productive and successful procurement, transportation and stationing of resources from the point of origin (raw material) to the point of consumption (end customer) to achieve certain purposes. It incorporates all segments of the production chain including design, financing, suppliers, energy, information, distribution, transportation and sales. In the oil and natural gas industry for example, logistics comprises the systems for collecting and transporting oil, including trucks and pipelines, as well as facilities for storage and distribution.
The resources or goods managed in logistics can be physical items such as animals, food, liquid, materials or equipment, and abstract items such as information, particles and time.
A Term First Used in the Military
The term “logistics” is of military origin, referring to organization of the delivery of weapons and soldiers to the correct place at the correct time. The importance of timing and place in war called for special precision and integration when it came to logistics procedures.
Logistics – Its Four Key Activities
As mentioned at outset, logistics is about managing the flow of goods from raw material (upstream) to the end customer (downstream). The process may be divided into four key activities:
1) Inbound Logistics – It is associated with the focal company or firm and its upstream suppliers. A focal company/firm is that which commences a global business transaction: it visualizes, designs and brings into being the resources or goods meant for consumption.
2) Outbound Logistics – It has to do with links between the focal company/firm and its downstream customers.
3) Internal logistics – It has to do with planning and regulation of material flow within the borderlines of the focal company/firm.
4) Reverse Logistics – The activity involves return of resources or goods in a direction that is in reverse to normal flow (downstream to upstream). The resources include repairs, maintenance, returns and end-of-life returns for dismantling and recycling.
A suitable procedure of logistics and a productive supply chain can help a company reduce costs and boost efficiency.