Logistics is a term used to define the process of moving goods from point of origin to point of use, notwithstanding the process of reverse logistics, which describes the process in which finished goods get put back into the Supply Chain to create added value.
The definition of Logistics has been a constant for many years, with origins going back to the Military, the term Logistics simply represents moving product from Point A to Point B in the fastest and most cost effective way possible.
Although answering the question, “What is Logistics?” is relatively simple, the processes are far more complex.
- Tightening of the economy, currency fluctuations, increased competition and reduced margins have been catalysts for companies to take a closer look at their cost centres.
- Manufacturing, Warehouse Space, Inventory, Technology, Shipping Costs, Packaging, Staff and Material Handling Equipment, all represent a significant cost to a company; but yet are necessary to operate an effective Supply Chain.
Although many companies continue to manage their own supply chain, more and more companies choose to outsource their supply chain to specialist organizations; these organizations are called 3PL providers.
3PL providers manage inventory, storage and distribution of product. 4PL providers take it a step further; not only do they run inventory, storage and distribution; they also manage Customer Services, Reverse Logistics and other value added services.
Although this is not a new concept, we are starting to see more small to medium sized businesses adopting these options. Whilst it is beneficial for SMEs’ to invest into product development rather then capital expenses; it is also beneficial for SMEs’ to concentrate on sales and marketing rather than storage and distribution.
A Word of Warning
Freight companies are not 3PL providers, holding inventory does not make a freight company a 3P provider, when looking for a 3PL or 4PL provider do your due diligence, take a look at their current clients, take a look at their technology and finally make sure they can scale as your Business scales.
So, the original question “What is Logistics”
What is logistics? Logistics is a term, Supply Chain is the process, whatever you do make sure you can get your product from point A to point B as quickly and efficiently as possible. Here at 3PL we can guarantee the use of a third party will add value to your business.