What is logistics and what does it do?

Logistics is a component of entrepreneurial activity. In simple words, logistics is the optimization of management and production processes, which ensures stable, efficient business development. Science, studying the operations of supplying enterprises with raw materials, organization of deliveries and transportation, helps to accelerate production processes, increase profitability and profitability of business. 

What is logistics

To understand what logistics is, you need to remember the essence of entrepreneurial activity, which is reduced to the delivery of manufactured products to the end consumer. Employees of the logistics department manage the movement of commodity masses. Optimize and control the process of transferring goods from the manufacturer to the consumer. Logistician manages the supply of raw materials, avoiding forced downtime of the enterprise, monitors the timely shipment of finished products to wholesale and retail outlets, forecasts costs and revenues. Thanks to the work of the logistics department of the company reduces production costs, transportation and storage costs. 

Functions of logistics

Science develops, grows tools and methods that help to achieve the goal of finding a short, convenient route to deliver products from the place of manufacture to the consumer. The main function of logistics – minimizing the cost of production, transportation and storage of goods. Together with the reduction of costs there is an increase in profits. 

The tasks of logistics include the distribution of resources and loads. Rational use of labor and material resources leads to increased profitability of production. An example of rationalization of labor resources in the company can be the replacement of courier delivery of documents by electronic document management. Functions of logistics:

• Creating a stock of resources in the warehouse – component parts and materials for the production of goods. In this matter it is important to find a golden mean. Large stocks of raw materials are associated with the freezing of working capital. At the same time, keeping large stocks of raw materials in the warehouse means additional costs. As a result of long storage of raw materials, losses associated with spoilage, theft, reduction of consumer properties due to expiration of shelf life increase. If there are not enough parts and materials, the enterprise is idle, which means the loss of potential profit. 
• Storage organization. Preparation of goods for delivery to final consumers includes arrangement of storage areas, delivery of goods to the warehouse, sorting and packing, and batch picking. 
• Transportation from the warehouse to the point of sale. The process of delivery of goods to the end consumer consists of stages – selection of a suitable vehicle and optimal route, execution of accompanying and authorization documents. In the case of transportation of dangerous and valuable goods, specialists of the logistics department involve a freight forwarder and security guards. 

Logistics has to analyze route options to find the optimal cost of cargo transportation. The speed of delivery of goods is of great importance. During transportation, logistics department employees track the location of the cargo, control the speed of movement in accordance with the planned schedule, communicate with the driver and freight forwarder, solve problems. Organization of international cargo transportation requires compliance with the standards and legal regulations in force in the countries through whose territory the truck passes. Customs clearance of cargoes is a mandatory stage in the organization of international cargo transportation. 

What kinds of activities logistics covers

Logistics affects different types of activities – procurement of raw materials, production of products, organization of warehousing and transportation, legal and legal support of working operations. What logistics does:

• preparation of goods for transportation – packaging, labeling;
• selection of transportation means taking into account the peculiarities of the cargo (perishable, oversized, liquid or bulk, hazardous);
• development of the route in order to minimize costs – reducing fuel and escort costs;
• intermediate placement in the warehouse;
• formation of prefabricated cargoes. 

Logisticians determine the optimal packaging for goods, taking into account weight and recyclability. A team of specialists works on preserving the consumer properties of products during transportation. If dairy products arrive at the store spoiled due to insufficient cooling, this is a flaw in the work of the logisticians. The logistics team selects carriers, taking into account fluctuating tariffs and contractual obligations. The tasks of the logistics department specialists include order processing, inventory control, managing transportation, warehouses, employees in the field, and forecasting supply and demand. 

Types of logistics

To learn all about logistics, it is worth getting acquainted with the types of logistics activities, which covers a variety of industries, including procurement and inventory management. Logistics can be transportation, warehousing, customs. Transportation logistics is implied in most cases when it comes to this field. The objectives of transportation logistics:

• Planning and organization of cargo transportation, taking into account legal aspects;
• monitoring the delivery of goods;
• time calculation and risk forecasting;
• creation of conditions for cargo safety, management of intermediate storage.

Delivery of goods to the destination point is carried out by different modes of transportation, including road, rail, air, river and sea. Multimodal cargo transportation involves the use of several modes of transportation. Delivery of dangerous, perishable and oversized cargo requires special transportation. When transporting small batches of goods, prefabricated cargo transportation is of special importance. From small shipments that need to be delivered to one region, a large one is assembled, which allows to reduce transportation costs. 

Logistics and business

Logistics in business is a component of commercial success. The company wins in competition by reducing production costs and production costs, which allows it to set minimum prices for the end consumer. Other important conditions for successful business are preservation of consumer properties of goods during transportation and storage. To maintain high customer demand, it is important to offer fresh products, quality goods that look attractive and fulfill the intended functions. 

Timeliness of delivery means replenishing inventory on store shelves to meet the needs of customers. Product shortages at retail outlets result in lower brand trust and loss of potential profits. Distribution logistics deals with the movement of goods from the point of manufacture to the point of sale. Specialists in this area are guided by criteria:

• The level of demand for the goods.
• Compliance of goods with quality standards.
• Compliance with the terms of delivery of goods in the required quantity.
• Minimization of delivery costs.

Tasks in logistics are fulfilled if the cargo is delivered in time to the desired point without loss of commodity appearance and properties. Transportation costs affect the cost of production. Reducing costs means increasing the profitability of the business. 

Importance of logistics

Logistics plays a fundamental role in different areas of business, including supply chain. The importance of logistics can be realized by recalling the words of the French commander Napoleon: “An army marches on its stomach”. This means that adequate and uninterrupted supply of provisions to troops contributes to military success. 

The scheme works the same way in business. Organization of rhythmic supplies of raw materials leads to continuity of the production process. Without efficient logistics, a business will lose the war for profitability. The logistics industry handles trillions of dollars each year that businesses spend to move goods from the point of production to the consumer. The movement of goods occurs through an established supply chain. 

Logistics is the movement of goods from point A to point B with transportation and warehousing processes in between. Supply chain is the network of businesses that are involved in the movement of goods. The success of the logistics department depends on the details:

• developing routes taking into account feasibility, maximum speed and minimum cost;
• transportation of goods taking into account regulatory and legal standards;
• reducing the impact on the work process of obstacles in the form of road repairs, congested highways and traffic jams, military actions, unfavorable weather conditions. 

The success of logistics activities depends on attention to detail, from the thoughtful packaging of goods to the execution of accompanying documents. Inefficient logistics in the best case leads to a decrease in the profit of the enterprise, in the worst case becomes the cause of financial losses and losses. Effective logistics is reflected in the benefits of:

• cost reduction;
• increased productivity of the enterprise;
• rational use of warehouse space and inventory management;
• improvement of service quality and customer satisfaction, creation of a favorable brand image. 

The logistician selects the intermediate storage warehouse taking into account the priority mode of transportation. If the goods are to be transported by road, access roads are required, while loading bays are needed for railroads. When placing goods in the warehouse, the logistician takes demand into account. Goods of lower demand are placed in the far parts of the warehouse, and those of higher demand – in the near parts. The result of rational inventory placement is reflected in faster loading times and lower labor costs. Successful logistics combines planning and strategy. Correctly chosen tactics make the ordinary movement of goods bring profit.