What is Logistics?

Definition: Logistics is an activity that plans and coordinates the flow of resources within an organization. It is the management framework that controls how goods and services move through a supply chain.

What Does Logistics Mean?

Logistics is a process that starts with a requirement and finishes with the fulfillment of that requirement. In business and military, logistics deal with how to get something from point A (regularly, the supplier or source) to point B. From an organizational perspective it includes processes such as purchasing, shipping, handling and quality assurance, among others.

There are many elements that play key roles within a logistical structure, for example, prices and volumes are reviewed to make sure they fulfill what it is being required. Quality assurance deals with the precision of what is being acquired and shipping and handling regulates and control the time that takes to move the items from the shipping point to the delivery point.

Logistics play a crucial role to ensure high levels of productivity, since it can reduce the time it takes to get what is being demanded in the hand of those that are manufacturing or delivering the goods and services to the final customers.

Example

All Keys LLC is a company that manufactures generic door keys for locksmiths to replicate. The company is currently buying its raw material from a supplier located in their own country, but after doing some research the Supply Chain Manager identified a cheaper supplier on another country. In order to make the purchase they need to figure out the logistical process involved. The manager asked his team to figure out what would be the final price paid (including shipping), the handling and customs requirements and the transit time.

After reviewing all logistical aspects of the transaction the company decided not to move forward with the purchase since it turned out to be more expensive to purchase and import the material than to keep buying it from their local supplier.