What is Logistics?

Logistics, in its most basic definition, is the efficient flow and storage of goods from their point of origin to the point of consumption. It is the part of the supply chain process that plans, implements and controls the flow of goods. It can also be seen as the management of inventory, in rest or in motion. The word logistics was first used in the military service to describe the process of supplying a war zone with troops, supplies and equipment. The term is now used more commonly in the field of business.

A recent US study found that logistics costs account for almost 10% of the gross domestic product. The process itself covers a diverse number of functional areas. Involved in logistics are transportation and traffic, as well as shipping and receiving. It also covers storage and import/export operations.

The concept of logistics can be applied to specific areas of business. Acquisition logistics, for example, covers everything involved in acquiring logistics support equipment and personnel for a new weapons system for the military. This includes identifying, designing, defining, developing, producing, delivering and installing the new weapons system.

Another area is Integrated Logistics Support (ILS). This is a management function that provides funding, planning and controls to assure that the system meets the expected requirements. ILS is also expected to make sure the price of the goods is reasonable and the product is of the required quality.

Many businesses that deal with supply of goods or services have their own logistics department. For example, a company supplying photocopying paper around the world will have a logistics team. The manager will oversee or delegate to his staff the process from the point of origin. The team will deal with the acquisition of paper from the paper supplier all the way to the customer who requests the paper. The supplier and buyer may be located in different countries.

It is the logistics team who must make sure that products can be obtained at a reasonable price. They then have to make sure the product is shipped on time and will arrive when expected. The logistics team also has to deal with importing and exporting contracts, and possibly also with the customs department. The process at times can be a lengthy one, but once in place should run smoothly.