The Definition, Evaluation, and Role of Logistics In Business

The definition of logistics is simple. Logistics is the flow of material, information and money between consumers and suppliers. The confusions of logistics definition enters when it is confused with many of the buzzwords - mixed up with the objectives of logistics.

Let we review five different contexts for logistics evaluation.

1. Workplace Logistics

Workplace Logistics is the flow of material at single workstation. The objective of workplace logistics is to streamline the movements of individual working at machine or along the assembly line.

Today, the popular name for workplace logistics is ergonomic. 

2. Facility Logistics

Facility Logistics is the flow of material between workstation within facilities. The facility could be a factory, terminal, warehouse, or distribution center. Facility logistics has been more commonly referred to as material handling.

Today, the term of material handling has fallen out of favor because of its association with nonvalue added activities.

In the 1960s, material handling, warehousing, and traffic management were grouped together to become know as physical distribution; procurement, marketing, and customer service were grouped together become know as business logistics.

3. Corporate Logistics

As management structures advanced and information systems accordingly, our ability to assimilate and synthesize departments (material handling, warehousing, and so on) into functions (physical distribution and business logistics) in 1970's permitted the first application of true logistics within corporation. 

Corporate logistics is the flow of material and information between the facilities and process of corporation (inter-workstation, inter-facility, and intra-corporate). Corporate Logistics is sometimes associated with the phrase physical distribution that was popular in the 1970s.

4. Supply Chain Logistics

Supply chain logistics is the flow of material, information, and money between corporations (inter-workstation, inter-facility, inter-corporate, and intra-chain). 

There is a lot of confusion surrounding the terms logistics and supply chain management. The distinguish the two by explaining that supply chain is the network of facilities (warehouses, factories, terminals, port, stores and even homes), vehicles (truck, trains, planes, and ocean vessels) and logistic information system (LIS) connected by an enterprise's supplier's supplier and customer's customers.

Logistics is what happens in the supply chain. 

Logistics is activities (customer response, inventory management, supply, transportation, and warehousing) connect and activate the objects in the supply chain.

To borrow a sports analogy, logistics is the game played in the supply chain area.

It is unfortunate that the phrase supply chain management has been so readily and commonly adopted as a reference to excellence logistics. 

First, it is not supply (or demand) that should dictate the flow of material, information, and money in logistics network. Actually, there are some links in the chain and some circumstances in which supply should dictate flow and some in which demand should dictate flow. 

Second, if you drew lines connecting all the trading partners in typical supply chain, what we would see would not look anything like a chain. You would see something that looks more like a complex we of link or spaghettis.

Finally, the term management suggest that a single party in the chain can truly manage and dictate the operations of supply chain. 

5. Global Logistics

Global logistics is the flow of material, information, and money between countries. Global logistics connects our suppliers' suppliers with customers' customers internationally. 

Global logistics is much more complex than domestic logistics, due to the multiplicity of handoffs, players, languages, documents, currencies, time zone, and cultures that inherent to international business.

Next-Generation Logistics

There are many theories as to the next phase of logistics development. Many logisticians believe that collaborative logistics, logistics models built with continuous and real-time optimization and communication between all supply chain partners, will be the next phase evolution.

Other camps in the logistics community believe the next phase of evolution will be virtual logistics or fourth-party logistics, where all logistics activities and management will be outsourced to third-party logistic provides who are turn managed by master or fourth-party logistics providers acting kind of like a general contractor.  

--Yudi Hermawan--

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