What is logistics exactly?
The dictionary defines logistics as:
“The management of materials flow through an organization, from raw materials through to finished goods.”
This is a broad definition which covers a lot of different aspects of the company. Material flow through the organization can refer to many things.
First of all, material can be divided into three categories:
- Material coming into the building
- Material going out of the building
- Material moving around within the building.
When we think about what logistics is, it’s really the management of this flow through the factory.
1. Material coming in.
In any manufacturing process something is being changed into something else. The material coming in is what is need to make this change. Raw materials like plastic pellets or steel coils are ordered from suppliers and delivered into the plant at the appropriate time.
A trained supply chain manager calculates how much inventory is necessary to sustain the requirements of the business. He has to develop the most efficient way to deliver the many different materials required and determine how frequently to order material. Transportation to the plant can be done in large batches or with milk runs to different suppliers.
2. Material going out.
After the product has been created by the factory it has to be delivered to the customer. Once again, many factors have to be considered. Most factories make many different products that must go to a multitude of locations, whether to distributors or directly to the end user. How to get the product to the end user as efficiently as possible isn’t an easy task.
Customers have different requirements for how frequently product needs to be delivered to them. Some want large batches, but most want small batches as frequently as possible. This can be difficult to manage with many products and many customers. Customer demand can change on a whim and interfere with the best laid plans.
Managing how the parts are packaged is also an important part of logistics. Depending on the distance traveled or the units required, different packaging is necessary. Reusable packaging has to be returned to customers and suppliers.
3. Material within the process.
All this material has to be converted from raw material to a product that the customer wants. This can be a complicated process depending on the part being produced. The material handling flow inside a factory is critical for ensuring a smooth and profitable business.
Material conveyed from one process to another requires a forklift fleet or conveyor system. Determining the batch sizes produced at each process is an important factor in affecting how much inventory to carry inside the plant. Once again, fluctuations in customer demand and how often orders are made impact the inventory levels as well.
Warehousing is a large component of logistics management. Many companies have large warehouses or distribution centres located in strategic areas, where nothing is done except storing parts for delivery or processing.
So, what is logistics?
Logistics is a complicated flow of material that needs to be constantly managed, tuned and adjusted to ensure an organization produces products smoothly, without interruption, to the complete satisfaction of its customers.
Individuals trained and certified in logistics management are highly valuable, since all manufacturing companies have a material flow to manage.