Chapter Two

Introduction to
Logistics
 Chapter Outline
 Definition and Scope of Logistics
 Logistics from a historical perspective
 Economic impact of logistics
 Relationship b/n logistics and other
functional areas
 The role of logistics in supply chain
 Logistics engineering tool chest
 Logistics as an integrating function
 Definition and Scope of Logistics
What is logistics?
 Logistics is the process of coordinating how goods and
products are obtained, stored and distributed.
 It is also the process of planning and executing the
efficient transportation and storage of goods from the
point of origin to the point of consumption.
 Manufacturers rely on logistics while overseeing complex
operations in order to maintain efficiency, reduce costs
and ensure that consumers’ needs are met.
 Cont...
 Many companies provide logistics services to manufacturers,
retailers and other industries with a large need to transport goods.
 Some of these logistics providers own the full range of
infrastructure, from jet planes and trucks to warehouses and
software, while others specialize in one or two parts. DHL, FedEx
and UPS are well-known logistics providers.
 Originally, logistics played the vital role of orchestrating the
movement of military personnel, equipment and goods. Today, the
term logistics applies to any context that requires moving
commercial goods within the supply chain.
 Scope of Logistics
 Logistics is the backbone of the economy as it ensures the flow
of goods in an efficient and economic manner.
 The main reason why an organization stands in front is
because of their effective and efficient supply chain network.
 Logistics does not just include movement of goods but also the
management of the flow of products from the place of origin to
the place of consumption. In other words, the process of
logistics starts from the producer and ends with the consumer.
 Cont...
• Today everything is available in a fraction of time. The reason
why your online order reaches at your doorstep is because of
logistics. It is a vast field with a lot of opportunities for
talented and energetic future managers.
• The scope of logistics is very wide. It is not confined to only
manufacturing operations.
• Be it transportation of goods, warehousing, freight booking,
express cargo delivery services, container services, shipping
services or clearances, it is the duty of logistics personnel to
ensure that the goods are delivered to the customer without
any disruption.
 Logistics history: origin and development
 Logistics has played a crucial role in the development of
humanity throughout history. From the origin of logistics —
with the first efforts made to transport goods and supplies
— to today’s most complex management and distribution
systems, logistics has become a pillar of the business world.
 Every stage in the history of logistics has been marked by
technological advances and changes in transport, storage
and management methods. The goal? To improve
efficiency and the flow of goods and services.
 Historical development of logistics
Logistics has evolved significantly throughout history,
adapting to changing societal needs and technological
advancements.
 Antiquity: the origin of logistics can be traced back to
Mesopotamia, Egypt, China and Rome. These ancient
civilisations devised transport and storage systems to
supply armies, cities and trade. They used carts, ships and
pack animals, establishing strategic routes and
warehouses.
 Middle Ages: during this period, guilds and trade routes
played an essential part in the exchange of goods. Storage
and distribution methods took shape in markets.
 Cont...
 Industrial Revolution: the 18th century marked a turning
point in logistics. The invention of machinery, railways and
steamships transformed transport systems, enabling a faster
and more efficient flow of goods.
 20th century: logistics became a more formal area of study
and research. Mass production, globalisation and the
adoption of technologies such as the telephone, radio and
later, the internet, transformed logistics management.
Methods such as just-in-time and supply chain management
were introduced.
 Digital era: With the advancement of digital technology and
the advent of the information age, logistics underwent
radical changes. Warehouse and transport management
software, barcodes, RFID technology and real-time
traceability and tracking systems were developed.
 Cont...
 Logistics 4.0: Modern logistics, i.e., Logistics 4.0, is based on
digitalisation, artificial intelligence (AI), the Internet of Things
(IoT) and robotic process automation (RPA). Route
optimisation, the use of autonomous vehicles and the
implementation of automated warehouses are examples of this
new technological era.
 Logistics 5.0: following the emergence of Industry 5.0, a term
coined by the European Commission, the logistics industry
seeks to promote additional values vital to its future. These
include human well-being, sustainability and resilience. It also
fosters the strengthening of resilience strategies to shore up
the sector against sudden supply chain disruptions such as
those resulting from the coronavirus pandemic.
 Economic impact of logistics
• Logistics is the backbone of international trade and supply chain
management, playing a pivotal role in connecting markets, nations,
and businesses worldwide. From enhancing efficiency to fostering
economic growth, logistics is the driving force behind seamless
movement of goods and services across the globe.
• The importance of logistics in the global economy cannot be
overstated. It plays a vital role in facilitating the movement of goods,
services, and information across the world, contributing to economic
growth, efficiency, and competitiveness. Below are some key points
that highlight the significance of logistics:
 Cont...
 Supply Chain Efficiency
 Trade Facilitation
 Job Creation
 Competitive Advantage
 Market Access
 Support for Other Industries
 Economic Growth
 Innovation and Technology
 Disaster Relief and Humanitarian Aid
 Environmental Sustainability
Relationship b/n logistics and other functional areas
Logistics is deeply interconnected with various other functional areas within an
organization. Here are some key relationships between logistics and other functions:
 Supply Chain Management (SCM): Logistics is an integral part of supply chain
management, focusing on the physical movement and storage of goods from
suppliers to customers. SCM encompasses broader activities such as
procurement, production, and distribution, with logistics playing a crucial role
in ensuring the smooth flow of materials and information throughout the
supply chain.
 Operations Management: Logistics intersects with operations management in
areas such as inventory management, transportation scheduling, and facility
layout design. Operations management focuses on optimizing processes to
maximize efficiency and productivity, and logistics contributes by managing the
physical flow of goods and coordinating activities to meet customer demand.
 Cont...
• Marketing: Logistics and marketing are closely linked through the concept
of customer service. Logistics plays a vital role in fulfilling customer orders
accurately and on time, which directly impacts customer satisfaction and
loyalty. Marketing decisions, such as product design, pricing, and
promotion, influence logistics requirements, such as packaging,
transportation modes, and distribution channels.
• Finance: Logistics has significant financial implications, including
transportation costs, inventory carrying costs, and warehousing expenses.
Financial decisions, such as capital investment in transportation
infrastructure or inventory management systems, can impact logistics
operations and efficiency. Conversely, logistics performance metrics, such
as cost per unit shipped or order fulfillment cycle time, provide valuable
data for financial analysis and decision-making.
 Cont...
 Information Technology (IT): Information technology plays a critical role in
modern logistics operations, enabling real-time tracking and visibility of
goods, optimizing route planning and scheduling, and facilitating
communication and collaboration among supply chain partners. Logistics
systems often rely on IT solutions such as warehouse management
systems (WMS), transportation management systems (TMS), and
enterprise resource planning (ERP) software to streamline processes and
improve efficiency.
 Human Resources (HR): Human resources management is essential for
recruiting, training, and retaining qualified personnel to perform logistics
activities effectively. HR policies and practices influence workforce
productivity, morale, and performance, all of which impact the efficiency
and effectiveness of logistics operations.
 The role of logistics in supply chain
A supply chain is a network that creates products and services and delivers those
products and services to customers. Supply chains include marketing, sales,
financing, procurement, processing operations, maintenance, service, and
logistics.
 Product Supply Chains
Product supply chains start with the demand from a customer for a product.
Products begin in the form of raw materials that must be sourced, gathered,
converted, and manufactured into the required products. Then, the product is
transported to end-users. Products will often stop at warehouses as they move
through the product supply chain. Logistics supports the transportation steps in
supply chains.
 Cont...
Logistics can be categorized as :
 Internal logistics
The logistics of moving materials, parts, and products inside a facility or
single location
 External Logistics
The logistics of moving materials, parts, and products between multiple
locations, such as: suppliers, factories, distributions centres, receiving/
shipping docks (inbound and outbound logistics) customers
 Cont...
 Information Supply Chain
The information generated by each process in a supply chain supports the supply chain’s
logistics networks and operations. This information is itself a supply chain. Consider that
similar to products, information is comprised of raw materials such as data and artifacts,
that are processed into information such as knowledge, documents like bills of lading,
certificates such as health and safety certificates, approvals, and reports.
Logistical activity is required to move that information and then store it. In contrast to
the physical movement of products, information is moved or transmitted through
information systems and electronic data interchange (EDI). Information can be found in
reports that need to be distributed in hardcopy, digital, and electronic formats. Storage
then takes place in databases, servers, and data warehouses.
 Cont...
 Service Supply Chain
Services like haircuts, accounting services or legal advice also have a
supply chain. Services unlike products are typically intangible and
require supply chain processes that acquire products, knowledge, and
develop talent that will be used in the provision of services to
customers. Logistics for services depends on producing and supplying
products like scissors for barbers, computers for accountants, and
cyber-secure information systems to ensure confidentiality of electronic
documents for paralegal services.
 Cont...
 Reverse Supply Chain
Whilst downstream logistics refers to the forward movement of raw materials
through multiple steps of production, storage, and transportation of final
products, upstream logistics refers to the reverse direction movement of
products from the customer back through one or more steps of the forward
logistics process.
Reverse Supply Chains, therefore, refer to the backward flow of products from
downstream to upstream in a supply chain. This process may occur if an item is
returned to the manufacturer due to damage, for example, reverse logistics
would move these products back to their point of origin or another
destination, such as a repair center, upstream in the process.
 Cont...
 Circular Supply Chain
Circular Supply Chains are a development from the traditional linear product
supply chain. They start with raw materials, convert them to products, and
then back to the raw materials from whence they started. These types of
supply chains emphasize reusing waste materials and returned or old
products. Sustainability, social, and economic responsibility are integral to
circular supply chains.
Logistics in supply chains considers the total system cost in planning and
managing the transportation and storage of products. Starting from the
extraction point of the raw materials back to the re-entry of these same raw
materials after their initial product life has expired, back into the beginning
of a new supply chain in the next life cycle they will experience.
 Logistics engineering tool chest
 The Logistics Engineering Tool Chest is a concept often used in the field
of logistics engineering. It refers to a collection of methods, techniques,
software tools, and best practices that logistics engineers utilize to
analyze, design, optimize, and manage logistics systems effectively.
 This tool chest typically includes various analytical models, simulation
software, optimization algorithms, data analysis techniques, and
decision-support systems tailored to address specific challenges in
logistics, such as transportation routing, inventory management, facility
layout design, and supply chain optimization.
 The Logistics Engineering Tool Chest serves as a resource for logistics
professionals to streamline processes, improve efficiency, reduce costs,
and enhance overall performance within logistics operations.
 Logistics as an integrating function
 Integrated logistics refers to the seamless coordination and
management of all the activities involved in the movement and storage
of goods from their point of origin to their final destination. It involves
the integration of various supply chain components, such as
transportation, warehousing, inventory management, and order
processing, to create a unified, efficient system.
 By breaking down silos and promoting collaboration between different
functions, integrated logistics enables businesses to optimize their
supply chains, reduce costs, and improve overall efficiency. This holistic
approach to logistics management not only streamlines operations but
also enhances visibility, allowing businesses to respond more effectively
to market demands and customer needs.
The End