Definition of logistics

Logistics is a subset of supply chain management that focuses on the challenge of planning and coordinating the flow of materials and information.

Flow progresses from upstream (raw material) to downstream (the end-customer).  The logistics task can be broken down into four major activities:

  • Inbound logistics: deals with the focal company and its upstream suppliers
  • Outbound logistics: refers to links between the focal company and its downstream customers
  • Internal logistics: deals with planning and control of material flow within the boundaries of the focal company
  • Reverse logistics: the return of goods in the opposite direction to the normal flow (i.e., from downstream to upstream). These goods include product returns, repairs, maintenance and end-of-life returns for recycling and dismantling.

Example

A retailer cannot generate sales without stock, and is constantly walking the tightrope between too much stock and not enough.  Logistics in retailing is concerned with getting the balance right.  Essentially, this means having the right product on shelf in the stores in the right quantity at the right time.

The role of information flow is to share today’s demand information from the till (by means of point of sale systems, POS) with suppliers.  Retail POS enable checkout data to be used to update both inventories (to find out how much is in stock) and demand forecasts (to find out how many of each item do we think the consumer will buy tomorrow/ next week). Updated demand forecasts in turn trigger replenishment orders onto suppliers, The role of material flow is the fulfillment of replenishment orders for each item from suppliers through the retailer’s distribution centres to the stores. [1]