Logistics is a term that was introduced by the Ancient Greeks thousands of years ago. At that time, military leaders needed a comprehensive system that would help them deliver food, weapons, and medical supplies to the front lines quickly and efficiently. Military logistics helped the Greeks gain a competitive advantage over their adversaries.
In modern times, logistics is used by businesses all over the world to manage the flow of goods between producers and consumers. Often referred to as supply chain management, the primary objective of the strategy is to fulfill consumer demand with an efficient allocation of company resources. What is the supply chain?
The supply chain is a management strategy that breaks company processes down into separate sections or legs. As a general rule, there are three separate legs that most companies are responsible for. There is purchasing (raw materials), production (making the product), and distribution (shipping). The single most expensive leg of the modern supply chain is distribution.
No matter what a company makes, its stands to reason that they will be pretty good at it. More often than not, the only reason they went into business was because they believed they could make better products than their competition. But they may not have considered the costs of distribution. This final leg of the supply chain includes packaging, storage, and shipping. In other words, the company will have to pay to have products packaged, stored in a warehouse, and shipped by rail, truck, or plane.
Shipping is a complicated industry. It depends on several factors that cannot be predicted or known in the future. For example, fuel costs. In the last year, fuel costs have increased by more than a dollar a gallon, which has had a profound effect on the shipping industry. Huge trucks and planes burn gasoline like it’s going out of style, which means that the cost of shipping has skyrocketed, especially when it comes to temperature controlled transport.
When a company ships produce, meat, dairy products, beverages, and certain medications, it must arrange for temperature controlled transport. These third-party logistics providers can handle as many supply chain management functions as needed. Not only will they ship goods in temperature controlled transport, but they can also store them in climate controlled warehouses, if needed.
Modern managers often use the terms logistics and supply chain management interchangeably, but there actually is a difference. Logistics should be used to describe the strategies and techniques that are used in the distribution process, whereas the supply chain actually refers to the entire production process from the procurement of raw material to the delivery of finished products in temperature controlled transport.