What is logistics and how does it affect business?

Introduction to Logistics

Definition of Logistics

Logistics is a complex set of activities aimed at optimizing the management of goods and information flows at all stages of their movement from the manufacturer to the end consumer. The goal of logistics is to reduce costs, improve operational efficiency, and enhance customer service quality.

History of Logistics

The use of logistics in the economy began long before the term itself appeared. In ancient times, logistics was associated with the transportation and distribution of goods for armies. Special logistics units were created in the Roman Empire to handle supply and logistics for military campaigns.

In its modern form, logistics started to develop in the 20th century with the increase in the scale of production and distribution of goods. In the 1950s and 1960s, logistics began to be recognized as a separate science, and the first educational programs were established.

Since the 1970s, logistics has permeated global business and has become an integral part of supply chains. In the 1990s, new technologies in logistics and supply chain management were developed, significantly impacting business development worldwide.

Thus, logistics existed long before the term itself appeared, and its importance and significance for businesses continue to grow to this day.

The Importance of Logistics for Business

Process Optimization and Cost Reduction

In logistics, process optimization and cost reduction are two key factors that can enhance a company's operational efficiency and improve its financial performance. To achieve these goals, various methods and tools, as described in the article you provided, need to be utilized.

One important method for process optimization in logistics is the use of technologies and software to automate and improve inventory management and warehouse logistics processes. This may involve the implementation of inventory management systems, automated storage and retrieval systems, and unmanned aerial vehicles for cargo delivery.

Another method of process optimization is improving the transportation scheme of goods. This can be achieved through the application of various technologies and approaches, such as route optimization, load optimization, and the utilization of multimodal transportation solutions.

Improving Service Quality

The ultimate goal of any logistics operation is to provide customers with high-quality service that meets their expectations. Here are some examples of how service quality can be improved in logistics:

• Improving inventory management systems to enable customers to receive their orders faster and more accurately.
• Developing and utilizing technologies for tracking and managing shipments that allow customers to track their orders in real-time.
• Optimizing delivery routes to reduce delivery time and transportation costs.
• Implementing loyalty programs that provide customers with bonuses and discounts for repeat orders.
• Establishing customer support services ready to answer questions and assist with any issues.
• Implementing stringent quality control procedures to ensure compliance with customer requirements and quality standards.

Improving the Logistics Chain

Improving the logistics chain involves optimizing the entire sequence of logistics operations from procurement to delivering the end product to the final consumer. The aim is to reduce costs and increase efficiency, ultimately leading to improved customer service quality and enhanced competitiveness in the market.

Examples of improving the logistics chain include:

• Optimizing transportation processes to reduce transportation costs and shorten delivery times.
• Developing and utilizing new technologies for managing logistics processes.
• Optimizing delivery routes using advanced technologies.
• Improving communication between chain participants through a unified information system.
• Optimizing warehouse logistics, including the use of automated inventory management systems.
• Implementing new technologies and innovations, such as drone delivery.

Functions and Tasks of Logistics

Purchasing and Inventory Management

Purchasing and inventory management are essential functions of logistics that ensure continuity of production and meet customer needs.

For example, consider a company that produces and sells a popular beverage, but it needs to procure sugar, water, and other ingredients. To effectively manage inventory, the company must understand the demand for the beverage, forecast it, and determine the necessary quantities of ingredients to purchase.

To optimize inventory management, a company can utilize automated procurement and inventory control systems that track inventory levels, forecast demand, optimize stock levels, and reduce storage costs.

In addition, the selection of suppliers and quality control of goods and materials are crucial aspects of inventory management. A company needs to have a supplier evaluation and selection system that considers not only price but also factors such as quality, delivery times, payment terms, and more.

It is also important to control the shelf life of goods and store them correctly to avoid quality losses and product damage. For example, a company may use specialized storage facilities that provide the appropriate temperature and humidity levels to preserve ingredients in optimal condition.

Overall, effective inventory management reduces purchasing and storage costs, ensures continuity of production, and satisfies customer demands for the required goods and services.

Transportation and Warehousing

Transportation and warehousing are key tasks in logistics. Transportation ensures the delivery of goods from the manufacturer to the end consumer, while warehousing provides temporary storage of goods throughout the logistics chain.

One of the main challenges in logistics is selecting transportation modes and delivery routes. Logisticians need to analyze various factors, including the type of goods, distance, delivery time, cost, and transport availability. Additionally, legislation and customs requirements must be taken into account.

Warehousing plays a vital role in optimizing logistics processes and inventory management. Effective warehousing reduces delivery time and increases the overall speed of goods movement. Logisticians must know how to store goods properly to avoid damage and losses, as well as control inventory levels.

Distribution and Delivery

The final stage of the logistics chain, distribution and delivery of goods, is a critical element that impacts customer satisfaction. Logisticians must ensure accurate delivery execution, taking into account factors such as the customer's location, delivery schedule, and specific requirements.

In modern business, with increasing competition, companies rely on efficient logistics operations. Consequently, the importance of logistics services and the number of companies offering such services have grown.

Customs Clearance and Import-Export

Customs clearance and import-export are important functions of logistics. They involve a range of procedures necessary for handling inbound and outbound goods and managing international shipments.

A specialist needs to have a good understanding of customs procedures and international trade legislation. They must ensure compliance with all requirements during customs clearance and consider customs duties, taxes, and other charges.

Additionally, exporting and importing goods require logistics professionals to manage international transportation and adhere to all legal and security requirements. Logisticians must also be familiar with the specific customs procedures of different countries and account for differences in customs rules and procedures.

Types of Logistics

Logistics is an essential element of any business, encompassing various aspects that can significantly impact organizational efficiency and performance. Let's take a closer look at the main types of logistics.

Transport Logistics

In any business, the final product has no value if it cannot be delivered to the right place on time and safely. Transport logistics is a branch of logistics that ensures reliable and efficient delivery of goods from the manufacturer to the end consumer.

Transport logistics involves the selection of optimal transportation modes and routes, as well as the management of all stages of delivery, from loading to unloading. It covers various aspects, such as route selection, freight optimization, choice of suitable transportation modes, and delivery management.

Transport logistics encompasses different modes of transportation, including road, rail, sea, and air. The choice of transportation mode depends on factors such as delivery cost, time, nature of the goods, and volume. Transportation logistics specialists assist in selecting transportation options that minimize delivery costs.

Transport logistics also includes the management of all stages of delivery, including planning, tracking, and coordinating freight transportation. Logistics professionals monitor every step of the delivery process to ensure that goods are delivered on time and according to customer requirements.

Procurement Logistics

Procurement logistics is a part of logistics that focuses on organizing and managing procurement processes. It includes procurement planning, supplier search, supplier evaluation and selection, as well as supply management.

One of the main objectives of procurement logistics is to reduce procurement costs and improve the quality of goods and services purchased by the company. To achieve these goals, procurement logistics utilizes various methods and tools, such as market analysis, supplier selection based on quality, price, and delivery time, and quality control of goods and services.

Procurement logistics is closely related to other parts of logistics, such as production logistics and warehouse logistics. It ensures the supply of necessary materials and components for production and manages inventory on the warehouse level.

Properly organized procurement logistics allows a company to not only reduce costs but also improve the quality of its products or services, enhancing its competitiveness in the market.

Inventory Logistics

Inventory logistics is a branch of logistics that focuses on managing stocks of materials and goods required to maintain uninterrupted business operations. Inventory logistics aims to minimize inventory levels, ensure timely delivery of goods, and reduce costs associated with inventory storage.

The main tasks of inventory logistics include:

• Determining optimal inventory levels
• Planning and forecasting material and goods requirements
• Supply management
• Timely delivery of goods to the company's warehouse

Inventory logistics is also connected with other types of logistics, such as transport logistics and warehouse logistics. It ensures the timely delivery of goods to the warehouse and their proper storage and management.

Properly organized inventory logistics enables a company to minimize costs associated with inventory storage and ensure timely fulfillment of production needs. It also allows the company to be more responsive to changes in demand for goods and services, enhancing its competitiveness in the market.

Information Logistics

Information logistics is an area of logistics that focuses on managing the flow of information related to logistics operations.

Some key information technologies in information logistics include:

• Warehouse management systems
• Cargo tracking and monitoring systems
• Order management systems
• Information security
• Protection of confidential data

The goal of information logistics is to ensure a smooth flow of information among different participants in the logistics chain. This helps to streamline logistics processes, reduce costs, and improve the overall efficiency of the supply chain. It is important to note that information logistics is closely interconnected with other types of logistics, such as transport logistics, warehouse logistics, and more.

Production Logistics

Production logistics is crucial for businesses involved in manufacturing goods or providing services. It aims to improve business efficiency, reduce costs, and enhance customer satisfaction. The goal of production logistics is to ensure the timely availability of necessary materials and components for production, as well as the delivery of finished products to the warehouse and subsequent distribution to customers. Various methods and technologies, such as optimization of production processes, reduction of manufacturing and transportation lead times, and cost reduction in logistics, are employed to achieve this goal.

Planning and control of production processes are important components of production logistics. There are several systems used for production logistics planning, such as ERP, MRPII, APS, and MES. Each system has its own features and applications depending on the needs of the enterprise.

To optimize the transportation of finished products to customers, routing, freight optimization, and selection of the most efficient mode of transportation are utilized. It is important to consider environmental aspects when planning and managing production and logistics processes.

Production logistics is closely interconnected with procurement logistics and inventory logistics. It is necessary to ensure a continuous supply of materials and components for production, as well as organize the storage of finished products in the warehouse. Effective inventory management and selection of optimal methods and technologies for storage and transportation of goods are essential. The use of automated warehouse systems is one direction in production logistics.

Distribution (Sales) Logistics

Distribution logistics, also known as sales logistics, is a type of logistics that focuses on the organization and management of product delivery from the manufacturer to the end consumer. Its goal is to ensure the delivery of products to the right place and at the right time, satisfying customer needs and enhancing the competitiveness of the business.

The main tasks of distribution logistics include planning and organizing the transportation of goods, inventory management in warehouses and retail points, order management, and handling returns. Within this process, delivery routes are developed, and optimal delivery methods are determined for each type of product.

An essential element of sales logistics is efficient warehouse management. This involves organizing the storage of goods in warehouses, which helps manage inventory and optimize storage costs. Prompt and accurate order fulfillment, as well as timely handling of issues and returns, are also crucial.

The use of information technologies to optimize logistics processes is an important factor in distribution logistics. Modern warehouse management systems and logistics information systems enable fast and accurate tracking of goods movement and inventory control, which speeds up order processing and reduces costs associated with storage and transportation.

Furthermore, when organizing distribution logistics, various factors need to be considered, including transportation costs, customs duties, taxes, and other factors that may impact the cost of delivering goods. It is also necessary to take into account the peculiarities of each region and country where the company operates and adapt logistics processes according to local rules and regulations.

Warehouse Logistics

Warehouse logistics is a type of logistics that focuses on inventory management and the organization of storage facilities.

Tasks of warehouse logistics and modern technologies:

• Inventory planning to avoid shortages or excess stock
• Space management within warehouses for efficient space utilization
• Organizing the processes of receiving and shipping goods, quality control, and risk management
• Utilizing modern technologies such as automatic identification systems and warehouse process automation

Warehouse logistics enables the optimization of supply chains, reducing logistics costs through the use of optimal delivery routes and minimizing transportation times. It can also help reduce lead times and improve service quality, enhancing customer relationships.

There are several types of warehouses employed to optimize logistics processes, including:

• Storage warehouses: the most common type used for storing finished products and goods until they are sent for sale.
• Distribution warehouses: used for distributing goods to regions or stores.
• Transit warehouses: used for temporary storage of goods during transportation.
• Cross-docking warehouses: used for transferring goods from one transportation vehicle to another.
• Assembly warehouses: used for assembling components and parts into finished products.
• Order warehouses: used for storing goods until they are ordered by customers.

Improper warehouse management can lead to additional costs and risks, such as inefficient use of warehouse space, excessive inventory, product obsolescence, and losses. Insufficient quality control can also result in the shipment of defective goods and potential customer returns.

Customs Logistics

Customs logistics is an important aspect of international trade that involves the documentation and payment processes at borders, as well as quality control and security checks of goods. Its goal is to reduce the risks associated with cross-border transportation and ensure compliance with all requirements and standards.

The main task of customs logistics is to simplify and expedite the customs clearance process to reduce logistics costs. This is achieved through the use of electronic documents and simplified procedures, such as customs warehousing and transit.

Organizations must also ensure that goods comply with all requirements and standards set by customs authorities. This includes testing, certification of goods, and verification of compliance with safety standards. Customs logistics also includes packaging and labeling goods to facilitate the customs clearance process.

Customs logistics can be complex and demanding to manage, so companies engaged in international trade should have customs clearance and quality control specialists with the necessary knowledge and experience.

Customs logistics specialists are familiar with the procedures and formalities required for customs clearance. They ensure the timely submission of necessary documents and assist in meeting the requirements of customs authorities. Additionally, they deal with customs formalities and obtain export and import permits for goods.

Customs authorities may conduct inspections of goods crossing the border to ensure compliance with laws and regulations. Such inspections can take time and lead to delivery delays. The goal of customs logistics is to minimize the downtime of goods and ensure smooth transportation across the border.

Supply Chain Management

Supply chain management is crucial for the success of a business. With proper management of logistics processes, a company can enhance efficiency and reduce costs. In this text, we will explore key principles of supply chain management, including integrated planning and coordination, monitoring and risk management, as well as the use of technologies for process optimization.

Key Principles of Supply Chain Management (SCM)

Supply Chain Management (SCM) is the process of managing the flow of goods and services from suppliers to end consumers. The goal of supply chain management is to make the process more efficient and effective for all participants in the chain. The key principles of supply chain management include:

• Collaboration: A successful supply chain requires collaboration and partnership among all participants, from suppliers to end consumers.
• Planning: Plans need to be developed for each stage of the supply chain, from procurement to production, packaging, storage, and delivery.
• Quality Control: Quality control is necessary at all stages of the supply chain to ensure compliance with standards and requirements.
• Timeliness: It is important to ensure that all stages of the supply chain are performed on time to avoid delays.

Integrated Planning and Coordination

Integrated planning and coordination are key aspects of managing supply chains. It involves planning all processes, from production and procurement to delivery. Successful supply chain management requires ensuring that all processes are integrated and coordinated with each other.

Monitoring and Risk Management

Logistical supply chains can be subject to various risks, such as unforeseen delays, loss of goods, and even natural disasters. Therefore, successful supply chain management requires the ability to monitor and manage risks. This includes:

1. Risk Analysis: It is necessary to analyze potential risks in the supply chain and develop risk management strategies.
2. Contingency Plans: It is important to have contingency plans in place for unforeseen circumstances.
3. Communication: It is crucial to ensure that all participants in the supply chain are aware of potential risks and contingency plans.

Use of Technology for Process Optimization

Modern technologies can help optimize logistical processes, reduce costs, and improve efficiency. Some examples of technologies that can be used in supply chain management include:

1. Warehouse Management Systems: Warehouse management systems help automate storage and tracking processes, allowing for faster order processing and more accurate inventory management.
2. Automated Tracking Systems: Automated tracking systems can be used to monitor the movement of goods throughout the supply chain, speeding up delivery and improving quality control.
3. Electronic Data Interchange: The use of electronic data interchange can expedite the exchange of documents among supply chain participants and reduce order processing time.

Logistics Profession

A logistics professional is an expert who is involved in the planning, control, and management of the logistics chain, which includes the processes of sourcing, transportation, storage, and delivery of goods and materials from suppliers to end consumers.

Logistics professionals work in various industries, including manufacturing, trade, transportation, and warehousing, and their work directly impacts the quality and cost of products, as well as customer satisfaction. They utilize methods and tools for managing logistics processes, such as planning, coordination, monitoring, and optimization, to ensure the efficient functioning of the logistics chain and the achievement of the company's business goals.

Qualifications and Skills of a Logistics Professional

A logistics professional should have a good understanding of logistics processes, methods, and tools, as well as possess analytical thinking and data management skills. Additionally, a logistics professional should be able to coordinate the work of multiple stakeholders and ensure effective management of the entire logistics chain.

Career Growth Opportunities

Logistics is a dynamic and rapidly evolving field, which means that career growth in this profession can be quite fast. Starting a career as a logistics specialist, one can progress to positions such as logistics manager and logistics director. Additionally, there are opportunities to hold managerial positions in other areas of business.

Professional certifications and diplomas can also provide excellent career growth opportunities for logistics professionals. These credentials allow logistics professionals to enhance their professional expertise and explore new horizons in their careers.

In Russia, it is valuable for a logistics specialist to have a higher education degree in logistics, economics, management, or transportation. Many universities in Russia offer specializations such as management, logistics (transportation), and logistics and supply chain management.

Features of Logistics in Russia

Logistics in Russia has its own characteristics related to infrastructure and transportation, legislation and customs procedures, as well as market peculiarities and competition.

Infrastructure and Transportation

Infrastructure and transportation are key factors influencing the efficiency of logistics operations in Russia.

Despite some improvements in recent years, Russia's infrastructure still lags behind developed countries, which limits the possibilities for logistics operations. For example, traffic congestion in Moscow and other major cities in Russia often becomes a challenge for logisticians and can significantly hinder operations.

Legislation and Customs Procedures

In addition, legislation and customs procedures also have a significant impact on logistics in Russia. The need to comply with requirements and regulations governing the import and export of goods can slow down processes and increase costs. The implementation of new rules and legislative initiatives can also create complexities and uncertainty for logistics companies.

In Russia, there are several laws regulating logistics and customs procedures, such as the Federal Law "On Customs Regulation in the Russian Federation and Amendments to Certain Legislative Acts of the Russian Federation" and the "Customs Code of the Eurasian Economic Union."

The Customs Code of the Eurasian Economic Union contains information on customs procedures such as customs transit, customs warehousing, and processing on customs territory.

Market Peculiarities and Competition

Logistics in Russia is significantly influenced by market peculiarities and competition. For example, in a highly competitive retail environment, logistics companies are forced to provide more efficient processes for delivering goods and quality services in their storage and transportation.

The Russian logistics market, while being one of the most dynamic in the world, has its challenges. The main issues in logistics in Russia include high transportation costs, inefficiency of transportation infrastructure, and complexities in customs clearance.

Competition in the logistics market in Russia is also quite strong. Both local and international companies operate in the market, such as DHL, FedEx, UPS, and TNT. Some international companies have been forced to suspend or limit their activities in Russia due to sanctions imposed on the Russian Federation.

Digital Logistics

Key Principles of Digital Transformation in Logistics

Digital transformation is an integral part of the development of the logistics industry. It involves the application of various technologies to enhance efficiency and optimize processes. The key principles of digital transformation in logistics include the use of Big Data, the Internet of Things (IoT), artificial intelligence (AI), and automation.

The use of large structured data allows logistics companies to analyze vast amounts of information to make more informed decisions. For example, analyzing data on the movement of goods across the logistics chain can help determine optimal delivery routes, reduce transportation costs, and shorten delivery times.

The Internet of Things (IoT) also plays a significant role in the digital transformation of the logistics industry. It enables the monitoring of shipments at every stage of their journey, tracking location and temperature conditions, as well as monitoring the technical condition of transportation vehicles.

Artificial intelligence (AI) is used to automate processes in logistics, such as the allocation of shipments to routes and forecasting demand for transportation services. This helps reduce time and costs in executing tasks.

Examples of Innovative Solutions

Examples of innovative solutions in digital logistics include various platform and software solutions that accelerate, simplify, and optimize logistics processes.

A few examples of innovative solutions in logistics:

• Platform solutions, such as a service for searching and selecting transport for cargo transportation, help quickly find suitable transport for shipping goods.
• Territorial platform creation. This allows organizations and companies to be united on one platform for more efficient management of logistics processes.
• Federal systems, such as the Platon system, ERA-GLONASS, AIS Mercury, and EGAIS. These systems automate and expedite the processes of control and management in logistics.
• Blockchain technologies, which can be used to ensure security and transparency in logistics processes, including cargo tracking and payment for services. For example, leading freight carriers already use blockchain to create a reliable and transparent cargo accounting system that allows participants in the logistics chain to easily track the location of goods and monitor their movement.