Logistics

What is Logistics?

Logistics refers to the planning, coordination, and execution of the movement and storage of goods, services, and information from origin to consumption. It ensures that the right products reach the right place, at the right time, in the right condition, and at the right cost.

Key Takeaways

• Core function within supply chain management.
• Focuses on efficiency, reliability, and cost control.
• Critical to customer satisfaction and competitiveness.

Understanding Logistics

Logistics covers inbound flows (raw materials and inputs), internal movements (handling and storage), and outbound distribution (delivery to customers). It integrates transportation modes, inventory systems, warehousing operations, and information technology.

Effective logistics reduces lead times, lowers costs, improves service levels, and enhances resilience. Poor logistics can result in stockouts, excess inventory, delays, and higher operating costs.

With globalization and e-commerce, logistics has become increasingly complex, involving cross-border regulations, last-mile delivery, and real-time tracking.

Formula (If Applicable)

There is no single formula, but common performance metrics include:

• Order Fulfillment Rate: Orders Delivered ÷ Orders Placed
• Inventory Turnover: Cost of Goods Sold ÷ Average Inventory
• Logistics Cost Ratio: Logistics Costs ÷ Revenue

Real-World Example

• A retailer uses regional distribution centers to deliver products within 48 hours.
• A manufacturer coordinates inbound shipments of components from multiple countries.
• An e-commerce platform optimizes last-mile delivery to improve customer experience.

Importance in Business or Economics

Logistics is important because it:

• Enables efficient trade and market access.
• Reduces operational costs and waste.
• Supports scalability and growth.
• Directly affects customer satisfaction and brand perception.

At a macro level, logistics performance influences national competitiveness and economic development.

Types or Variations

• Inbound Logistics: Receiving and storing inputs.
• Outbound Logistics: Distribution to customers.
• Reverse Logistics: Returns, recycling, and disposal.
• Third-Party Logistics (3PL): Outsourced logistics services.

Related Terms

• Supply Chain Management
• Inventory Management
• Distribution

Sources and Further Reading

• Investopedia – Logistics and supply chain basics.
• World Bank – Logistics Performance Index.
• OECD – Trade logistics and infrastructure.

Quick Reference

• Scope: Transport, storage, inventory, information.
• Goal: Right product, right place, right time.
• Impact: Cost, speed, and service quality.

Frequently Asked Questions (FAQs)