What is Logistics?

The emergence of Logistics is intertwined with the history of mankind. A story that gained greater complexity when ancient nomadic peoples settled in settlements and lived off agriculture, approximately 12,000 years ago. Gradually, paths were created between these settlements, which would later become cities and then nations. The paths would become roads, through which the commerce of the Ancient Age would flow. Who has not heard, for example, of the Silk Road, which connected China to the West? Many empires only became viable thanks to what we understand today as Logistics. This is the case of Egypt, which for 4,000 years already stored grain for the off-season and dry periods. Or European countries, which gained fortunes by conquering other continents thanks to their large ships.

An evolution that seems logical and rational. Incidentally, one of the meanings of Logistics is linked to Mathematics. It is the name given to the part of algebra that deals with the four arithmetic operations (addition, subtraction, multiplication and division). Definition present in the Priberam dictionary, which uses the word Logistics to further define mathematical logic, as well as modern logic as a combinatorial science. The same dictionary also defines this word as “ part of the military art that deals with supporting troops with regard to food, ammunition, health, transport, etc. ”.

Incidentally, it was in the military environment, due to the countless wars fought throughout history, that the concept evolved in complexity and migrated to the business universe. According to the website umov.me, “ the first time the concept of logistics was published and, consequently, gained more visibility was due to the book by Lieutenant Colonel George Cyrus Thorpe, entitled ‘Pure Logistics: the science of preparing for the war’ of 1917. With that, logistics conquered a higher level in the concepts applied to war, with the words strategy and tactics ”.

Today, in the corporate world, “ Logistics is that part of supply chain management that plans, implements and controls the efficient and economical flow and storage of raw materials, semi-finished materials and finished products, as well as information to them relative, from the point of origin to the point of consumption, in order to meet customer requirements ”. This definition was formulated by the Council of Supply Chain Management Professional (CSCMP) and published on the blog egestor.com.br.

In the Summit Mobility 2022 section, Jornal Estado de São Paulo, published a text talking briefly about Logistics, where it described, in a didactic and brief way, the operation of one of the most complex segments of the business environment: “There are several ways to understand the operation of logistics. One of the classic ways is to separate this specialty of administration into two types of activity:

• major — Shipping, inventory management, and order processing;
• secondary—warehousing, material handling, packaging, purchasing, product management, and management systems.

It is also important to highlight that the logistics chain — as the process through which the goods go through is called — can be organized into three phases:

• Procurement — Supply and raw material management for industries, including supplier order processing, transportation, warehousing, and distribution;
• production — Control stage of the so-called SKUs (product stock codes), in addition to the flow of goods, supply and initial distribution of items;
• distribution — Management of customer orders and the means of distribution used for this, including inventory management, storage and delivery by various routes. ”

Lay people usually divide Logistics between Transport and Warehousing. This is not wrong. It’s just too simplistic. Especially at a time when e-commerce has become essential for the functioning of the economy. And without good logistical performance, it would be impossible to carry out any type of negotiation in the online universe.

Currently we have many types of Logistics. See now some of them, in a list created by the site contaazul.com:

• “ Supply logistics — Supply logistics, or inbound logistics, is focused on the supplies, goods and raw materials necessary to guarantee the company’s resources. Its function is to plan and manage the materials so that they are always available according to demand, in addition to controlling their storage and transport. 
• Production logistics — Production logistics is used in industries to manage the process of converting raw materials into final products.
• Distribution logistics — Distribution logistics, or outbound logistics, is the area responsible for planning deliveries. The sector professional takes care of the output of products to distribution centers, points of sale or end consumers, fulfilling functions such as creating delivery routes, managing carriers, hiring drivers and tracking deliveries.
• Reverse logistics — Reverse logistics has the main function of planning the return of materials and products to the company, forwarding post-sale or post-consumption collection. Some companies are required by law to implement reverse logistics policies to collect packaging and waste from their products, such as manufacturers of pesticides, tires, oils and electronics. In other cases, management is focused on the flow of exchanges and returns of products, as in e-commerce when the customer gives up on the purchase or receives a defective item.
• Third Party Logistics (3PL) — Third Party Logistics (3PL) is an outsourced model used by e-commerce companies. In this case, the company hires a 3PL provider to handle the entire customer ordering process, shipping, delivery, exchange and return. When the organization is responsible for all logistics, we use the term “1PL”, and when it hires a carrier to handle deliveries, the system is called “2PL”.  
• Fourth Party Logistics (4PL) — In Fourth Party Logistics (4PL), the company also outsources the entire logistics process, but there is a higher degree of optimization. 4PL providers are also called Lead Logistics Partners (LLP) as they offer a high level of service that includes managing other 3PLs with a single point of contact. There is also FIFTH PART LOGISTICS (5PL) , which offers innovative solutions and uses advanced technologies such as artificial intelligence, automation, blockchain and radio frequency identification devices (RFID) to add value to the supply chain. ”

Finally, see below, in the list created by the IC Portal, some areas of Logistics:

• Material management — This stage has the function of guaranteeing the administration of the necessary resources for the production and distribution of goods. It is a precise and detailed survey of the needs of each sector.
• Storage — Here, the best conservation, protection and storage techniques for products available in stock are analyzed, as well as space optimization. This study includes the location of the shed, its layout and the need for air conditioning.
• Packaging — The way the product is packaged during transportation can guarantee its integrity or cause irreversible damage. For this reason, negotiation with suppliers must be carried out prioritizing quality, not just price.
• Inventory — Controlling the items that need to be replenished and the ideal quantity for each order, without generating an excess or shortage of SKUs ( Stock Keeping Unit ), as well as the development of purchase and sale reports, are some of the responsibilities of this sector.
• Order Processing — In addition to transportation, internal processes can also interfere with product delivery times. Supervising the order from the first moment it is placed and taking steps to ensure that it is routed to the carrier is crucial to ensuring a fast and safe delivery.
• Transport — It is thanks to transport that the commercialization of the product is possible. At this stage, the means of delivery are defined, the carrier is hired (if outsourcing is chosen) and route planning is carried out.

In each of these areas there are secondary operations developed in coordination so that the product or service passes through the supply chain until it reaches the consumer.

Oh! As we live in a Digital Era, the use of Information Technology in the Logistics Sector is of paramount importance. We are talking about Logistics 4.0, where tools such as Big Data, Internet of Things, Machine Learning, Artificial Intelligence, radio frequency tags and many others have become essential to make companies more competitive. Not to mention the need to install powerful software, such as the WMS ( Warehouse Management System , which manages warehouses) and the TMS ( Transportation Management System , which takes care of the vehicle fleet). Here, on our page, you will find texts on these subjects.

Did you like the text? At Águia Sistemas, we are national leaders in Intralogistics and we can help your company to always find the best solution in this field. Keep in touch with us!