The Logic Behind Logistics

Posted on June 17, 2015 By

Companies aim to become successful in the business industry. They try to outdo their competition and acquire as much profit as possible. This drives companies to incorporate anything that might significantly help them to achieve their goals. Among the techniques and theories being used by companies today is known as logistics. By definition, logistics is the way of managing the flow of resources or products from the source to consumption. Depending of the nature of the company or entity, the resources and products vary from tools, raw materials, livestock, equipment and many more. The constant factor in logistics is management.So why do companies incorporate logistics into their operation. What is the logic behind logistics?

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Efficiency

Efficiency is the ratio between the input and output. In business terms, the input are the raw materials used throughout the operation while the output is the gain, profit, product or result obtained from the raw materials. There are so many fields of logistics that depend on the location or point of operation. Though companies still value the total production cost and the total profit, logistics divides the whole operation from procurement of resources up to sales in order to better manage the operation.

Procurement Of Raw Materials

Logistics in the procurement of raw materials cover the dealing of suppliers and transport of the raw materials to the production area or factory. This includes negotiation contracts with suppliers to get quality resources in the least amount. Transportation of the raw materials is also considered. The company weighs whether it is more efficient to secure and own transportation vehicles or include the delivery of resources with the supplier’s contract. The methods of transporting the materials are also considered.

Storing Of Raw Materials

Raw materials are not immediately converted into products. Companies which purchase huge amount of resources also prioritize the way they store the resources until needed for production.

Conversion Of Raw Materials Into Products

Though this process can be further divided into several areas depending of the production method, the main goal is to constantly refine production methods in order to increase the products out of a certain amount of resources.

Storing Of Products

Companies have warehouses to temporarily stock the product until delivery is made to different locations. Techniques in storing the product can greatly affect the lifespan of the product.

Distribution Of Products

In order to gain profits, the products must be distributed to different locations accessible to the consumers. Locations can either be independent vendors, warehouses or distribution stores owned by the company. How the product is transported to these areas will be considered. Estuary freight forwarding demonstrate how distribution is key.

Though the fields of logistics are many, the areas and coverage fall into those mentioned above. The logic of logistics is the efficiency it can provide throughout the business operation giving the company the best chance of success even with minimal amount of resources.

 

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