Overview of the term logistics – definitions, specializations and job descriptions

Table of contents

Introduction

The term logistics commonly refers to the planning, management and control of tangible as well as intangible flows of goods. These move between several companies, within a company or between suppliers and end consumers. Logistics thus includes flows of goods and information, but also flows of people. In addition, logistics represents both a branch of industry and an operational function as well as an interdisciplinary science.

Logistics definition and the 6 R

In the course of the historical development of logistics, certain criteria have emerged that summarize the tasks or objectives of logistics. They define the term in a simplified way and are known as the 6 Rs of logistics. Accordingly, logistics is all about the delivery of the

  • Right inventory, at the
  • right time, in the
  • right composition (quantity) and the
  • right quality (condition) at the
  • right price (cost) in the
  • right place

Logistics is therefore about making goods available. The 6 Rs show which aspects must run correctly for a logistics task to be successfully completed. The development of a logistics definition can also be seen in these criteria: While for years the focus was on 4 Rs, namely the right product in the right quality at the right time in the right place, other goals have since been added to meet the reduced depth of production, such as in just-in-time manufacturing. These other criteria include quantity and cost, which the 6 R then established as core elements of logistics.

However, this development is not yet complete, because there is also talk of 7 R or 7 R+, as the control and importance of logistics processes is increasing more and more, both in industrial manufacturing and in society as a whole. Such additional R’s include:

  • The right information
  • The right packaging
  • The right customer

If storage quantities are to be minimized, then a corresponding flow of information must be ensured, for example via ERP systems, in order to always know where and how much of which product is stored or where it is currently on its transport route. The right packaging has become an equally important factor in logistics; it should ensure product quality, save space and also be environmentally friendly. The right customer is about changing the way we look at things within the entire service and supply chain. This means not only the right customer at the very end of the supply chain but every point in the supply chain downstream from another. Through this kind of (internal )customer-centricity, every point becomes a supplier and a customer at the same time, so to speak.

The modern supply chain represents a networked, process-oriented materials management system. From demand to production to final delivery, the entire supply chain is covered. This includes appropriate information management as well as the technical solution options that are increasingly being used in all areas. Business, internal and social aspects increasingly define what logistics must achieve and determine which individual services must be improved. The following fields of action, among others, can be derived from this:

  • Shortening the delivery time
  • Increasing the ability to deliver
  • Increasing delivery flexibility
  • Increase in delivery quality
  • Improving delivery transparency
  • Improving the security of supply

Each individual logistic service has a certain dependent relationship to the other services. This interdependent relationship may result in almost no effect of one performance on another when it is optimized, i.e., it may be relatively neutral. However, it is equally possible that improving one aspect will have a supportive effect on another or a negative effect on another logistic performance. In any case, optimizations in a logistics system and the accompanying measures either entail an increased cost input or have a detrimental effect on other values of the delivery performance.

Areas in Logistics

Logistics is divided into four subsystems, mainly from a business perspective:

  • Procurement logistics
  • Production logistics
  • Distribution logistics
  • Disposal logistics

At the beginning of a value chain is procurement logistics, which deals with the ordering of raw materials and supplies and the selection of suppliers. The focus here is on optimal, timely delivery. In-house storage, handling and transport processes are planned, controlled and monitored in production logistics. An important aspect of production logistics is keeping manufacturing costs low or reducing them. Distribution logistics, also known as sales logistics, primarily involves the distribution and delivery of goods; these can be inventories or information. Distribution logistics is also responsible for optimizing packaging and improving delivery services. While the three subsystems described above are coupled one after the other in the supply chain, they are all permeated by disposal logistics, which ensures along the entire value creation process that waste, goods that are no longer used and other residues are disposed of or (re)utilized. Due to the very broad and specific areas of application, disposal logistics can be defined in various narrow terms, which is why it is also referred to as return logistics or reverse logistics, depending on the context.

A further classification of logistics takes place at the functional level, where different functional areas are identified and corresponding areas of logistics can be named. Thus, there is internal transportation as well as external. Inventory management with picking and planning with the operation of storage systems represent two other functional areas. Goods handling (loading, unloading, reloading), goods inspection as well as handling and packaging of the same are further areas that can be derived from the respective function.

Cardboard boxes on conveyor belt in factory. © endostock Fotolia.com
Transportation logistics is an essential part of the global economy. Image rights: © Diezer – Fotolia.com

However, since logistics is particularly process-oriented, terms have become established for subareas that subsume all logistics tasks in a specific comprehensive process section, or the logistics processes are more individually distinctive, in order to distinguish them from other areas and sectors. These subareas can then have intersections with other areas, also encompass them and fulfill individual functions together. In certain application contexts, there are also separate logistics terms due to the special circumstances, such as pharmaceutical logistics, hospital logistics or contract logistics. In general, however, the following specifications, among others, are considered subareas of logistics:

Storage logistics

The choice of location of the warehouse, the design of the ideal storage system, the warehouse technology as well as the warehouse organization consist of logistical measures that must be planned, implemented and controlled. Furthermore, the operation of a warehouse is also part of warehouse logistics.

Transport logistics

The physical transportation of goods by road, air, and water from one location to another and the accompanying tasks such as providing shipping documents, calculating transportation time, and planning the use of transportation equipment, technology, and manpower are all part of transportation logistics.

Intralogistics

Intralogistics usually maps the complete logistics processes at a particular location; this can be both a manufacturing company and a distribution center. Thus, depending on the context, it includes production logistics, warehouse logistics, packaging logistics and likewise distribution logistics. The entire material flow within a site form the core of intralogistics.

Packaging logistics

Packaging logistics includes the availability as well as disposal of the packaging material and the selection of the same with regard to various criteria: Cost savings, quality assurance of the transported goods, maintenance of a cold chain, environmental compatibility. The introduction of technologies such as RFID has made packaging logistics even more important, as it is thus possible not only to use packaging to transport inventory but also to transmit or generate information. This results in an intersection with information logistics.

Information logistics

According to the material flow or the transport of goods, information must be provided. The current location and condition of the inventory should preferably be able to be transmitted in real-time and at any time. This also includes the strategic planning as well as the development of all information systems necessary for the exchange of information and the handling of business processes. Likewise, the application of blockchain technology in supply chain management, for example, is part of the subarea of information logistics.

Branch logistics

The regular supply of branches of a retail chain, especially in food retailing with thousands of fast-moving items, is subject to special requirements, for example, in delivery, warehousing, the secondment of employees, and the restocking of shelves, which are subsumed under the term branch logistics.

Last mile logistics

In mail order and e-commerce, the last mile, i.e. the route from the distribution center of the mail order service provider to the delivery address of the end consumer, represents the most expensive, costly and complex part of the entire transport route. Last-mile delivery is not only a logistical challenge from a business perspective, but also in terms of increased traffic within localities and equally in terms of more environmentally friendly solutions and alternatives such as cargo bikes, parcel stations or micro depots in city centers.

All these areas of logistics, regardless of the criteria under which they are divided, are subject to fundamental logistical processes that bring their own challenges with them and accordingly form their own fields of action for optimization.

Processes in logistics

There are numerous processes in logistics, whereby each individual process can already reach a very high degree of complexity. In all sub-steps or sub-processes, information is also transmitted and exchanged, which is essential for the smooth running of the entire process chain. As much as the concrete logistical requirements differ in the respective application areas, the actual logistics processes are very similar.

Cardboard boxes on conveyor belt in factory. © endostock Fotolia.com
Especially when materials handling technology is in operation, the use of detection systems is essential. Image rights: © endostock Fotolia.com

Depending on the industry and company, the processes vary in complexity, while there are other processes that are always a challenge to plan and implement, such as the rush order. A central point in the logistics of a company is the warehouse and the corresponding processes. Here, everything revolves around optimal utilization of spatial resources as well as minimization of operating costs, which is constantly monitored with key figures, such as the inventory coverage. For this reason, all logistics processes must be coordinated and closely interlinked.

Such optimal coordination requires the use of know-how, time, money and skilled labor, which is why both external and internal expertise is called upon for logistics processes. Despite the relatively comparable processes, the change or optimization of logistics processes is always very individual, as the circumstances and concrete conditions on-site differ enormously. The goal is to implement logistics processes as automated as possible. The following simplified list maps and briefly describes the processes in logistics from delivery to outgoing goods:

Logistical processes: Goods receipt and delivery

The delivery of goods requires communication with the supplier. The minimum of this information exchange consists of the order confirmation and, if necessary, the shipping confirmation. Using an ERP system, this process can be mostly automated.

If the inventory then reaches the company premises, for example by truck, then this traffic must be controlled in terms of time and space by specifying a certain area and a certain time window for unloading. Unloading is followed by notification as well as inspection of the inventory and recording in the company’s inventory management system. A storage location is then assigned to the delivered inventory. If the inventory was delivered in reusable containers, these must be booked, returned or exchanged accordingly, for which there are usually separate container management systems.

Logistical processes: Intralogistics and warehousing

From the goods receipt area, the delivered goods are transported to their storage location by means of industrial trucks, for example. The movements in the warehouse of vehicles and workers are subject to logistical specifications in order to use all resources as efficiently as possible through forklift control systems or a higher-level control center. Once materials are required from the warehouse, picking and picking of the inventory takes place, which in turn is transported to the destination; this can be a production facility in the plant or shipping for delivery. Likewise, materials handling systems (material flow systems) can be connected at this stage of the process to automate the majority of the transport route.

Logistical processes:Production and order fulfillment

Logistical supply to production usually follows set Kanban processes and also relies on complex implementations such as the Jidoka principle to trigger the replenishment process when replenishment is actually needed, not too early and especially not too late so that needed materials can be delivered from the warehouse just-in-time. Serial and batch numbers are also used in production to ensure that the origin, as well as the quality and finishing, are traceably documented along the entire route in and from production to the end consumer. The products from production can then also be packaged there, but this is usually done in distribution.

Logistical processes: Shipping and distribution

Shipping is where products are packaged for delivery. The more packages are shipped per day, the larger this area is and accordingly, this process can be more complex. During shipment preparation, the CEP service providers are selected and thus the shipment is organized. This also includes sticking the appropriate labels or tags on the packages and providing them with the necessary documents (a delivery bill, for example). This entire process can also be highly automated. Another very error-prone process section is freight cost management, in which the invoices for shipping are managed and checked, which is why a high level of automation has also been established here in order to minimize manual intervention as much as possible. Once all processes have been completed, the parcels are ready for the CEP service provider to pick up; as with goods receipt, the aim here is to keep downtimes as short as possible and optimize loading. If a parcel is sent back as a return, this in turn also has to go through various processes. These include quality inspection, possible reprocessing and renewed storage or disposal; and if there is already a new order for the product, then it can also be repackaged and shipped right away instead of being stored again.

As described above, logistics processes consist of many small individual steps that vary from industry to industry and from company to company. For example, a supplier in the automotive industry faces different challenges in its processes than a large online vendor in its distribution center. When the latter processes 7,500 orders per minute every day at peak times during Cyber Week, this vividly illustrates how crucial it is for the individual process steps to be as efficient as possible and to mesh smoothly with one another. Every wasted second or every substep that is not optimized to the maximum has a cumulative negative impact on the operating result.

Jobs in logistics

The logistics sector is the third-largest industry in Germany after the automotive industry and retail. Accordingly, the professions in logistics are very broad and represent a very wide range that runs through all industries.

The fields of activity of logistics professions include:

  • Forwarding and logistics services
  • Warehousing
  • Picking
  • Distribution
  • Disposition
  • Transportation
  • Supply chain management
  • Logistics planning

In addition, logistics tasks also play a major role in aviation and shipping, and likewise, there is a great need for logistics-specific requirements in IT, for IT specialists, application developers and information managers. The same applies to the areas of sales and controlling.

Specific apprenticeships and positions are as follows:

  • Freight forwarding and logistics services clerk
  • Courier, express and postal services clerk
  • Specialized warehouse clerk
  • Specialist in warehouse logistics
  • Warehouse manager
  • Picker
  • Materials management manager
  • Import/export specialist
  • Shipping manager
  • Dispatcher
  • Forklift operator
  • Professional driver
  • Fleet manager
  • Purchasing Agent
  • Supply Chain Manager
  • Logistics Planner

There are also more and more degree programs that deal explicitly with logistics or general degree programs, such as business administration, that offer a focus or specialization in logistics.

Summary

In logistics, the flows of inventories, information and people are planned, managed and controlled. Thus, both economic and social life is permeated with logistics requirements, tasks, processes and solutions. Logistics can be divided into various sub-areas and is made up of numerous individual processes that interlock to ensure that the overall process runs smoothly. Particularly in the economic sector, logistics continues to develop with an increased level of automation. The use of the latest technologies in logistics means that process costs and process times, as well as susceptibility to errors, are being reduced more and more. Making goods available in a modern way requires ever-increasing transparency and speed, which can also be seen in the evolution of the 6 Rs of logistics to 7 Rs+ of logistics.

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