The concept of logistics can be explained with the help of an example. Suppose there is a manufacturer of leather. He has a large consumer base in different cities. How will he make leather available to customers in other states? Goods can’t move from one place to another on their own. Making goods available to the customers is the most important aspect which every business must fulfill. The service that carries out the operation of making the goods available at the right place, at the right time, and in the right quantity is known as freight forwarding and logistics. The logistics department of a company ensures the timely distribution, storage, and transportation of the required goods.
Logistics is a department in a company which ensures making goods available at the right place, in the right quantity and at the right time. The logistics department is managed by the company itself. On the other hand, freight forwarding services are third-party logistics companies specialized in making the goods available at a particular place. These companies charge a certain amount, known as carriage charges, for transportation of goods.
Logistics plays a key role for the business to prosper. If the goods aren’t made available at the right place and the right time, it may lead to consequences, which may not be favorable for the enterprise or the industry. The need for logistics is as follows:-
- Availability of goods: logistics ensures that the goods are available at the right, at the right time and at the right time. Hence, logistics removes the hindrance of place.
- Perishable goods: perishable goods can’t be stored for a long time. They need to be dispatched as soon as possible. For example, food products. The logistics department ensures the dispatching of the goods as earliest as possible, depending upon the demand and requirement of the product.
- Improves efficiency: logistics improve efficiency as the business can focus on main operations such as production and sales.
- Removes geographical barriers: If the goods are to be transported abroad (exports), the goods can be made available easily.
- Builds goodwill: If the goods are made available to the customer at the right time, it builds goodwill of a firm in the market.
Logistics management is a hybrid of several activities. Depending upon the tasks performed, logistics management can be classified into the following:
- Supply management: supply management plans and interprets the number of goods to be supplied at a particular place. It involves studying the market conditions and doing complex calculations to reach an outcome of how much of a good is required at a particular place at a particular time. For example, bricks, cement, and other materials to be provided to a construction company.
- Distribution/Transportation management: distribution or transportation management includes the medium of making the goods available at a particular place. The medium chosen depends upon the type of goods to be transported and the place where the goods are required. For example, if the goods are required domestically, they are transported through trucks and if the goods are to be sent outside the country, then ships are preferred. Also, liquid goods such as oil and petroleum can be transported through pipelines.
- Production management: Production logistics includes the conversion of raw material into a finished product. It also ensures the assembling of the product, if the company owns an assembly line.
- Reverse logistics: Once the goods are manufactured, the reverse logistics ensure the reclamation of the excessive material transported. For example, in a leather manufacturing company, the excessive leather transported to a belt manufacturing company is reclaimed. This reclamation is done by the reverse logistics department.
Logistics is a department managed by the company itself, while the freight forwarding companies are companies specialized in making goods available at a particular place. The following are the types of freight forwarding companies:
- Rail freight services: Rail freight allows the goods to be transported to vast distances. The railway freight forwarders ensure that the goods are transported safely.
- Sea freight services: In sea freight services, the goods are transported through cargo ships in large sea vessels. It helps in transporting goods across countries. It is also an economical means of transport for transporting goods.
- Air freight services: Air freight is the fastest freight service. It saves a lot of time. It has a drawback that it is a costly means of transporting goods.
- Road freight services: it is the most common freight service. The goods are transported through delivery trucks and vans. The time taken depends upon the traffic and the road conditions.
Freight forwarding and logistics play an important role in the functioning of a company. Being from transporting raw materials to the site of production to making finished goods available to meet the supply, logistics play a very eminent role. Hence, freight forwarding plays a crucial role in the growth of an economy.
- Posted by admin
- On April 1, 2020