What is logistics? What does it mean to projects?
What is your advice to budding managers? I asked a friend of mine who has been several years in logistical management. "Logistics is the word," he said. "The future belongs to Logistics." That is right and we will see why, but first thing first.
What is logistics?
A widespread idea prevails that logistics is 'movement of goods'. That is a narrow concept. Logistics is much more and much wider than mere physical handling of goods. Logistics involves several other functions such as purchasing, plant location, plant layout, etc., and even the disposal of wastes. It covers astonishingly varied professional disciplines. They are:
* Facility location
* Forecasting and order management
* Transportation: the mode and the route
* Inventory management: all inventories
I Protective packaging
I Information: maintenance and flow
Many definitions are given for 'logistics'. Here are some: "Logistics is…
* strategically managing the procurement and movement of goods and storage of inventory in all forms."
* the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organisation and its marketing channels in such a way that current and future profitability are maximised through the cost-effective fulfillment of orders"
* the study and management of goods and service flows and the associated information that set these in motion."
These definitions give the idea of the wide range of functions that logistics covers. A simple definition is: "Logistics is the delivery of the required goods, at required place, at required time, in required state and to the required person…efficiently."
Logistics is the one important function in business today. No marketing, manufacturing or project execution can succeed without logistics support. For companies, 10 per cent to 35 per cent of gross sales are logistics cost, depending on business, geography and weight/value ratio.
Logistics is comparatively a new term, but not the operation. Logistics has existed since the beginning of civilisation. Raw material and finished products had always to be moved, though on a small scale. Things began changing with the advance in transportation. Population began moving from rural to urban areas and to business centres. No longer did people live near production centres, nor did production take place near residence centres. The geographical distance between the production point and consumption point increased. And logistics gained importance.
Another factor has come into play recently. Since the early 1990's, the business scene has changed. The globalization, the free market and the competition has required that the customer gets the right material, at the right time, at the right point and in the right condition… at the lowest cost.
You will get some idea of what logistics is, from the fact that, in the 1991 Gulf War, the US and allies airlifted half a million people and over half a million tonnes of materials over 12,000 km and moved additional 2.3 million tonnes of equipment by sea, in a short time frame. That kind of movement is more than physical handling. That is logistics.
Wars have been won and lost through logistics capability or lack of it. Generals have understood the importance of logistics since early days, but the business has learnt it fairly recently. And the logistics capability gives an edge to the business.
Another dimension to logistics is 'Reverse Logistics' (RevLog). Goods return from the consumer point to the original supply point, for various reasons. Bad delivery, over-supply, damage, expiry, failing inspection tests at the customer point, goods unsold etc., are some instances where the material traverses back. That is Reverse Logistics. The material that has to come back to the original point, or to the original supplier, has also to be handled effectively and efficiently. Maintain a 'RevLog system'. That will give you more edge.
What will be logistics for future? This can be discussed at length, but, looking at the trends today, four pillars can be recommended:
1. Train, develop and maintain a team of logistics experts in your company. Make this team a part of strategy developers.
2. Develop and make your suppliers, of materials and services, aware to work and respond as a link in your logistics, including 'RevLog'
3. Make your logistics as an IT-based operation. Remember that information flow is the crux of efficient and effective logistics.
4. Have a goal of your logistics as customer satisfaction rather than meeting marketing men's targets, fulfilling demands etc.
Logistics for projects
To projects, logistics means success or failure. After all, a project is a time-bound assignment. Generally, as of today, project procurement ends with specifying date and place of delivery. After that the Project Manager loses the control of delivery and all he can do is have expediters chase the goods.
That will have to change. The project manager will have to innovate a logistics system for all deliveries. The project manger then will cut down delivery time. That will reduce the project duration. Having one's own logistics system will change the way a project is executed. The system is an asset.
Remember, 'logistics' is the future: more so for projects.
(Prof. Nansi was with Tata Consulting Engineers for 21 years. He has handled assignments on various aspects of a project, including project procurement. He can be contacted at email@example.com)
What is logistics? What does it mean to projects?