Business logistics (physical distribution)

Originally the term logistics described the strategic movement of military personnel and equipment. During World War II, General George Patton’s army was stalled by a lack of fuel. Patton called his problem “the iron grip of logistics.” Transporting a large number of troops and a lot of equipment quickly and efficiently is often the key to military success. The business world now uses logistics (also referred to as physical distribution) to describe the process of distributing final goods efficiently to the consumer to ensure a PROFIT. Seven elements comprise the logistics (physical distribution) system:
• customer service—to ensure that customers get what they ask for
• INVENTORY CONTROL—to determine where and how much inventory should be kept on hand
• transportation—how and from where goods should be shipped
• processing orders—how long it should take for orders to be processed
• packaging—how goods should be packaged. Goods need to be packaged according to their method of delivery and in a manner that is visually attractive and environmentally conservative
• handling of materials—determining whether materials be kept in a warehouse, where orders will be filled later, or shipped and transferred to other trucks on the loading dock (cross-docking) and then delivered to stores
• warehousing—determining whether it will be more cost effective to keep materials in warehouses in different locations or ship from one location?
Optimally, these seven elements work together to ensure the logistics system runs effectively from both the customers’ and the firm’s perspectives. If one element is not working efficiently, the other elements will not run as smoothly. U.S. companies spend approximately $700 billion on logistics yearly. In some cases businesses are able to reduce distribution costs by hiring third-party logistics firms, companies that specialize in handling logistics for other firms. Hiring a third-party logistics firm will allow a company to focus more on the manufacturing of the product rather than its distribution. By contracting other companies to distribute goods, the producer may use less manpower, leading to greater profits. In order to make a profit, companies need to find the most cost-efficient way to produce and deliver their products to customers. Logistics can make or break a company. Amazon.com, for example, started as an INTERNET bookstore that was distributed from the house of its creator, Jeff Bezos, is now one of the largest domains for on-line shopping. Consumers are more likely to do business with a producer who is able to get products to them in a timely manner. Consumers will often pay more in order to get a product in a shorter amount of time.
See also LOGISTICS.