The "flow of goods" from when a product is made to when it is delivered to the customer is an important system that poses challenges for many companies. Logistics is a concept that is deeply connected to this flow of goods. What does logistics mean, and what is its purpose? We will introduce the difference in meaning from distribution, the effects that can be obtained through logistics initiatives, current issues, and solutions that are being implemented.
What is Logistics?
Logistics is important for supporting and further developing today's complex logistics networks. Let's start by looking at the basic meaning of logistics.
What does logistics mean?
Logistics refers to the comprehensive optimization of the flow of manufacturing, from the procurement of raw materials and supplies to production, and then transportation and sales.
For example, even if a production system is in place and goods can be produced efficiently, if there are flaws in the transportation system, the goods will not reach those who want them. Or, even if the transportation system is perfect, if production efficiency is poor, there will be delays in the production of goods, and similarly, they will not reach those who want them. In this way, if there is no balance, the overall movement of things will stagnate. Logistics is about balancing all the functions related to this flow of goods and improving the overall process.
Logistics and Distribution
Logistics is sometimes expressed in English as logistics, and logistics and logistics are sometimes used synonymously. This is because logistics can be used in a broad and narrow sense.
In the broad sense, logistics is used in the same sense as logistics, but in the narrow sense it simply means the movement of things. In general, it is often used in the narrow sense, in which case it differs from the definition of logistics. When referring to logistics in the narrow sense, that is, the movement of things, it is expressed in English as physical distribution and is distinguished.
Generally, logistics refers to the flow of goods, including transportation, storage, packaging, systems, distribution processing, and loading and unloading. Logistics is a systematic way of thinking that includes not only logistics but also procurement, production, and sales.
Purpose and Benefits of Logistics
The purpose of logistics can be summed up simply as "creating a balance between supply and demand." In other words, "delivering what is needed to those who need it in the right way." This
may seem like a given, but the flow of goods in modern times requires rapid and wide-ranging responses, necessitating detailed logistics planning. A balance between cost and transport quality is also important.
In the face of this increasingly complex flow of goods, regulating this flow through logistics brings the following benefits:
Optimizing supply against demand
By optimizing supply and demand through logistics, you can prevent stockouts and overproduction, and eliminate lost sales opportunities and wasteful production. Inventory can also be optimized, making it possible to reduce the amount of wasted effort required for inventory management. This will allow you to avoid situations where holding inventory makes it difficult to keep up with fluctuations in demand, and will allow you to respond flexibly to demand.
Improving logistics efficiency
By producing appropriately in response to demand, it is possible to improve the efficiency of the production process, inventory management, and transportation. When demand is high and production cannot keep up, or when there is overproduction relative to demand, congestion will occur somewhere in the flow of goods, leading to inefficiencies in the entire logistics process. By optimizing the balance between supply and demand through logistics, it is possible to smoothly carry out logistics from the time the goods are produced to the time they are delivered.
Reduce costs
Logistics is also highly effective in reducing costs. If an imbalance between supply and demand leads to overproduction, unnecessary costs can occur. Preventing overproduction can reduce a variety of costs, including the operating costs of the manufacturing line, labor costs, and the cost of raw materials used. In addition, since excess inventory also requires management costs, optimizing inventory also leads to cost reductions. Conversely, if there is a shortage of supply, it may not be possible to secure the necessary sales and make up for the costs incurred. Optimizing supply and demand through logistics also leads to optimizing costs and profits.
Improved marketing precision
Logistics optimizes supply volumes based on data-based demand forecasts. More accurate demand forecasts allow sales activities to be tailored to the demand. Strategic sales activities can be carried out more efficiently, and the data gained from these activities can be used to forecast future demand. In this way, logistics also leads to improved accuracy in marketing and sales activities.
How logistics makes the flow of goods more efficient
What kind of mechanism will achieve the objectives of logistics and the benefits obtained from them mentioned above? Let's start by considering why logistics is needed.
The increasing importance of logistics is largely due to the diversification of needs along with the changing times and the evolution of technology. There was a time when uniform products were mass-produced and sold as much as they were made, but today, people want different things. For this reason, small-lot, multi-variety production is now mainstream, and efficient logistics of making and sending is no longer possible.
Therefore, a mechanism that benefits both the demander and the supplier by delivering the products that customers need, when they need them, in the quantity they need, and to the place they need them is required. In order for logistics to function effectively and maximize its benefits, the following mechanisms are important.
Identifying popular products and forecasting demand
By visualizing product movements using data such as inventory and sales numbers, we can understand which products are selling well. It is important to establish a system for accurately forecasting product demand based on that information. Accurate demand forecasts provide the basis for making important decisions such as inventory management and production planning, improving productivity.
Proper inventory management
Maintaining an appropriate level of inventory leads to optimized supply, more efficient logistics, and reduced costs. In order to keep inventory levels at an appropriate level and respond to sales of needed products, it is important to optimize procurement plans for raw materials and supplies as well as production plans.
Improving and automating production processes
In order to streamline the flow of goods, it is also necessary to improve and stabilize production efficiency. To achieve this, it is effective to introduce technological improvements and automation. Using automated equipment and robots increases the operating rate of the production line and improves productivity.
Review of production and logistics processes
By reviewing and improving the production and logistics processes, the flow of goods can be made more efficient. Specifically, we analyze the manufacturing and logistics processes and eliminate wasteful or inefficient work to improve productivity.
Introduction of a logistics system and efficient operation structure
For logistics to function effectively, coordination throughout each process and task is important. Data-based coordination is essential to link processes taking place in different locations. By sharing and utilizing data in real time through procurement, production, transportation, and sales, the flow of goods is optimized.
It is the logistics system that makes it possible to optimize logistics processes based on such data. By sharing real-time information through the logistics system, it becomes possible to adjust supply in response to fluctuations in demand and quickly respond to production and transportation problems. In addition, the accuracy of demand forecasts can be improved from accumulated data.
However, even if a logistics system can visualize the real-time situation and predict fluctuating demand, the effect will not be great unless a system is in place to operate it effectively. It is also important to develop an operational system that can maximize the effect obtained from the data.
Logistics challenges and solutions
In recent years, logistics has been facing the following challenges:
- Increase in logistics costs
- Labor shortage
- Environmental Considerations
Rising fuel costs and an increase in small parcel deliveries are driving up logistics costs, putting pressure on corporate profits. In addition, the labor shortage in the logistics industry due to a declining birthrate and a shrinking labor force is a major issue facing the industry.
There are also issues with environmental considerations. It is said that 60% of logistics in Japan is transported by truck, and we cannot ignore the issue of CO2 emissions. In addition, plastic is widely used in packaging and material handling materials related to logistics, so we must actively work on the sustainability of resources.
In response to these issues, the following efforts are being made:
Labor-saving and digital transformation at logistics centers
As the labor force declines, securing workers becomes even more difficult. Therefore, labor saving is progressing by having robots perform tasks in place of humans. Collaborative robots, in which robots assist and work together with humans, are also attracting attention. Collaborative robots can be introduced at a relatively low cost, and since they do not completely replace humans, there is little resistance on the ground, and they are very effective in resolving labor shortages.
The nature of logistics centers is also changing. Traditionally, logistics centers such as distribution centers (DCs) that "collect and redistribute" were mainstream. In recent years, fulfillment centers (FCs) with even more functions are increasing. FCs not only arrange inventory and transportation and manage information, but also have the function of managing order and customer data and customer support. Information management is highly important, and not only can logistics be made more efficient by utilizing data, but it can also handle tasks ranging from grasping changes in demand and forecasting demand to inventory management and transportation route adjustment.
In the future, it is expected that the use of digital technology, such as further use of robots and data, will progress.
Modal shift
Approximately 60% of domestic transportation is carried out by truck. From the perspective of reducing CO2 emissions, switching from engine-powered truck transportation to other methods is being considered, and efforts are currently underway. This shift to transportation methods that have a smaller environmental impact is called a modal shift. Switching to transportation by rail and ship, which have high transport capacity, is not only expected to reduce CO2 emissions, but also to address labor shortages and reduce fuel costs.
There are many examples of logistics companies promoting modal shift as an effort to achieve the SDGs.
Transition to Supply Chain Management (SCM)
In today's world, where logistics networks have become so complex, there are limitations to a single company being able to tackle logistics on its own. This is where supply chain management (SCM) has come into the spotlight. SCM is a system for optimizing logistics by building a supply chain (supply network) for providing products and services that transcends the boundaries of companies and organizations.
In SCM, multiple companies jointly carry out all processes related to the provision of products and services, such as procurement of raw materials and supplies, production, inventory management, and transportation and delivery. This leads to improved logistics efficiency, cost reduction, and improved logistics quality. SCM, which links supply systems between companies and aims for streamlining among multiple companies, can be said to be one type of logistics. It is expected that such efforts, which are not limited by the competition between companies, will become even more important in the future.
For more information about SCM, please see this article:
What is SCM (Supply Chain Management)? Explaining the benefits, challenges, and background of its popularity | Stratus Blog
Logistics will become even more important
In order to address the challenges facing the logistics industry, such as labor shortages and rising logistics costs, companies must improve efficiency, or their costs will rise and it will become difficult to secure profits. In addition, as needs continue to diversify, it is becoming increasingly important to work on overall optimization from a bird's-eye view, not just in logistics but also in procurement and sales. Logistics is a systematic approach to the entire flow of such things. The issues surrounding current logistics will not be resolved naturally, so the importance of logistics is expected to increase.
