What Is A Logistics System? Structure and More.

. 6 min read
What Is A Logistics System? Structure and More.

How Does The Logistics Industry Work?

  • Logistics means “the detailed organization and implementation of a complex operation.”
  • The logistics industry is the backbone of both domestic and international businesses across the world.
  • No company can survive without a strong foundation of logistics.
  • Logistics refers to the transport of any material from the source to the point of consumption.
  • In reality, that is the most important part of any product, and there are many challenges as well as advancements.
  • A logistics company is the company involved in planning, implementing, and controlling the storage and movement of goods, services, and information within the supply chain, enabling the connection between the origin and consumption points.
  • A supply chain is a network of suppliers and distributors of a company that allows the company to send the goods across.
  • The supply chain is an essential part of the logistics industry.
  • Logistics, like many other terms before it, has evolved from the military.
  • In times of war, the supply of equipment and supplies was done by the logistics arm of the military and formed the backbone of any country’s military strength.
  • It has evolved to other industries and happens to be one of the most vital points in the world business ecosystem.

What Constitutes A Logistics Company?

  • From the definition, logistics might be synonymous with transportation.
  • However, similar to the supply chain, transportation is a part of a broader term we call logistics.
  • Also, transportation includes human transport, while only the military involves the movement of personnel in logistics.
  • Transportation may be defined as the movement from one place to another, be it of people, animals, or goods.
  1. Logistics, On The Other Hand, Includes The Following:
  2. Obtaining
  3. Production
  4. Distribution
  5. Packaging
  6. Containerisation
  7. Documentation
  8. Insurance
  9. Storage
  10. Managing And Following Import And Export Regulations
  11. Freight Damage Claims
  12. Working And Collaborating Within The Supply Chain Network
  13. Vendors And Partners Management
  14. Responsibility For Risk Mitigation

What Does A Logistics Company Do?

  • A logistics company, essentially, only eases the lives of individuals and businesses.
  • The regular tedious tasks of any organization are managed and simplified by a logistics company.
  • Day-to-day operations such as warehousing, inventory management, port management, fleets, shipping, cargo handling, and distribution are among the few of the many tasks the logistics company handles.

Logistics Industry Of India

  1. The approximate size of the Logistics Industry in India is $215 billion.
  2. However, it is largely an unorganised industry with only 10-15% forming the organised industry.
  3. Covid19 has given an essential boost to logistics all across the globe, however.
  4. The growth, expected at 17% from USD 2,734 billion in 2020 to USD 3215 billion in 2021, globally, is more organised.
  5. We witnessed the same scenario in India, with logistics for essential commodities getting a more focused and streamlined effort.
  6. Further, globalisation and digitisation, and the increasing need for international trade and commerce, have given a push to the Indian logistic industry.
  7. Recent trends have pointed at a more focused approach to the logistics industry.
  8. Key players have entered, the outlook of the industry has changed, and policymakers are now interested in the industry.
  9. The presence of both inbound and outbound trade of both products and raw materials, and also products at different stages of production, have made it essential for better regulations.
  10. That has, lately, been coming to the fore.

Challenges For The Indian Logistics Industry

  • India is a large country, with different topology and geography, and different state governments from central governments.
  • It isn’t, as yet, digitised to the core.
  • The challenges facing the Indian industry pertain to these issues.
  • Some of these challenges are as follows:
  1. Local, regional, and national rules and regulations differ considerably.
  2. Some of the parts of the country still haven’t been benefited by the IT industry, which leads to manual as well as digital databases, and inconsistencies.
  3. Poor warehousing and distribution have often hampered the growth of logistics in India.
  4. Improper storage facilities and poor management have been the reason for loss, wastage, damage, and deterioration.
  5. Not enough training institutes are there. Hence, a large-scale skilled workforce isn’t available.
  6. The infrastructure development, and bringing the industry into the organised sector are also big challenges.
  7. Industrial policies and the ease of working needs to be implemented by governments.
  8. There needs to be a more cohesive effort to bring the entire nation under the same rules and regulations.
  9. One of the methods how the industry managed to grow is via outsourcing the supply chain management to 3PL service providers.

What is a 3PL service provider?

  • A 3 PM Service Provider is a 3rd party logistics company that offers one or more services relating to storage and shipping services.
  • 3PL can only offer a single service, like inventory management or transport by trucks.
  • There are two types of 3PL companies, the specialized ones offering only a single service or the large scale ones that offer all types of services under one umbrella.
  • They usually invest in brick and mortar storage centers or skilled workforce or simply in vehicles suited for different terrains and goods.

What Is A Freight Broker?

  1. A freight broker is an intermediary between the shipper and the carrier.
  2. The broker doesn’t do any transportation or movement but merely creates a passage between the shipper with actual goods and the carrier who follows through with the transportation.
  3. Freight brokers are useful in negotiating with movements of goods in different kinds of areas and terrains.

Why Is Logistics Important?

  • It can be inferred that logistics makes the life of businesses easier.
  • No business can survive without logistics.
  • The e-commerce industry is directly impacted by logistics and cannot exist.
  • This is why major e-commerce players invest in their logistics.
  • Mergers and acquisitions and strategic partnerships are all part of the game to help set up better e-commerce logistics.
  • Other businesses and services, too, depending on how well the goods and services can reach from various points.
  • It isn’t only the finished product that needs to be taken to the endpoint via the route.
  • It is also the raw materials, parts, and unfinished products that require moving.
  • The management of all the to and fro is a hard task to manage.

Technology Involved in Logistics

  • The newer business models have spent considerable time, effort, research, and expenditure on technology for better logistics.
  • Everything is digitised in the newer models, and more companies turn to technology for improving their systems.
  1. Some of the noteworthy developments in technology in logistics are as follows:
  2. Efforts have been made and plans unveiled to use drones for short-haul delivery (<15 miles). Companies like Amazon and Zomato plan to use drones soon for part of their deliveries, reducing the time and improving the connectivity.
  3. Artificial Intelligence (AI) and machine learning have been implemented into the systems to improve customer service time and quality.
  4. 3D Printing is another technological advancement that will be used in the future.
  5. Autonomous vehicles have been under research for a considerable time, and will vastly improve the time and quality of vehicular transport. Testing has already been done at some levels for mail deliveries.
  6. Robotics finds its applications in some of the large warehouses for automated order-pickings. Machines have been developed for tasks that involve robotics technology.
  • The Indian ecosystem has been welcoming to the wholesale changes in the logistics industry.
  • With the world trade and commerce coming together, it was eventual.
  • The new-age requirements call for an even greater understanding and fine-tuning of the processes in the Covid-19 and post-Covid era.
  • Everything needs to be scrutinised, more technological involvement needs to be included, and more policymakers need to be part of the opening up of the trade and commerce world.
  • It is happening with large players making their foray into the industry, like Amazon, Reliance, and Tata.
  • The start-up world has also been having great new achievements in the logistics industry.
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Q- Is it essential to embrace digitisation, especially when networks can often be a challenge in many areas of the country?

Ans- The requirement is for a wide-scale reach for the mobile and broadband networks. Since it is a continuous process, it is advisable to go for the paper records and manual methods in case the company or the individual has to go to such areas of limited or no coverage.

Q- Do we need a 3PL or a Freight Broker?

Ans- Often, it is a healthy mix between 3 PM and Freight Broker. It also depends on the unique requirements of the businesses.

Q- What is the future of logistics in employment generation with so many automated systems being introduced?

Ans- It is an old saying: ‘a computer is a good slave but a bad master’. There’s a huge demand for a skilled workforce in the industry. There’s a need for education and training institutes in the field.