IN the last decade, logistics practitioners have increasingly been drawn to supply chain management. And increa-singly, people are looking at the concepts of logistics and supply chain as one and the same. The general idea, however, is that logistics is only part and parcel of the whole supply chain.
In this column, we will provide some basic definitions and discussions on the role of international logistics in providing for a comprehensive approach to international supply chain management.
Logistics has generally been defined as the science and practical management of the physical supply of materials. The Council of Supply Chain Management Professionals (previously the Council of Logistics Management) defines logistics as: “that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point-of-origin to the point-of-consumption in order to meet customer requirements”.
Traditionally, logistics describes the various activities involving the movement of products in regards to securing:
- the right type of material
- in the right quantity
- in the right condition
- to the right location & customer
- at the right time
- for the right cost
In recent years, two additional “rights” have been added to the list:
- delivered with the right tailored services (e.g. user technical support, warranty, maintenance & repair, etc.)
- with the right information (e.g. track and trace technology, trade compliance and quality inspections, environmental, health, safety and social requirements, etc.)
These additional rights are very much seen in the high-tech and fashion apparel industries.
Stages in Logistics
In many organizations, logistics normally involves the following:
- Inbound Logistics (moving goods from suppliers to buyer’s warehouse)
- Internal Distribution (also materials management, moving goods within the organization, from the production floor to intermediate storage facilities)
- Outbound Logistics (distribution and transportation of finished goods or component parts to retail outlets or customers)
Supply Chain Strategy
While logistics involves the management of the material flows from the perspective of the company, supply chain management involves management of all the processes requiring coordination with many functions within the company — purchasing, inventory management, manufacturing and sales operations. Other than coordinating these functions, companies will need to integrate with a number of third parties — shipping and freight agencies, customs brokers, independent warehousing and cross-docking center operators, customs and other regulatory authorities, suppliers and end users or customers.
To effectively position its services, logistics practitioners and providers will need to understand the various factors involved in the supply chain strategy as follows:
- Understanding end customer needs and priorities, by industry or by market segment; as in the fashion sector, speed and agility of supplies may far outweigh the price or cost factor;
- Implementing an effective supply chain strategy to meet customs requirement and customer needs in a cost-effective manner such as ensuring that supplies are readily available even it requires longer holding period for certain inventories;
- Coordinating all supply chain partners to align with the overall strategy, e.g., minimizing inventory across the supply chain;
- Addressing operational issues through the supply chain, e.g., implementing quality systems to minimize rejects;
- Maximizing international supply chain by identifying trade opportunities (lower prices) and creating new customer markets; and
- Providing the latest information and communication technology to create efficiencies and to better coordination among all supply chain members.
The author is an international trade consultant, and a licensed customs broker. He is a lecturer on logistics, indirect tax and customs, and a lecturer of Ateneo and BayanTrade on International Supply Chain Management. Please contact firstname.lastname@example.org for your comments.