Business logistics is the process of planning, organizing, and controlling the movement of supply, inventory, and information within a company. It generally involves the inflow and outflow of goods and information from the purchase of raw materials, to the transportation of goods in different stages of production, all the way to the distribution of goods to the end user. Through effective execution of business logistics, a company can save time, resources, and cost.
A significant portion of the management process is centered on logistics. Almost all company processes, including the production line, warehouses, and distributing centers require a steady movement of goods. By effectively implementing business logistics, a company can use fewer resources to deliver the same quality of products or services. This normally translates to a bigger profit margin and to gaining an advantage over competitors.
Logistics has its roots in the military. During World War II it became crucial to find ways of moving people and materiel efficiently. In the 1950s, business started to incorporate this philosophy into their processes, and business logistics was born. From its inception, business logistics has advanced to encompass a variety of other management concepts.
During the 1950s, logistics officers who had served in World War II transferred and contributed their expertise to the private sector. Their experience in coordinating the war effort translated to new practices in the transportation of resources and inventory. Furthermore, the 1958 recession led to cost cutting measures which meant that logistics managers had to conceive of new ways to move goods more efficiently and at a lower cost.
Seven principles form the foundation of business logistics management. The first is having the right items, and the second is having the items when they are needed. The third and fourth principles, respectively, are delivering the right number of items, and delivering them at the right time. The fifth is buying the items at the right price; sixth is maintaining the item’s good condition; and seventh is delivering the items to the right person.
Information logistics is generally considered an important element of business logistics for several reasons. Improvements in information technology enabled companies to communicate instantly with suppliers and customers from all over the world. In addition, supply chain management is made more efficient because materials can be tracked in every step of the production process. Finally, materials requirements and enterprise resource planning are expedited with the help of software dedicated to these processes.