Understanding Logistics

Logistics is a series of efforts that encompass the effectiveness of planning, implementation, and supervision of the process of transferring goods or services, energy, or other resources from the starting point to the end-user.

All logistic activities are carried out to achieve the main goal, which is to ensure the availability of goods and timely delivery to the intended location. There is a series of logistics activities that companies must undertake, namely procurement of goods, production activities, and distribution.

In the process, logistics activities have specific performance standards that must be achieved. The level of performance to be achieved in logistics activities is the balance between the desired service quality for customers and all costs incurred to reach the company’s ultimate goal.

Important Components of Logistics

There are five important components that must be present in the logistics system to support the flow of goods and distribution:

1. Logistics Facility Location The network of facility locations is a component that must be owned by a company. The goal is to plan where and from where materials and products will be transported. Providing other facilities such as factories, warehouses, and retail stores is a form of good service to customers directly related to the products.If a series of location structures can be arranged well and strategically, the company will gain many benefits. The company also expects a high level of efficiency in the logistics management system, closely related to and limited by the structure of facility locations.
2. Transportation Transportation is another crucial aspect to consider in the logistics system. Usually, a company has three alternatives to support various capabilities of its transportation equipment:
   • Private equipment fleet that can be purchased or rented.
   • Entering into a specific contract that can be arranged with transport specialists to obtain transportation service contracts.
   • Utilizing various services from licensed transportation companies offering transportation services from one place to another at agreed-upon costs.

   When designing a logistics system, it is recommended to consider factors that can affect the quality of transportation services, such as cost, speed, and delivery consistency.

3. Inventory Procurement Management Inventory procurement management in the logistics system is a part of the company’s structure that plays a role in regulating the level of inventory. The company must be able to manage and organize the way to obtain inventory, the storage process, and how the inventory can be issued or utilized later.
4. Communication Communication is the activity of sharing information throughout logistics activities. Poor communication in the logistics system can cause serious problems. Firstly, assessing trends in logistics speed will be incorrect, leading to inventory shortages or excessive commitments between the company and suppliers, intermediate customers, and end customers.Secondly, poor communication can lead to disruptions in system performance, resulting in instability due to insufficient or excessive evaluation processes.
5. Storage In this case, storage includes all operational aspects of logistics, such as packing, movement, and packaging. All these aspects are related to the inventory flow needed to meet the needs of a specific product or material.

Why is Logistics Important?

Logistics plays a crucial role in commodity trading because it is closely related to the storage and physical delivery of commodities.

Roles of Logistics in a Company

An effective logistics team can enhance marketing quality by providing a more efficient product transfer process from seller to customer. Here are some roles of logistics in a company:

1. Market-Oriented Logistics plays an important role in satisfying customers; therefore, the logistics team has a vital role in marketing efforts. Additionally, logistics also has a key role in achieving profits for the company.
2. Adding Value Companies must continually strive to improve the quality of their products, providing added value to consumers. A good logistics system can add value to consumers in terms of place and time utility.
3. Efficient Product Transfer A good logistics system proves capable of creating an efficient product supply process in the right place, at the right time, and in the right condition and at a more affordable cost so that customers can benefit from the product.
4. Economic An efficient and economical logistics system is an asset that must be maintained and guarded by the company. If a company can provide products to customers quickly and at a low cost, the company will be able to increase market share more than competitors who do not have a good logistics system.Furthermore, the company can sell products at a lower cost due to logistics efficiency, or provide better service satisfaction to consumers, creating a positive effect.

Requirements for a Good Logistics System

1. User Service It is crucial for logistics service providers to promptly provide information updates, as logistics heavily relies on time and speed. This can only be achieved through good and proactive communication.
2. Details International trade processes are complex. Logistics service providers must pay attention to document details and communicate with relevant parties to avoid penalties, delays, and other losses for users.
3. Legality Logistics service providers must have official permits and operate in accordance with applicable laws. This will reduce user concerns.

Logistics System in the Market

One of the main challenges in commodity trade logistics is recording. When a party buys in large quantities and across international locations, it is difficult to monitor the shipment of goods.

The difficulty of tracking or monitoring these shipments can lead to losses for various parties, including buyers, shipping services, and sellers. Therefore, an organized logistics system plays a significant role in minimizing losses during the shipment of goods.

In fact, 75% of logistics companies experienced operational difficulties, especially during the peak of the global health crisis throughout 2020-2021, according to a report from the Institute for Supply Management.