Logistics

economic-dictionary

Logistics are all the operations carried out to make it possible for a product to reach the consumer from the place where the raw materials are obtained, passing through the place of its production.

They are mainly the operations of transport, storage and distribution of the products in the market. For this reason, logistics is considered as operations external to the primary manufacture of a product. In this sense, it is one of the departments of companies that is most often outsourced or subcontracted.

Logistics is an increasingly used term nowadays. It comes from the French military concept ‘logistique’, where it began to be used to describe the transport, supply and accommodation of the troops. It is currently also used in business. Mainly in the marketing and distribution sectors.

Some define logistics as the art of directing materials and products from the acquisition of raw materials at the source to their consumption by the end user.

The objective of logistics is to make the desired product available to the consumer, in the quantity and at the right times, at the best point of sale and that all this is done at the lowest possible cost.

Logistics functions

Logistics comprises several activities to meet your objectives:

  • Order processing: Everything related to purchase orders.
  • Material handling: It encompasses all the material means to move the products both in the warehouses and between them and the points of sale (belts, conveyors, forklifts, etc.)
  • Packaging: Systems used for the protection and conservation of products.
  • Goods transport: Determine the material means to transport the product (truck, train, ship, etc.) and plan the routes that provide the lowest possible cost.
  • Storage: Location of the product, size and characteristics of the warehouse.
  • Stock control: Determine the stock of the product that the seller must have available for sale.
  • Customer service: Includes the services and means necessary for the customer to purchase the product.

The cost of logistics

The cost of logistics in the total cost of the product varies from one product to another and depends on the country in which we are located. For example, non-alcoholic beverages (water, beer, soft drinks) have a logistics cost between 5 and 10% depending on the company and the country. The logistical expense supposes 11% of the cost of production of a car. In Spain the average percentage of the logistics cost is 10.7%. Due, in large part, to the fact that the transport of goods is carried out mainly by roads. The European Union average is 8%.

Currently, companies are trying to make the consumer himself pay a large part of the logistics cost. This occurs primarily in electronic commerce, where shipping costs are almost always borne by the customer.

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