Supply Chain Management

7 Key Functions Of Logistics: Elements and Components

Logistics is also known as physical distribution management. Many industries which produce goods regularly, including FMCG, and consumer durables, use logistics companies to distribute goods. These goods must be shipped to distributors, dealers, and consumers. Logistics refers to transporting goods from the company to either the middlemen or the end consumers.

A logistics company is an entity responsible for managing another company’s supply chain. Depending on the terms of the commercial agreement, the logistics company may be involved in supply procurement, storage and transportation, and order fulfillment and distribution.

Logistics is not limited to transport. A company may use many logistics functions or activities.

For e.g., you will need to adjust your inventory if you are required to ship a product from your warehouse to a dealer. You must also have records that show when the goods left your warehouse and arrived at the dealer. You must also ensure that the goods arrive in the correct condition at the dealer. You must also account for any returns received from the dealer.

Logistics involves many responsibilities. These are the main functions of a logistics business.

1. Order Placing

A logistics company must complete order processing. Order processing is the first step in logistics. This may fall under the purview of the company’s commercial department. Before processing orders within the company, the commercial department makes sure that payment terms and delivery terms are met.

A logistics company follows the following steps for order processing:

  • Examining the order to see if there are any deviations from the agreed-upon terms or negotiated terms
  • All information is available, including prices, delivery times, payment methods, and delivery schedules.
  • Ask about the availability of materials in stock
  • Planning and production in the event that there is a shortage
  • Recognize the order and indicate any deviations.

2. Materials Handling

Material handling is the act or process of moving goods around a warehouse. This involves managing inventory so that orders can be fulfilled quickly and accurately. Although it may seem like a simple job, it is crucial and must be done frequently.

It is easy to move one item from a small shop with 100 products. If the shopkeeper is unsure where products are kept, he will need to search for them each time a customer places an order. He has 100 products in his inventory, so he will have to go through them before moving any others. Multiply the above scenario by 100. Warehouses of large companies can extend up to half a kilometre in length. Think about how many inventory items are stored in the warehouse. The warehouse manager will have a lot of trouble if he doesn’t know how to transport the material to the dispatch centre. His productivity and efficiency will be greatly affected. The materials handling function is crucial.

3. Warehousing

Take LG and Samsung as an example. These are long-lasting consumer companies with a worldwide presence. Although their products are located in one place, their distribution is worldwide. Warehousing is an important Logistics activity that has a significant impact.

The warehouse must be located near the distributor or retailer to deliver goods quickly. A branded product may take longer to arrive than a product with a similar name. Therefore, it makes sense for a branded company to set up a more convenient warehouse to deliver the products quickly. The first step for a brand in a new territory is to lease a warehouse. This will allow it to be closer to its customers and the area.

This is a very common practice. This is a common practice. These warehouses can relieve the delivery pressure and become interdependent so that customers receive their goods when there is a high demand or low production.

Learn more about – Introduction To Warehouse Operations

4. Inventory Management

One of the most important functions of a logistics business is inventory management. It is about managing sufficient inventory to satisfy client demand while keeping the cost of carrying goods minimum. It is essentially about balancing the need to provide excellent customer service with avoiding losing market share.

A company may have 100 units in stock, but only 10 are required to meet demand. It has wasted money by buying 90 products. Another company ordered 500 units, but only 200 units were produced because they believed the demand would be lower. They have lost sales and suffered a loss in opportunity.

Logistics companies use software to manage inventory efficiently. This software makes it possible to resolve routine problems, such as determining how many items are left in a warehouse, without conducting a physical inspection. To optimize time and precision in inventory operations, it will be necessary for each to be recorded. This will allow you to increase space, optimize costs, and reduce waste.

Learn more about – Advanced Inventory Management

5. Transport

The logistics company’s most important activity is transportation. It is also one of the most resource-intensive and revenue-generating logistics segments. One reason transportation is so expensive is fuel. Whether it is gasoline, diesel or natural gas, fuel is a very expensive resource used primarily for transportation. The logistics company must procure LTL and FTL according to the order shipment.

Companies spend thousands each year to control transportation costs. It is an important source of business variability. Transportation includes the physical delivery of products from the manufacturer to the distributor or dealer and then to the final customers.

Learn more about – Basics of Transport Management System

6. Packaging

The packaging found in supermarkets and hypermarkets is divided into two types. One is the one customers see on the shelf. It appeals to them and makes them want to buy the package. The second type is transport packaging. This allows the product to be transported safely from one place to the next without being broken or spilt.

The logistics company is responsible for cost-effectively packing the product. End customers could suffer damage to their goods if the proper precautions aren’t taken. This can lead to severe losses for both logistics companies and end clients. Packaging can cost as little as 1-2 percent of the product’s actual value. However, if the packaging is not done properly during transportation, the company will be responsible for all the loss and damage it sustains.

7. Monitoring

Logistics companies must keep track of inventory management, transportation, warehousing, and other information. Each site, for example, requires continuous information about its supply status, future commitments, and replenishment capacities.

Similar to the previous step, the logistics company should research the costs of different modes of transport and their suitability for additional products and services. It is important to keep track of information regarding logistics, such as space utilization and work schedules, order requests, and delivery. Logistic companies can help increase efficiency by monitoring and evaluating overall delivery effectiveness.


Logistics refers to the movement and storage of goods within a company’s supply chains. This process involves many functions that must all be properly managed to increase the effectiveness and efficiency of the supply chain.

Although it is complex, the final result can be achieved by improving customer service, reducing costs, and increasing quality. Strategic, data-driven planning can help logistics professionals increase sales and commercial profits.

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