What is the role of logistics in a company?

Customer satisfaction is essential to the company’s sustainability. However, a major part of this satisfaction comes from logistics: the company’s ability to organize its material flows to meet the needs of its end customers.

Logistics is not only a service: it is a strategic function, both a lever for internal optimization and a tool for competitiveness. In this article, we propose to define the term in a precise way before analyzing the role of logistics in a company and to underline its strategic and competitive importance.

What is logistics?

Logistics can be defined as the activity of the company related to the control of its physical flows. It is about managing resources efficiently so that they can meet customers’ needs. And in particular to coordinate the movement of goods so that they circulate continuously from point A (the supplier) to point B (the final customer).

The term comes from military language. We speak of logistics in relation to the organization of the supply of troops in the field. This is a sine qua non condition to ensure their integrity and to make sure that they can continue the campaign. The notion of logistics therefore has a strategic meaning from the outset.

However, logistics in a company is more complex and is not limited to the simple routing of goods. Indeed, it includes both material and information flows.

Material flows

We can distinguish two material dimensions within logistics:

The technical dimension

It includes current activities such as:

• the transport of goods,
• storage,
• handling,
• packaging,
• and delivery to distributors or customers.

It takes into account the use of vehicles or transport machines, the layout of the premises, the management of returns, the security of the goods, etc.

The functional dimension

It confers to logistics in a company a transversal role: it is a question of optimizing the network of circulation of the flows of products to guarantee at the same time:

• the quality of goods,
• speed of delivery,
• and cost rationalization.

Information flows

In order for material flows to be possible, logistics in a company must be crossed by information flows connected to all the services and/or service providers in the supply chain.

These flows are essential because they enable orders to be placed, goods to be acknowledged, and information to be provided at any time on the state of stocks.

The information flows are managed by adapted software that ensures the transmission of data. They also ensure good communication between the links in the logistics chain. They contribute to forecasting needs for greater efficiency.

What is the role of logistics in a company?

Logistics occupies a very special place in a company. Firstly, because it is essential when the organization is based on material flows. Secondly, because it is an integral part of the value chain. Finally, because logistics is also a function, in the sense that it is transversal and concerns all departments.

Logistics: a central role in the company

The role of logistics in a company is therefore central, insofar as it affects all departments and influences the overall performance of the organization. It is a strategic lever in itself, an added value.

This concept is recent: thirty years ago, logistics was still considered a secondary function. But today, this function is at the heart of the company’s business issues, as it has an impact on production, delivery, inventory and finances.

This centrality is further reinforced in network companies, which outsource a large part of their activities. The fewer activities a company undertakes on its own, the more important logistics is to its operations.

Logistics as a strategic lever

The role of logistics in a company makes it a strategic lever to better manage its production, to satisfy its customers more and more, and to reduce its costs.

• Better manage its production. By optimizing its logistics function, the company manages to organize each task in order to take care of it more efficiently and to save time. This is made possible by the automation of processes. This is a win-win situation: employees are freed from recurring low value-added tasks and have better tools to work with, while management can control product quality more efficiently and rationalize costs.
• Improve customer satisfaction. By virtue of the fact that logistics in a company is concerned with supplying given products to targeted users, this process is naturally the lever par excellence of customer satisfaction. A quality product, in stock, that arrives in good condition and in the best possible time, is the assurance of satisfying the customer, but also of building loyalty.
• Reduce costs. Optimizing the logistics process in a company helps to make significant savings at all levels: purchasing management (comparing product and raw material prices), inventory management (reducing the invoice by limiting the space needed to store goods), and delivery management (finding distribution solutions at the best price, without cutting back on quality).

Logistics as a competitive tool

The role of logistics in a company is also competitive. In a context of “chrono-competition”, the “time” factor has become a major parameter of comparison between service providers, and therefore of satisfaction for the final customers.

In fact, optimizing the coordination between the services involved in logistics makes it possible to pursue a common objective: to deliver faster, in the best possible conditions, to satisfy customers.

The search for flexibility is part of this competitive perspective. The supply chain must adapt to a growing need for agility, which is necessary to maintain a competitive advantage: it is a question of placing orders at the right times to meet consumer needs in a relevant way.

To conclude on logistics in a company

The role of logistics in a company is both central and transversal. Nevertheless, this function is always part of a more global process, that of the supply chain. It is therefore the entire supply chain that must be optimized (via Supply Chain Management) to achieve optimal results.