Many activities and processes of businesses and even the daily affairs of society are tied to Logistics services. Almost all manufacturing industries, commerce, tourism and many service units are dependent on logistics infrastructure. But what is the exact definition of logistics services?
The definition of logistics can be different from the definitions that are used in general practice. Therefore, Logistics services applications can also be redefined under its influence. However, transportation and warehousing are usually the two main processes of all types of logistics. Join us in this article to discuss the types, stages and planning of logistics, along with its role in the supply chain.
What is Logistics services?
In response to the question “What is logistics?” We must say that the process of planning, implementing and controlling the efficient and effective flow of goods, services and related information, from the origin to the point of consumption, is called logistics in order to meet the customer’s needs. In other words, logistics is the coordination and management of the flow of resources between the point of origin and the point of consumption, in order to meet the needs of the customer or customers.
Now that we understand what logistics is, it is good to know what is the role of logistics management and what does a logistics service company do?
MORE: What is the difference between logistics and transportation?
What is the role of logistics management? What does a logistics service company do?
The main role of logistics management and in fact the logistics service company includes planning, execution and control of forward and reverse flows of goods transfer as well as storage of goods and related information in order to meet customer needs.
The main goal of a logistics service company is to do all the work in the supply chain effectively and efficiently. All aspects of the supply chain must be considered by the logistics service company. These aspects include transportation, inventory, general warehousing, cargo packaging, security, documentation and information systems.
To ensure that the final product meets the customer’s needs in terms of quality, quantity and timeliness, each of these components must be carefully planned and coordinated by the logistics service company and fit into the logistics service levels.
What is the importance of logistics?
After knowing the answers to the two questions “What is Logistics services?” and “What is the role of logistics management?” Now we answer the question, “What is the importance of logistics?”
It doesn’t matter whether you are a manufacturer or a seller, you can reach your customers through marketing techniques or word of mouth. However, your product will not be transported by these methods, but must be transported by the logistics service company.
As you can see, without logistics services, all the efforts and expenses you spend on promoting your products will be in vain. Only a good logistics service company can transport products safely in different places and even across a country and between different countries.
In cases where the manufacturing plant is small, it can undertake the transportation process itself or use the services of transportation companies, but for large and organized companies, it is inevitable to use various types of logistics services provided by the logistics service company. Some large manufacturers design a logistics department for intercity cargo transportation inside themselves, and others decide to outsource all kinds of logistics services.
This decision depends on the management, goals and costs of the manufacturer or the factory and workshop in question.
What are the stages of the logistics cycle?
Logistics is done in a repeatable cycle. Each of the stages of the logistics cycle are performed many times by the company’s employees. These steps include the following:
- Product selection
- quantification
- Inventory management
- Providing services to customers
Product selection:
This stage is actually the first stage of the logistics cycle. Each company chooses a product that will be responsible for its transportation according to its facilities and interests.
quantification:
Quantification means procuring or sourcing materials from a manufacturer or supplier and focuses on calculating estimated quantities. At this stage, the ability of the company to carry out a large or small order should be checked and then based on this quantification, the order should be accepted or rejected.
Inventory management:
As we said, one of the duties of a Logistics services company is to store goods. The company must constantly check its inventory and distribute accordingly. This will ensure that there is always enough material to supply the market. However, “inventory management” is usually for logistics companies that constantly distribute a specific product.
Providing services to customers:
The main purpose of logistics is to serve customers by providing the products they need. So delivering the goods to the customer is the last stage of this cycle, which all the previous stages are done to reach it.
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What are the types of logistics services?
Now that you know what Logistics services is and what the duties of a logistics service company are, it is necessary to familiarize yourself with the types of logistics services and, in the next step, with the levels of logistics services.
Types of logistics services include the following:
- Inbound Logistics
- Outbound Logistics
- Internal logistics (Intra Logistics)
- Reverse Logistics
- Third party logistics (3PL or Third-Party Logistics)
Of course, the types of logistics services are not limited to these four items; But since these are the most widely used types of logistics services, we will review them here.
Inbound Logistics
Inbound logistics is one of the main types of logistics. This type of logistics service includes the transportation, storage, and receipt of input resources (such as raw materials or other goods) that are needed to produce a product.
For example, if your company deals with shoes, the in put Logistics services in your company include shoe rubber, thread used to sew shoes, dye, etc. will be
Outbound Logistics
Outbound logistics is one of the types of logistics services performed by a logistics service company. In this process, the logistics service company receives the product from the manufacturer and delivers it to the customer at the promised time.
Here, customer satisfaction is the main goal, and the logistics service company makes a lot of effort so that the product reaches the customer with minimal cost and ease.
Following the previous example, the outbound logistics of a shoe manufacturing company will include shipping the final product to customers.
Internal logistics (Intra Logistics)
This type of logistics service takes place inside a company or factory. For example, in order to make shoes, after molding, it is necessary to make the plastic part and move it inside the factory to make holes for the laces. In the next step, the shoe is moved inside the factory for strap installation and packaging.
This type of logistics service is known as domestic logistics and is considered a part of the activities of the logistics service company. However, in many cases, these internal services are undertaken by the manufacturing company itself.
Reverse Logistics
Reverse logistics is one of the types of logistics services in which the logistics service company transfers the product from the end customer to the seller. This type of logistics includes collecting, inspecting, sorting, packaging and returning the product to the seller.
Undoubtedly, you have at least once encountered the issue that you ordered a product online and it did not meet your needs. Then you have requested to exchange or refund the product. In this situation, the logistics service company will recover the material from you and return it to the seller by providing reverse service.
Types of reverse logistics services are usually offered in a common way in relation to large stores.
Third party logistics (3PL or Third-Party Logistics)
Third-party logistics is a type of logistics service that focuses only on transporting products from one end to the other and nothing else.
It does not matter whether the transfer is from seller to consumer or from consumer to seller. In this type of logistics service, the logistics service company takes responsibility for delivering products in two specific places and at the right time.
These types of logistics services help businesses to focus on their core business instead of spending time overseeing delivery services.
Logistics service levels
Logistics services have six levels:
- First party logistics (1PL)
- Second party logistics (2PL)
- Third party logistics (3PL) (which we talked about)
- Fourth party logistics (4PL)
- Average logistics (4.5 PL)
- Fifth party logistics (5PL)
In the past, international trade was not very prosperous and first and second party logistics were the default choice of most businesses. But as international trade flourished, companies began to explore new markets around the world. The pace of globalization increased and companies needed to create a wider supply network to support overseas expansion.
What are 1PL and 2PL logistics service levels?
PL1 and 2PL are two levels of logistics service levels, which are considered the simplest level of logistics service levels.
First-party logistics (1PL) refers to logistics companies that take full control of their own logistics. They use their own assets (trucks, warehouses, etc.) to store and deliver goods to customers. Although, 1PL helps to closely monitor the load transfer, the additional infrastructure and resources required impose a high and constant cost on the business.
Alternatively, companies may decide not to own warehouses, trucks, etc., and outsource logistics to service providers with transportation, handling, or storage capabilities. This level of logistics service is known as Second Party Logistics (2PL). This method of logistics service levels allows the outsourcing of only a few components of the supply chain.
What are the service levels of 3PL and 4PL logistics?
3PL refers to a person or company that ships or transports various goods produced by other manufacturers to various destinations based on specific and detailed documented instructions. It may also receive and store these goods.
The third-party logistics service company undertakes all steps from warehousing to delivery and delivers the goods to the destination on time.
This method of transportation enables freight companies to focus their time and resources on transportation alone, while also reducing costs and delivery times. 3PL logistics service level providers are the primary choice for businesses looking to cut costs.
4PL logistics services create a customized model to increase the overall efficiency of the value chain. A 4PL operates on an asset-less model to help companies by coordinating with other service providers. In simpler terms, 4PL logistics service levels are limited to consulting and are not involved in the implementation of the supply chain model. These companies provide logistics services using the resources and assets of other companies, including 3PL.
4PL services are usually the ideal choice for businesses looking for customized solutions and value chain optimization.
Average logistics service levels (4.5 PL)
4.5PL goes one step beyond other logistics service providers by merging the operational excellence of 3PL with the technical and business expertise of 4PL. 4.5PL is a promising hybrid solution offered by only a few companies.
The features that make the 4.5PL logistics service company stand out from the previous types include the following:
- Cost-effective: 4.5PL enables businesses to achieve cost-effectiveness by taking ownership of their entire supply chain operations and thinking about lower transportation costs.
- Consulting capabilities: A variety of 4.5PL logistics service companies consult with businesses on each component of supply chain operations and design strategies that can optimize the entire value chain.
- Customization: 4.5PLs create customized solutions to address the specific challenges of each business.
- Expertise: All types of 4.5PL logistics service companies have great expertise to understand future trends and technologies such as AI, ML, Blockchain and IoT that can be implemented in business.
- Technological capability: 4.5PL provides a developed IT structure that plays an important role in improving transportation services.
Final thoughts
Logistics services help businesses manage inventory, order fulfillment, and shipping. From inbound goods to picking, packing, and shipping, these service providers can handle a number of tasks that are costly to manage in-house. Understanding the costs of these services and how to choose a provider can help you find a partner that you can grow and scale with in the months and years to come.
Meran Group offers a wide range of logistics services. Our experienced team works with you to develop a custom solution tailored to your exact needs. You’ll be confident you’re getting the most out of your logistics services provider.
We understand that every business has its own requirements about supply chain needs. That’s why we offer flexible pricing plans that fit within any budget or operational need. We promise accuracy and efficiency, in all aspects of our logistics services.
