Logistics is necessary for moving p

Logistics is necessary for moving purchased materials from suppliers to buyers,
moving work-in-process materials within a firm, moving finished goods to customers,
returning or recycling goods and also for storing these items along the way in supply
chains. Effective logistics systems are needed for commerce to exist in any
industrialized society. Products have little value to customers until they are moved to
customers’ usage areas, at a point in time when they are needed. Logistics thus provides
what are termed time utility and place utility. Time utility is created when customers get
products delivered at precisely the right time, not earlier and not later. The logistics
function creates time utility by determining how deliveries can be made in a timely
manner and where items should be held prior to delivery. Place utility is created when
customers get things delivered to their desired locations.
The official definition of logistics from the globally recognized Council of Supply
Chain Management Professionals is: “that part of supply chain management that plans,
implements and controls the efficient, effective forward and reverse flow and storage of
goods, services and related information between the point of origin and the point of
consumption in order to meet customers’ requirements.”
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So it can be seen that transportation, warehousing, information systems and
customer service play very significant roles in the logistics function. For supply chains
in particular, logistics is what creates the flow of goods between supply chain partners,
such that costs, service requirements, competitive advantage and finally profits can be
optimized.
When moving around within a city, between cities or between countries, it is
impossible to ignore the business of logistics, whether it be large trucks ambling along
the roadways, trains pulling boxcars, cattle cars and tankers next to highways,
warehouses storing goods in cities’ industrial sections, airplanes taking off at airports,
container ships unloading cargo or barges floating slowly down rivers. In the U.S. and
other highly industrialized nations, the movement of goods is ever-pervasive. Without
it, we as consumers would never have opportunities to find what we want, when we
want it, at the many retail outlets we routinely visit each day.
Using the latest available information from the U.S. Bureau of Transportation
Statistics, at the end of 2007 the total annual U.S. for-hire logistics services
contribution to the U.S. gross domestic product (GDP) was approximately 2.9 percent,
or $407 billion. Table 9.1 shows the growth of for-hire logistics expenditures in the U.S.,
which has almost quadrupled in 27 years. Notice that for the past twenty years or so,
for-hire logistics expenditures have stayed close to 3 percent of GDP. Also note that
aside from warehousing and “other,” everything has remained fairly steady for the past
twenty years. This may be due in part to the need for faster and more flexible
warehousing services and from the increased security placed on transportation services
entering the U.S. since 2001.
In this chapter, the many logistics activities are discussed, along with logistics
nomenclature and related events affecting businesses each day. Included are discussions
of the modes of transportation, transportation regulation and deregulation, warehousing
and distribution, a number of logistics decisions firms must make, the impact of logistics
on supply chain management, the global issues affecting logistics, the impact of
e-commerce on logistics activities and management of product returns, also called
reverse logistics. Some of the transportation basics are reviewed next.