To start, let us see the origin of the word “logistics”. According to Wikipedia, the word is in use since 1846 in the English language. But the activity of moving goods in the most effective manner exists almost as long as humankind. Logistic had special importance in wars, where troops able to move swiftly. Back then, armies getting replenishments were the ones winning the wars.
Now, how do we define logistics? The Council of Supply Chain Management professionals defines logistics as:
“Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses 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.”
So, it is all about the movement of goods. From the supplier, trough our warehouses and all the way to the customer.
There are many different products on the market. Thus, we will have a couple of different types of logistics
Ambient, chilled and frozen logistics
Depending on the temperature of the goods, we have those three types. Those definitions are used in the food industry, as well as anywhere where the quality depends on the temperature the goods are stored.
In general, if the goods are stored below -18 degrees C, it is considered as frozen. Chilled logistics need to keep the temperature between 0 and 4 degrees C. And the ambient temperature is in the 18 – 24 degrees C range.
Why is pharma so special, that it has its’ own logistics? First of all, it is a controlled substance. So, tracing and product security plays a big role. We have now blockchain involved already in the pharma logistics chain, assuring that we buy genuine. Secondly, it needs to be stored in very special conditions. Not only the temperature but as well the humidity needs to be in a very narrow range. The latest good example is the COVID vaccine from Pfizer, which needs to be kept at -70 degrees C. Once it reaches chiller temperature, we have to use it within 5 days. If not used by then, it needs to be discarded.
3rd 4th and 5th party logistics
Everyone saw somewhere the 3PL or 4PL “word”. And, it is quite confusing. It is all about managing the logistic process.
The first one is 1PL. The company takes care of everything. Our trucks take raw materials from the supplier. The warehouse and all the employees belong to us. And we deliver to the customer as well. Very controlled, but may not be the cost-efficient way of doing things.
This brings us to 2PL, where we hire trucks for transport. Still, the company controls everything. Only, instead of having their own trucks that may sit idle for some time, an external service provider is hired.
With 3PL things are getting a bit more complicated. An external company takes care of our logistics. This includes managing our warehouse and transport requirements. They as well take care of freight forwarding, customs and everything related to moving your goods to and from the company. The process itself is still under the control of the company. The 3PL provider is taking care of the execution.
In 4PL the organization gives away control over the Supply Chain to the service provider. Now the 4PL company communicates with vendors and customers regarding shipping. They are providing information about the reorder levels and optimize stock. In the cases where the company has a VMS agreement with its customer, the 4PL takes care of it.
Now you may wonder what is then 5PL? After all, there is nothing much in logistics left to outsource. Correct. 5PL focuses on Supply Chain network optimization. Here we talk about using big data, blockchain, RFID and all other technologies that help in getting the product in and on the shelf at the just-right time, at the optimum cost. For companies that operate in the e-commerce space, 5PL providers are almost a must.
I have written about this to a great extend in a separate post. So, for the purpose of having all definitions in one place, let us just define it. Reverse logistics deals with goods return from the consumer or client for any reason. It may be buy-back, recycling expired or damaged products. In today’s world reverse logistics becomes more important as a company looks into the environmental impact of their business on the planet. Hence, recycling becomes a big CRM tool, especially with younger generations.
So, here it is. Just enough about logistics that you can discuss it at a party. Logistics is a large and complex topic. You can find books around only a part of it. Or you can start by checking out the links below.