Do you understand Logistics correctly?

Logistics is a very familiar concept in the field of business and transportation, but not everyone clearly understands its true nature and role, even those who have worked in this industry for many years because, until now, even many experts in the industry and legal experts still give different concepts about logistics. In this article, we will learn about the concept of Logistics, explore the main fields and its important role in the development of businesses.

Logistics was originally a military term which was first conceptualized in the French work “Précis de l’Art de la Guerre” by Antoine-Henri Jomini, a Swiss military officer. The word Logistics is the English translation of the French word logistique. However, there is another stream of information that says that logistics has a much older origin, originating from the ancient Greek word logistikos. But anyway, we do not need to be “stubborn” about these things, we just need to know that logistics actually originated from military activities and up to now, it has “evolved” into a much broader field and is the “blood” of the global economy. Note that, in English, the word Logistics is always written in plural form as a way of indicating its diversity.

According to the Council of Supply Chain Management Professionals (previously the Council of Logistics Management), logistics is the process of planning, implementing and controlling procedures for the efficient and effective transportation and storage of goods including services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements and includes inbound, outbound, internal and external movements.

In Vietnam, the 2005 Commercial Law does not introduce the concept of “Logistics” but introduces the concept of “logistics services” in Article 233:
“Logistics services are commercial activities in which traders organize the implementation of one or more tasks including receiving goods, transporting, storing, storing, carrying out customs procedures, other paperwork procedures, consulting customers, packaging, marking, delivering goods or other services related to goods as agreed with customers to receive remuneration.”.

Thus, we can see that although there are different expressions in terms of words and presentation, all authors agree that Logistics is the activity of managing the flow of raw materials from the procurement stage through the storage process, production of products and distribution to consumers. The purpose is to optimize costs and time for the circulation of raw materials to serve the production process as well as timely distribution of goods.
To put it poetically, Logistics is the art of organizing the movement of goods and raw materials from the procurement stage, through the storage, production, distribution processes until they reach consumers.

Because Logistics is a very broad category, covering many fields, the classification of logistics will be based on many different criteria, which can be listed as follows.

• 1PL (First Party Logistics): The owner of the goods organizes Logistics activities himself as one of the main sources of income as well as increases revenue and saves costs.
• 2PL (Second Party Logistics): is a form of renting services from a 2nd party of an import-export company, in which these 2nd party companies only undertake individual activities in the chain of Logistics activities (such as transportation, warehousing, customs procedures, payment, etc.).
• 3PL (Third Party Logistics):This is a form of representing the owner of the goods to perform logistics services in each small step in the logistics chain such as: representing the shipper to carry out import and export procedures, providing delivery – transportation and domestic transportation documents or representing the importer to carry out customs clearance procedures and deliver the goods to the agreed destination.
• 4PL (Forth Party Logistics or Lead Logistics Provider (LLP): This is a model of managing and implementing complex logistics activities including resource management, control coordination center. In 4PL, the company or representative organization will be authorized by the customer with a management role, focusing on improving process efficiency and implementing the entire supply chain and logistics.
• 5PL (Fifth Party Logistics): This is a more advanced form of 4PL that comes with the growth of e-commerce. The 5 PLs are characterized by systems: Order Management System (OMS), Warehouse Management System (WMS) and Transportation Management System (TMS). All three systems are closely related to each other in a unified system through information technology.

• Business Logistics: Each business sector and specific goods will have different ways of preserving, transporting, and managing goods. Therefore, the Logistics chain of each subject has its own characteristics. Here are some main examples:
  + Fast Moving Consumer Goods (FMCG): With this type of goods, the most important requirement is to ensure delivery time, the time from when the goods are produced until they reach the final consumer.
  + Aumotive Logistics: This industry requires smooth coordination between factories and departments producing individual spare parts, ensuring that the end of one stage is the beginning of the next stage, avoiding waiting time. Particularly important is the storage and distribution of spare parts.
  + Some popular others: Chemical Logistics; Pharmaceutical Logistics; Petroleum Logistics,…
• Military Logistics: Planning, integrating all aspects of support for military combat capability (in troop deployment or stationing) and military equipment designs to ensure readiness, reliability and efficiency. For example, the operation of the Ho Chi Minh Trail as a typical example of Logistics in the resistance against the US of Vietnamese Army.
• Event Logistics: A network of activities, facilities and people required to organize, plan and deploy the above resources for an event to take place and conclude effectively.

• Inbound Logistics: is the activity of ensuring the supply of input resources (raw materials, information, capital) for the production and business activities of an enterprise in an optimal way in terms of location, time, and cost.
• Outbound Logistics:are activities that ensure the delivery of ingredients to consumers in a good manner in terms of location, time and cost to meet the goals of the business.
• Reverse Logistics: is the process of recovering by-products, scrap, waste, and environmental factors arising from the production, distribution, and consumption processes for recycling or treatment.

Although logistics focuses on the movement of goods, its impact on business is much broader. In business, success in logistics means increased efficiency, lower costs, faster production, better inventory control, smarter use of warehouse space, increased customer and supplier satisfaction, and improved customer experience. Each of these factors can significantly contribute to a company’s success. It is worth noting that logistics now also extends to managing returns so that the most revenue can be extracted from these goods.

The essence of business is the exchange of goods or services for money. Logistics is the path that goods and services take to complete a transaction. Sometimes goods are shipped in bulk, such as raw materials to a manufacturer. And sometimes goods are shipped as individual payments, to individual customers. Regardless of the specifics, logistics is the physical execution of a transaction, and it is the lifeblood of a business. Where there is no movement of goods or services, there is no transaction and no profit.

Hopefully the above article has helped readers better understand what Logistics is as well as the role and importance of Logistics in business. If you need further discussion, need advice or have a need for Logistics services, please comment below or contact our team of experts immediately to receive the earliest support.