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Meaning, definition, Classification, Characteristics - Logistics | 11th Commerce : Emerging Service Business in India

Chapter: 11th Commerce : Emerging Service Business in India


Logistics can be viewed as a logical extension of transportation and related areas to achieve an efficient and effective goods distribution system.





Logistics can be viewed as a logical extension of transportation and related areas to achieve an efficient and effective goods distribution system.

Logistics Management is defined as ‘Design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to the consumer)’. This implies that an integrated view of a number of different activities and functions may be required. These activities are  represented as part of the value chain, called the generic value chain by Porter. All firms are viewed as a collection of primary and secondary activities.




The logistics management involves various decisions that need examination for an integrated system, they are:

Product design, Plant location, Choice of markets/sources, Production structure, Distribution/Dealer network design, Location of Warehouses, Plant Layout and Logistics, Allocation Design, Production Planning, Inventory Management – Stocking Levels, Transportation-mode Choice, Shipment Size and Routing Decisions, and Transport Contracting, Packaging, Materials Handling, Warehousing Operations.


Key Actors


Shippers (users  of  logistics),  Suppliers (of logistics services) – Carriers  (rail, road, air, water, pipeline, rope-way), Warehouse Providers, Freight Forwarders, Terminal Operators (ports, stevedores etc), Government (regulator of logistics).

Organisations taking proactive managerial attention in co ordinating the actors in logistics leads to reduced logistics costs and improved customer service.


Role of Government


The government plays a significant role in logistics in India. The important legislations that affect logistics are Central Sales Tax and Local Sales Tax, Consignment Tax, Excise Duties, Octroi and Entry Tax, Use of Packaging Material, MODVAT, GST, Motor Vehicles Act and similar acts for other modes, Distribution of Policies.


Classification of Logistics Applications


The Logistics Management can be classified on the basis of applications from various dimensions in the process of examining and evaluating alternatives. They are 1. Decision-wise 2. Actor-wise 3.Inbound logistics and Outbound logistics


Lements of Logistics Cost


The important elements of logistics cost are

Product Inventory at source, Pipeline Inventory, Product Inventory at Warehouses and Dealers, Transit Losses/Insurance, Storage    Losses/Insurance,    Handling and Warehouse Operations, Packaging, Transportation, Customers’ Shopping.


Models in Logistics Management


The decision areas of Logistics can be addressed using various quantitative models from Operations Research namely

i. Forecasting Models ii. Mathematical Programming Models – Location Models, Allocation Models, Distribution Network Design Models iii. Inventory Models iv. Routing Models v. Scheduling Models vi. Alternatives Analysis


Logistics and Infrastructure


Generally a good transportation, storage, handling and information infrastructure helps in efficient logistics management. In India most of the transportation happens through road  and  rail.  Pipeline  and  Water transport are to be fully utilized further. Air  transportation  is  used  for high value commodities. In transportation infrastructure the following framework  can be used to identify the problem areas like Right of way, Vehicle, Motive power, Terminals, Operations/systems.


Logistics Management to Supply Chain Management


Logistics Management deals with the efficient management of a static gap between demand and supply whereas Supply Chain Management tries to identify the dynamic nature of the  value  creation  itself  such  as responsiveness, quality and design. Hence, it aims for an effective management response over the longer run.SCM focuses on profit maximization rather than cost minimization. LM activity is supply driven and SCM is more demand driven.


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11th Commerce : Emerging Service Business in India : Logistics | Meaning, definition, Classification, Characteristics

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