An Overview of Logistics Process

What is logistics?

“Logistics management is a part of Supply Chain Management that plans, implements, and controls the efficient, effective flow and storage of cargo, services, and related information between the point of origin and the point of destination in order to meet customer's requirements”

- Definition on Wikipedia

In other words, you can say that logistics is the management of flow of cargo from origin to destination whereas, shipping is the physical process of transportation from point of origin to point of destination.

Shipping Modes:

Inland:

Inland shipping can be by train or truck (lorry) via rail or road respectively. Typically, inland shipping is required when the cargo is shipped from consignor to origin port and from destination port to consignee.

Ocean:

Cargo is transported by containerized and bulk shipping via ocean. 

Air:

Cargo can be transported via cargo planes from origin port to destination port. Air shipping is usually required when transporting cargo from one country to other.

LOGISTICS PROCESS FLOW:

An individual or a firm that sends a freight is known as consignor or sometimes shipper. Consignor books a freight with Liner / Freight forwarder / NVOCC. 

Liner can be defined as a carrier who transports cargo abroad ships, while Freight Forwarder are those who acts as an agent on behalf of a shipper and NVOCC are those who consolidates cargo in ocean trades who will buy space from a carrier and sub–sell it to smaller shippers.

Now, the consignor can either transport the cargo via road to the warehouse or ask the freight service to pick up. When the shipment is picked up from consignor’s place (point of origin) and delivered to consignee (point of destination) is called as door to door shipment.

Once all the cargo / package is collected at the origin warehouse from the consignor, the product/ item is packed and sent as a consignment. This consignment is transported to the origin port, it can be seaport / airport. 

Customs clearance is done by Custom house agent CHA at the warehouse or port (both origin and destination). It involves groundwork and submission of documents / records required to facilitate export or imports into the country, representing client during customs inspection, assessment, and payment of duty and proceeds to deliver cargo from customs after clearance along with documents.

Documents involved in customs clearance are:

1. Exports Documentation: Purchase order from Buyer, Packing List, Sales Invoice, Bill of Lading or air way bill, Shipping bill, Certificate of Origin and any other specific documentation as specified by the buyer, or by financial institutions or LC terms or as per importing country regulations.

2. Imports Documentation: Purchase order from Buyer, Packing List, Sales Invoice, Bill of Lading or air way bill, Shipping bill, Certificate of Origin and any other specific documentation as specified by the buyer, or as required by financial institution or the exporting country regulation.

Now, the cargo is shipped via ocean/ Air/ Inland. 

Inland shipping comes into picture when the cargo is shipped from consignor to origin port and from destination port to consignee, or it’s a domestic shipment / to neighboring countries where rail or road facility is cheaper than Ocean / Air.

Domestic shipment is within the country where mode of transport is rail/ road; whereas, in international shipment, internal mode of transport (i.e. within the country) is via rail / road and external mode of transport (i.e. from one country to other) is via air / ocean. 

Once, the cargo has reached at the destination port, the freight service receives it and forwards to the destination warehouse. Now the consignment is disseminated into package and the package is delivered to the consignee. 

REVERSE LOGISTICS:

Reverse logistics is for all operations related to the reuse of products and materials. It is the process of moving cargo from their typical final destination for the purpose of recapturing value, or proper disposal. Reproducing and restoring activities also may be included in the definition of reverse logistics. 

The reverse logistics process typically includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business. Normally, logistics deal with course of action that delivers the product to the customer. In the case of reverse logistics, the resource goes at least one step back in the supply chain. For example, goods move from the customer to the manufacturer or to the distributor.

A manufacturer's merchandise usually moves from consignor and it reaches to the distributor or customer / consignee. Any process or management after the trade involves reverse logistics. If the product is substandard/ unreliable/ defective, the customer would return the product. The manufacturer would then have to organize shipping of the defective product, testing of the product, dismantling, repairing, recycling or disposing the product. The product would travel in reverse through the supply chain network in order to retain any value from the defective product. The logistics for such matters is reverse logistics.

The typical process of reverse logistics is shown in the figure below.

Conclusion:

Thus this is a brief description of the end to end process flow of Logistics. It gives a high-level overview of the same.

About Author:

Rajeshwari Pawar  is a consultant in Systems Plus Pvt. Ltd. Within Systems Plus, she actively contributes to the areas of Technology and Information Security. She can be contacted at:  rajeshwari.pawar@spluspl.com