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Logistics Management’s Role in International Trade

By Tim Moran

The many players involved in the big, wide world of international trade and shipping tend to overlap in terms of roles and responsibilities. So, it’s sometimes challenging for small or midsize enterprises (SMEs) to differentiate logistics management companies from all the others that are afloat on business’ bounding main.

What, exactly, is logistics management, and what are the nuances of difference between logistics and other elements of global supply chain management?

 

What is Logistics Management?

 

Logistics management companies plan, control, and implement procedures for the effective and efficient storage and transportation of goods, tracking the products from the point of origin to the point of consumption. As observers explain, the “logistics industries are responsible for producing, obtaining, and distributing products and goods to the right place in the appropriate quantities.”1

 

Logistics companies deal with planning, while transportation companies execute those plans. Logistics management companies can handle:

 

  • Packaging
  • Containerization
  • Documentation
  • Insurance
  • Storage
  • Import/export regulations
  • Freight damage claims
  • Vendor management
  • Risk mitigation
  • Collaboration with the rest of the supply chain.2

Sometimes also called third-party logistics providers (3PLs), logistics management companies are said to provide transportation expertise, hands-on experience with various transportation technology platforms, and the market visibility and scale to cost-effectively meet ever-changing requirements. Leading 3PLs with fully developed transportation capabilities offer a variety of services that provide shippers with predictability, capacity, and flexibility.3

 

Logistics and Supply Chain Management

 

There is also some confusion about logistics versus supply chain management, as continuing evolution of supply chain functions has caused these roles to intersect. This intersection has resulted in blurred definitions for some of these terms—including logistics and supply chain management.4

 

  • Supply chain management is an overarching concept that links multiple processes to achieve competitive advantage, while
  • Logistics refers to the movement, storage, and flow of goods, services, and information within the overall supply chain.

Difference Between Logistics and Freight Forwarding

 

Another confusion arises when looking at logistics companies and freight forwarders. Though often mentioned together, they, too, are different.

 

  • Freight forwarders don’t typically own assets, and may partner with multiple logistics management companies;
  • Logistics companies tend to have a much wider array of physical assets, even down to owning ships, trucks, or planes. Yet, while they might own these assets, logistics companies do not generally have access to additional shipping routes.

Further, according to observers, the majority of logistics companies will specialize in a particular area (cold storage, dry box, large scale, long haul, intracity) but will still try to reach all parts of the supply chain.5

 

Logistics Companies Aim to Eliminate Inefficiencies

 

Logistics startups have begun to focus on eliminating some of the inefficiencies associated with traditional shipping and delivery business models. According to a recent report by PwC, “disruptors are impacting logistics globally and are clearly a threat to legacy logistics companies. New technologies are targeting a variety of logistics services, including automated scheduling, the consolidation of deliveries from multiple shippers, on-demand trucking and carrier-based data analytics.”6

 

According to the PwC report, blockchain is one of the main technologies that will change logistics. It notes that logistical bottlenecks are often caused by bureaucracy or lack of transparency. For example, the inability to know the precise location of a shipment en route, “which makes it virtually impossible to optimally schedule deliveries or provide guaranteed specific delivery times.” Blockchain could potentially eliminate such roadblocks.

 

PwC also notes that other technologies are coming into play for logistics, including artificial intelligence—to cut costs and provide better day-to-day operation—and robotics—to help handle warehouse inventory management and loading dock activities. For logistics companies, explains PwC, the creative use of machines will clearly be a defining feature of success in the coming years.

 

SMEs Can Take Advantage of Logistics Management Companies, Too

 

For the SME with shipping needs, knowing about—and when to use—a logistics company can be paramount.

 

According to experts, while demand can exist for SMEs’ products, and opportunity for growth might be strong, the SMEs comparatively small size can prevent them from registering on their logistics provider’s radar screen. As a result, they can miss out on logistics innovations that could help them operate more efficiently by tapping into the guidance and planning necessary to succeed.7

 

So how can they take advantage of technology and other opportunities to improve efficiency and better serve their customers? The first step, of course, is for a business to seek out information about industry best practices and learn from others’ experiences.

 

Observers say that many businesses might find that technology solutions can be highly affordable and customized to meet various budgets.

 

Experts also suggest that SMEs team with partners on logistics and transportation. Perhaps speak with vendors and customers to find out what type of logistics technology and services they currently use. Also, since logistics management companies typically base prices on volume, SMEs can team up with partners to maximize economies of scale.

The

Takeaway:

While supply chain industry consolidation and evolution has caused some overlap among shipping players, logistics companies are still responsible for distributing products and goods to the right place, in the appropriate quantities, at the right time. New technologies—such as AI, robotics, and blockchain—are helping logistics companies digitally transform, and experts say that SMEs and businesses of all sizes might find the solutions they offer affordable and useful.

Tim Moran  - The Author

The Author

Tim Moran

Tim Moran is a veteran business-technology journalist. He has most recently been involved in brand publishing startups, including creating CMO.com for Adobe.

Sources

1. “The Difference Between Transportation and Logistics Industry,” MNS Freight Services, https://medium.com/@mnsfreight/the-difference-between-transportation-and-logistics-industry-1e67872a6ec5
2. Ibid.
3. “Understanding and Evaluating Your Transportation Options,” Logistics Management; https://www.logisticsmgmt.com/article/understanding_and_evaluating_your_transportation_options
4. “Is Logistics the Same as Supply Chain Management? Michigan State University Online; https://www.michiganstateuniversityonline.com/resources/supply-chain/is-logistics-the-same-as-supply-chain-management/
5. “Difference between freight forwarder and logistics company,” Kargo.tech; https://kargo.tech/artikel/difference-between-freight-forwarder-and-logistics-company/
6. Transportation and logistics trends 2019, PwC; https://www.pwc.com/gx/en/ceo-survey/2019/Theme-assets/reports/pwc_2019_t-l.pdf
7. “Top Logistics Challenges for Small- and Medium-Sized Businesses,” SupplyChain 247; https://www.supplychain247.com/paper/top_logistics_challenges_for_small_and_medium_sized_businesses/purolator

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