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Logistics covers everything related to moving and storing products. This function involves physical distribution, warehousing, transportation, and traffic.

Inbound logistics refers to the products that are being shipped to your company by your suppliers. Outbound logistics refers to the products that you ship to your customers.

Logistics adds value because it gets a product where a customer needs it when the customer wants it. Logistics costs money too. Transporting products on ships, trucks, trains, and airplanes has a price tag. Also, whether a product is sitting on a truck or gathering dust in a distribution center, it’s an asset that ties up working capital.

The goals of the logistics function are to move things faster, reduce transportation costs, and decrease inventory. Following are some ways that a logistics department might try to achieve these goals:

 Consolidating many small shipments into one large shipment to lower shipping costs

 Breaking large shipments into smaller ones to increase velocity

 Switching from one mode of transportation to another, either to lower costs or increase velocity

 Increasing or decreasing the number of distribution centers to increase velocity or lower costs

 Outsourcing logistics services to a third-party logistics (3PL) company

You can see the conflicts that can occur between logistics and purchasing. Logistics wants to decrease inventory, which may mean ordering in smaller quantities, but purchasing wants to lower the price of the purchased materials, which may mean buying in larger quantities. Unless purchasing and logistics coordinate their decision-making and align their goals with what’s best for the bottom line, the two functions often end up working against each other and against the best interests of your company, your customers, and your suppliers.