Having a Bachelor Degree in Physics and a Diploma in Multimodal Transport and Logistics Management, Ritesh started his career in 1997 as a Logistics Excutive. Ritesh moved to USA and joined KOG Transport in 2006 and continued as a part of the team under Rhenus Project Logistics, when they bought over KOG in 2015. He now manages Project Ops & Global Sales for Rhenus Projects. With 25 years experience in transport management, Ritesh has handled multiple multi-million dollar projects.
I remember being told once by one of my superiors that logistics is no rocket-science.
It may not be rocket-science, but logistics planning and support is imperative for the success of any operation that involves international trading activity, global transport of raw materials or finished products and the associated Export-Import (exim) regulations.
The logic of logistics is fairly simple. The core idea is to transport goods from one point to another at the lowest possible cost. How hard could that be, right? Get your documents in order, get it on an airplane, rail, truck or ship and you are on your way!
Any Logistician with enough exposure to the subtlety of its process would be vehement in their vindication of why it is not so simple after all. The major hurdles faced by a logistician at every point in a Supply Chain process comes directly from this faulted perspective that no special skills are required for execution of this activity, which until half a century ago was looked down up on as an area of poignant expense and no revenue. To a certain extent, the thought prevails even today, mostly in developing countries.
Business logistics can trace its origins way back in time as well but got serious attention only about half a century ago, as global trading evolved requiring companies to buy raw materials from or ship products to various countries. The process was indeed so complex that it opened demand for professionals specialized in the field. As commercial shipping took off on its newly chartered course, it grew exponentially, as new ways of shipping were introduced, new technologies developed, and new trade agreements made.
Today, logistics not only drives development of a country’s infrastructure, keeping pace with the requirements set by the trade, but also demands constant and consistent improvement in its process.
Logistics at one point in history was seen as a glorified word for “shipping and receiving” but now it is considered by many as a backbone of their business. While until a few decades ago, purchasing and production were considered an organization’s core business function, today they are consolidated under its Supply Chain. It is no longer just enough to make purchases to ensure production is uninterrupted, but it is necessary to ensure purchases are made from the right source at the right time.
While it is encouraging to see that many companies have realized the significance of a strong logistics team and have started investing heavily in building one, many still limit its extent between purchase and delivery. Few companies have woken up to the possibility of widening the scope to include pre-procurement planning – seeking offers from various vendors, studying where to buy from and when to buy, before entering the purchase negotiation process – and post-delivery follow-up – studying the result of such planning and implementing changes to improve the process for the future.
The 6-Ps of Supply Chain that a company should ideally have in place, at a minimum, for a successful supply chain:
Pre-procurement planning – This answers the important question of Who (will be the supplier). That a supplier is 10 miles away does not necessarily mean that it is better to purchase from him than a supplier who is 100 miles away. Hence it is important to do an analysis on which would be the best place to buy from.
Procurement planning – Deals with When (to buy). While a pre-procurement planning provides purchasing possibilities, procurement planning helps in making purchases at the right time. Purchasing too early results in inventory costs and purchasing too late results in interruption of production.
Procurement – Deals with What (terms to buy at). Depending on the nature of business or urgency of the requirement, it may help to purchase a product assuming responsibility of the shipping from the factory of the seller or to have the seller deliver the goods to the buyer’s door.
Portage – Deals with How (to ship). Sometimes, even though shipping by air may be cheaper, it might make sense to ship by sea to use ocean going vessel as a floating storage given its longer transit time; at other times, shipment by air may be required, even though cost may appear prohibitive, if the inventory is precarious.
Provisioning – Deals with Where (to deliver). Some orders are very urgent that they may need to be delivered directly to the end consumer; some orders may be arriving early but the buyer may not have sufficient storage space available to stock inventory and hence may require renting warehouse space.
Premise – Deals with Why (there were bottlenecks on the shipment). It is not only important to create and execute a plan, but it is important to identify what contributed to the successful execution of the plan or what obstacles were faced in the execution of the same. This helps to promote best practices and mitigate the effect of obstacles in the future, increasing productivity of the supply chain. Where they cannot be changed, this gives a great lesson, drawn from the greatest teacher – experience – on what to anticipate.
The simple logic of logistics is only as good as its weakest link and could end up being one’s worst nightmare. Purchases or sales orders are negotiated and established many a time with the slightest regard for the process it necessitates.
I have borne witness to many such poorly crafted purchase orders that have not properly accounted for the cost involved in executing them. I have seen order rushed out the door only to get stuck in Customs because paperwork accompanying the shipment was not prepared in relation to it. All such ill-planned activities result in additional costs that could have been avoided with better planning.
So, Logistics may not be rocket-science, but it still is a science of logic.
