Logistics

Logistics is the management of the movement of goods. For a business it covers how materials and finished products travel from supplier to warehouse, from warehouse to shop or customer, and how they are stored and handled along the way. It is more than transport: choosing a courier, deciding how often deliveries arrive and planning storage space are all logistics decisions. A small business selling scented candles online, for example, must decide how often to have wax and glass jars delivered and which courier to use for customer orders.

Effect on costs

Logistics and supply decisions change costs in several ways: transport (how goods travel and how often), storage (warehouse or stockroom space, heating, insurance), stockholding (cash tied up in goods sitting still), waste (materials spoiling, breaking or going out of date), and delays and lost sales (orders that arrive late or cannot be met, which lose the business money). The candle seller who orders a large crate of jars once a month pays less per delivery but needs more storage space and risks breakages; ordering every week costs more in transport but frees up cash and space.

Effect on reputation and customer satisfaction

Customers judge a business on whether the product is available when they want it, whether its quality is consistent and how quickly it arrives. Late, poor-quality or unavailable supplies damage customer trust: someone who waits two weeks for a candle promised in three days may never order again. A reliable supplier, a sensible amount of stock and a courier that delivers on time protect reputation and keep customers satisfied.

The opposite is also true: a courier that loses or damages parcels may charge less per delivery, but refunds, replacement stock and lost customers usually cost more than the saving. Well-judged logistics and supply decisions can lower costs, improve reliability, protect reputation and raise customer satisfaction, while poor ones raise costs, cause delays and lose customers.