LOGISTICS IS one of the oldest and also the newest activitives of business management. It involves combining diverse functions and service providers who may be culturally and objectively different.

Logistics is about moving materials, information and funds from one business to another or from a business to the consumer. It is an important part of the business economic system and is a major global economic activity. In fact 10-15 per cent of product costs is logistics related. Worldwide, logistics constitutes about $2 trillion a year. For any country, the logistics cost is estimated between 9 and 20 per cent of its GDP.

Logistics was defined by the Greeks as “the science of correct reasoning by means of mathematics”. The first modern use of the term was in the military to identify the process of planning and co-ordinating the movement of army and weapon support systems. Good logistics brings out the ability to move faster and accurately to the battle front. If one applies the same to the business organisation, it is one’s ability to reach the product to the consumer at the right time, right place , right quantity and at the lowest cost. On similar lines, supply chain management will mean the network of organisations involved in the process by which goods are moved from producer to consumer and the counterflow of information, to manage the supply chain as a single entity.

A prominent application of logistics was in World War II where weapon movements were coordinated to ensure success. A recent instance of massive logistics initiatives is in the Gulf war. With increasing competition in the market place, managements started focusing on customer services in the early 1950s in developed markets such as Europe and the U.S. In late 1960s some of the logistics concepts were tested. Following the oil crisis of the 1970s and the concept of just-in-time in manufacturing customer servicing standards were given more importance and new integrated logistics models and solutions were born. The emergence of organised distribution system by department stores and superfast courier service organisations gave a boost to logistics concepts and strategies. Today all businesses are looking for seamless transaction systems to co-ordinate their information and material requirements along the value chain.

At the micro level any manufacturing and marketing company spends 5 - 35 per cent of sales on logistics. The major cost components are transportation, warehousing and inventory carrying cost. Improvements in logistics get reflected in a reduction in inventory levels, shorter delivery schedules, improved servicing standards with significant savings in total costs.

At present, companies specialising in logistics operations use traditional technologies and cater to stand alone services like transportation, warehousing, clearing and forwarding. There is tremendous scope to upgrade the technology, integrate the entire supply chain, improve productivity levels and bring down operating costs. Any technology that can improve productivity in transportation operations will be a great boon to the economy both directly and indirectly with opportunities for 10-12 per cent reduction in costs. Besides the savings on downstream users of transport will be much higher and the cost multiplier effect on the economy will be reduced to that extent.

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