What is logistics in simple words and its importance in business

Goals and objectives of logistics

The main strategic goal of the functioning of the logistics service at the enterprise is to increase the efficiency of the enterprise by reducing costs, increasing competitiveness, increasing liquidity and the cost of fixed assets, ensuring rapid adaptability to a changing market, increasing the added value of products, and reducing business risks within the framework of the corporate strategy.

Achieving this goal is achieved by solving the following tasks:

• optimization of production processes, warehousing, transportation, supply;
• competent management of material reserves;
• algorithmization of goods movement;
• minimizing the time it takes for the product to reach the end consumer;
• rationalization of various flows - monetary, information, material, etc.;
• reduction of costs for general logistics;
• raising consumer service standards;
• work with packaging and containers.

Why do you need logistics?

Logistics plays an important role in business. After all, any company needs effective management of material or information flows. Especially when it comes to production.

Logistics is needed to organize the competent distribution of raw materials (material for production) and finished products. Here you need to understand the coordination of almost all processes: procurement, storage of raw materials and products, transportation, etc.

After the advent of logistics (in the form in which it can be seen from the early 90s to this day), it became possible to consider in more detail the totality of material and technical support for the activities of an enterprise. It made it possible to calculate all possible costs that are inevitable in the production sector.

Components of the logistics structure

Logistics includes elements such as:

• Minimizing costs.
• Increased profitability from each delivery.
• Conclusion of contracts.
• Inventory Management.
• Creation of an effective goods delivery scheme.
• Establishing communications with customs authorities.
• Monitoring current market demand.
• Transportation of products to the final consumer.
• Control over stocks in warehouses.
• Storage and packaging.

Various models are used for optimization purposes. They can be marketing, that is, aimed at making a profit, or transport.

Characteristics of the logistics market in Russia

After a decline, the cargo transportation market resumed its growth starting at the end of 2020. The Russian economy is in a recovery phase, which is leading to a revival of activity in the logistics sector. According to expert forecasts, in 2018-2022. This market is expected to grow steadily by more than 7% annually.

In Russia, it is just becoming fashionable to use external cargo transportation service providers. Thus, the share of logistics outsourcing slightly exceeds 30% (in Western countries - more than 50%). But the trend stands out clearly: manufacturers are increasingly shifting all the work of transporting and delivering goods from themselves to specialized companies. And most often, logistics is carried out by road transport. Motor transport leads the market - more than 68% of the total volume of transportation.

Taking into account low inflation in the market and the absence of long-term risks, the logistics business can be considered promising.

Organizational logistics chart

A logistics service requires the presence of a number of management levels. It includes these structural links:

• An executive director who serves on the company's board.
• Managers of various departments and their subordinates.
• Groups for the implementation of specific logistics projects: organizing goods distribution centers, expanding relevant platforms, working on the design of logistics systems.
• Managers responsible for operational work, transportation of raw materials and components.

Organizing project delivery teams is a particularly challenging task. There are methods for their formation:

• Integration of groups into the logistics service. For example, this could be control over the execution of a project, engineering in various farms.
• Creation of separate divisions. They will involve their own employees. The units are assigned specific tasks. For example, this could be organizing the delivery of resources.
• Groups are created with the participation of employees who already work in the company.

The choice of a specific method depends on the characteristics of the company’s functioning.

How to open a logistics company

Logistics companies are often opened by people who have already worked in this field, know how this business works, and have connections in business circles. If you have not dealt with logistics before, it makes sense to hire a competent logistician.

Registration

To register a business, you can choose either a legal entity (CJSC or LLC) or an individual enterprise (IP). Experts recommend registering a company as a legal entity, this will increase the trust of potential partners.

To register an LLC, collect a package of documents that includes:

• application of the established form;
• decision to open a company;
• company charter;
• guarantees of providing a legal address;
• premises rental agreement;
• document confirming payment of state duty;
• permits from fire inspection and sanitary authorities.

Advice: Registration of an enterprise can be entrusted to specialized companies.

At the initial stage, you can register as an individual entrepreneur, and when scaling your business, open a legal entity.

The code according to the new OKVED classifier – 52.29 – is suitable for your direction. Other auxiliary activities related to transportation

Choose a taxation system: for a small company, the simplified tax system will be more rational, however, if you are planning to organize a large enterprise, the general system is preferable.

Room

Choosing a room is not an easy task: on the one hand, the office must be representative. On the other hand, the quality of the services provided is more important. Therefore, choose the “golden mean”. It is enough for it to be a renovated room where it will be comfortable to hold meetings with partners.

The warehouse must have sufficient space and meet your goals and objectives.

Be sure to comply with the requirements of the SES and fire inspection:

• the room is equipped with a fire alarm and ventilation system;
• the necessary communications must be provided;
• floor made of non-slip materials without bulges or depressions;
• Ramps are installed for loading and unloading cars.

On the territory of the warehouse there is a living area where company personnel can change clothes, take a shower, and have lunch.

Equipment

The choice of equipment depends on whether you will transport goods on your own or only provide intermediary services to the customer in transporting goods.

In any case, you will need to equip your warehouse and office with equipment by purchasing:

• rokly – hydraulic carts for manually moving goods around the warehouse (one for each worker);
• Stacker – a forklift for lifting and transporting large loads on pallets;
• racks (shelves) for placing goods in the warehouse before shipment;
• pallets;
• Scotch tape and stretch film for packaging goods;
• furniture and office equipment for office equipment.

If funds allow and there is a desire to immediately organize a large project with your own fleet of vehicles, you need to purchase vehicles suitable for cargo transportation.

Staff

Personnel must be selected based on the scale and positioning of the business. It is advisable that employees have the appropriate skills and experience working in such a company, since you take responsibility for the delivery and safety of goods. For example, a logistician must be able to draw up and check contracts with partners, know what papers need to be completed during transportation, etc.

The business initiator can take on customer service and general management of the business.

In addition, you will need to hire warehouse workers, drivers and auto mechanics (if you have your own fleet), an accountant, and security guards for the warehouse.

Next steps Read also how to open an insurance company.

Costs and approximate income of a logistics business

Accurate calculations can only be made if you know the specific conditions for opening a company.

Therefore, let’s look at the example of an intermediary logistics company.

Monthly expenses – RUB 520,000:

• wage fund – 320,000 rubles;
• rent – ​​150,000 rubles;
• advertising – 50,000 rub.

At the initial stage, the company's monthly income is estimated at 100,000 rubles. The company's profit will depend entirely on the volume of transportation.

Investments in the transport and logistics business pay off on average in 18-24 months.

Basic activities of logistics services

Logistics service is usually divided into 5 groups. Each of them is responsible for the following aspects of activity:

• Transportation. Includes internal and external transportation, selection of the type of vehicle, and care for vehicle maintenance.
• Structure of fixed assets. Involves management of warehouses, equipment, distribution of assets.
• Inventories. Includes sourcing raw materials, creating various types of inventory, processing returned inventory.
• Maneuvering resources. This is the sorting, processing and packaging of goods.
• Communication. Includes processing incoming orders, making demand forecasts, planning production processes, and updating the database.

Previously, some of the functions considered were performed by the material resources supply department.

Equipment

Warehouses must be equipped with racks and other equipment for storing and redistributing products stored in them.

There should be 1 rokla (hydraulic trolley) for each worker. They are needed for transporting goods (not very heavy and not large).

You will need a stacker (or forklift) - equipment with a high load capacity (there are manual, self-propelled and automatic). It is needed for transporting pallets and large cargo.

A cantilever lift will come in handy. It allows you to load/unload cargo from the upper racks.

The reloading system will ensure fast and safe cargo turnover between vehicles and the warehouse.

Recommendations for organizing logistics

The company must focus on the practical efficiency of the logistics structure. To do this, the following conditions must be met:

• Correct formulation of the functions of the department and specific employees. Functions must be specified as precisely as possible. It is necessary to formulate the job title, accountability, responsibility, duties and rights.
• Determining the exact number of employees needed to solve the problem. The head of the company must determine the logistics strategy and make forecasts.
• Hiring a professional manager. The specialist must understand logistics. He must be suitable for the position and have all the relevant knowledge and skills.

These are the three “pillars” on which effective logistics rests: precisely defined tasks, professionalism and the presence of forecasts.

Workplace

The office is the face of the company. Repairs here must be carefully carried out. New furniture and appliances will also work to your advantage. A warehouse for a logistics center must meet a number of requirements. The state requires that it comply with all safety rules: fire, sanitary and labor protection. There are also requirements for floors: they must be perfectly flat and have a non-slip surface.

Ramps must match the height of the vehicle. In general, it would be nice to acquire electric lifting ramps when purchasing equipment for a logistics center. To open a logistics center from scratch, you will definitely need to calculate the cost of the equipment. In order for the business idea of ​​a logistics center to start working clearly and smoothly, you must acquire hydraulic trolleys. Moreover, their number must match the number of workers in the warehouse. Another must-have for this job is a forklift. True, it costs a lot - about 500,000 rubles. A little expensive, isn't it? But there is a way out.

You can buy a used forklift in good condition. When purchasing, be sure to test the equipment. With this approach, the savings will be reasonable. And you can earn more money from the logistics center.

Two logistics markets

The organization of logistics at any enterprise must take into account the optimization of logistics processes in 2 polar markets - business and consumer.

The supplier market includes:

• raw materials;
• equipment;
• components, spare parts;
• Consumables;
• goods intended for resale;

The consumer market includes:

• final points of consumption;
• retail chain;
• wholesalers;
• distributors;
• dealers;
• trading houses.

For each item of the supplier market and the client market, an appropriate logistics structure should be thought through and organized.

Summary

This project represents the organization of a transport company with a payback period of 4-8 months of the year.

Project goals:

1. creation of a highly profitable enterprise
2. organization of obtaining a stable profit
3. satisfying the consumer market demand for transportation services of goods of various volumes and weights.

Source of project financing: own funds or bank loan

Form of business activity: individual

Total cost of the project: 200,000 – 1,000,000 rubles

Payback period: 4-8 months

Interest rate included in calculations: 25%

The total amount of interest payments will be: 15-35 thousand - 100-175 thousand rubles

The investor's income will be: 15-35 thousand - 100-175 thousand rubles

Payments of loan funds and interest on the loan will begin from the first month of project implementation.

Three levels of logistics structure

As a rule, the logistics service includes three levels:

1. General management and planning. Responsibility for this rests with the vice president of the company. His job responsibilities: monitoring the state of the system, changing plans depending on the current situation, assessing the activities of departments, coordinating policies with other branches, determining costs. The specialist must collect all the necessary information about the unit. The information will be needed for further research and analysis. The ultimate goal is to make forecasts and make informed decisions.
2. Software control. The manager must exercise control over specific subsystems. This specialist is responsible for warehousing, handling materials, processing orders, and eliminating errors. Based on the information received, the manager sums up the results and draws up a report. The latter is sent to management. If a manager fails to cope with his responsibilities, he can involve his subordinates in the work.
3. Operational management. At this level, work with suppliers is carried out, errors are recorded, and time and costs are managed. The main functions are operational actions and conclusion of contracts. At this level, efficiency is measured in terms of volumes of product shipments. Shipping costs and losses from damage to goods are also taken into account.

An audit is considered a tool for checking the effectiveness of logistics. It belongs to the second level of the structure.

It's all about competition

Competition has the greatest impact on the development of logistics business. It is this that forces suppliers and manufacturers to reduce prices, as a result of which they have to make money on volumes. This greatly increases the workload of logistics centers. Those who cannot cope with a large volume of orders are forced out by faster ones and fade into the background. This is the law of competitive business.

The profitability of a logistics center depends on the quality of service. It starts with the appearance, namely the office. This does not mean that everything needs to be furnished with luxurious furniture. It is important that the surroundings are clean and tidy. New technology will definitely catch the client's eye. A presentation projector or hanging plasma will give you extra points.

It is desirable that the office be located closer to the center. Your image will only benefit from this. Whatever costs of the logistics center are invested in the material part, the main profit will still come from the staff. The whole transaction depends on the quality of his service - from beginning to end. Only positive customer reviews indicate that employees are coping with their task.

Information level

The logistics structure includes an information level. It is also divided into levels:

• Operational. At this stage, decisions that arose as a response to received information are made and implemented.
• Control. The information obtained is needed for operational planning and control over decisions made.
• Average. This level is characterized by a narrower information flow. Only the information that is needed by the management team will appear here. This is the information on the basis of which decisions are made and tactical planning is carried out.
• Higher. Information is highly concentrated. This is analytical and reference data on the basis of which strategic planning is carried out. Based on the data, global plans can be made.

Information flow is the most important component of logistics. It is on the basis of information that all decisions are made.

Who to hire?

To open a logistics center, you need to remember the importance of personnel selection. Your business reputation and the safety of expensive equipment, and therefore the success of the enterprise as a whole, depend on the quality of its work. There are a number of specialties without which no transport company can exist.

In first place is the driver(s). If you are going to operate the car around the clock, then you will need three drivers. If only during the daytime, two are enough. Remember that all drivers, as well as companies with whom you intend to cooperate, must have registration and permits. And with the driver it is necessary to conclude an additional agreement on financial liability for the cargo.

A standard contract for the carriage of goods includes the following:

• Name, weight, type and volume of cargo.
• Loading and unloading areas.
• Vehicle type and number.
• Penalties.
• Signatures and seals of both parties.

To organize a logistics center, it is necessary to hire another important employee - a dispatch service operator. Every logistician must be guided by the principle that the cargo must be delivered within the agreed time frame and nothing else. You have registered an enterprise and are now obliged to support its activities, ensure the timeliness and completeness of measures for the delivery of goods, and maintain reports. No one can handle this more skillfully than a professional logistician. As a rule, such companies employ at least 2 such specialists. At least one of them must be an experienced specialist, otherwise you will not end up with problems.

Main logistics problems

Let's consider the main logistics problems and the reasons for their occurrence:

• The logistics service and other divisions of the company are not interconnected. The problem often arises when logistics functions were previously assigned to other departments, but later a separate department was formed.
• There is no effective logistics structure. The problem arises due to divergence in the directions of production activities.
• There is no optimal organizational structure. Employees are motivated by their lack of confidence in their position.

Introducing a new logistics division is a very difficult task. You can only entrust it to a professional manager. He must be able to identify problems and search for their causes. To prevent difficulties, you need to outline an accurate plan for organizing logistics. At each of its stages it is necessary to collect information. Prompt collection of information will allow you to identify “weak” areas and quickly solve emerging problems. Based on the information, various decisions can be made.

Basic costs of starting a business

The amount of initial investment for opening a logistics company, its breakdown by item, is in the table below.

The amount of expenses was determined based on a study of prices on the Internet and approximate rent in the regions of Russia.

According to the initial conditions, the company will not buy cars (in order to reduce the amount of initial capital). For reference, the cost of a light-duty Iveco Daily truck (used) is 1.5 million rubles. We will hire drivers with their own cars.

Formation of a client base

Step-by-step instructions for opening a logistics center laid out on the shelves are impossible without planning and organizing orders. You must do difficult and painstaking work. The most important point is to fill the customer base at the initial stage. There will always be companies that are unhappy with cooperation with current partners or want to reduce the price of the service. Establish yourself as a conscientious partner, and they will do business with you again and again.

So, it’s worth starting the search for potential orders by dividing them into two groups – individuals and legal entities. Advertising will help you find the first ones. This could be advertisements on the Internet, or posting paper versions of them. The choice of location depends only on your imagination. Anything will do – from entrances to stop poles. It is important to stand out from others in color or design.

When opening a logistics business, don't forget about business cards. Visit a few hardware stores and try to connect with them. If the outcome is favorable, the business cards will remain with the store employees, and they will recommend you to their customers themselves.

If you are looking for clients among legal entities, sending out commercial proposals for cooperation will help you. In addition, you can work on a subcontract with dispatch companies. A popular way to find clients among legal entities is to participate in tenders. To win, you must offer the most attractive conditions. If a potential partner considers your offer profitable, he will definitely choose you.

Logistics center business plan

Currently, the activities of companies engaged in logistics activities are especially relevant. Sooner or later, any successfully developing organization needs the services of logistics centers. That is why business in this area is characterized by high income levels, as well as rapid development trends.

Logistics centers are separate, independently operating organizations that provide services to third-party companies for the implementation of channels for the movement of material assets.

There are varieties of such centers, including transport and logistics (cargo transportation services), trade and logistics, as well as those that perform various functions.

The main component of the activity of a logistics center is the quality of the services it provides, in addition, they must meet the requirements of state standards. It is necessary to convey to consumers that by resorting to the services of logistics centers, it is possible to significantly reduce the costs of an enterprise.

Be especially responsible about the location of your organization, especially if it is a transport and logistics center, it must be equipped with convenient access roads.

According to statistics, the costs of developing such a project are significantly significant, so ideally you need to attract investors or take out a loan from the bank. Payback periods vary from one to two years, subject to other positive conditions. Profitability indicators are quite high, they reach 100%. As for competition, it is currently rapidly intensifying, but leaves a chance to take a significant share in this market niche.

In order for your business to become successful as quickly as possible, first take care of drawing up an effective business plan. You can find such examples below.

The main steps of the project implementation with a detailed description - a business plan for creating a logistics center is presented. The nature of the activity and the essence of the project are described. Investment efficiency indicators and project payback periods were calculated. The basic concept of the project has been developed. An illustration of the explication of the warehouse area premises is presented. Technical solutions have been developed, the implementation of which provides the following effective results and conditions. A production program has been developed that sets the planned production volume. The marketing strategy contains a list of services provided.

Economic justification for the activity - a business project for a logistics organization has been developed. General information about the company is presented, as well as the nature of the services it provides. A feasibility study of the feasibility of the project as a whole was carried out. Contains the developed management structure, as well as the composition of the company’s personnel. A list of areas of activity, services provided, results and prospects for the industry is presented. The state of affairs in the industry, as well as factors influencing the industry and development trends are analyzed. Much attention is paid to the company's pricing policy.

Recommendations and tips for improving activities - a manual has been developed for developing the activities of a logistics organization. The theoretical aspects of organizing service management in this industry are described in detail. The most used materials management system has been developed and presented. In addition, the principles of logistics personnel management are described. A list of methods for estimating logistics costs and ways to optimize them is presented. Contains recommendations for grouping costs according to cost estimates. Methods have been developed to reduce costs, as well as logistics features in industry areas.

Technological characteristics of the activity - contains a business plan for a real-life logistics center. A brief description of the economic activities of the enterprise is presented. An effective organizational structure of the enterprise has been developed. An analysis of the dynamics of services provided in absolute and cost terms was carried out, and a schedule of key works for the project was developed in the table. The marketing strategy contains an analysis of the state of affairs in the industry. The main competitors existing in this market niche, with their strengths and weaknesses, have been identified. A detailed description of the technological process is provided.

Development of an effective sales policy - a business plan for the creation and development of a joint venture in the field of international railway transportation has been developed. A clear goal of the project is presented, and an analysis of the market situation is carried out. A comparison was made of the cost of transportation along alternative routes. Much attention is paid to organizing an effective sales policy. A list of the competitiveness of the joint venture is presented. Costs and selling prices were calculated for key areas of potential for attracting volumes of consumers. Various economic indicators relating to the entire project as a whole have been calculated.

Ways to improve business - contains a project for creating a logistics center. The particular relevance of these services today is presented. A list of factors has been developed that must be taken into account when justifying demand. An analysis of international logistics centers was carried out. Project management is described, as well as methods for allocating resources. Contains detailed project monitoring. The main points that need to be paid special attention to in the process of carrying out activities are highlighted. Priority ways for further development have been developed.

Risks when opening a logistics company

When drawing up a business plan and defining the concept of a future logistics company, it is important to analyze possible risks and consider options for mitigating them.

The main risks may be the following:

• Increased competition, entry of large international companies into the Russian market, opening branches of transport companies in your city;
• Changes in current legislation and international regulations governing the customs sector and transportation services;
• Failure of equipment and machines;
• Emergency and other force majeure situations leading to loss and damage to cargo;
• Reputational risks.

Stages of implementing a business idea logistics

The first step is to create a summary of the project, which will analyze its goals.

Then you need to describe the company. The description will include statistical data of sales points, determination of the range of goods provided, market research, determination of the class of the complex and its area, as well as the construction period. It is very important to sign an agreement in the case of construction of a logistics center by other persons. After solving organizational issues, a management company is created.

The next stage is the calculation of all possible risks and ways to minimize them. According to statistics, these projects as a whole account for approximately 50 different risks, of which 18% are “high” risk, 66% are “medium”, 16% are “low” risk. To avoid risks, various preventive measures should be taken, and insurance and reservations will also help.

An important step in maintaining a logistics center plan is demand. But all of the above will be useless without highly qualified personnel.