Logistics, a term with military roots, is a fundamental concept in business. Logistics is all about getting resources—people, materials, and products—from their point of origin to their destination on time.
Let’s look at what logistics means for retail businesses, and some examples of the tasks involved in logistics management.
Table of contents
What is logistics?
Logistics is the process of moving goods to and from locations where they’re required.Logistics managementis about ensuring enough goods arrive safely at those locations, at the correct time.
Logistics is a major part of the back-office activities of retail businesses. It makes sure:
- Materials are ready for manufacturers
- Products are stocked and organized in warehouses
- Stores have enough inventory to meet customer demand
- Purchased items arepicked and shippedefficiently
- Returned items make it back to the vendor
Think about a large company like Apple. It sources parts for its iPhones from different suppliers around the world, stores those parts until needed, assembles devices, distributes them to stores and retailers, and serves their ecommerce customers.
For Apple, this process involves the coordination ofmore than three million peopleand thousands of partner businesses and facilities. Without complex logistics management, Apple’s entire supply chain would immediately cease.
Even for businesses that don’t manufacture goods or interact directly with the global supply chain, a logistics process is required to avoidstockouts, organize inventory, and ship packages.
It’s common for smaller businesses to partner withthird-party logistics companiesto handle these back-office activities.
Manage all your inventory from Shopify
Shopify comes with built-in tools to help manage warehouse and store inventory in one place. Track sales, forecast demand, set low stock alerts, create purchase orders, count inventory, and more.
Explore inventory management on ShopifyWhat are examples of logistics?
Logistics isn’t just about moving products from one place to another. It’s a broad field that covers many tasks related torunning a business. Some of the main responsibilities of logistics management include managing inventory, arranging transportation, and finding the right storage for fragile items.
Here are five key areas that logistics can cover:
1. Inventory management logistics
Inventory managementis about keeping track of what’s in a warehouse or store, and making sure there’s enough stock to meet customer demand. For larger retailers, inventory organization is an important and continual task, keeping employees aware of stocking issues and allowing them to quickly find and package customer purchases.
2. Transportation management logistics
Planning and coordinating the movement of goods from one location to another is also a key logistics activity. Transportation management is often separated into inbound and outbound logistics.
Inbound transportation
Inbound transportationrefers to the acquisition of raw materials or goods from wholesalers and production facilities. A car mechanic, for example, might need to coordinate the delivery of various parts from different suppliers to their garage.
Outbound transportation
Outbound transportation is about getting finished products from factories and wholesalers to retailers—or directly to customers.
3. Warehouse logistics
Warehousingrefers to storing goods in a safe and efficient way. Even the smallest home business that keeps stock in its founder’s garage needs a method for categorizing productSKUs.
As businesses grow,warehouse management systemsbecome necessary to maintain processing times as floor plans, stock volume, and employee numbers increase in size.
Some warehouses are also distribution centers, which fulfill orders as well as store inventory. IKEA’s famously unique warehouse layout lets customers pick and transport their own orders, reducing the need for staff and storage space.
4. Order fulfillment
Order fulfillmentis about picking, packing, and shipping orders quickly. Tasks involve creating invoices, printing shipping labels, working withcarriers, and accepting returns—known as reverse logistics.
Reverse logistics
Reverse logisticsis a term for managing the return of products for repair, replacement, or disposal. Many companies have a review process for incoming returns to determine whether they can be resold and for issuing refunds.
For ecommerce brands, a comprehensivereturns policystrengthens consumer trust. When you can’t see or test products in-person, feeling confident about returns can help move shoppers from basket to checkout.
Here’s a walkthroughof Shopify’sshipping and fulfillment tool.
5. Demand planning logistics
Demand planningis about forecasting customer needs to make sure there’s enough inventory when orders surge or external factors affect product demand.
Forecasts are based on historical sales data, such as sales volume patterns across the year. Demand planning also considers unique factors like the effects of recent marketing campaigns, new product launches, and products thatgo viral on social media.
The Shopify guide to shipping and fulfillment
Boost customer satisfaction while driving sales growth for your ecommerce business with an effective shipping and fulfillment strategy. Use this guide to create a plan that covers all aspects of shipping and fulfillment, from how much to charge your customers to choosing the right fulfillment method.
Get our shipping and fulfillment guide delivered right to your inbox.
Almost there: please enter your email below to gain instant access.
We'll also send you updates on new educational guides and success stories from the Shopify newsletter. We hate SPAM and promise to keep your email address safe.
Why logistics is important
Small businesses—especially those that produce products—have lots to focus on. Fromproduct designtomarketing content, it’s easy to get wrapped up in the customer-facing aspects of retail.
But, if products aren’t available to customers when needed, the business will suffer—and eventually fail. That’s why logistics is such a vital part of any retail company.
Efficient logistics not only keeps items in-stock and sees them delivered quickly, but also helps manage the costs of inventory. The less wastage,shrinkage, spoilage, distance covered, and resorting to expensive expedited services, the more profits a business can generate.
Companies likeAmazonhave changed the game when it comes to logistics efficiency by making fast shipping and customer service a focus of their innovation.
Take Amazon’s acquisition of Whole Foods in 2017. After buying the grocery store chain, Amazon allowed Whole Foods customers to use itsPrime home delivery service, while giving Amazon Marketplace customers the ability topick up and return packagesduring their grocery shopping trips.
Logistics management software
In the 1960s,IBM developedthe first computerized inventory management system to help NASA coordinate manufacturing for its moonshot. The software was quickly adopted and replicated across the logistics industry, digitizing the process ofinventory auditsand counting stock.
Since then,logistics management softwarehas continued to evolve, with AI and automation playing increasingly significant roles.
AI in logistics
Artificial Intelligence is a big player in the logistics industry. It’s used to help predict demand, forecast supply chain shortages, and optimize delivery routes. For example,UPS uses AIto analyze data from its delivery vehicles to anticipate traffic and discover more efficient routes, saving millions of miles and dollars each year.
Fulfillment automation
Automation in logistics is about using technology to perform tasks with minimal human intervention. Both hardware and software enable automation. For example,Amazon warehouses use dexterous robotsto autonomously process up to 1,000 items per hour.
Shopify merchants canautomate fulfillment taskslike low-inventory notifications, ordering replacement stock, and placing holds on risky or high-value orders.
Logistics vs. supply chain management
Logistics and supply chain management are terms that are often used interchangeably, but they actually refer to different aspects of inventory and goods transport.
- Logisticsis all about what happens within one company—including the purchase of materials, packaging, shipment, and delivery to customers.
- Supply chain managementis about a larger network of organizations that work together to deliver products to businesses and customers. This includes vendors, shipping providers, call centers, distribution centers, and more.
Packaged delivered
Logistics is often the unsung hero of commerce. It’s all about making sure that products and resources are in the right place at the right time. From managing inventory to planning transportation, efficient logistics plays an invisible but crucial role in keeping a business running.
With the rise of fulfillment automation, logistics is becoming more efficient and user-friendly. Whether you’re a small business or an enterprise corporation, harnessing the latest logistics tools from platforms like Shopify will help you deliver on your promises to customers.
Ready to create your first business? Start your free trial of Shopify—no credit card required.
What is logistics FAQ
What are the 4 types of logistics?
- Inbound logisticsrefers to receiving and storing goods from suppliers and vendors.
- Outbound logisticsinvolves picking, packing, and shipping products to fulfill customers’ orders.
- Reverse logisticsis about managing the return of goods from customers and redistributing them to other customers or back to the supplier.
- Third-party logisticsis when a company outsources logistics operations to a third-party provider.
What is logistics in simple words?
Logistics is the process of moving products and raw materials from the manufacturer to the retailer, and from the retailer to the customer. It’s about making sure that goods are transported efficiently, stored in an organized way, and arrive when they’re needed.
What is the role of technology in logistics?
Technology plays a crucial role in modern logistics. Software helps companies track and manage inventory, plan delivery routes, automate warehouse operations, and more. With advancements in AI and automation, technology is making many logistics processes more efficient and autonomous.
What are examples of logistics?
- Inventory managementkeeps track of what’s in a warehouse and makes sure there’s enough stock to meet customer demand.
- Transportation managementhelps coordinate the movement of goods from one location to another.
- Warehousingis about storing goods in a safe and efficient way.
- Order Fulfillmenthandles picking, packing, and shipping orders quickly.
- Freight managementinvolves negotiating rates and choosing carriers for the transportation of goods.
- Reverse Logisticsis about managing the return of products for repair, replacement, or disposal.
What is green logistics?
Green logistics refers to efforts to minimize the environmental impact of logistics activities. This can include the use of fuel-efficient vehicles, better route planning, the use ofeco-friendly packaging, and improved recycling practices.