Logistics is the science of optimizing the distribution of freight and freight-flow information from manufacturer to consumer utilizing advanced information systems and expertise to reduce inventories, cut transportation costs, speed delivery and improve customer service.
It is the process of planning, implementing and controlling the efficient flow and storage and goods, service and reliable information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.
What is Third-Party Logistics?
Third-party logistics (3PL) originated with the United States Military, which developed the first logistics systems for managing and deploying large volumes of supplies and troops.
During the middle and later 1990s, private companies discovered the benefits of hiring outside, or third-party, logistics experts to manage the total flow of products from raw materials to finished goods. Recognizing the value of strategic business counsel, companies utilizing third-party logistics providers have become more efficient, competitive and focused on their core competencies.
Logistics . . . An Enormous Industry
- The cost of logistics in the United States was $1.25 trillion in 2008; 10.5% of the gross domestic product or “GDP”. (Source: Council of Supply Chain Management Professionals 2009 Annual State of Logistics Report)
- U.S. expenditures on logistics are larger than the national GDP of all but 12 countries.
- U.S. transportation costs alone, $824 billion, are larger than the GDPs of all but 16 countries.
- The transportation-related workforce totals 12.3 million people (8.9% of the total U.S. labor force). (Source: United States Department of Labor).
- 4.36 trillion ton-miles of freight were moved in the U.S. in 2007, the equivalent of shipping the Statue of Liberty around the world 1,164,528 times.
- Big three auto producer Chrysler receives 2,500 truckload shipments per day.
Logistics . . . An Efficient Industry
- In 1980, logistics represented 17.9% of U.S. GDP. Today, it is 9.5%. This clearly demonstrates the efficiency of US logistics.
- By comparison, estimated logistics costs represent 22.3% of China's GDP and 17% of India's.
- It is estimated that the total logistics costs associated with delivering a $3.60 box of cereal from the field to the consumer's table is about $0.37 in the US. The net retail profit is about $0.05.