Logistics

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DEFINITION of 'Logistics'

The overall management of the way resources are obtained, stored and moved to the locations where they are required. Logistics management entails identifying potential suppliers and distributors; evaluating how accessible and effective they are and establishing relationships and signing contracts with the companies who offer the best combination of price and service. A company might also choose to handle its own logistics if it is cost-effective to do so.

BREAKING DOWN 'Logistics'

This term originated in a military context, referring to how personnel acquire, transport and store supplies and equipment. In the business community, the term refers to how resources are acquired, transported and stored along the supply chain.

For example, in the oil and natural gas industry, logistics consists of the systems for gathering and transporting oil, including pipelines and trucks, along with storage and distribution facilities.

By having an efficient supply chain and proper logistical procedures, a company can cut costs and increase efficiency. On the other hand, a company with poor logistics will fail to meet customers' expectations and see its business suffer.

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