Logistics company handles some or even all of the supply chain functions which include planning, implementing, and controlling the movement and storage of goods, services or information in the supply chain from start to finish depending on the logistics needs of the client or customer.
Today almost all business sectors use logistics to describe the efficient flow and storage of goods from the point of origin to the point of consumption. The supply chain is an important part of this process. The right supply chain can include transportation, shipping, receiving, storage, and management of all or any of these functions. In addition, logistics also functions as a means of information, transportation, inventory, warehousing, material handling, packaging, disposal, and security in the business sector.
Some Components You Need to Know on Logistic Company
In its most basic form, the logistics component includes:
- Intake from suppliers and material handling.
- Labeling, packaging into smaller units, organization and warehousing.
- Inventory management for production or distribution.
- Demand planning, order fulfillment and transportation.
- A logistics management system that includes inbound and outbound transportation management, warehouse management, fleet management, order processing, inventory control, supply and demand forecasting, and third-party logistics service provider management.
The Effect of Fuel Costs on Logistics
Price fluctuations in the fuel market have a significant effect on the logistics industry. Rapid increases in fuel prices can destroy the management of a carrier, and a sudden drop in prices can result in increased short-term profits and a wave of competition in the market to provide consumers with the lowest prices.
When Oil Prices Rise
When fuel costs rise, companies are forced to raise prices or bear losses. But in turn, the cost of fuel affects not only the logistic company, but also the shipper and the shipper’s source of profit as well.
Based on this, it can be concluded that if more costs are charged to the freight forwarder to transport the goods, the sender will be charged more to redeem. On the other hand, if it is the sender who will be charged more for transporting the goods then the receiver will be charged more to cover their additional costs.
For example, if rail costs are lower and fuel costs are high, logistic company can ship more goods via intermodal transport than road trucks. This means the product will be sold to consumers at a higher cost to cover higher transportation and fuel costs. Basically, higher fuel costs will lead to product inflation as well as affecting every aspect of production transportation along the way.
When the price of fuel drops
When fuel costs fall as expected, this will be felt and impact consumers in the form of lower prices. This can be indicated by the increasing demand for delivery services along with lower costs. Based on this, it can be said that if the cost of fuel is lower, consumers will also experience lower prices.
Read more: 5 popular problems on procurement and how to overcome it
The Role of Third Party Companies (3PL) in Logistics
Third party logistics (3PL) represents the relationship between shippers and third parties compared to basic services which have a more customized offering and implies a wider number of service functions characterized by mutually beneficial long-term relationships.
Timeliness of service, price, and delivery quality of 3PL service providers are positively related to user logistics. However, with the volatility of crude oil prices continuously increasing, logistics companies are forced to restructure or strategize their operations to ensure sustainable profits, and avoid potential setbacks in the future.
The effects on the logistic company and rising costs of transporting goods have caused some companies to start keeping more inventory and minimizing the amount of transportation needed.
Since fuel is the main operating cost for most logistics companies, this can certainly be a significant additional cost in addition to lowering fuel costs which can make most goods cheaper.
Lower prices of goods signal stronger economic demand, which in turn could weigh on logistic company that have to follow suit. To manage fluctuations in fuel prices, logistic company can focus on improving their operations and seeking efficiencies that increase service levels.