What Is Logistics? Definition, Processes & Role in Supply Chain

You might already know what logistics refers to in general. It moves goods from one place to another. It could be getting raw materials to factories, or getting inventories warehouses, or what most of us know, getting orders to customers’ doorsteps. But what often gets missed is just how intricate and fast-moving the entire logistics system has become over the years.

Behind every “shipped” notification is a whole chain of decisions and actions: A lot of questions you might not have thought about are asked. For example, which is the fastest route? Do we have the right amount of goods stocked? Is the delivery window manageable? What do we do when a truck breaks down in the middle of a road? What if the storm decides to brew?

Keeping aside the usuals of logistics, shipping and storage, what else does it do to help with situations like the ones mentioned above? Well, logistics these days also entail real-time tracking, calculated routes, automated warehouses, and the tech needed to connect each and every stage of the journey.

You get the gist, there’s a lot more meaning behind the word “logistics”. Let’s explore it, along with the different types of logistics and the processes involved, and look at how it helps shippers be more efficient and flexible.

Logistics Definition in the Modern Supply Chain

Logistics is the process of managing how goods move from one place to another, with the goal of delivering the right item, to the right place, at the right time, in the most efficient way possible.

But, let’s be honest, we all know it’s not as simple as it sounds. In practice, logistics is actually more dynamic than what the definition suggests. Are transportation and storage still important? Yes,  but they have become more nuanced. How? By ensuring that your  huge supply chain spread across different regions and time zones is properly coordinated in real time. 

Logistics is present where goods are present. So, by nature, it is present everywhere. From raw material sourcing to last-mile delivery, returns, and even sustainability tracking, logistics is never left alone.

Evolution of Logistics: From Warehouses to Real-Time Visibility

There was a time when logistics was more of a background activity, quietly moving goods from warehouses to distribution centers, and to the shelves of stores. No one really thought about how they got there, as long as shipments were delivered on time. 

But, when the boom of eCommerce and global trade came into picture, customers started wanting everything on their doorstep as fast as possible, and wanted to track where their goods are in real-time. So, logistics had to evolve. It went from being just a transport function to something that you can strategize to gain advantage. 

As this evolution took place slowly but surely, businesses realized that they can’t simply let days go by, waiting for updates or operating in silos anymore. They realized that they absolutely need to know where their shipments are in real-time, what the inventory levels look like, and how the delivery performance is across the entire supply chain.

This shift has been driven by technology. Thanks to cloud-based platforms, APIs, AI, and IoTs, it is now possible to track every movement, predict delays, automate warehouse workflows, and make quick decisions. Logistics is now no longer about “where things are”, it’s about “what’s happening right now” and “what needs to happen next”.

In short, logistics is not reactive, it’s becoming intelligently proactive. The businesses that keep up are reaping the benefits of improved efficiency, speed, and customer trust.

Inbound Logistics

Inbound logistics deals with everything that comes into your business. This could be anything like raw materials and other parts, or it could be finished goods from suppliers. It includes transportation of these goods, receiving and storing these incoming goods, and managing the inventory of your overall goods.

For example, if you’re a manufacturer of steelware, clothes, and mobiles (hats off if you are actually one), inbound logistics covers how steel, fabric, or electronic components get to your facility. How efficient these goods enter your facility, sets the speed for everything else, if everything else goes as per plan.

Outbound Logistics

Outbound logistics solely exists to manage everything that goes out. If you are getting finished products out to customers, distributors, or retailers, outbound logistics will be your mandatory guest, invited or not. It includes fulfilling orders, packing, shipping, and ensuring proper delivery of the goods.

When a customer places an order and receives it on time, you need to thank outbound logistics and everyone involved in maintaining it.

Third-party (3PL) And Fourth-party (4PL) Logistics

To put it simply, both 3PL and 4PL service providers basically act as your external partners who you can rely on to help with your logistics operations. If you ask for the difference, it really just lies in the service they provide.

• 3PL service providers typically handle logistics operations. So something like storage, shipping, and sometimes packing for your products are their turf.
• 4PLs expand on this turf and offer to manage your entire logistics operations. This naturally includes working with other 3PLs on your behalf. How cool is that?

If 3PLs are your logistics partners, then 4PLs are your logistics managers.

Reverse Logistics and Returns Management

Reverse logistics is exactly what you think. It manages the goods that move through the supply chain, in reverse. A typical example is handling returns, but it can also include handling repairs, recycling, or even disposal.

When done right, it can actually turn out to be a smoother customer experience, rather than a frustrating one. Imagine your new smartphone was a defect, and getting it replaced with immediate response and clear communication. Would you lose the trust in your supplier drastically compared to if the whole replacement experience was terrible?

Digital and Smart Logistics (AI, IoT, Automation)

This is where logistics gets its “faster, smarter, and responsive” tag. While traditional logistics relied on manual coordination, fixed schedules and systems that didn’t talk to each other. Digital logistics, on the other hand, uses technology to automate decisions, improve visibility, and react in real time.

Here are some use cases for how it’s done:

• AI and machine learning are used to forecast demand, predict delays, and recommend the best routes or delivery times.
• IoT devices like sensors in trucks, packages, or warehouses provide constant and live updates on location, temperatures, and more.
• Automation speeds things up across the board. In warehouses, robots and automated systems help with storing, picking, and packing.
• Cloud-based logistics platforms like FarEye bring all of this together, giving teams a single dashboard to manage shipments, track exceptions, and coordinate with partners.

The key logistics processes involves:

• Inventory management
• Warehousing and fulfillment
• Transportation and fleet management
• Route optimization and delivery scheduling
• Last-mile delivery operations

Let’s take a deeper look into these processes and what they actually mean:

Inventory Management

Inventory is something that can make or break your whole supply chain. When you manage your inventory well, you’ll know what goods you have, where they’re located, and if you’re running out of stock.

Modern inventory management has the responsibility of forecasting demand, setting reorder points, avoiding stock outs or overstocking, and syncing inventory data across channels and locations. When done right, you can reduce holding costs, and speed up order fulfillment.

Warehousing and Fulfillment

Everyone knows that warehouses store your goods. But, did you know that It can also tell you what is understocked, what is overstocked, what is damaged, and what is ready to go out?

Fulfillment is the other side of the coin, it includes everything, starting from when you receive goods to picking, packing, and shipping them out. Automation, barcode scanning, and warehouse management systems (WMS) help speed up these operations and help you reduce errors along the way. 

Transportation and Fleet Management

As the name suggests, it takes care of the actual movement of goods, either by truck, rail, air, or sea (I believe there are no other modes of transport). Fleet management makes sure vehicles are available, routes are already planned, loads are well-optimized, and costs don’t spike up.

But it’s not as easy as it sounds. Fuel prices can increase suddenly and delivery timelines can become tight. To help your transportation management be more efficient, you need real-time tracking, driver performance monitoring, and digital documentation.

Route Optimization and Delivery Scheduling

Route optimization will let you know what the shortest path is while also looking at the delivery windows, traffic, weather, vehicle capacity, and more.

Smart route planning tools help reduce the total driving time, saves fuel, and improves on-time performance. Meanwhile, delivery scheduling helps you meet both the supply chain timing and customer expectations at the same time.

Last-Mile Delivery Operations

The last mile is usually the most expensive and unpredictable part of the journey. It’s also the one that can have the most impact on customer satisfaction.

Last-mile logistics provides you with dynamic routing, real-time updates, contactless delivery options, and exception handling. Technologies like live ETAs, customer notifications, and proof-of-delivery apps are becoming the norm.

Check out FarEye: The Only Courier and Logistics Solution You Need

Impact on Customer Experience and Brand Loyalty

When talking about customer expectations, there are three things they don’t want to negotiate on, that is, speed, accuracy, and transparency. Logistics is at the center of all three. When you promise a next-day delivery to a customer, or a bulk shipment to a retail partner, logistics is going to tell you how quickly and reliably you can fulfill that promise.

When it comes to brand loyalty, a single delivery experience can change things, either for good or bad. When a shipment is en route, you can make customers feel like they’re in control by providing real-time tracking, accurate ETAs, along with clear communication.

On a negative note, delays or a lack of updates can eat away at that trust. Even if the product is a masterpiece, a missed delivery can leave a negative impression that lasts like a bad aftertaste.

Cost Efficiency and Scalability

When you’re running a logistics system that is well-optimized, you can keep your costs under control, which will directly affect your overall costs involved. For example, optimizing your routes reduces fuel spend. Automating your warehouse cuts down labor hours. Planning your inventory avoids both stockouts and dead stock.

All of these cost control practices help you scale at a rate you’d be satisfied with. How? Well, If your logistics system can now handle more SKUs, allows you to explore new markets, and manage larger order volumes. When you invest your saved costs on scaling, scaling is inevitable.

Resilience and Risk Management in Global Trade

When supply chains face disruption like they usually do, logistics is your Superman. There could be delays, or customs could be holding up your goods. They are sure tough, but they’re not impossible to work around when you have your Superman with you.

In logistics, being resilient usually means three things. You should have alternate carriers, backup suppliers, and delivery models that are easily adaptable. It also means having real-time visibility so that you can act quickly when something goes off plan.

Real-Time Tracking and Visibility

Everyone wants end-to-end visibility. But achieving it is harder than it sounds. Many companies still operate with siloed systems. They might have WMS, a TMS, a carrier portal, which is great. But, if they are not connected, it’s doing more harm than they might think. Only when your software talks to each other, you’ll get real-time updates that’s actually real-time.

Let’s say you have all the tracking you need in place, what next? You have to interpret the data and make decisions before things get out of hand. For example, you might know a truck is getting delayed, but if you can’t reroute or alert the customer soon enough, the damage is already done at this point.

Labor Shortages and Delivery Delays

Let’s be real, issues like unavailable drivers, high warehouse turnover, and even burnout during peak seasons are no longer issues that happen once in a blue moon. 

When customer expectations increase, like we previously talked about, logistics teams are simply forced to do more with fewer people. This leads to staff who are overworked, shipments that are delayed, and below-the-mark quality, all of which will ripple across the entire operation.

Managing Omnichannel Fulfillment Demands

Customers want to be able to buy from anywhere and receive the goods anywhere they want. It could be a home delivery, a friend’s place 5 miles away, or even a store pickup in a remote location. But managing all of the inventory, routing, and timing across so many channels can get messy real fast.

If you’re running an omnichannel system, you need constant coordination between warehouses, storefronts, carriers, and tech systems. One gap like a stockout at a pickup store or a missed sync between systems, can bring the whole experience down low.

Reducing Emissions and Meeting Sustainability Goals

Sustainability is something that all companies want to improve on, but balancing it while trying to maintain the same speed and cost efficiency is pretty tough.

Fleets are still in work-in-progress transitioning to electric. Green packaging isn’t always available when you need it. And optimizing for carbon impact sometimes means that you are going to have an angry customer or an increased cost, or both at worst.

If you want to start going green, the first step is to have complete visibility into your operations. Only then, you can start to think about what is feasible and what is not.

Role of Artificial Intelligence (AI) and Machine Learning

AI is helping logistics teams move from reactive to proactive. It can track what’s happening, and forecast what’s likely to happen next like delivery delays, spikes in demand, or route bottlenecks.

Machine learning algorithms continuously analyze data from past shipments, weather patterns, traffic, and customer behavior to improve route planning, load optimization, and inventory decisions. Over time, the system gets smarter, and your logistics operation becomes more efficient without needing constant manual input.

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Predictive Analytics and Data-Driven Decisions

Predictive analytics helps teams stay one step ahead. Think of it like a crystal ball, but powered by your data.

You can forecast everything from demand surges and restock timelines to high-risk deliveries and warehouse bottlenecks. Instead of reacting to problems, you can fix them before they happen—or at least have a backup plan ready.

Data-driven decision-making also improves cost control. For example, analyzing delivery patterns might reveal cheaper and more reliable routes—or help flag carriers that consistently miss SLAs.

Automation in Warehousing and Sorting

Manual picking, sorting, and inventory checks take time, and they’re prone to error. Automation speeds things up and improves accuracy, especially in high-volume or fast-moving operations.

Robotic arms, automated guided vehicles (AGVs), and conveyor systems are increasingly common in modern warehouses. These tools reduce strain on staff and help businesses handle spikes in demand without hiring large seasonal teams.

Even partial automation like barcode scanning or automated putaway systems can make a noticeable difference in speed and efficiency.

Drones, Autonomous Vehicles & Future Trends

While still in early stages, drones and autonomous delivery vehicles are carving out real use cases in logistics.

Drones can bypass road traffic, deliver small packages quickly, and cut down fuel emissions. For example, companies like Walmart (partnering with Wing) are expanding drone services to reach customers in under 30 minutes.

Every industry has its own unique logistics headaches. From compliance to customer experience, logistics solves problems that aren’t always obvious from the outside. Here’s how it plays out across different sectors:

E-Commerce and Retail

Challenge: You’re chasing fast delivery promises, surprise sales spikes, and a customer base that expects updates every step of the way.

How logistics solves it:

• Distributed warehouses and fulfillment hubs help shorten delivery times, especially during crunch periods like flash sales or holidays.
• Inventory is synced across stores and online channels so you don’t end up selling what you don’t have.
• On the last-mile side, tools that batch orders and plan delivery routes keep things moving without burning out your fleet.

Courier, Express & Parcel (CEP)

Challenge: Every minute counts. Deliveries are packed close together, time windows are tight, and if one thing falls behind, it all piles up. You’re constantly trying to move faster without driving up your costs.

How logistics solves it:

• Route optimization tools help group deliveries in ways that actually make sense, not just by zip code, but by traffic patterns and delivery urgency.
• Real-time tracking lets customers and ops teams know what’s going on, without guesswork.
• Load balancing ensures drivers aren’t left waiting or overloaded.

See how leading brands are using FarEye.

Food & Grocery Delivery

Challenge: Orders need to go out fast and stay in the right condition along the way. Oh, and no one likes waiting 45 minutes for milk and eggs.

How logistics solves it:

• Micro-fulfillment centers and dark stores shorten the last mile and support hyperlocal delivery.
• Temperature-controlled packaging and vehicles maintain product quality in transit.
• Batching + live routing allow riders to deliver multiple orders efficiently while still hitting narrow delivery slots.

Healthcare and Cold Chain

Challenge: There’s no room for error. From vaccines to critical supplies, the goods are fragile, heavily regulated, and often time-sensitive. A single delay or temperature drop can ruin the entire batch.

How logistics solves it:

• Cold chain monitoring with IoT sensors helps us monitor the temperature, humidity, and handling.
• Chain-of-custody documentation tracks every handoff, making it easier to trace and be compliant.
• Having backup vehicles, or alternate routes delivers life-saving shipments on time, even in emergencies.

On-Time Delivery Rate (OTD)

On-time delivery rate shows the percentage of deliveries that arrive on or before the scheduled time. It sounds straightforward, but it’s often the first sign something’s wrong when things start slipping. 

One late delivery? Fine. Ten in a row? You’ve got a trend. Sometimes it’s weather, sometimes it's a slow warehouse morning, and sometimes you just overpromise. Either way, if this number dips, your customers will probably notice before you do.

Order Accuracy Rate

Order accuracy rate measures how often orders are delivered exactly as expected. This isn’t just about the right product. It's about the right size, the right count, no cracks, no surprises. A solid accuracy rate keeps the chaos out of your return desk and saves your team from playing email tennis with angry customers. 

But once mistakes start creeping in, things spiral fast. A single off-by-one error can turn a smooth process into a refund-filled mess.

Cost per Delivery

Cost per delivery calculates the total cost involved in completing one delivery. Costs might not scream urgency, but if you're not watching it, it creeps. Fuel prices go up, routes get messy, someone forgets to consolidate a shipment, and suddenly, that affordable delivery is eating into your margins. This number adds up the little leaks until they quietly empty the tank.

Average Delivery Time

Average delivery time tracks the time it takes from dispatch to final delivery. If deliveries are taking longer than usual, something upstream might be dragging: slow picking, poor route planning, overloaded fleets. And when the number shifts without warning, you’ll want to know fast. Because that delay might be one bad day, or it might be your new normal.

Delivery Exceptions and SLA Adherence

Delivery exceptions include delays, failed attempts, missed time windows, and damaged goods. SLA adherence measures how well you’re meeting service-level promises. When this pair goes off track, it doesn’t stay silent. Carriers call in late. Customers lose patience. Your support inbox gets louder. 

It usually means small things are going sideways. It could be wrong routes, missed syncs, mislabelled packages, and they add up quickly. Falling short here tells your partners you're slipping, whether you admit it or not.

Features to Look for in Logistics Software

• Real-time visibility across shipments, modes, and partners. 
• Route optimization that adapts to traffic, delays, and delivery windows.
• Carrier management for rate comparison, tendering, and performance tracking.
• Returns and reverse logistics workflows.
• Exception alerts and automated notifications.
• Scalability to handle growing volumes and new delivery models.
• Integration support with ERPs, WMS, OMS, and external APIs.

Questions to Ask Logistics Tech Vendors

• Can your platform support multi-modal and last-mile visibility in one dashboard?
• How do you handle integration with our existing tools?
• What’s the setup time, and how customizable is the platform?
• How often do you update or improve features?
• Do you provide real-time support and onboarding assistance?
• What kind of reporting and analytics do we get out of the box?

Benefits of Using FarEye’s Logistics Suite

• Dynamic Route Optimization to cut delivery time and fuel costs.
• Real-time Delivery Tracking to stay in control of every shipment with live updates.
• Exception Alerts and Resolution to act quickly on delivery issues.
• Digital Proof of Delivery to reduce delivery disputes and speed up billing.
• Carrier Performance Dashboards for smarter carrier management.
• Customer Communication Tools to keep customers informed and happy.

1. What are the main functions of logistics?

At its core, logistics is about moving things. But it’s not just moving, it's moving with purpose, timing, and zero room for guesswork. You're managing transportation, keeping inventory in check, fulfilling orders, storing goods, planning routes, and coordinating handoffs. 

Basically, it’s everything that happens between "we have the product" and "the customer has it too". When it runs well, nobody blinks. When it breaks down, it’s chaos. It’s the engine under the hood of every supply chain, and if you forget to maintain it, things start rattling fast.

2. What is the difference between supply chain and logistics?

Think of the supply chain as the entire story, from raw material to product-in-hand. Logistics is just one chapter, but it’s the one with all the action. It deals with how goods physically move and where they’re stored along the way. 

If the supply chain is the movie, logistics is the stunt team. You don’t always see it front and center, but without it, everything falls apart mid-scene.

3. How can businesses reduce costs in logistics?

Start by asking better questions. Are we using the fastest route or just the one we always use? Are our trucks leaving half empty? Why are we storing slow-moving stock in prime warehouse space?

Small leaks drain budgets the fastest. Fixing them doesn’t always mean big tech. Sometimes it’s as simple as loading smarter, batching orders better, or getting your warehouse team to stop firefighting and start forecasting.

The fancy answer is: use TMS, WMS, and smart analytics. The real answer is: stop doing things the way you did last year if your cost per delivery keeps creeping up.

4. What role does AI play in logistics management?

AI watches patterns you don’t. It notices that a certain route always runs late on Fridays, that a certain SKU always spikes two days before payday, or that a driver’s delays tend to start after stop number five. It becomes the quiet operator in the background that keeps tapping you on the shoulder with “Hey, maybe don’t send that shipment now.”

You still make the call. But with AI, you're making it faster, smarter, and with fewer regrets.

5. What are current trends shaping the future of logistics?

Speed, flexibility, visibility, and everything being connected, whether you like it or not. Real-time dashboards, autonomous vehicles, drones that actually deliver things, and platforms that tell you when one late shipment might snowball into five others. Sustainability is no longer a side note. Neither is customer experience. 

The old model of “we shipped it, they’ll get it” doesn’t hold up anymore. Now the question is “Can we deliver faster, cleaner, cheaper, and still leave the customer feeling in control?” That’s the future. And honestly, it’s already here. Most companies are just trying to catch up.

Logistics as a Competitive Advantage

Logistics often gets treated like a backstage crew. Quiet, efficient, out of sight. But in reality, it’s center stage. It shapes how fast you move, how well you adapt, and how your customers remember you after the product lands in their hands.

The way you deliver has a direct line to how you’re perceived. A smooth experience earns trust without you having to ask for it. A messy one leaves a mark, even if the product itself is flawless.

When everything’s moving fast like your orders, expectations, and timelines, it’s your logistics engine that decides whether you're keeping up or constantly catching up.

Why Investing in Modern Logistics Pays Off

Old systems slow you down. Manual steps pile up. Teams spend too much time fixing what shouldn’t have broken in the first place. That kind of setup might survive in the short term, but it holds you back when it’s time to scale.

Modern platforms change that. They connect the dots between tools, give teams one place to see what’s happening, and reduce the time spent on repetitive decisions. Instead of reacting all day, your team gets to plan ahead.

Costs stop spiraling. Delays don’t snowball. Visibility improves across the board, which makes it easier to grow without breaking what’s already working.

Book a personalized demo with FarEye.