A supply chain is comprised of all the businesses and individual contributors involved in creating a product, from raw materials to finished merchandise.
Logistics is a specialized field of its own comprised of shipping, warehousing, courier services, road/rail transportation, and air freight. Retail companies become involved in supply chain management to control product quality, inventory levels, timing, and expenses. In a global economy, supply chain management often includes dealings with companies and individual contributors in other countries, which requires involvement in politics, trade and tariff laws, quality control, and international relationships.
Examples of supply chain activities include farming, refining, design, manufacturing, packaging, and transportation. Because global supply chains are both logistically and technologically complicated, there are now global supply chain management specialists and firms who oversee the process for many different retail companies.
As consuming trends increasingly move towards digital purchases shipped from a central warehouse facility directly to the consumer, the largest retail companies are going to be increasingly involved with supply chain management and logistics.
The Role of Logistics in Supply Chain Management
Estimates of the size of the global logistics industry in 2019 range from $4.96 trillion to $9.30 trillion. That means that moving and storing goods around the planet accounts for anywhere from 5.6% to 10.6% of global GDP.
The Beginning of Supply Chain and Logistics
"Supply chain" was first used as a military term in the early 1900s to describe the process of getting food, weapons, ammunition, etc. to the front line of battles. It involved creating "supply points" between the military base and the battlefields.
"Logistics" was also a military-related word, first used in 1838 in the book "The Art of War," which was written by a French General in Napoleon's army.
Supply Chain and Logistics Fun Facts and Statistics
- Barcodes were first used to track and label railroad cars. The first product using a barcode was a pack of Wrigley's gum scanned in a supermarket in 1974.
- Approximately 62.7% of all U.S. freight was transported by trucks in 2018.
- Electronics, motorized vehicles, and mixed freight (items bound for restaurants, grocery stores, and retail stores) are the most valuable categories of products that are shipped in the U.S.
Current Statistics and Fun Facts About Logistics - by the Numbers
14.8 million - The total number of people employed in transportation and warehousing in the U.S. in 2019.
$102.4 billion - The global amount spent on air freight in 2019.
73% - The percentage of cargo that is transported via air freight between Europe and Asia.
1% - The percentage of total world trade that is transported by air freight, when measured by tonnage.
35% - The percentage of total world trade that is transported by air freight when measured by the value of the freight.
11.9 billion - Total tonnage of freight carried via sea freighters in 2019, compared to 60.9 million tonnes of freight transported by air.
9.8 million - The total number of people employed in transportation-related industries in the U.S. in 2019.
$10.8 trillion - Total value of freight transported by truck in the U.S. in 2018.
11.5 billion - The total tonnage of goods transported via truck in the U.S. in 2018.
Supply Chain Best Practices and Their Benefits
According to Supply Chain Quarterly, these are the 10 Best Practices that companies in the retail industry (and any industry) need to ensure that their supply chain management is as effective as possible and contributing as much as possible to the company's bottom line.
- Identify supply chain stakeholders and establish a committee to engage stakeholders in supply chain issues and establish a workgroup comprised of departments.
- Make sure the supply chain itself has appropriate staffing.
- Technology is your friend.
- Establish synergistic relationships with key suppliers.
- Engage in collaborative strategic sourcing.
- Don't just consider price when making supply chain decisions. Consider the "total cost of ownership."
- Supply chain leaders should have some contribution and control with contracts.
- Inventory optimization is essential.
- Establish appropriate controls throughout the supply chain system to minimize risk.
- Keep the supply chain sustainable with social responsibility and green initiatives.