Excellent ideas remain hypothetical unless wisely implemented. Conceptualizing within an organizational setup requires planning and implementation to foment concrete results. Managing all operations so that they flow smoothly lies at the core of logistics management.
It’s a term often misunderstood in a real-world scenario, and there’s a lot of debate about what logistics management is or isn’t. People sometimes confuse or conflate it with supply chain, transportation or warehouse management.
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Article Roadmap
- What Is Logistics?
- What Is Logistics Management?
- Types
- The Product’s Journey
- The 7 Rs
- Primary Benefits
- Logistics Management Challenges
- Tips
- Next Steps
What Is Logistics?
Logistics is a supply chain management component that refers to the organization and coordination of products, raw materials and services within the supply chain. It deals with the movement and storage of products and services, as well as the paperwork and reports accompanying them.
Understanding logistics management requires a solid definition of logistics.. The Council of Supply Chain Management Professionals (CSCMP) lays down the logistics definition as:
“The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.”
The term has its roots in military practices, describing the processes of supplying troops with their necessary provisions. But what is corporate logistics?
Expanding supply chains and growing supply complexity creates a demand for logisticians.
The emergence of technology in the digital era resulted in the creation of dedicated logistics firms capable of streamlining resource movement throughout the supply chain.
What Is Logistics Management?
Logistics management is the confluence of coordinating the product lifecycle, from raw material sourcing to customer delivery. Manufacturing, storage, inbound or outbound movement, warehousing, and reverse logistics are some of the static and dynamic components.
CSCMP defines logistics management as the planning, implementation and control of the flow of goods, services and related information within the supply chain.
The functions of logistics management span all three stages of deployment:
- Planning: Identifying objectives and ideating solutions.
- Implementation: Putting solutions into practice.
- Control or Monitoring: Analyzing solution performance.
Types
Logistics applies to the following facets of supply chain management:
Production Management
Production logistics is the planning, control, and execution of a company’s production system’s transit and storage of raw materials, auxiliary materials, operating resources, purchased parts, spare parts, semi-finished and finished products, and related supporting operations.
As the name suggests, different raw materials are combined in coordination with several departments to make the final product. Depending on the business, this typically involves staging materials at the right time, building products and more.
Correlating raw materials at the right time is vital as its absence can result in storing early shipments or stalling operations.
Supply Management
Logistics management focuses on transporting and storing items. In contrast, supply chain management manages the complete supply chain, from raw materials to final consumer delivery.
This type entails order planning, ordering raw materials and procuring unfinished stock by a preplanned deadline. Logisticians need to find a suitable mode of transportation, considering the temperature and storage needs of all items.
For instance: Fruits, vegetables and seafood may require refrigerated vehicles with temperature-sensitive units.
Order size is another critical factor that affects transportation mode volume.
Distribution Management
At this stage, stored goods are loaded, unloaded and transported. According to Investopedia, distribution management oversees the movement of goods from supplier or manufacturer to the point of sale.
This process can be bifurcated into two parts — commercial and physical distribution.
Commercial distribution, or sales distribution, makes products and services available to the final consumer or another business (as a raw material).
Physical distribution covers transporting by-products, raw materials and merchandise from the source to the end consumer.
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Reverse Logistics and Product Returns
Reverse logistics switches the process flow around. It typically involves reclaiming supplies and raw materials from producing or picking up returned products.
Reverse logistics is costly for everyone but especially for retailers who haven’t positioned themselves to provide on-demand pickup of returned goods.
The returns manager handles all return-based transactions. For instance, once a project is complete at a construction site, it can return excess raw material supplies to the warehouse. Quality issues and defects are other common reasons for returns.
The Product’s Journey
Logistics management is responsible for seeing a product’s journey from the raw material stage to end-user or consumer acquisition.
Typically, logistics infrastructures divide into parts that handle the different segments of this journey.
Logistics management focuses on meeting the customer’s requirements and prioritizing them over those of the producers or sellers. However, this may differ depending on the product or industry.
Forward and reverse flows refer to the journey of goods, services and information from the origin to the final consumer and vice versa. A good example of logistics forward and reverse flows include:
- Forward Flow: A tree is cut, paper is made, the news is printed on it, and it’s bought and read by the consumer.
- Reverse flow: A consumer wants to buy a new car. The company offers a buyback of the old car for a discount and uses it for parts.
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The Seven R’s of Logistics
An easy and effective way to sum up what logistics management tries to achieve is through the Seven R’s of Logistics.
Getting them all together is a logistician’s most significant challenge and ultimate goal. When logistics management succeeds, the right product will reach the right customer, at the right time and place, in the accurate quantity and conditions at the right price.
Primary Benefits
Without clear benchmarks and goals, supply chains can collapse. Once you’ve outlined what you want to achieve with logistics management, you can easily move to strategy execution.
Good logistics management can benefit an organization, regardless of size, type or industry.
Boost Efficiency
Smart logistics strategies help you identify product or delivery issues before customer intervention. The result is an upshot in consumer loyalty and a reduction in possible returns.
Businesses can streamline their logistics operations and cut delivery times by automating procedures, improving transportation and implementing new technology. This strategy can increase revenue and profitability by improving overall efficiency and production.
Logistics management tools help you find and reduce inefficiencies and errors before shipping. They also boost efficiency by optimizing warehouse layouts and implementing strategic organizational changes.
Organize and Optimize Stock
Managers need to discover the fine line between under and overstocking inventory.
Logistics management aims to lower inventory deployment so companies can meet customer demand at a minimal cost.
Deploy effective logistics inventory management to follow product progress from its manufacturing site to consumption. Assess quality while expediting shipping and assuring cargo accuracy.
Inventory optimization can improve customer satisfaction by ensuring orders are chosen, boxed or kitted promptly. It can assist in determining which products are slow-moving or fast-selling, as well as which warehouse locations are optimal for storing various items based on demand to limit the time they sit on shelves.
Increase Customer Satisfaction
These days, the customer ultimately decides whether a business flourishes, floats or dies out.
A big part of that decision depends on whether they’re getting the product or service they buy when, how and for the price they want.
Companies are restructuring their workflows to become more customer-centric, which means an added emphasis on last-mile logistics, reverse logistics and supply chain visibility.
Organizations can cultivate consumer trust and encourage repeat business by enhancing on-time delivery, diversifying delivery alternatives and proactively handling orders.
Improve Quality
Building failsafe products is a well-defined logistics need. If products fail, you’d need to repeat the complete logistics process to pick and refurbish faulty materials. A fundamental goal of good logistics management is to focus on formulating high product quality to boost sales and customer engagement.
Earn More Revenue
Material transportation expenses constitute a significant chunk of logistics costs. Consolidating goods movements is another helpful cost-reduction strategy.
Optimum logistics management can help you group smaller shipments based on size, type or destination, resulting in better profit margins.
Companies can reduce defects, returns and customer complaints by setting up quality control systems, conducting rigorous inspections and guaranteeing adherence to standards across the supply chain. Improved quality leads to enhanced client fulfillment, brand reputation and competitive advantage in the market.
Challenges
The era of disjointed logistics has passed, but the industry still faces some challenges by way of customer service, delivery disruptions (natural disasters and pandemics) and more.
Risk Management
Today’s dynamic business landscape demands foresight into possible disruptions due to natural calamities or economic headwinds like a recession. Here are a few challenges that the industry is combating:
Addressing Disruptions
International trade links bind countries in such a way that it’s difficult to untangle logistic channels after crises. So it’s critical to design and implement contingency plans for risk identification and mitigation. Consider four essential factors when future-proofing your organization’s supply chain: supplier risk, alternate sourcing arrangements, supply chain mapping and environmental risk remedies.
Contingency Plans and Alternate Sourcing Options
Every logistician must plan for contingencies because it’s a part of business continuity, risk management and recovery. The first stage in creating emergency plans is identifying the causes and consequences of possible or existing sourcing outages or contingencies.
SWOT analysis, risk matrices, scenario planning and supplier audits are some approaches you can use.
Once you’ve identified the risks, investigate and assess several alternatives and possibilities based on your sourcing objectives and criteria, and weigh the benefits and drawbacks of each option.
Consider less-than-truckload (LTL) shipments to help save money and increase efficiency.
Supply Chain Visibility Tools for Risk Mitigation
Include supply chain visibility tools in your risk management toolkit. You can out-maneuver delays in the flow of materials, capital, or information by combining process changes, better intelligence from supply chain visibility and swift decision cycles.
Internet of Things (IoT), blockchain, and artificial intelligence (AI) are among the cutting-edge technologies businesses use to increase supply chain visibility, cut costs and improve customer experiences.
Collaboration Between Suppliers
Collaboration and information exchange between logistics partners boosts agility, lessens bullwhip effects and helps businesses better organize their supply networks.
The resilience of the entire supply chain improves by exchanging knowledge about potential hazards, setting up backup plans and cooperating to find solutions.
Customer Service
Logistics management focuses on getting the product to the right consumer at the right time within budget. One of the key difficulties in the logistics industry is that customers want complete visibility into where their deliveries are at all times.
With rising expectations, customers’ inclination to pay more for expedited shipping has decreased, and the majority of them now won’t pay anything more for deliveries that take longer than two days.
Cost Control
Transportation expenses are an important component of logistics management. Logistics managers must develop strategies to keep transportation costs under control while ensuring timely delivery of goods.
Tips
Prioritize Planning and Collaboration
Planning is the first step to effective logistics management.
Logistics encapsulates several activities, such as procuring raw materials, arranging for proper warehousing and storage, delivery and scheduling return pickups.
We define collaborative logistics as a network of professionals who:
- Deliver top-notch performance by themselves.
- Work with competitors and stakeholders as a team.
A collaborative approach to planning enables a company to transition from a static business and budget planning system to a dynamic process that’s more sensitive to consumer needs. Organizations must adjust collaboration strategies to their corporate culture and needs to succeed.
Hire a Logistics Manager
A skillful logistics manager who’s also great with interpersonal communication is crucial for organizational success. A logistics manager oversees the transportation, distribution, and storage of goods and supplies. They can assist you in developing and implementing logistics plans, managing logistics budgets and ensuring regulatory compliance.
The logistics team has to handle logistics processes and keep things up and running while executing a contingency plan.
As a growing organization, it’s imperative to focus on staff training and development while keeping up with the latest transportation and supply chain trends.
Adopt Automation
The logistics automation market is experiencing a growth surge that’s expected to push its value to $96.2 billion in 2024. The advent of IoT and interconnected systems enables businesses to perform material batching, order picking, packaging and warehouse inspections to drive operational efficiency.
Replacing tedious manual tasks with automated workflows saves time and money so administrators can focus on essential areas like planning and decision-making. Logistics managers can easily track inventory and final products in real time with automation.
Growth, innovation and sustainability result from digital transformation. In other words, connecting all of the components in the supply chain gives you comprehensive insight into your operations and improves fleet transparency.
Optimize Transportation
In logistics, safe, timely and budgeted product deliveries are important. Logistics managers must also ensure that items take up minimal space and are light enough to minimize transportation costs.
An effective transport management solution can help you with all these tasks while providing real-time package locations. It’s smart to consider investing in TMS and tracking solutions if you haven’t already.
Most TMS software offers live reports and lets staff proactively identify problem areas.
Formulate Strategic Performance
A logistics strategy is a set of principles, perspectives, and driving factors that aid in coordinating plans, goals and policies among different parties in any supply chain.
Logistics optimization is incomplete without periodic performance measurement. There’s always room for improvement, whether it’s finding a faster transportation medium or an economical storage option.
It’s essential to establish overall long-term productivity while developing the logistics plan. Set your goals and objectives by monitoring key performance indicators (KPIs) like cycle time, cost and service metrics.
As a result, you can track the success of your logistics plan.
Next Steps
In addition to following these tips and suggestions, implementing a smart logistics management system is a wise decision. Analyze your current operations and identify all of your must-have features. Finalize a budget and select a logistics solution that best fits your requirements.
Grab our free requirements template to line up and explore vital features like carrier compliance, tracking and more.
Is there anything else you need to know about logistics management? Let us know with a comment down below!