- December 21, 2020
Why does Logistics Management Matter?
Written by Stephanie Chan Dec, 15th 2020
What is Logistics Management?
Logistics management is the part of the supply chain process that plans, implements, and controls the flow and storage of goods, services, and related information from the point of origin to the point of consumption to meet customer requirements. To put it simply, the ultimate objective of logistics management is to have the right amount of stuff at the right time, transporting it to the right location in the right quality, and delivering it to the hands of the right customer.
Logistics management involves different parts of the supply chain process, including material sourcing, order fulfilment, transportation, warehousing, demand forecasting, inventory management, and supply chain management, which we will go over in the next few sections.
Difference between Logistics Management and Business Logistics Management
Business Logistics Management is very similar to logistics management in that it also deals with workflows of an item as it moves from production, to procurement, and to its final destination for consumption. It usually involves multiple processes or domains, and the objective is to make these flows more effective and convenient for its organization.
Logistics management in general encompasses a broad process of managing and carrying out a product’s lifecycle to maximize profitability. It helps a business gain competitive advantages across all of its operations and departments, as well as external vendors or third-party contractors. Business logistics management, while serving similar functions, focuses more on internal activities related to product flows.
Why does Logistics Management Matter?
Knowing what’s happening at every stage of the supply chain will help you understand the entire operation and be able to react to changes and make adjustments to sudden fluctuations with minimal disruption to the supply chain flow. Increased visibility will also give you better historical data for future planning and improvement, which leads to a more optimized system in the long run.
Reduces Overhead Cost
Through utilizing sectors under a logistics management system, such as inventory management and demand forecasting, businesses can identify cost saving measures in areas such as transportation, scheduling, routes, inventory and storage, purchasing expense, and production expenses, which add up to a total supply chain cost cut. By tailoring parts of the supply chain to its unique needs, businesses will have better cash flow, improved order fulfillment rates, and ultimately result in more profit.
Better Managed Physical Resources
Having a logistics management system in place allows you to keep track of all your physical resources and optimize the use of them throughout their lifecycle, making the supply chain process more cost-effective.
Improve the Customer Experience
Customers’ satisfaction is the key to a business’ success. Having products arriving on time with the quality promised and the ability to track the order throughout the entire journey is essential to consumers. A good logistics management system will allow you to ensure product quality from the moment of sourcing to the last mile delivery. With clear insights and data, a business can review past performance and improve upon the supply chain process to create even better customer experiences in the future.
Support Expansion with a Strong and Flexible Organizational Framework
Logistics planning is not only put in place for present business operations, but with the consideration of business expansion or growth that requires transparent data and information to ensure the transition is smooth. With a logistics management system, individual departments and units will be able to work more interconnectedly and coordinated, thus enhancing quality and speed of output.
Become more Resilient
The supply chain is often and easily disrupted by external factors such as natural disasters, political unrest, or a pandemic. Without a logistics plan, a business will lose track of its operations and be unable to react to disruptions within the supply chain. Even with a logistics system in place, not having clarity will slow down a business’ reaction to disruptions and increase unnecessary losses that can otherwise be prevented. Having a transparent and tightly-knit logistics network makes your supply chain more resilient against unexpected risks.
Logistics Management Goals Breakdown
While many features such as low cost or high efficiency are important to a supply chain, the most important measure of success is customer satisfaction. Having faster delivery speed may not make a customer happier if it means that they have to pay more. At a high level, it is about meeting the requirements for each customer. This can be broken down into a few specific goals.
Minimize inventory, hence storage space, to reduce costs
A just in time strategy allows for decreased waste and inventory space. However, after Covid-19 and a supply shortage, whether a just in case strategy is more appropriate for dealing with unexpected supply chain disruption is once again put into question.
Maintain consistency in quality of service
If a retailer promises one day delivery to its customers but fails to fulfill half of the delivery in time, the inconsistency will negatively impact customers’ perception of the business and they will likely not return. Understanding the existing limitations and constraints and working toward consistent output across the supply chain is better than over focusing on one part and neglecting the others.
Look for constant improvement within the logistics process
The logistics process is not fixated, but rather flexible and constantly adapting to changes in internal and external factors. Periodic reviews will help weed out some of the inefficiencies and make the process smoother overall.
Respond to rapid market changes and customer orders
Similar to the point above, monitoring the market and adjusting the logistics process will make the supply chain operations more sustainable and resilient to disruptions. It will also allow us to be more prepared than other competitors when opportunities arise.
Components of Logistics Management
There are four main parts of logistics management, each dealing with a different part of the supply chain process.
This involves the planning, procurement, coordination and transportation of materials to a certain location at a set time for production. In this part of the supply chain, you also need to evaluate the level of supply at all stages of the process to make sure clients’ needs are met.
This involves combining distributed supplies into a product, which means staging materials at the right time to work with the production of the product.
This involves moving materials, from unloading, loading, and transporting, to keeping track of the number of inventories. Essentially, following the movement of materials and products from warehouses to retail stores.
This involves overseeing and management of reclaiming materials and supplies from production. This can be returning excess materials from a construction site or the return of unwanted products from a customer.
Distribution Network of Logistics Management
- Factories that manufacture products
- Warehouses that store products
- Distribution centers to receive and return items for clients
- Transportation to deliver product
- Retail locations, from small to larger stores, to sell product
What is Logistics Planning?
Logistics planning is the process that combines a business’ key logistics activities within the supply chain network including order management, inventory, transportation, warehousing, material handling, and packaging. Logistics planning serves to integrate and synchronize the overall supply chain as a continuous process so that you can achieve your business goals and have plans to deal with potential disruptions.
Logistics Plan – Step by Step
To stitch all the key activities within a supply chain to make a cohesive process requires a series of steps. These steps are flexible with interchangeable orders based on the circumstances.
Identify the Logistics Nodes
Know all the geographic nodes that are part of your forward and reverse supply chains to figure out the best combination that will make the logistics process more effective. This includes selecting warehouse locations so that they are at optimal distance from the target market.
Develop Import Export Strategy
Decide the volume of freight and number of SKUs as well as placing inventory strategically to reach max efficiency and cost. An example is choosing which borders to cross for your importing and exporting route, inventory storage locations relative to customers’ location, and other concerns such as areas with civil unrest.
Select Transportation Modes and Carriers
Determine the mix of transportation modes that will connect different parts of your supply chain together.
Select Logistics Partners
Try to use the minimal number of freight providers/3PL/4PL to manage your logistics, as more partnerships increase difficulty in coordination and may cause more confusion. Make sure the partner is aware of the local market and regulations.
Implement Information Systems
Nowadays converting to digital has become increasingly popular in the logistics and sourcing industry as a way to better manage information flow as it is crucial to the supply chain operation. By accurately tracking demand information, real time location of goods and production process, you can review and evaluate the current supply chain performance to make future forecast and planning. It will help you react to unforeseen obstacles in the supply chain in a timely manner to minimize damage and loss.
A great logistics plan entails good coordination between departments, proper planning, automated processes and so on. Proper planning means to devise a flow chart for the entire supply chain operation aiming at maximizing the profits and customer satisfaction. Adopt automation to save time on getting information updates on the movement of goods. Create valuable relationships with internal team members as well as logistics partners to support a healthy operational environment and growth of the business.
Lastly, project management logistics requires constant measurement, analysis, and review to continuously improve. Any measurement tools and software should be integrated to acquire the information needed to start the reviewing process. Make sure a metric is established to measure cycle time, cost, and services so that there is a baseline to improve upon. Ultimately, adapting to the latest technology and tools will help you achieve your ideal logistics process faster and more efficiently. CBX Software provides a sophisticated supply chain management software hub, modernizing processes to help companies overcome the vast challenges that come with the collaboration and sourcing of thousands of products from suppliers across the globe. If you’re interested in learning more about how CBX Cloud can help you optimize your current logistics operation and increase profit and customer satisfactions, reach out to us.