What is logistics management? Why is it important? What are the benefits?
By FarEye | October 18, 2022
Increasing demand for online deliveries, shorter delivery cycles, growing competition, shrinking margins and ensuring better customer service are some of the major drivers that are pushing enterprises across industries to make logistics management efficient.
If achieving efficient logistics management is not powered by modern technologies or digital tools, chances of failure grow multifold.
What is logistics management?
Logistics management includes multiple processes that ensure seamless movement of goods, freight, parcels, raw materials, finished inventory and packages from its point of origin to end-customers. These processes can be both automated and manual depending on the digital maturity of an enterprise. Modern and efficient logistics management, armed with technologies like Artificial Intelligence, Machine Learning, Predictive Intelligence, the Internet of Things (IoT) among others, empower businesses to discover new revenue streams, boost delivery profitability and generate delightful customer experiences. Logistics management is a core component of Supply Chain Management (SCM).
SCM is a series of interconnected activities related to the transformation and transition of raw materials into finished goods until they reach the consumer. SCM takes care of the entire process of buying, supplying, manufacturing, and selling, while logistics bridges the gap among different segments. SCM gives companies a substantial competitive advantage through efficiency.
Logistics also involves other activities like warehousing, protective packing, order fulfillment, stock control, maintenance of equilibrium between demand and supply, and stock management.
One of the most important concepts in logistics management is the concept of 7 Rs or 7 “Rights.” The Chartered Institute of Logistics & Transport (U.K.) defines the 7 Rs as:
“Getting the right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer, at the right price.”
Types of Logistics Management
The logistics management process starts with the accumulation of raw material and goes on to the final stage where goods are delivered to the destination. There are many types of logistics associated with different supply chain processes. The main types of logistics management are as follows:
1. Supply management
Supply management involves the planning, procuring, and coordination of materials that are needed in a certain location at a specific time to support production. This logistics will also involve coordination for the storage and transportation of the materials. It also means evaluating the level of supply to match demand to make sure that the process has a smooth flow. Supply management needs to be handled on time as delays can lead to a disruption in the entire supply chain.
2. Distribution and material handling
This movement generally involves moving stored materials or products for further manufacturing or distribution. This kind of logistics involves a lot of loading, unloading, tracking, and keeping stock of materials. This type of management controls the movement of supplies from a central warehouse to various other locations, involving intense material movement where timely delivery is an important factor.
3. Product management
Product management in logistics involves planning, management, and control of the different stages of production within a company. It takes care of the coordination required in the manufacturing or assembling process, movement between factories and warehouses, managing of production spaces, and sticking to a strict schedule. Production logistics provides the means to achieve capital efficiency.
4. Customer service management
Customer service management refers to practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle. Good customer service management in logistics depends on excellent communication and timely and damage-free deliveries. This helps to improve business relationships with customers and assists in customer retention.
5. Returns management
Returns management, often referred to as reverse logistics, is the management of returned items to the company. Returns management involves reclamation of material and supplies from a production or assembly process or the return of damaged, unwanted and unused products from the end customer. Through proper inspection and sorting of returned products, one can significantly reduce losses by using undamaged/unused returned items to restock inventory.
Tips for Effective Logistics Management
Efficient logistics management ensures a smooth flow of communication and products, builds better customer relationships, and minimizes the need to maintain excess inventory. It also helps to reduce errors, shrink delivery times and increase revenues.
1. Ensuring better control of ground-level activities
Logistics Management helps to connect all resources and integrate with various departments to give a more visible and transparent view of operations. Real-time access to information throughout the entire delivery process can streamline the transportation process and ensure better control to mitigate delivery disruptions.
2. Bringing inventory closer to customers
The location of inventory plays an important role to fulfill delivery timelines. With customers expecting faster delivery service day by day, the distance between the customer and product needs to shrink. Logistics management needs to find inventory locations, which can speed up the delivery timelines and keep operational costs at a minimum.
3. Automating core logistics operations
Automation saves a considerable amount of time and money because manual interference is eliminated, especially with regards to repetitive tasks. Automating core logistics operations like scheduling, task allocation, roster management, route planning among others can reduce costly errors, improve customer service, and drive high-levels of operational excellence. Automation ensures speed, accuracy, quality, and efficiency when it comes to the execution of operations.
4. Embracing advanced routing practices
Advanced routing practices help to plan delivery routes that highly efficient and productive. By considering a plethora of external factors like weather, one-ways, tonnage, empty miles, risk factors and more modern route planning platforms can significantly reduce transportation costs and delays.
5. Making last-mile deliveries customer-centric
Driven by the need to be instantly gratified, modern customers need to know where their orders are, when it was shipped, when exactly will it de delivered and who will be delivering it. Brands need to provide customers with self-service type delivery models that allow them to select, and change if necessary, the delivery date, time and location. Hence, it’s critical to make logistics operations, especially the last-mile, customer-centric.
6. Reducing carbon footprint
Transportation is one of the biggest reason for growing carbon emissions across the globe. consume resources on a large scale and are largely responsible for the world’s carbon emissions. By introducing modern technologies, like route optimization, automation, Machine Learning, digital documentations among others, businesses can drastically shrink their carbon footprint.
7. Accurately benchmarking 3PL performance
Third-party logistics companies are used when a business wants to outsource all or some of its distribution and fulfillment functions. Embracing a digital platform that empowers logistics stakeholders to drive data-backed decision-making goes a long way when it comes to seamless management of third-party logistics providers. Businesses can quickly access 3PL provider KPIs and map it to specific delivery needs. Effective logistics management that ensures interoperability between in-house IT architecture with 3PL systems further enhances 3PL management by improving fleet visibility, real-time tracking, better delivery experiences and enhanced compliance adherence.
8. Building robust risk management strategies
Companies can enhance the robustness of their supply chains and protect them against crises through strategic planning driven by digital logistics tools. Rigid processes and lack of transparency lead to a lack of logistics agility and resiliency. Embracing digital tools that can mitigate thefts, pilferage and damage is vital for ensuring customer loyalty and better margins.
Why is logistics management important?
The increasing complexity involved in the movement of goods from the point of origin to the point of consumption has made logistics management critical with regards to keeping up with changing customer needs, growing competition and evolving market dynamics. Logistics is key to utilizing, planning, implementing and controlling the flow and storage of goods and services to meet customer requirements. Efficient logistics management provides clear visibility of transportation activities involved in ensuring smooth supply chain operations. By analyzing the transportation data, companies can implement better route optimization to avoid potential disruptions and also save on operational and fuel costs.
Logistics management helps to identify cost-saving measures and keep expenses lower, thus ensuring better productivity. The last-mile is the most important element in logistics and is the key to achieving customer satisfaction. Efficient logistics management enables the implementation of reliable strategies that help provide services to meet customer demand and boost sales volume.
Major Components of Logistics Management
Logistics management involves a vast network of suppliers, agents, freight forwarding providers, distributors, packers, and service providers, through various modes of transport. It is a complex process that includes multiple components that determine the effective movement of goods.
The major components of logistics management are:
Inventory planning ensures that proper stock quantities are maintained to meet customer demand while minimizing the costs related to storage. Inventory planning helps provide accurate order fulfillment, a well-organized warehouse, increased productivity, and savings in terms of time and money.
Inbound logistics refers to the transportation, storage, and receiving of goods by a business. Effective inbound logistics can help to procure high-quality products, reduce overhead costs, avoid wastage of materials, increase sales and improve production time. Inbound logistics is based on the relationship between businesses and suppliers.
Outbound logistics refers to the transportation of finished products to customers from a warehouse or distribution centre. The outbound logistics stages are warehousing and storage, distribution, transportation, and last-mile delivery. It plays a critical role in a supplier's overall customer relationship management process. Outbound logistics relates to how companies get their goods to the end-customer.
Fleet management involves the managing of vehicles to eliminate or mitigate the risks associated with transporting goods. It also helps improve efficiency, productivity and reduce overall transportation and labour costs. Fleet management helps to calculate the profitability and scalability of logistics services and further optimizes logistics planning.
Warehousing refers to storing goods or raw materials in a warehouse. The capacity of the warehouse is an important factor that impacts inventory planning. Effective logistics management is not possible without proper warehouse management. Warehouse proximity and capacity are two critical aspects in a supply chain that determines the efficiency of logistics operations.
Delivery fulfillment plays an important role in enhancing customer satisfaction. It is the process used to move a product from its point of sale to the hands of the customer. It also refers to the way businesses respond to customers and the steps taken to achieve the ‘perfect order index’.
Demand Planning is the process of analyzing, evaluating, and forecasting the demand for goods to ensure availability of products and goods that customers want to buy. It gives a business the ability to predict future sales and to have sufficient inventory levels to meet customer needs, without having a surplus stock. Demand planning also predicts future revenue generation opportunities and helps gain insights into market trends. It helps to plan resources to meet demand and supply gaps as and when required.
Benefits of Logistics Management
Businesses need to implement effective logistics management to remain competitive and to ensure their stability. Proper logistics management ensures that businesses can meet both demand and consumer expectations.
1. Improving customer experience
Logistics management helps to provide fast and quality service. A management strategy can constantly try to improve transportation processes and eliminate any disruptions since delayed deliveries can lead to a disappointed customer. Providing better customer services and a smooth freight moving process can add more value to the customer experience. Improved customer experience can lead to a better brand or company reputation and help generate more business. Hence, well-handled logistics contributes to an overall positive customer experience.
2. Optimizing operational costs
Logistics works optimally when there are ample transparency and visibility in operations. An efficient logistics management plan can analyze historical data and provide route optimization to increase efficiency and reduce fuel costs. Logistics management can optimize the utilization of assets, improve business efficiency and reduce operational costs.
3. Boosting profitability
Logistics management enables companies to gain clear visibility of their operations, improve customer relations, and reduce the necessity of maintaining excess inventory. This helps to increase the order fulfillment rate, thus boosting profitability for the company. With the usage of route optimization systems, implementation of the latest technological innovations, and by increasing fleet capacity utilization, companies can minimize operational costs and ensure synchronized supply chain management.
4. Better intermodal operations
Intermodal operations involve the use of two or more modes, or carriers, to transport goods from supplier to consumer. Special standardized containers are used for intermodal operations, which eliminates the risks of directly handling goods. Better intermodal operations help to lower costs, are environment friendly, and are more reliable and safer.
5. Greater delivery productivity and efficiency
Logistics focuses on optimizing operations and improving efficiency without affecting the profit margins. By reducing the wastage of resources, delivery productivity is ensured without compromising on the timely delivery of goods. Logistics management can meet quality standards, reduce failures, defects, and deviations to ensure that delivery productivity is not affected.
6. Intelligent route planning
Goods need to be delivered efficiently and seamlessly while adhering to road safety rules and set time deliverables. Smart route planning allows the easy selection of the best routes, help avoid traffic jams, make it easy to monitor the status of drivers and vehicles, reduce empty miles and ensure that the goods reach customers intact and on time. Smart route planning ensures a good fulfillment rate and customer satisfaction.
Best Practices to Address Disruptions in Logistics Management
The pandemic compelled businesses to rely more on logistics management to keep up with changing demands and provide essential items to customers. Although disruptive forces might be environmental, geopolitical or technological, they can throw logistics networks into disarray. To address disruptions in logistics management, it is necessary to establish a few best practices to increase scalability, maintain delivery, and limit delays in services. Luckily, the modern supply chain is in the midst of digitalization, with new technology and tools promising to add efficiency and enhance accuracy.
Here are some tips that can help respond to disruptions in logistics management:
For agility and cost-efficiency, leverage crowdsourcing capabilities to optimize your staff and vehicle capacity. This will help save money, meet demand surges and optimize last-mile delivery.
Adopt contactless delivery and payment options to keep your customers and your employees safe and healthy. Flexibility to adapt to various payment options like tap and go payment and digital wallets can also enhance customer satisfaction.
Keep a contingency plan handy to respond to unforeseen problems. Establish a “crisis team” to ensure preparedness in the event of any logistics emergency.
Real-time and dynamic routing capabilities can help maximize delivery efficiency, emergency delivery, and multiple drop locations on the same route.
Consider implementing cost-effective methods and value-added services for customers to ensure control on prices and prevent unnecessary price hikes.
Create a “dark store” that can be used as a distribution center that helps facilitate a "click-and-collect" service, where a customer collects her orders placed online or as an order fulfillment platform for online sales.
Keep investing in new technologies like artificial and augmented intelligence, advanced analytics, automation, warehouse robotics, and many more, to improve businesses’ scalability and competitive edge.
Logistics management needs to evolve and adapt to the latest technological innovations to meet rising customer expectations, generate profits, and achieve growth. Companies need to implement the best logistics management practices to enhance operational performance by emphasizing process coordination and information sharing.