What is logistics management? Why is it important? What are the benefits?
By Komal Puri | 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 is the process of planning, implementing, and controlling the movement of goods, services, and information between the point of origin and the point of consumption. It involves the integration of various activities, including transportation, inventory management, warehousing, material handling, packaging, and security.
The goal of logistics management is to ensure that goods are delivered to the right place, at the right time, and in the right condition, while minimizing costs and maximizing efficiency. This involves optimizing the supply chain to achieve the best balance between customer service and cost-effectiveness.
Logistics management plays a crucial role in business operations, particularly in industries such as manufacturing, retail, and e-commerce, where timely and efficient delivery is critical for customer satisfaction and retention. It helps organizations improve their supply chain efficiency, reduce transportation and warehousing costs, and increase their overall competitiveness.
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 logistics software 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.
Importance of logistics management?
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.
1. What is the role of logistics management?
The role of logistics management is to plan, implement, and control the movement of goods, services, and information between the point of origin and the point of consumption, while optimizing the supply chain to achieve the best balance between customer service and cost-effectiveness.
2. What is an accurate description of logistics management?
Logistics management is an important business operation process that involves the coordination, movement, and storage of goods through efficient use of resources. It includes activities such as sourcing, planning, tracking, warehousing, transportation, inventory control and customer service.
3. What is Transportation logistics management?
Transportation logistics management is a subset of logistics management that specifically focuses on the planning, implementation, and control of the movement of goods from one location to another. It involves selecting the most efficient mode of transportation, arranging the routing and scheduling of deliveries, and ensuring the timely and safe delivery of goods to their intended destination.
Transportation logistics management also involves managing the associated costs, such as fuel, maintenance, and labor, while ensuring that the transportation network is environmentally sustainable.
4. What does logistics mean in business?
In business, logistics refers to the process of planning, implementing, and controlling the movement of goods, services, and information from the point of origin to the point of consumption. It involves the management of the flow of materials, as well as the associated costs, such as transportation, warehousing, inventory management, and material handling.
Logistics plays a crucial role in business operations by ensuring that products are delivered to customers on time and in the right condition, while minimizing costs and maximizing efficiency. It is essential for businesses that rely on the movement of goods, such as manufacturers, distributors, and retailers, as it helps them meet customer demands, optimize their supply chain, and remain competitive.
Effective logistics management also involves coordination and collaboration between various departments within a business, such as production, marketing, and sales, to ensure that the logistics process is aligned with the overall business strategy. In summary, logistics is a critical component of business operations that impacts the bottom line and overall success of the organization.
5. What is logistics experience?
Logistics experience refers to the quality and efficiency of the delivery process of a product or service. It involves the ability of a company to deliver the product or service to the customer's desired location within the expected time frame, while ensuring that the product arrives in good condition and with minimal disruptions.
A positive logistics experience for the customer involves various aspects, such as timely delivery, accurate tracking of shipments, effective communication about delivery status and any issues that may arise, and efficient handling of returns or exchanges. Customers value logistics experience as it impacts their satisfaction with the overall purchase experience and their perception of the company's reliability and professionalism.
On the other hand, a negative logistics experience can result in customer dissatisfaction, negative reviews, and loss of business. For example, late deliveries, damaged products, or poor communication about delivery status can lead to frustration and disappointment, and can harm the reputation of the company.
6. Difference between logistics and supply chain management?
Logistics and supply chain management are closely related concepts, but they have different meanings and scopes.
Logistics refers to the process of planning, implementing, and controlling the movement of goods and services from the point of origin to the point of consumption. It involves activities such as transportation, warehousing, inventory management, and order processing. Logistics is focused on the efficient and effective management of physical goods, ensuring that they are delivered to the right place, at the right time, and in the right condition.
Supply chain management, on the other hand, is a broader concept that encompasses the entire network of activities involved in the production and delivery of goods and services, from raw material sourcing to final delivery to the customer. Supply chain management includes logistics as one of its key components, but it also involves other functions such as procurement, production planning, demand forecasting, and supplier relationship management. Supply chain management is focused on optimizing the entire network of activities to improve efficiency, reduce costs, and enhance customer satisfaction.
In summary, logistics is a subset of supply chain management that deals with the physical movement of goods and services, while supply chain management is a broader concept that encompasses all the activities involved in producing and delivering goods and services to customers.
7. How is customer service related to logistics management?
Customer service refers to the level of support and assistance provided to customers before, during, and after a purchase. This includes addressing customer inquiries, resolving complaints, and providing after-sales support.
Effective logistics management is essential for providing good customer service. Logistics managers must ensure that products are available when customers need them, and that they are delivered on time and in the right condition. This can help to improve customer satisfaction and loyalty, as well as reduce the likelihood of customer complaints or returns.
8. What is the role of logistics in supply chain management
Logistics plays a pivotal role in the modern supply chain environment. It ensures that goods and products are received and delivered on-time, every time, by optimizing route planning, transport scheduling, storage needs, inventory tracking and shipping methods. With the advent of technology - such as Warehouse Management Systems and Global Positioning Systems - logistics providers have become increasingly efficient, allowing for higher customer satisfaction through faster delivery times and improved order accuracy. The importance of logistics cannot be understated when looking at optimizing the entire supply chain process; any delay or mishap in this area can have a cascading effect leading to significant financial losses.
9. What is a logistics company?
Logistics companies are essential partners in the global transportation and delivery of goods. They provide a wide range of services connecting suppliers, customers, and vendors around the world. Logistics companies have expertise in inventory planning, route optimization, document management, supplier sourcing, warehousing and fulfillment. By offering these services they enable businesses to focus on their core activities while reliable logistics companies take care of regulation compliance and cost optimization. Logistics companies are thus indispensable for efficient and productive supply chain operations.
Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.