Rapidly growing demand for online commerce has also given rise to business models with shorter order fulfillment cycles, increasing competition, reduced margins, and the prime need for excellent customer service. In effect, these are the core drivers that have necessitated vast improvements in Logistics Management.
Analyzing a company’s logistics function and using the correct tools and tips to optimize it, has become crucial for success.
Logistics Management: definition, types, tips, importance, components, and benefits
Definition: Logistics management is defined as a set of multiple processes that facilitate the efficient movement of raw materials, goods, parcels, finished products, and freight from their point of origin through to their end-consumer.
Depending on the degree of digital adoption within an ecosystem and the stakeholders and companies within it, these processes can be manual or automated. Today’s logistics management methods have rapidly adopted new-age technologies like Cloud-Tech, Internet of Things, Artificial and Predictive Intelligence, Machine Learning (etc.).
Core activities of logistics management include order fulfillment, warehousing, inventory management, packing, predicting patterns of demand and supply, and fleet and driver management, to name a few.
By deploying such powerful tools to manage the logistics function, today’s businesses have become empowered – they have been able to identify new revenue streams, improve profitability, and achieve high levels of customer satisfaction.
Since logistics form the core of supply-chain management, this has created breakthrough improvements in the overall methods and operational efficiencies achieved by supply chains all over the world.
What are the various types of Logistics Management?
Following are the main types of logistics management:
1. Supply-Chain Management: This type is focused on the planning, procurement, and coordination of raw materials that are required at specific locations and destinations to facilitate the production of goods and products. This also includes the warehousing, storage, and movement of materials and inventory.
Importantly, supply management needs to ascertain demand patterns so that the corresponding supply of materials can be organized. Poorly planned or executed supply chain management will surely result in disruptions and losses along the entire supply chain.
2. Material Handling and Distribution: This relates to the movement of material and supplies from a central location e.g. a centrally located warehouse, to several other points of its requirement in an organized and timely manner wherefrom further production or distribution can continue.
As is natural with materials handling and distribution, this type of logistics involves a lot of tracking, stock-keeping, loading, and unloading of materials.
3. Production Management: This refers to the planning, execution, and monitoring of the various stages of production in a company.
It handles all the coordination required in the assembling or manufacturing process, production areas, warehouses, and factories, per the production and delivery schedules required.
Importantly, efficient production logistics enable a company to operate with capital efficiency.
4. Customer Service Management: The strategies, practices, and technologies used by firms to analyze and manage customer interactions and the data generated across the customer lifecycle process are referred to as customer service management.
Transparent communication and damage-free deliveries made on time form the cornerstone of good customer service management. In addition to building strong business relationships with all stakeholders, it ultimately results in a most critical metric i.e. customer retention.
5. Reverse Logistics Management: This is also called Returns Management, and refers to the handling of order returns.
This includes reclamation of supplies and materials from the supplier (e.g., manufacturer, agent) for products returned from the end-customer due to damage, unwanted, or unused (for a legitimate, acceptable reason).
Through standardized inspection, sorting, replacement, re-stocking, and timely decision-making with regard to returned products, companies can reduce their losses.
Top tips for efficient Logistics Management
With effective logistics management, companies ensure increased revenues, reduced errors and wasted resources, achieve optimum communication, and build strong business relationships.
Given below are some top tips for efficient logistics management.
1. Automation: By automating core logistics operations such as route planning, scheduling, roster management, task-allocation (etc.), companies not only save a significant amount of time and money, but are also able to achieve much higher levels of operational efficiency, plan better for the future, and maintain a robust, profitable operation.
2. Maintain control of on-ground operations: With logistics management, companies can maintain an integrated view of their resources, departments, and teams, and monitor their operations in real-time.
This transparent and real-time view helps in achieving optimum efficiency, minimizing disruptions, and making the best use of its resources.
3. Route-optimization: An important part of logistics management is optimizing delivery routes with the services of modern systems like last-mile software. Such advanced optimization techniques balance out numerous elements that are forever fluctuating—such as traffic, weather, empty miles, tonnage (etc.)—and come up with optimal route(s).
4. Bring inventory nearer to customers: With customers demanding faster and cheaper delivery times every day, the distances that parcels have to travel from their storage point to the final destination need to be minimized. Therefore, storage locations assume great importance.
Logistics management must identify such inventory locations that not only achieve the shortest delivery times but also minimize operational costs.
5. Minimizing carbon-footprint: It should hardly be a surprise that transportation is a leading cause of environmental damage due to its carbon emissions!
By adopting modern technologies—e.g. electric vehicles, green fuel, digital documentation, and route optimization—companies can reduce the carbon footprint of their logistics operations significantly.
6. Empowering customers: Driven by their need for ‘control” and ‘instant gratification,” today’s customers want to know exactly where their parcels are, want to be updated throughout the process with real-time communication about ETAs, any delays or changes (etc.).
Companies must manage their logistics operations so that they offer enough options to their customers and make it ‘customer-centric,”, especially in the last mile.
7. Mitigating operational risk: By adopting digital processes and logistics tools, companies can achieve a robust supply-chain operation. This, in turn, mitigates risk exposure by making sure best practices are established, ultimately leading to healthy margins and building customer loyalty.
8. Using a 3PL: Using third-party logistics (3PL) companies enables client companies to outsource all their fulfillment and distribution functions completely. These 3PLs are global behemoths that ensure all-around efficiency and optimize the use of resources.
Conclusion: As is evident, to achieve supply chain efficiency and maintain profitable operations, companies must leverage the use of modern technologies like last mile delivery software to optimize their logistics management.
What are the major components of Logistics Management?
Needless to say, Logistics Management is a complex process that deploys the use of numerous components to determine the efficient movement of cargo.
It includes an elaborate network of service providers, freight forwarders, agents, packers, and distributors, all working in tandem via different methods of transport.
The major components are:
1) Inventory management: A most crucial part of logistics management is managing inventory. This has a far-reaching impact including managing an efficient order fulfillment process, an organized warehouse operation, and optimizing the use of time and money toward improving productivity.
It also ensures that the requisite amounts of stock quantities are maintained, customer demand-supply patterns are studied, proper planning is used, and carrying costs are minimized.
2) Inbound logistics: Inbound logistics sits at the dynamic point of interaction and exchange of goods and services between suppliers and buyers. It includes the movement/transportation, receipt, and storage of goods by a firm.
A well-planned and executed inbound logistics operation helps no end to increase sales, improve production-line efficiency, reduce wastage of precious raw materials and resources, and reduce company overheads, to name a few.
3) Outbound logistics: Extending the point above, outbound logistics is the process by which companies transport their finished goods from a distribution center, or warehouse, to the customer delivery address.
There are numerous stages, including storage and warehousing, transport, distribution, and importantly, the last-mile delivery operation. It determines the success or failure of a company’s customer relationship management.
4) Fleet management: Fleet management is an area that goes a long way to determining the success and profitability for logistics and distribution companies.
It is the management of fleet vehicles and drivers to transport goods in the most efficient manager, by minimizing risks involved, by balancing out all the numerous dynamic elements (e.g. traffic, weather, nature of cargo, tolls and taxes, safety protocols, driver and vehicle availability, labor costs) and aiming to increase the number of deliveries by reducing costs, improving profitability, and achieving customer satisfaction.
5) Warehouse management: Storing, and managing raw materials and goods in a warehouse, is known as warehousing. Efficient logistics management isn’t possible without a sound warehouse management policy – remember that warehouse capacity and its proximity form the two most important elements in managing an efficient supply chain.
6) Order fulfillment: As the name suggests, order fulfillment is moving a product from its point of purchase to the point of final delivery to the customer. Since it is not only the final stage of the supply chain process but also the part where companies interact directly with their customers, it is a crucial part of generating, and maintaining, customer satisfaction.
7) Demand forecasting: Studying demand pattern and using it to predict future demand trends is called demand forecasting.
It is an extremely complex process that takes into account numerous ever-changing factors and is responsible for ensuring sufficient inventory at all times. It predicts future market opportunities, consumer and market trends, and how suppliers can use this to grow their businesses.
What are the top 5 benefits of effective Logistics Management?
An effective logistics management strategy equips businesses to predict consumer demands, provide for the supply side, and run a profitable concern. Without it, a business would not be able to stay competitive.
Let’s look at the top 5 benefits:
1. Minimized operating costs: A strong logistics management program analyzes historical trends and data to not only understand the business and its eco-system deeply but also to predict future demand-supply requirements. It can improve asset utilization, and business productivity, and optimize operational costs.
2. Better customer experience: An effective logistics operation makes a direct and positive impact on Customer Experience. It ensures improved transportation, minimizes disruptions (if any), makes for the smooth movement of raw material as well as finished goods, and operates as quickly and reliably as a fulfillment service is required to. This, in turn, creates a stronger brand and better company reputation.
3. Improved profitability: Logistics management provides companies with a clear view of all key areas including customer dynamics, competitive scenario, capital ROI, technological innovations, operations, supply-chain management (etc.) thus helping them to boost company profitability.
4. Optimized routing: In the end, logistics companies need to move raw materials and finished goods efficiently and safely across the supply chain, within the promised timelines and costs.
Route planning ensures route optimization by taking into consideration several variables – including weather and traffic patterns, type of cargo to be transported, the drivers and types of fleet vehicles available, reducing “empty-miles” traveled – to achieve solid order fulfillment rates. All this is geared toward meeting customer demand and achieving customer satisfaction.
5. Intermodal operations: Improved intermodal operations are environmentally friendly, safer, more reliable, and reduce costs. An intermodal operation involves the use of two modes (or, more) to move goods from manufacturer to customer. It uses specialized and standardized containers to eliminate risks connected with cargo handling and movement.
Best Practices to Address Disruptions in Logistics Management
By establishing best practices, companies can address – and hopefully, prevent completely – disruptions in logistics management thus ensuring stability, efficiency, and profitability.
Let’s look at some tips:
- In the modern world of Ecommerce, maintaining “dark stores” that are used as order-fulfillment centers offers customers a “click-and-collect” option, for them to collect their orders at their convenience.
- ePOD (electronic-proof-of-delivery) and contactless payment options not only keep customers and employees safe (as we saw during the pandemic) but also reduce the time taken to complete deliveries, thus leading to customer satisfaction.
- Use crowdsourcing to optimize vehicle and staff capacity. This meets peaks and demands in demand supply, reduces fixed costs, and optimizes last-mile delivery.
- Always investigate value-added services for customers to manage costs, and offset unavoidable price hikes, resource crunches (etc.).
- The unpredictable environments under which logistics and distribution companies operate will, unfortunately, throw up unforeseen problems. Make sure to have a contingency plan to tackle such logistics emergencies.
Conclusion: As is evident, a robust Logistics Management program must not only constantly evolve but also adopt the latest technological innovations such as last mile delivery software to meet growing customer expectations, achieve growth, and maintain profits.