The global supply chain grows more complex by the day. In today’s environment, businesses find themselves managing a vast network of suppliers, navigating global trade regulations, grappling with volatile customer demand, and maintaining cost efficiency—all while ensuring products reach their destinations without damage and on schedule. Logistics services have become vital in this intricate process. Add to this the mounting pressure to practice sustainability and it's clear: managing these supply chain complexities can be like juggling sharp knives and delicate water balloons.
In light of these often diverging concerns, manufacturers, eCommerce companies, and retailers often turn to global logistics providers to streamline and optimize their logistics operations.
But what is logistics? And what are the services and solutions logistics providers offer that can alleviate the burden of managing complex logistics operations?
Let’s dive in.
Defining Logistics: A Basic Overview
In business, what is logistics? In a nutshell, logistics is how raw materials and finished goods move from point A to point B. This involves key aspects like material handling and inventory control, while the goal is for this all to happen in the most efficient way possible.
Logistics, then, is a systematic process of planning whereby a company implements measures to control the flow and storage of goods, services, and information from the point of origin to the point of consumption. Logistics managers are often concerned with the movement and management of both the people and resources necessary to ensure that the product pipeline continues to flow from manufacturers and suppliers to the final customer.
Boiled down, the ultimate goal of logistics is to ensure that the right products are available at the ideal price, at the right time, and then arrive in a timely manner in the expected condition. This often involves the use of inventory management software and various strategies related to material handling.
If handled properly, logistics empowers a business to:
- Find the equilibrium for supply and demand
- Proactively manage inventories
- Optimize costs
- Maintain product quality
- Ensure customer satisfaction through effective customer service
Moreover, logistics involves finding the best shipping rates and options.
What Is Logistics Management? The Crucial Components of Logistics
While logistics can involve dozens of diverging concerns, it can be broken down to three key components:
Transportation
Transportation lies at the heart of logistics.
Broadly speaking, transportation focuses on the movement of raw materials, components, and finished goods from the point of origin to their final destination. Depending on the given supply chain, a business must often rely on several modes of transportation—including land, sea, air, and rail—to ensure that goods are transported in a safe, timely, and cost-effective manner.
This can involve several tasks, including:
- Selecting the mode of transportation
- Route planning
- Freight forwarding
- Carrier selection
- Shipment tracking
- Freight consolidation
- Freight insurance
- Customs and regulatory compliance
- Last-mile delivery
- Return and reverse logistics
Warehousing
In the modern supply chain—particularly in the world of eCommerce—the warehouse often functions as a logistics hub in which physical inventory can be stored, organized, and then dispatched as needed.
For both retail and eCommerce companies, warehousing enables them to:
- Purchase wholesale goods in bulk
- Maintain an inventory capable of meeting demand fluctuations
- Store products in strategic geographic locations to reduce lead times and shipping costs
Warehousing covers several processes, including capacity planning, inbound shipment reception, inventory tracking, product storage, climate control, reorganizing, and retrieving.
Inventory Control
Inventory control is focused on optimizing stock levels for smooth operations. Using inventory management software, companies can ensure that the right amount of supply is available. As Oracle notes: “Inventory control, also called stock control, is the process of ensuring the right amount of supply is available in an organization. With the appropriate internal and production controls, the practice ensures the company can meet customer demand and delivers financial elasticity.”
One of the most difficult decisions any logistics manager might make involves determining the optimal amount of inventory to have on hand at a given time. Business owners must balance a tightrope between too much or too little inventory, seeing as either outcome could cause significant problems. Tools for shipping reporting and inventory forecasting can greatly help in shipping optimization, managing stock levels, and overall reduction of shipping costs.
For instance, excess inventory reduces available cash flow and takes up costly warehouse space, whereas inadequate inventory can result in stock-outs or cause you to miss potential cost efficiencies.
Inventory control can involve various tasks and processes aimed at managing and optimizing the levels of stock in a company, including:
- Inventory forecasting
- Reorder point (ROP)
- Economic order quantity (EOQ) analysis
- Safety stock management
- Inventory classification
- ABC analysis
- Inventory turnover monitoring
- Stock monitoring and tracking
- Demand planning
- Lead time management
- Vendor management
What is a Logistics Company?
Logistics management isn’t an easy task, especially in the modern era. This is why manufacturers, eCommerce companies, and retailers often turn to logistics providers to streamline and optimize their supply chains by providing a range of logistics services and technology solutions capable of alleviating the burden of managing complex logistics operations.
Thus, logistics providers are specialized companies that provide solutions designed to help businesses manage and optimize their supply chains. These supply chain management professionals are the lubricant on the gears of the global supply chain, playing a crucial role in ensuring efficient movement and material handling of goods from the point of origin to the final destination.
Types of Logistics
Logistics is frequently used as an all-encompassing term. However, it’s far from a one-size-fits-all discipline. In fact, logistics is a multifaceted sector, comprising various specializations—each one catering to a unique set of requirements and challenges.
Most logistics providers focus on specializing in a particular sub-branch. That said, there are others who offer a wide-ranging repertoire of logistics-related services. To appreciate the diversity of this field, let's explore some common specializations:
- Inbound logistics – Focuses on the transportation of raw materials, components, and goods from the companies and their suppliers. It's the beginning of the production lifecycle, ensuring the seamless inflow of necessary resources to keep the operational wheels spinning.
- Outbound logistics – Focuses on the management, storage, and transportation of final products. Here, the end goal is to ensure that final products can swiftly and securely reach the customer.
- Production logistics – Focuses on optimizing the flow of materials within the production process, thereby ensuring that all components are in the right place at the right time in order to maximize efficiency and minimize downtime.
- Reverse logistics – Focuses on managing the return flow of goods from customers back to the business—whether that’s for repair, replacement, return, recycling, or disposal.
What Is Supply Chain Management?
Supply chain management (SCM) is the process by which a business administration manages the sourcing of raw materials necessary to create a product or service and then deliver that finished product or service to end customers. As CIO notes, this typically involves 5 steps:
- Planning – Companies draft strategic plans to ensure inventory availability for all manufacturing stages, accounting for demand variation.
- Sourcing – Firms identify vendors capable of supplying needed materials efficiently and within budget.
- Making – Companies assemble, test, and package final products adhering to customer requirements.
- Deliver – This phase ensures final products are delivered efficiently, maintaining a strong brand image, and meeting customer expectations.
- Return – The final stage, or "reverse logistics," prioritizes customer support, particularly regarding returned goods.
The Role of Logistics In Supply Chain Management
The strategic, operational, and tactical importance of logistics spans the entirety of supply chain management. It's the cog that keeps the supply chain machinery running smoothly. However, logistics' influence shines particularly bright in three key areas:
- Logistics Planning and Execution - Logistics forms the groundwork for orchestrating the flow of goods and information throughout the supply chain. Whether it’s selecting transport modes and routes, warehouse layout planning, or inventory management, the overarching goal is to turn a strategic plan into an efficient, cost-effective operational reality.
- Supply Chain Integration - Logistics binds the various elements of the supply chain into a cohesive, synchronized unit according to the brand’s overarching mission. It facilitates seamless collaboration and information flow between suppliers, manufacturers, and customers, creating an integrated network that enhances overall efficiency and responsiveness.
- Customer Satisfaction - Arguably the most significant facet of logistics' impact, it directly influences customer satisfaction. By ensuring timely, accurate, and efficient delivery and return of goods, logistics plays a vital role in not just meeting but exceeding customer expectations. If successful, this can enhance brand loyalty and foster long-term relationships.
Trends Shaping the Future of Logistics
The logistics industry is mercurial—constantly shifting and evolving. And digitalism has only accelerated this change, pushing the logistics industry into uncharted territories. For businesses to stay competitive, they must keep their finger on the pulse, monitoring and then responding to these emerging trends with alacrity.
Peering into the industry crystal ball, experts have identified three monumental trends that are set to reshape the logistics landscape over the coming decade:
- Technology advancements – The advent of automation, machine learning, and AI is reshaping logistics, bringing innovations like autonomous vehicles, robotic warehouse systems, and AI-powered forecasting and analysis into the mainstream.
- Sustainability and green logistics – In response to mounting environmental concerns, the industry is prioritizing green logistics. This shift sees businesses exerting greater control over their entire supply chain to reduce both upstream and downstream emissions. This will involve strategies like:
- Optimizing operations to reduce fuel consumption
- Practicing carbon accounting
- Utilizing renewable energy
- Implementing recyclable materials
- eCommerce and last-mile delivery – The rise of eCommerce has emphasized the importance of brands providing efficient last-mile delivery. Modern consumers demand faster, more flexible delivery options, which has driven innovations like drone deliveries and advanced route optimization.
How Lojistic Supports Effective Logistics Management
In the modern business climate, logistics management is often too large and important a task to be handled in-house. Many businesses prefer to outsource specific tasks to specialists in order to create internal efficiencies.
As it relates to shipping spend management, this is where Lojsitic can help you save and drive value. Our free intelligence platform offers actionable insights and automation necessary to streamline processes, accelerate timelines, and reduce shipping costs.
Want to learn more about how Lojistic can analyze your historical shipping data, identify costly shipping inefficiencies, and help you resolve those issues?
Check out our demo to discover more.
Sources:
Oracle Netsuite. Inventory Control Defined: Best Practices, Systems, & Management. https://www.netsuite.com/portal/resource/articles/inventory-management/what-are-inventory-management-controls.shtml
CIO. What is supply chain management? Mastering logistics end to end. https://www.cio.com/article/272353/what-is-supply-chain-management-mastering-logistics-end-to-end.html
Author
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.