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In 2021, the world is in a global shipping crisis affecting supply chains across the globe. Brought on by the Covid-19 pandemic, there have been massive disruptions in the supply of goods, affecting everything from Christmas shopping to menus in homes and restaurants. The importance of logistics has never been clearer to us all.
Logistics management is a key function that focuses on the planning, organizing and executing an efficient and cost-effective movement of goods from supplier to customer. When it comes to product fulfillment, quality of service and cost savings, logistics management in supply chain management is critical to how businesses function.
Let’s understand what logistics management is and the role it plays in a business’s success.
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Logistics Management Definition
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Types Of Logistics Management
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Benefits Of Effective Logistics Management
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Examples Of Effective Types Of Logistics Management
Logistics Management Definition
Logistics involves managing moving goods between the point of origin and point of consumption, including warehousing, transportation, third-party services and inbound and outbound logistics. Here’s a closer look at some of its features:
- Logistics management in supply chain management is part of the distribution channel. It includes all steps between supplier and customer, whether the customer is a wholesaler, manufacturer or the ultimate consumer.
- It can be categorized into three major branches — inbound logistics, outbound logistics, and third-party logistics services.
- The logistics professionals ensure they deliver goods on time and safely. They plan, monitor and optimize material flow through the distribution channels.
- A well planned and efficient flow of materials supports efficient utilization of resources like raw materials, suppliers and labor force, which eventually helps organizations to save money and increase profit margins.
This is the basic logistics management definition. Depending on the activities of the organization, the needs of the logistics team can differ widely.
Types Of Logistics Management
As we’ve seen, different kinds of logistics are appropriate for different businesses. Here are some types of logistics management:
Inbound Logistics
The inbound logistics process is responsible for receiving, storing and moving the product shipped from the supplier or manufacturer to an organization’s warehouse. The inbound logistics manager is mainly concerned with receiving, storing, shipping, stocking and issuing goods within the warehouse.
Outbound Logistics
Outbound logistics involves planning and shipping goods from a business’s location to the customer’s location. The third-party service providers, like courier services and logistic firms, are also involved. The outbound process begins with order processing and ends with the delivery of goods to the customer. It includes expediting, transportation management, warehousing, picking, sorting and packing goods for shipments.
Third-Party Logistics (3PL)
Third-party logistics providers include freight forwarders, air and ocean carriers, 3PL service providers and more. The primary objective of 3PL is to manage customers’ logistics activities and ensure that goods are delivered on time. Many businesses don’t want an internal logistic function and rely entirely on third-party logistics to manage their supply chain processes.
Reverse Logistics
Reverse logistics is the process of returning products to the seller after they’ve reached the end-user. For instance, if a product has reached a customer’s location and is found to be defective, the reverse logistics process begins with returning goods to the supplier, manufacturer or retailer. The reverse logistics process may also involve returning goods to the manufacturer for rework or refurbishing before shipping them back to the customer.
Organizations involved in the manufacture or sale of products may require all these types of logistics management for the efficient functioning of their business.
Benefits Of Effective Logistics Management
By now, the importance of logistics management in supply chain management is clear. It can have a wide-ranging impact on a business’s operations. Here are a few of the benefits of getting types of logistics management right:
Increased Profits
Logistics management helps organizations reduce the expenses associated with the transportation of goods. It helps improve the efficiency of the distribution channel.
Enhanced Customer Satisfaction
Logistics management in supply chain management plays a vital role in controlling delivery time to the customer. It also ensures goods are delivered in optimal condition.
Improving Damage Rates
The process of logistics management involves order processing, picking, packing, transporting and delivering goods to a customer’s location. With proper inventory management, damage can be reduced through the cycle.
Reduced Warehousing Needs
With efficient logistics management, less warehouse space is needed. One of the aims of logistics management is to ensure the outgoing orders are moved at the correct time, making space for new stock. This reduces the total amount of goods held in inventory at any given time.
These are a few benefits possible when organizations make the most of the logistics management definition. For organizations involved in manufacture or retail, it’s a large part of running a successful operation.
Problems With Logistics Management
Because it’s such an important function, some problems arise with logistics management. Here are a few to keep in mind when putting together a logistics plan:
Poor Distribution Management
Distribution management is the process of ensuring that goods are delivered to the customer on time. It’s critical for businesses to prevent loss or theft by reducing the levels of inventory in warehouses. It’s also critical to ensure customer satisfaction. When this aspect of logistics suffers, it impacts the brand and the bottom line.
Inadequate Labor Resources
Labor resources play a major role in logistics management. Inadequate labor resources could lead to loss of product from inventory due to worker errors and theft. Also, inadequate labor resources could delay the delivery of goods due to bottlenecks in production.
Operational Inefficiencies
These could be caused by weak coordination between departments or a lack of optimized production and inventory management processes. Also, poor operational efficiencies could cause product loss or damage or cause delays in transportation. Both oversupply and undersupply can be damaging.
Inefficient Storage Facilities
Inefficient storage facilities could result in product damage or loss due to theft, rodent or insect infestation or natural disasters. Warehouse management is important because it ensures that storage facilities are safe and secure. Poor warehouse management could lead to product loss due to theft, damage or cause a delay in transportation.
Poor Transportation Planning
Transportation planning is crucial for businesses that need timely delivery of goods to customers. Poor planning leads to delays in shipment, loss of products or damage during transit. This can also impact customer experience considerably.
Poor Handling Of Returns
Reverse logistics involves handling defective and returned products. Improper management of these goods may lead to product loss or damage. When consumers return a product, it may be fit for resale, need refurbishment or be salvaged for another use. If this stock isn’t utilized, it’ll lead to losses. In addition, if the customer doesn’t receive their refunds or exchanged goods, they may lose faith in the brand.
Poor Quality Control
Quality control procedures are important for organizations to ensure the quality of products supplied to customers is at the expected standard. Without this, there will be a higher rate of rejection and return, leading to a loss of revenue.
Logistics are subject to quick changes from environmental factors, economic and climatic disruptions and internal troubles. It requires careful cross-functional planning to get the best results.
Examples Of Effective Types Of Logistics Management
Fortunately, despite the significant hurdles, there are plenty of examples of how organizations can use logistics management to turn things around. Here are some real-world examples:
Myntra
With so much retail moving online, portals such as Myntra have experienced growth. How can you convince customers to shop online when they’re used to buying all their clothes after trying them on in a trial room? By providing a seamless return service, they ensure customers will be willing to take a chance as they know they’ll have the opportunity to try it on. If, for any reason, they don’t like it, they can send it back for a full refund, exchange it for a different size or get store credit. They achieve the physical return of products through reverse logistics, for which they have an app and delivery partners who follow protocol for checking the item before they accept the return.
Parle-G
The Indian biscuit brand Parle-G saw a massive uptick in demand during the pandemic lockdowns due to its popularity and low price. It was included in government and NGO food aid. It was able to bounce back and replenish stocks due to its tightly controlled logistics management. It has a very close relationship with its vendors and distributors, which is how it maintains its consistent product at a budget price.
Auto Industry
A semiconductor shortage is crippling the global auto industry. Automakers have been hit with worldwide computer sales up thanks to work and school from home being the norm during 2020 and 2021. With the supply chain still disrupted, corporations such as Ford and GM have got into chip manufacture for the auto industry. Sometimes, logistics management isn’t enough, and the supply chain disruptions call for other interventions.
Understanding the logistics management definition and its scope is invaluable for professionals in the fields of manufacturing and customer order fulfillment alike. Harappa’s Manage Projects Expertly course teaches how to keep the client at the center of all decisions while maximizing efficiency. Attention to detail, effective prioritization and big picture thinking are all important when managing projects or processes of any scale. With this learning pathway from Harappa, professionals can boost skills for success at any stage of their careers.
