Logistics is an important component of supply chain management. It involves planning, carrying out, and managing information, services, and goods from the point of origin to the point of consumption. Logistics allies the complex pattern of transportation and traffic, receiving and shipping, import and export warehousing, operations, purchasing, inventory management, customer service, and production planning. Companies see logistics as a vital blueprint of the supply chain. It monitors, coordinates, and manages resources needed to move products in a timely, cost-effective, smooth, and trustworthy manner.
As the global economy moved into the 21st Century, logistics became vital for supply chain management and customer demand. Logistics management has influenced product movement to exceed or meet consumer demand in less than two decades. Companies saw they could reduce costs and increase productivity by managing logistics on a system theory and managing the company to improve performance.
David Goodnight says that by creating partnerships with shipping services, suppliers, and warehousers and connecting these services through automated systems, the logistics of getting products to the consumer are enhanced with reduced overhead costs and faster delivery. Understanding how the logistics system theory works necessitate strategic planning when calculating what will be required while focusing on obtaining materials and managing how fast products are produced to help ensure swift delivery to the customer.
Simplifying communication and services between numerous departments help create a workflow blueprint that decreases costs by increasing visibility and enhancing the overall understanding of company requirements. Cost savings are created by reducing warehousing costs and buying based on supply forecasts, reliable shipping, better inventory management, and timely delivery to the end-user.
Advantages provided by its correct implementation
- Transportation costs are one of the leading expense categories in logistics management. They usually increase based on the batch size, distance, and product exposure to damage. On the other hand, the transportation cost per unit of weight reduces as the lot size increases in the long run. Thus, the maximum consolidation of transportation volumes can help decrease transportation costs. Enlargement can be achieved by combining small lots into a large one, intended for the long run.
- The main function of logistics in supply chain management is primarily to increase the overall value of each delivery, which is recognized by customer satisfaction. This means that the optimization and reduction of labor resources must be tied to keeping up a certain level of quality customer service. This issue is solved by decreasing the total labor resources and introducing automation solutions.
- Concerning the service quality, it is chiefly influenced by the speed of delivery of the goods to the end-user, as well as its transportation under inappropriate conditions and within the allowed time limits;
- Intermediary services take up the main share of the cost of implementing supply chains. Experienced logisticians plan routes to minimize the need for involving third-party services for efficient logistics management. Supporting goods with the necessary documentation. Insurance and support of documentation are two fundamental tasks of logistics, solving which assists in eliminating any problems associated with legal restrictions in the storage, transportation, and marketing of goods;
- A business is lucrative if the value it creates exceeds the costs related to implementing activities. To attain a competitive advantage, a company must either carry out these activities at lower costs or carry them out to lead to differentiation and price increment. The first thing to be done to solve this problem effectively is to reduce the losses associated with the return of goods.
- It is essential to plan not only the routes on the way to the distributor or the customer and the routes by which the goods are delivered back to the warehouse or the establishments for their disposal. The second factor affecting risk reduction is the correct planning of enterprise resources, which reduces the likelihood of damage or loss of goods or manufacturing components on the way from the extraction of raw materials to delivery of the finished product/service to the end-user.
David Goodnight From Austin says that logistics is an essential part of the supply chain management processes to increase productivity and lower costs. Considering logistics as a part of supply chain management and looking at it systemically helps businesses reduce overhead costs and streamline delivery processes. Using strategic planning and collaborating with other departments enables companies to build transparent business processes and increase visibility.