If you are an e-commerce business, your company’s bottom line depends heavily on supply chain management. Businesses constantly optimise processes and systems to manage the physical movement of goods and information flow.
Market research shows that global logistics automation is a significant portion of supply chain management and is set to grow at a CAGR of 12.4% to reach $82.3 bn by 2026.
In this article, we discuss supply chain management and how logistics work together with it. You will learn about the areas within the supply chain where logistics have a direct impact starting from demand generation to product delivery.
What is the role of logistics in supply chain management?
Logistics management starts way before the product hits the road for delivery. It begins with knowing the right product you want to source to delivering it to the right address.
Sourcing the right product
The product design process must consider the possible problems with transportation in the future. You should also consider the warehouse space needed, the problems you may face in storage and the industry standards.
Serving the right target market
With sufficient market research, you can select products that solve a practical problem for the client. You can also tailor the products to increase your revenue and foster the company’s growth.
Setting the right product price
Selling the right product comes with setting a competitive price that people are willing to pay. Your selling price should consider the cost price, the logistics expense, and the competitor’s rates.
Shipping the right quantity
Your business must know the correct quantity to ship to the customer. Incorrect quantity not only takes up extra space in the transport vehicle but also triggers returns, inflating the cost of logistics.
Ensuring that the product ships in good condition
One of the primary goals of logistics is to deliver the product in good condition. Damaged goods tarnish your reputation and increase your cost due to returns and cancellations. Your logistics system should have an efficient distribution strategy.
What is the function of logistics within supply chain management?
Even though logistics is a small component of the supply chain, it impacts all of your decisions, from order processing to delivery. Successful businesses ensure that the process runs smoothly for exceptional customer experience. Amazon, the world’s largest e-commerce business, has a customer retention rate of 90% which shows the efficiency and quality of its logistics, among other processes.
An efficient order processing system kickstarts transportation and delivery. It should be in sync with the logistics system so that the goods reach the right customer at the right time. Order processing sets the stage for warehousing, distribution, shipment analytics, and customer service.
By stocking the right quantity of items in the warehouse, you support transportation and delivery. Managing the inventory involves maintaining records, ensuring the safety of the stock, predicting the demand, and reordering when necessary.
Logistics plays a dual role in inventory management. It handles supplier relationships through inbound handling and order fulfilment through outbound deliveries. Inventory management is an important element that directly ties into logistics.
While inventory management tracks the goods end-to-end, warehouse management tracks them within the warehouse. Large warehouses can easily end up in chaos where the team does not know the exact location and the number of items in stock.
Warehouses have micro-logistics systems that use drones, robots, and manned or unmanned forklifts. By using the warehouse space strategically and managing the movement of items efficiently, businesses can directly impact the cost of pickup, transportation, and delivery to the customer.
Packaging is a major supply chain function that determines the success of delivery and safety of the item. Given the enormous amount of material used in packaging, it must comply with safety and environmental regulations.
The packaging must meet the storage and transportation capacity and the size of the vehicle for efficient use of space.
Cargo handling works closely with packaging and directly impacts the cost of logistics. Businesses need standard packaging and handling procedures for safe and efficient transportation. Damaged products not only get you bad reviews but also result in a direct loss of investment. Some technologies that aid in efficient cargo handling are barcode scanning, fleet optimisation, and contactless delivery.
While most people relate logistics to transportation only, it works efficiently only if it intertwines well with the other processes mentioned above. Some features of an efficient transportation management system are route optimisation with ETA, live tracking and customer notifications, proof of delivery, and a portal for the shipper to add, track, and manage the orders.
Supply chain and logistics are the two elements you must consider together to keep the costs low. By choosing the right value chain optimisation solutions, you ensure that all the elements flawlessly share information. Automation using artificial intelligence, robotics, machine learning, IoT, and analytics further optimises your supply chain and puts you ahead of the market competitors.