At present, global supply chain management systems are unimaginably huge, transcending the basic understanding of import and export of goods and services that existed before globalization boomed at the dawn of the 21st century. Given how vast the systems are, one might assume that there isn’t room for a key player that keeps these systems running. Well, they would be wrong.
The pivot around which supply chain management revolves is logistics – a simple looking activity of transportation which in actuality is a complex web within itself comprising dexterous organization and implementation that can keep the supply chain running smoothly. Logistics management is the part of supply chain management that plans, implements and controls the robust and efficacious forward and reverse flow of goods and services, and related information between the points of order and consumption so as to meet consumer demand.
Before supply chains became international and logistics took a front seat in operating this big business, “logistics” as a term was referred to the obtaining, storing and moving of supplies and equipment by military personnel. Gradually, it adopted a wider meaning, with goods and services all across the globe becoming a part of its operations.
Seven R’s of Logistics
Multiple concepts in Logistics Management have emerged over the decades and yet the most popular remains the concept of 7 R’s of Logistics.
Simply put, logistics management strives to get the right product in appropriate quantity shipped and delivered in the proper condition at the right place on the right time to the correct customer for the due price.
Principal Functions of Logistics in Supply Chain Management
Transportation in the context of logistics involves the movement of goods – be it raw materials being taken up to a factory or the final good moving from the point of manufacturing to the point of consumption where it had been ordered. It encompasses global transit through air, rail, roads and oceans, with the vast majority being imported through sea and moving on land through trucks and heavy-duty commercial motor vehicles.
Suppliers create inventory to have a buffer stock in the times of shortages, or simply storing the goods before they are shipped out for distribution. Efficient warehousing techniques mean that the storage space is optimally utilized, a sufficient buffer stock is created, goods are stored in proper warehouses or silos so they don’t get damaged, and distribution from the warehouses is strategic, time-based and quality-checked.
Third and Fourth Party Logistics
It is a common practice for large retailers or manufacturers to have their own logistics network, but most companies prefer to outsource their functions to third-party logistics providers (3PLs). While 3PL includes handling logistics operation by an outsourced third-party, 4PL handles the entirety of the supply chain. Finding a reliable and responsible logistics service provider is important for any supply chain system.
Reverse logistics is the backward flow of goods through the supply chain, from the customer back to the supplier or manufacturer. It can also include the final disposal of the product by the end consumer only, by reusing, recycling or reselling.
Product return is a trend in ecommerce that never runs out of style. In this regard, Tobin Moore, CEO of reverse logistics company Optoro, stated that “the amount of returns is going to be over a trillion dollars a year,” in the next several years. Given that, reverse logistics becomes imperative in minimizing the costs incurred and environmental damage caused due to these returns, through repurposing or recycling those goods.
Achieving the goals of Logistics leads to efficiency in Supply Chain Management
A supply chain is competent only if its logistics are able, adequate and dynamic to address any challenges it may face. It is significant for cost reduction, maintaining business efficiency, ensuring proper storage space usage and building customer loyalty. A failure in the process of logistics management can lead to delayed deliveries, decreasing rate of returns and damage to the business image.
The main goals of logistics management are:
- Ability to respond to customers rapidly through skilled human capital and technological resources
- Maintain high quality of transportation and warehousing services to avoid any damage to the freight
- Minimum expenses on maintaining an inventory and making sure that an excessive buffer is not created
- Consolidated shipments to utilize time, resources and human capital wisely while reducing costs
- Implementing reverse logistics to support the complete lifecycle of a product, so as to be environmentally conscious
- Integrating IT solutions and other technological advances in making the management more efficient
- Reducing vulnerabilities, losses and possible risks in the overall supply chain management system
Logistics Management will always be the Principal Operation
Manufacturing companies or business enterprises can outsource their logistics to trained professionals who specialize in logistics management, but no company can forgo it. Supply chains would come to a halt like they did when the COVID-19 pandemic hit if logistics management is overlooked or eschewed. There will always be a demand by a consumer, and a supplier who will fulfil that demand. This simple transaction in an increasingly interconnected world is impossible without logistics.
After all, logistics management is the oil that keeps the clockwork of supply chain systems lubricated.