What is Logistics Management? (Supply Chain)

What is Logistics Management?

The meaning of logistics management can be defined as a comprehensive business process which involves the coordination, movement and storage of goods and services through sufficient resources. This process is designed to help manage the processing of products from the point of manufacturing and point of delivery. It involves the combination of many activities such as sourcing, planning, tracking, transportation, inventory management and customer service.

Role And Definition of Logistics Management:

The main purpose of logistic management is to make sure that the manufactured goods and services are delivered at the right place without any complications or risk of poor condition. This helps minimizing costs and maximizing efficiency which is the main role and objective of logistics management.

The application of logistics management can be utilized in business operations, specifically in industries such as manufacturing, retail and e-commerce. For the growth of such businesses, efficient and timely delivery is crucial for customer satisfaction and retention. 

One of the key concepts of logistics management is the concept of the “7 R’s” or the “7 Rights”. The Chartered Institute of Logistics & Transport (U.K.) defines the 7 Rs as:

“Getting the right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer, at the right price.”

The 7 R’s of Logistics Management

Managing logistics requires effective design, execution, monitoring, and control of the steps required to transform a good or service from raw materials to final delivered product. The 7 “rights” is fundamental knowledge for anyone in logistics, as these R’s help logisticians achieve efficiency and optimization.

There is no particular order to these rights, and your business can order them in its own way according to your company’s priorities. You may prioritize the right product, or another factor may be most important. Either way, the 7 R’s of logistics management are:

1. The Right Product
   Logisticians need to understand exactly what type of product they need to deliver to their target customers. Typically, these products are in demand and well-designed. You should look into issues that may potentially occur with your chosen product (defects, damage during transportation, etc.) to make packaging and transportation as efficient as possible.
2. The Right Customer
   The customer is the cornerstone of logistics operations. It’s extremely important to identify the target audience and spread awareness of the products and services you offer to these customers. This often requires market research and acquiring leads to ensure that your goods are sold in the correct market.
3. The Right Condition
   When customers receive their product, it should be in good condition without any damage or defects. Logisticians have the responsibility of ensuring that products are shipped in the right condition and packaged properly. Consistency is key in this “right”.
4. The Right Quantity
   Quantity has an important role in logistics, as it’s necessary to control the right amount of goods. Logisticians work with distribution and production departments to get the right quantity of goods to customers. This is the “right” that provides the most opportunity to meet demand while avoiding creating too many products, which leads to waste.
5. The Right Place
   The product must arrive at the correct location. In many cases, this where companies utilize third party software. Some companies use a tracking distribution system or route optimization system so that both customers and suppliers can monitor the product as it travels until it’s finally delivered.
6. The Right Time
   Timing is another essential component to logistics. A large aspect to customer service is delivering products in a timely manner that doesn’t inconvenience the customer and also maintains your reputation or competitive advantages in the product’s market. Delays in shipment and errors in routing can lead to customer dissatisfaction.
7. The Right Cost
   Pricing is crucial. However you price your products can make a big impact on the profits your company enjoys or the losses you suffer. Logisticians analyze dynamics within the industry and market demand to determine reasonable prices. They also keep track of costs and periodically ensure that goods are sold at an appropriate price point.

Overall, logistics aims to deliver the right product to the right customer, in the right condition and the right quantity, at the right place, right time, and right cost.

Types of Logistics Management

The logistics management process begins with the procurement of raw materials and then proceeds to the final stage where goods are delivered to the customer or store. There are a number of various types of logistics associated with different supply chain processes. The main types of logistics management are listed down below: 

1. Supply management:

Supply management involves planning, purchasing and coordination of raw materials that are required at a specific location to ensure production of finished goods. This step is an integral part of logistics to ensure that there is smooth flow of products throughout the supply chain. 

2. Distribution and material handling:

This kind of logistics involves the transportation of stored materials or products for further manufacturing and distribution. This involves the timely movement and coordination of materials from the warehouse to other locations.

3. Product management

Product management in logistics management consists of the planning, management and processing of multiple stages of production within a company. 

4. Customer service management

This particular kind of customer service management, there is involvement of multiple practices and usage of technical systems to assess and manage customer interactions and satisfaction. This is a key aspect in ensuring growth of a particular business or production of any finished goods. 

5. Returns management

Also known as reverse logistics, where the management is responsible for the returned items to the company. Return management involves the assessment and reclamation of return of damaged, unwanted and unused products from the customers end. Businesses can reduce their losses by using undamaged returned items to restock their inventory to avoid waste of resources. 

What Is a Logistics Management System?

A logistics management system is a combined method of software tools which help optimize business processes from the starting point to the end. Businesses with a functional logistics management system will help to manage products in the inventory to transport orders to customers. 

A logistics management system will help you provide reliable and quick customer service to enhance your businesses customer experience. 

Logistics Management System: 

There are several key functional areas to logistics management. These are:

The Procurement Of Goods:
The first task in functions of logistics operations, this procurement occurs when a buyer (your business) places an order with a supplier or a customer places an order for a finished product from your business. Processing the order involves checking product availability, finalizing price, and describing delivery terms. 

Inventory Control:
Inventory management keeps enough items available to meet demand while maintaining a low carrying cost. This function often has the most potential to incur high costs, which negatively impact overall profits. The goal is to strike a balance between meeting demand and keeping the cost of meeting that demand as low as possible.

Warehousing:
This function of logistics involves the storage of goods until they’re sold. It plays an essential role in logistics as a key area of decision; often the efficiency of your networks depends on your choice of warehousing.

Packaging:
Logistical packaging is critical to the distribution of products. It covers damage protection, material handling, and terms of storage space to ensure that products are delivered efficiently to customers in a high quality manner. The customer should receive their purchase in a timely manner and in a way that doesn’t cause damages or defects to the product.

Transportation: Transportation is often regarded as the most fundamental component to logistics, as it moves goods from the supplier to the buyer and from the buyer to the customer. Once an order is placed, the transaction isn’t fully completed until the goods physically arrive for the customer, and the only way to achieve this is through a variety of modes of transportation. 

Customer service:
The last function to manage logistics is ensuring high quality customer service. The whole point to optimizing a smooth flow of your inbound and outbound networks is to make sure products are delivered to customers conveniently and efficiently. 

What Is Meant By Logistics Management Software?

Logistics management software comprises functions and processes that provide companies to manage and efficiently conduct storage and distribution. Logistics management functions are incorporated into ERP systems that focus on maximizing product development and flow from the warehouse to its final destination, being a store or the customer. 

The Relationship Between Logistics + Supply Chain Management

Given that both supply chain management (SCM) and logistics involve the movement of products from raw production to final delivery, it can be easy to confuse the two. Despite their similarities, they are not quite the same and logisticians will have different objects than supply chain operators.

Logistics management is a subset of supply chain management; basically, it is a single activity of inventory movement across a supply chain—it can be considered as one piece to the process of creating a product and ensuring that the product reaches its end consumer. While logistics mainly involves the storage, transportation, and delivery of goods, the supply chain includes additional activities such as the planning and design of products and the optimization of available resources.

The “supply chain” is a network of businesses that create a partnership to manufacture and deliver information or physical goods. Supply chain management supervises the supply chain and aims to optimize outcomes so each business involved benefits as much as possible. It not only coordinates the production and distribution of products to end consumers, but also between the suppliers themselves. Supply and demand trends are difficult to navigate, but SCM executes effective plans that tap into logistics.

Reducing Supply Chain + Logistics Costs

One of the main goals to logistics is to identify problem areas within the supply chain. These problem areas typically involve either waste or high costs. For example, a product may have been ordered in high quantity but is sitting for long periods of time on warehouse shelves because the quantity doesn’t match true market demand. Or, the transportation provider a business has teamed up with incurs high costs and there are more cost-effective solutions available.

Lean Logistics

It is possible to use logistics reduce costs and waste that occur throughout the supply chain, particularly in logistic management’s functions of warehousing, inventory control, and transportation. In these areas, it’s highly beneficial to implement what’s known as Lean Logistics, a method that helps to reduce waste in any type of industry. Lean Logistics focuses on continual improvement and tackles certain types of waste, including:

Using Lean manufacturing techniques in your business’s logistics processes can help reduce waste and more closely match customer requirements. Techniques such as Total Productive Maintenance, Kanban, and Just-in-Time (JIT) Production aim to make production as efficient as possible to deliver the right product at the right time in the right quantity to the right customers.

Logistics Tracking

Many companies also use logistics tracking, a system that tracks resources throughout the movement and storage of products. With a logistics tracking system, companies know where their products are physically located and where they are scheduled to be next. Certain software that utilizes RFID and barcodes can provide real-time updates as to the movement of your product as it’s on its way to the customer. Software tracking can also provide real-time confirmation of delivery.

Logistics tracking is highly useful for handling maintenance outages and other types of downtime. If a supplier or facility along the supply chain cannot function, this means equipment and materials may need to be moved to a different site or a new supplier must be found as quickly as possible. Logistics tracking helps logisticians take action on delivery or production delays to ensure that customers still receive their products in a timely manner.

Kanban Cards

Kanban is a Lean manufacturing technique that uses visual cues to trigger action and improve organizational efficiency. As an inventory system, it helps to manage the movement of materials and information—making it the perfect thing for logistics management and controlling supply chains. Kanban provides a means of communication between different suppliers, businesses, and departments so everyone is on the same page as to where a product is located and what steps are further needed before it is finally delivered to the customer.

“Kanban” means signboard or card, and a card that provides specific information can be sent from shipping to the transportation provider, for example, to trigger necessary action. This may be a physical letter or card included with the product, or more typically is part of logistics tracking software (ex: a customer receives an email that their product was delivered so they can retrieve it). Overall, kanban serves as a link and provides the information that connects the entire process of managing logistics.

Kanban can particularly help logisticians visually see the movement of shipments and what priorities or deadlines are being met. Kanban cards can represent each item and show its location within your shipping cycle, so the process becomes transparent. This also makes it much easier to pinpoint waste or delays, and correct mistakes before they become a more widespread problem.

Importance of Logistics Management:

Logistics is all about finding more efficient ways to move products from their creation all the way to the customer. The driving force behind logistics, and the reason why it’s important for many companies in many industries to adopt this type of management, is to provide the best customer service possible and meet demand. Having an effective logistics process can help protect the reputation of your business and increase profits. Through managing logistics, you can ship your products in a timely manner accurately and with a high level of quality.

On top of this, logistics creates transparency in your business’s supply chain and can track real-time movement of goods. Not only can you better control the flow of inventory, you can see potential disruptions before they happen and take preventative action to reduce waste. When done properly, logistics management helps you provide the right product to the right customer, in the right condition and the right quantity, at the right place, right time, and right cost.