Logistics and Supply Chain Management G5
Logistics and Supply Chain Management G5
Logistics and Supply Chain Management G5
Logistics
Logistics fucoses on the movement and storage of items in the supply chain. It is the flow of
thing or the product of a business between the point of business and the point of consumption.
The efficient movement of goods from their origin to their final destination is known as logistics.
The goal of logistics is to promptly and economically meet consumer demands.
Logistics, in a broader sense, refers to the organizing and transporting resources-people,
materials, inventories, and equipment – from one location to storage at the desired destination. In
the military. Logistics refers to transporting equipment and supplies to troops on the battlefield.
Logistics management is critical to the success of any business. Companies use logistics
management to ensure that goods move smoothly from their origin to the end of consumption.
Companies can build proper strategies and framework with appropriate planning making the
entire process much more straightforward for the business. Logistics may have either an internal
focus (inbound logistics) or an external focus (outbound logistics).
Inbound
A manager in charge pf inbound logistics manages everything related to the incoming flow of
resources that the company needs to produce its goods or services. These activities will include
managing supplier relationships, accessing raw materials, negotiating materials pricing, and
arranging quicker delivery.
Outbound
A manager working in outbound logistics will be focus in two issues: storage and transportation.
He or she will used warehouse techniques to keep the finished goods safe and accessible. Since
the products may need to be moved out to a customer at any moment, proper organization is
crucial. Having as little product stored as possible can be advantageous since stored products are
not making money, so the outbound logistics manager often has to balance company cost saving
with consumer demand. The transportation function is by far the most complex part of outbound
logistics. Without transport, there no simply is no logistics. For the reason its critical to be able to
move the product from one location to another in the fastest, most cost-effective, and efficient
way possible. Since transportation involves fluctuations, factors such as delays and changes in
fuel costs need to be taken into account in order to cover all possible scenarios that might
jeopardize the efficient movement of goods.
Supply Chain Management
It is the process of managing of movement of the raw materials and parts of the beginning of the
production through delivery to the consumer. In many organizations, operational supply chain
decisions are made hundreds of times each days affecting how products are developed,
manufactured, moved, and sold. The complexity of the supply chain varies with the size of the
business and the intricacy ad quantity of items manufactured, but most supply chain have
elements in common such as following:
Customers: Customers start the chain of events when they to purchase a product that has
been offered for sale by a company. If the product has to manufactured, the sales order
will include a requirement that needs to be filled by the production facility.
Planning: the planning department will create a production plan to produce the products
to fulfill the customer’s the orders. To manufacture the products, the company will then
have to purchase the raw materials needed.
Purchasing: the purchasing department receives a list of raw materials and services
required by the production department to complete the customer’s orders.
Inventory: the raw materials are received from the suppliers, checked for quality and
accuracy, and moved into the warehouse.
Production: Based on the production plan, the raw materials are moved to production
area. These raw materials are used to manufacture the finished product ordered by the
customer and then sent to the warehouse where they wait shipping.
Transportation: When they finished product arrives in the warehouse, the shipping
department determines the most efficient method to ship the product so they are delivered
on or before the date specified by the customer.
Logistics Operation
Logistics operations is an essential part of the supply chain and refers to the process of moving
finished goods, starting from the manufacturer and moving to the end user. The entire inbound
and outbound logistics process consists of managing ecommerce inventory, and fulfilling and
shipping orders. Inventory management, warehousing, and order fulfillment all play a key role in
optimizing ecommerce logistics. While larger companies may have dedicated logistics directors
to manage logistics operations, smaller business owners typically handle it themselves.
Why are logistics operations so important for ecommerce? Depending on the systems and
processes you have in place, your ecommerce supply chain can make or break your business.
Since ecommerce logistics has many moving parts, inventory management becomes a challenge
without proper ways to track ecommerce inventory throughout the process. You can end up with
too much product, which can lead to deadstock and high carrying costs, or have too little, which
can cause stockouts and shipping delays. Without streamlined logistics operations, you will end
up with several loose ends that impact both your profit margins and customer satisfaction.
Therefore, having a cost-effective, streamlined logistics operations process in place will help to
keep logistics costs down, reduce risk and human error, and keep your customers happy.
Logistics operations: 4 key processes Logistics operations are made up of a series of processes
that work together to optimize the supply chain, from delivering goods from the manufacturer to
the seller, all the way to last-mile delivery.
1. Suppliers and Manufacturers
Obtaining raw materials is the first part of supply chain management, which is taken care of by
the manufacturer or supplier. A dependable manufacturer is responsible for tracking the work-in-
process inventory phase (i.e., the movement of raw materials being processed into finished
goods) to make sure you get a high-quality, sellable product on time and at the most affordable
price. Choosing the right supplier is important; manufacturers that are inconsistent in delivering a
quality product and/or shipping inventory to the seller can slow down operations from the very
start.
2. Distributed Fulfillment Centers
Fulfillment centers are warehouses that hold inventory close to the end customer, so each order is
picked, packed, and shipped as soon as it’s placed to ensure the fastest delivery possible. Many
direct-to-consumer (DTC) brands depend on a third-party logistics (3PL) company that performs
ecommerce fulfillment services. That way, they don’t have to worry about fulfilling and shipping
orders themselves. Another key benefit of partnering with a 3PL is the ability to distribute
inventory across logistics centers. For instance, ShipBob is a retail fulfillment company that
offers a robust international fulfillment center network that allows merchants to split inventory
across locations to be closer to their customers. This reduces shipping costs and speeds up
delivery.
3. Warehousing
Warehousing is a key stage in the logistics operations process that involves storing and managing
physical goods before they are sold. There are several key parts to warehouse management,
including the safety and security of stored goods, inventory control processes that help to
optimize inventory storage, and much more. These crucial operational warehouse management
systems help to track where items are located, when they arrived, and how long they have been
there.
4. Shipping
Orders that are shipped to customers accurately and quickly speaks to how well you run your
logistics operations. Although the execution of shipping orders to their final destination is
ultimately up to the carrier, you can choose which shipping methods to offer your customers
(e.g., standard via ground, expedited shipping via air, etc) and to which locations (domestic vs.
international shipping). You also have the option to ship orders in-house, most often which
involves standing in line at the post office. Otherwise, you can outsource fulfillment to a
company that has access to discounted shipping rates from major carriers and can take care of the
shipping process (and all other logistics operations) for you.
Logistics service providers handle more than just storage and transportation — unless they’re
first- or second-party LSPs, which only handle shipping (more on that later). For LSPs third-
party and above, a more comprehensive list of tasks they manage may include:
Incoming-goods Logistics:
When raw materials or supplies are brought in, the logistics service provider will make sure the
shipment matches the initial purchase order and allocate the materials to their appropriate
destinations. For companies with multiple production facilities, this may involve cross-checking
current levels to make sure that no factory is left waiting while another has more supplies than it
needs. More complex LSPs may also handle the ordering process in addition to incoming
logistics.
Inventory Management:
Inventory management is the entire process of managing inventories from raw materials to
finished products. An LSP can help businesses identify and respond to trends to ensure there’s
always enough stock to fulfill customer orders, and it can provide proper warning of a shortage.
Warehousing:
For finished goods, warehousing is more than just storage. Proper cataloging is crucial to ensure
that goods can be picked and shipped quickly. Without proper labeling, orders can be left
unfulfilled, leading to dissatisfied customers. For LSPs that use multi-tenant warehouses,
accurate organization and cataloging ensure that different clients’ goods are kept separate and
accounted for.
Order Tracking:
When orders are received, it is the LSP’s responsibility to manage and fulfill them. Often, orders
are placed and managed through a business’s own enterprise resource planning (ERP) system,
which should be integrated with the LSP, allowing for both the client company and the LSP to
effectively track orders. Without proper integration, orders can be left unfulfilled, or in-transit
orders may be mistakenly labeled “not yet sent” and reshipped.
Invoicing:
Many companies prefer to bill their customers themselves and pass the orders along to an LSP,
but some LSPs offer direct customer invoicing. These invoices should be matched with original
order numbers and prices to ensure accuracy before orders are shipped. Payment receipts should
be saved and tracked to keep accurate records for the future.
Logistics service providers also regularly bill their clients based on the terms of their contract —
often monthly or yearly. LSPs typically have several clients at one time and may bill flat rates or
vary charges by the services provided. LSPs offering more complex services will generally have
higher costs.
Picking and Packing:
After an order is placed, the items must be picked and processed. The LSP will handle item
picking and label generation, often using internal track-and-trace systems with “license plate
numbers” (LPNs) to ensure that every item and package are kept together as entire orders are
completed. These tracking systems also keep inventory counts current and accurate.
Shipping:
Logistics service providers will either have their own fleet of vehicles for shipping or outsource
this service to another company. When an order is placed through the client company, customer
information is forwarded to the LSP with the order details to initiate the delivery. Businesses that
have specific delivery requirements, such as time-sensitive arrivals or temperature-controlled
environments, often use LSPs as a more affordable shipping option. This is especially true if
these types of deliveries account for only a small fraction of a business’s sales, which doesn’t
justify the large investment needed to purchase a specialized fleet of its own.
Payment and Finance Management:
LSPs manage the day-to-day costs of shipping and warehousing goods, including labor and
packing materials, with client companies outsourcing the payment management responsibilities
from an internal accounts payable team to the LSP. Through detailed analysis of logistics key
performance indicators (KPIs), such as shipping cost per unit, shipping cost per mile/km traveled
or shipping cost per lb/kg of package, LSPs are able to identify trends and optimize their
shipping methods and logistics operations to minimize waste and reduce costs for themselves
and their clients. Businesses can also receive bulk discounts through their LSPs that they would
not qualify for on their own, freeing up capital for other financial needs, like growth or
managerial investments.
Many LSPs process customer payments for their clients as well. Businesses relying on LSPs to
collect payments from customers must make sure accounts are properly integrated so that
payments end up where they belong – with the client’s accounts receivable team. And for
businesses extending credit terms to customers, it is important to ensure that payments are
properly linked to purchase orders and shipping confirmations to match what goods were sent.
Not every LSP takes over responsibility for payment collection, so in-house accounts receivable
staff must fully understand what they are responsible for and what is being outsourced to the
LSP. Otherwise, customers may get their goods without ever receiving an invoice, resulting in
losses for the company.
Returns:
Returns, also known as reverse logistics, can present a challenge for a company operating with
small margins. Many LSPs handle customer returns and also raw materials returns to suppliers.
Because LSPs typically have more locations and a wider reach than their clients, customer
returns through an LSP can be cheaper and more convenient for both customers and suppliers at
either end of the returns process. Easier return policies can give customers more confidence
when shopping and lead to more repeat customers, even when orders need to be returned.
Disposal:
Some products will inevitably need to be disposed of due to damage, malfunction or outdated
and discontinued product lines. Businesses often end up with storage units and warehouse
shelves filled with goods that will never be sold, so many turn to logistics service providers to
handle the disposal of unwanted inventory, freeing up space and reducing carrying costs.
Third-party logistics service providers (3PLs) are the most common structure for LSPs, but
there are several others that businesses can choose from, commonly ranging from first party to
fifth party. With the growing popularity of environmental and social accountability and advances
in artificial intelligence (AI) and machine learning, some innovators have begun to imagine
sixth- through tenth-party LSPs; however, many elements of those higher-level LSPs are
theoretical and have not been widely accepted or implemented.
First-Party Logistics Service Provider (1PL)
First-party logistics service providers (1PLs) are companies that handle all their logistics in-
house. They have their own fleet of delivery vehicles and don’t outsource any steps in their
logistics workflow, retaining complete control. 1PL is also called self-logistics.
Second-Party Logistics Service Provider (2PL)
Second-party logistics service providers (2PLs) offer intermediary transportation options.
2PLs have their own fleet of vehicles and offer customer delivery or freight options but don’t
handle warehousing or other services. Businesses that use 2PLs, or traditional transportation
providers, package their goods themselves and either drop them off or arrange a pickup location
for the 2PL to deliver the goods to their next destination.
Third-Party Logistics Service Provider (3PL)
Third-party logistics service providers (3PLs) control both inbound and outbound
transportation and warehousing. 3PLs typically lease warehouse space to clients and handle
shipment preparation — like labeling and packaging — as well as transportation. They may own
their own fleet of vehicles or outsource the actual delivery to a 2PL. Once goods are shipped,
3PLs may handle tasks such as tracking, delivery status and customs. Many insiders use the term
logistics service provider to refer exclusively to third-party LSPs.
Fourth-Party Logistics Service Provider (4PL) or Lead Logistics Provider (LLP)
Fourth-party logistics service providers (4PLs) take further control of a client’s supply chain
than 3PLs. Not only do 4PLs control inbound and outbound transportation and warehousing, but
they also oversee the rest of a business’s supply chain, taking a hands-on approach with
suppliers, retailers and other relevant parties to the business’s operations. 4PLs, also called
supply-chain overseers, don’t own any physical assets themselves for moving goods. Instead,
they play a consulting and managerial role by contracting with 2PLs and 3PLs for shipping and
warehousing.
Fifth-Party Logistics Service Provider (5PL)
Fifth-party logistics service providers (5PLs), also known as logistics aggregators, combine,
contract and oversee multiple 3PLs to create a large supply network. These networks may
grow large enough to create market leverage and lead to further discounts for client companies.
5PLs often provide businesses a full framework for how to best plan and execute their supply-
chain operations. 5PLs require significant trust and communication from their clients as 5PLs
take over more responsibilities and control of a business’s operations than the other types of
LSPs.
International Logistics
One can think of international logistics as designing and managing a company's supply chain
from acquisition to client purchase in a way that crosses at least one international boundary. A
company's supply chain must cross at least one foreign border for international logistics to take
place. Moreover, a skilled intermediary can assist a company in navigating local conventions and
laws, as well as establishing positive working ties with local businesses. Thus, they provide
better understanding of foreign legislations and enable transactions with domestic companies.
According to the Council of Logistics Management, logistics is the management process of
'planning, implementing, and controlling the physical and information flows concerned with
materials and final goods from the point of origin to the point of usage.' International logistics
involves the management of these resources in a company's supply chain across at least one
international border.
International logistics seemingly has a way of improving life. It is important for reasons such as
lowering costs, plays a critical role in movement of products globally, and offers better inventory
control.
Let’s understand the roles and responsibilities of logistics and freight forwarders.
Logistics is simply the management of various activities like Management of different orders
throughout the supply chain. Customer’s requirement, quantity, quality and area of demand. The
logistics department highly manages the storage of goods to ensure proper storage practices.
Warehousing of different types of goods, from perishable to non-perishable. Planning and
executing the distribution of goods. Aligning diverse packaging to various materials based on the
requirements. Transportation management and handling of fragile and non-fragile items with
ease. Import and export of logistics. Tracking and managing the trade information throughout the
journey of the goods. Managing the supply chain from the initial to the final stage. Management
of assets along the complete supply chain ensures smooth cargo flow from one point to another.
Logistics management is a broad term that defines and manages all the above responsibilities,
but what priorities are deemed vital in freight management?
Freight forwarders need to negotiate and match the expectation of the company’s rate, terms and
conditions while sealing a deal. One needs proper documentation to stick along with transit to
eliminate any hassle later. On-time collection and delivery of goods. Freight management
focuses on establishing contacts while deploying excellent transportation facilities. When
working with officials, freight forwarders must maintain a close relationship with the customs
brokers to ensure customs compliance. In case of any damage, the forwarders are responsible for
insurance and cover the cargo in transit. Analysing different modes of transport required for
transporting the goods. Managing and tracking cargo movement along with freight claims.
Importance of logistics and freight forwarders Both logistics and freight forwarding have
benefits that a shipping firm can utilise. Logistics manages most of the responsibilities of the
supply chain, from planning and execution to resource management and delivering goods to the
final destination. Freight forwarders handle the transportation of goods from the warehouse or
one point to the final destination or the customer’s doorstep.
While both manage the goods, logistics will focus on the quality, quantity and fleet management,
and execution of goods.
In contrast, the freight forwarders look over the transportation, documentation, policy and
tracking of goods. Freight forwarding is a part of logistics where freight forwarding is an agency
or an agent that facilitates the movement of goods effectively. Logistics manages the inbound,
outbound and reverse logistics, where each segment reduces equal roles and responsibilities.
Companies should align their goals towards managing the fleet properly.
Any shipping industry’s top priority is delivering goods and materials at the right time, place,
and with the right products. Logistics management encompasses a wide range of jobs and
stakeholders. Freight management is an essential subset of logistics management.
Without both managements, many businesses would come to a halt, causing a cascade effect
around the world.
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worldwide. With the difference between logistics and freight forwarding, one can easily manage
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