Logistics refers to the movement of goods from the point of origin to their final destination. The logistics process includes Inward, Storage, inventory management, transportation and order fulfillment. All these processes are interlinked. Inefficiency in any step can cause delays in order fulfillment and adversely affect brand reputation.
The global logistics industry is massively growing in the market and is expected to reach $18 trillion by 2030. Various factors drive it, such as the rise in e-commerce and technological advancement. AI is even increasing logistics efficiency by 40%.
What Is The Logistics Management Process?
The logistics management process involves planning and controlling goods movement from the point of origin to the point of consumption. It includes numerous activities like warehousing, inventory management, order fulfillment, distribution, and returns management.
Logistics management ensures that the right amount of product should be reached at the right time and in a cost-effective manner. Effective logistics management can reduce costs and improve brand awareness in the target market.
The logistics management process involves inbound and outbound logistics processes. The inbound process involves moving goods from the supplier to the warehouse, and the outbound logistics involves moving goods outside the warehouse. The outbound process includes shipping goods to the customer’s doorstep.
The logistics process also involves reverse logistics, i.e., management of various activities of returning goods and materials.
Logistics Process Example
Amazon sources its products from various vendors and suppliers. The goods arrive at the fulfillment center, are inspected thoroughly, and are kept in the warehouses according to their size and demand.
The system automatically selects the earnest warehouse whenever a customer places an order. The product is picked and packaged properly. It is shipped to the customer’s doorstep by choosing efficient transport modes like air, rail, road or sea.
The ordered product is delivered on time by the last-mile delivery partners or Amazon-branded vehicles.
If a customer does not like the ordered product, then he places a return request. The order is picked up from the customer’s address and returned to the warehouse. It is inspected thoroughly, and then it is either restocked, recycled or discarded.
Key Logistics Process: Breaking Down The Supply Chain
1. Procurement & Supplier Coordination
Procurement involves acquiring raw materials or finished goods from the suppliers. A business should coordinate with reliable suppliers to supply goods on time and in the right quantities to meet customer demand.
A business needs to choose suppliers based on cost, raw material quality, reliability and location.
2. Storing & Inventory Management
Storing and inventory management involves storing, tracking and managing the goods efficiently to avoid overstocking or out-of-stock issues.
A business can use FIFO (older stock is sold out first) and LIFO technique (newer inventories are sold first) to manage inventories according to their product category.
3. Distribution & Transportation
Distribution involves the movement of goods from warehouses to customers efficiently. Businesses should use the latest technology, such as AI and transport management systems, to find the best route for goods transport.
Businesses can even do partnerships with 3PL companies in India to reduce shipping costs.
Internal Logistics Process: Managing Operations Efficiently
The internal logistics process involves all the processes involved in the movement of materials inside the warehouse.
- The incoming goods are first inspected, and their quality is checked.
- The goods are then stored in the warehouse in their designated locations.
- Conveyor belts or forklifts move the goods.
- Whenever a customer orders a product, it is picked from the designated location and packed thoroughly so that it will not be damaged during transport.
- It is handed over to the shipper to reach the customer’s doorstep on time.
Streamlining Warehouse Movements And Order Fulfillment
A business utilizes various strategies to simplify multiple warehouse operations. For example, a warehouse and inventory management system can track inventories, assign tasks to the staff and monitor stock levels in real time.
Again, automated material handling, like conveyor belts, can speed up the movement of goods inside the warehouse.
Reduce Internal Logistics Challenges
Inefficient internal logistics can increase warehousing costs and cause delays in delivering products to the customer.
For example, poor inventory management can lead to overstocking and out-of-stock issues. You can use RFID tracking to prevent overstocking and out-of-stock issues.
Space may become short to store products inside the warehouse. You can use vertical storage systems or cross-docking phenomena where goods are sent to their destination without being stored in warehouses.
Inbound Logistics Process: Managing Goods Entry
Inbound logistics involves the flow of raw materials from suppliers to the business’s manufacturing plant. It includes numerous activities like sourcing, storing, and delivering materials for production.
Any inefficiency in inbound logistics can cause delays in delivering finished goods to the customer and adversely affect brand reputation in the market.
The steps involved in inbound logistics are as follows.
1. Sourcing raw materials
Purchasing raw materials from the suppliers is the first step in the inbound logistics process. A business owner should know which raw materials and quantities are required for manufacturing.
He should keep the records to avoid overstocking problems. Try to choose reliable suppliers and maintain good coordination with them so that they can provide raw materials on time.
2. Transport management
It involves the movement of goods from suppliers to the manufacturing facility or directly to the warehouse.
The business should select cost-effective and reliable transport companies. Simulately, it should use GPS and other advanced software to track goods. The transport management system can help to find optimized routes and make order delivery faster.
3. Receipt Of Goods
The business should assign an unloading area for storing inventories.
4. Quality Control
The workers thoroughly verify the shipments to ensure they are not damaged and comply with the specifications. Some businesses perform barcode scanning or AI-driven quality checks while inspecting goods and materials.
5. Warehousing And Inventory Management
Warehousing involves storing raw materials till they are required for production. Most warehouses are now leveraged with advanced technology like warehouse management systems. Forklifts, conveyors, and pallet jacks are even used to move goods inside the warehouse.
Effective inventory management ensures enough stock in the warehouse to meet customer demand.
Outbound Logistics Process: Ensuring Timely Deliveries
Outbound logistics involves delivering finished goods to the customer’s doorstep. It involves various processes like picking, packaging, labelling and transporting the product from the warehouse to the customer’s doorstep.
Various outbound logistics processes are as follows:
1. Order Processing
The customer places an order on the e-commerce website. The order is confirmed by the nearest warehouse.
2. Picking And Packaging
The ordered product is picked from the rack or shelf and is packaged entirely. Product packaging will enhance brand reputation and present scratches or any damage during transport.
Packaging has various aspects, like bubble wrap or sturdy cartoons, to prevent product damage. Some businesses use eco-friendly packaging to protect the environment.
3. Labelling
Businesses need to properly label the packaged product, including order details, tracking codes, and handling instructions.
4. Shipping
The packaged and labelled product is handed to the shipper. The business must choose a logistic company based on speed, cost, and reliability. It should use GPS or any advanced software to track products.
It even manages reverse logistics processes efficiently. Whenever a customer doesn’t like the ordered product, he raises a return request. The business picks up that product, does its quality checking, and then decides to either restock or discard the product.
Strategies For Reducing Outbound Logistics
A business can reduce outbound logistics by various strategies.
- Utilization of route optimization software to find the best route based on distance, weather conditions and bad roads.
- Do partnership with multiple shipping carriers to get the best rates.
- Prefer eco-friendly packaging for packing the product.
- Warehouse automation can minimize the time taken for picking and packaging. It will fulfill orders quickly and enhance customer satisfaction.
Shipping & Logistics Process: The Last Mile Delivery Challenge
Shipping logistics refers to transporting goods from the warehouse to the customer’s doorstep.
Importance Of Last Mile Delivery Efficiency
Last-mile delivery is the final step of the shipping process. The main aim of last-mile delivery is to deliver the product to the customers as soon as possible. It accounts for nearly 50% of the total shipping costs.
There are a few challenges faced in last-mile delivery.
1. Expensive
Last-mile delivery is expensive because of various factors like vehicle maintenance, fuel, labour and operational costs. There are even a few hidden costs during the order delivery, like customers rejecting the parcel and many more.
2. Delays
Delays in delivering products can be due to heavy traffic, remote locations or bad roads.
3. Theft
Sometimes, delivered parcels can be stolen from the customer’s step. Again, the delivery boy may not have delivered the parcel properly and safely. This decreases customer satisfaction and has a negative effect on the brand.
4. Environmental Impact
Most of the vehicles used for last-mile delivery are run on fossil fuels. They are prone to environmental pollution.
A business can optimize the shipping and logistics by utilizing the following strategies.
- Utilizing route optimization software to find the shortest and most efficient delivery route.
- Use dark stores or micro fulfillment centers closer to the target market for quick order fulfillment and reduced shipping costs.
- Implementing electric vehicles to reduce carbon footprints in the environment and reduce fuel costs.
Logistics Process Outsourcing: Pros And Cons
Logistics process outsourcing means outsourcing all the supply chain and logistics operations to a 3PL service provider.
The business partners with a third-party logistics provider to handle various supply chain activities like warehousing, transportation, inventory management, etc.
Outsourcing supply chain and logistics activities to a third party has pros and cons. We list them below.
1. Cost Saving
Building a warehouse, managing staff and buying heavy equipment for goods transport requires a lot of money. Again, the business has to manage vehicles and their maintenance, bear fuel costs, and many more, which is not possible for a small and medium enterprise.
Delays in delivering products can decrease customer satisfaction. Outsourcing the warehousing and logistics process can reduce the costs of a business.
The business does not have to purchase land to make a warehouse or manage storage and transportation.
2. Focus On Core Business Activities
Third-party logistics providers manage various aspects of supply chain activities, such as warehousing, transportation, and many more. This frees up time for a business to focus on core activities like product development and new market exploration.
3. Scalability
Most third-party logistics providers provide scalable warehousing solutions, which means you increase or decrease logistics operations based on the product demand in the market.
4. Advanced Technology
Most warehouses are equipped with advanced technology, such as a warehouse management system. This system can track inventories in real time and avoid overstocking problems.
Cons
1. Loss Of Control
The business will have limited control over various supply chain operations, such as warehousing, transportation, etc. Disruption of any of these activities can negatively impact the business.
2. Data Security
Sharing business and customer data with a third-party logistics provider can lead to security concerns.
How To Choose the Right Logistics Provider?
- The third-party logistics provider should have good expertise and years of experience. You can check reviews or customer testimonials.
- Ensure the 3PL company has a strong transportation and distribution network in your target markets.
- Look for a logistics provider with advanced technology like real-time tracking and AI-based analytics.
Logistics Optimization Process: Improving Efficiency And Reducing Costs
How To Optimize Logistics Process For Cost Savings?
- Use advanced software to transport goods from one place to another. The software chooses the best route based on cost, road conditions, and many other factors. Choosing an efficient route can reduce the fuel costs of a business.
- Utilizing the latest technology, like warehouse management systems, can track inventories and avoid overstocking issues. This will avoid holding costs of a business.
- Utilizing cross-docking to avoid storage costs.
- Store products in local fulfillment centers to reduce shipping costs.
Role Of AI, Automation And Data Analytics
- AI can optimize inventory levels and reduce wastage.
- Automation can avoid repetitive tasks like invoicing and order processing. It can speed up warehouse operations with almost no error.
- Data analytics can enhance product visibility and prevent losses.
Conclusion
The logistics process is the backbone of a business’s supply chain management. An efficient logistics process can reduce warehousing costs and facilitate fast order fulfillment. A business can adopt advanced technologies like AI, warehouse management systems and data analytics to fulfill orders on time and increase its brand reputation in the market.
AAJ Supply Chain Management
