The Power of Logistics
We all witnessed the true power of logistics when the world needed it most last year. With National Logistics Day right around the corner, on Monday, June 28th, let’s take a moment to truly emphasize and appreciate the impact and power of logistics by illustrating the intricacies of the trade.
Importance of Logistics
Logistics, at its core, focuses on the movement and distribution of goods, but its effects extend beyond trucks on the road. Overall success in logistics generally equates to increased efficiency of the operation, reduced costs, increased production rates, enhanced inventory control, efficient utilization of warehouse space, and an improved customer experience.
While each of these factors can significantly impact a company’s success in the marketplace, how the company approaches each of these individual factors, is what truly defines the impact logistics has on your organization.
The Role of Logistics in the Marketplace
When you really break it down to the basics, the underlying purpose of a business is to exchange either goods or services for capital or assets. Following that logic, logistics is the path those goods and services take to complete the transactions. Sometimes goods are moved in bulk, such as raw goods to a manufacturer, or from manufacturer to retail. Other times, goods are moved as individual disbursements, serving one customer at a time.
All details aside, at its core, logistics is the physical fulfillment of a transaction, and as such is the life of the business. Where there are no movements of goods or services, there are no transactions.
There are seven pillars of an effective supply chain:
1. Material sourcing: Material sourcing is much more dynamic than simply finding the lowest-cost supplier for a raw material used in manufacturing. Finding the right source for any given material requires a strong understanding and management of all contributing factors, from the obvious factors like price, down to the detailed information such as seasonality, inventory and shelf-life. This process is called strategic sourcing, and logistics plays an important role in that planning.
2. Transportation: This is the big one, folks. As we mentioned previously, at it’s core, logistics is the act of physically transporting goods from Point A to Point B. First, a company must first select the best mode of shipment: air, sea, rail, road, etc. Next to consider is the best carrier, based on cost, speed and distance. To make the most of it, there will need to be some give-and-take in order to find the right carrier for the job.
3. Order fulfillment: In order to complete a transaction, items must be transported from the manufacturer, properly packaged and labeled, and then shipped to the customer or distribution center. Collectively, these processes create the order fulfillment stage, and are the heart of the logistics sequence in customer distribution.
4. Warehousing: Both short-term and long-term storage are common parts of logistic planning, which is why many shippers already have, or are in the process of introducing Warehouse Management Systems (WMS) to their day-to-day functions. This technology helps logistics planners optimize warehouse space while considering special requirements such as perishable goods, cold storage, docking facilities, proximity to modes of transportation such as rail lines or shipyards, and more.
5. Demand forecasting: Logistics relies heavily on inventory demand forecasting to ensure that a business never runs short on core or high-demand products or materials. Another crucial factor is for a company to never unnecessarily tie up capital in warehoused goods with longer sales times. Through forecasting demand, logistics professionals can determine to the best of their abilities how much of each product they will need, and where and when they will need it.
6. Inventory management: By planning for increased demand in seasonal or trending products, companies can keep profits higher and make inventory turns faster. On the other hand, by taking note of slowing inventory turns on certain products, companies can better determine when to offer discount pricing or other incentives to generate capital and inventory space to reinvest in goods that are in higher demand. Logistics is key to moving inventory where it is likely to get the most traction.
7. Supply chain management: Transportation is possibly the most important link in the supply chain, as it facilitates the initial movement of goods from suppliers to manufacturers. From there, the goods are delivered to manufacturers, sellers or distributors and finally to buyers.
As we celebrate National Logistics Day on June 28th, let’s understand and relay the impact and power of logistics by illustrating the intricacies of the trade and its impact on our day-to-day lives.
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Director of Marketing & Media, C.L. Services