The Seven Pillars of Effective Logistics
The very essence of a business is to exchange goods or services for money or trade. Logistics is the metaphorical, and in many cases literal road those goods and services take to complete the transactions. Sometimes goods are moved in bulk, such as raw goods to a manufacturer. Other times goods are moved as individual disbursements, one customer at a time.
Regardless of the specifics, logistics is the physical fulfillment of a transaction and as such is the life of the business. When goods stop moving, or services cease, there are no transactions—and no profits.
To help make sense of the world of logistics, we broke the main facets down into seven different subjects… the seven pillars of effective logistics.
There are seven pillars of an effective supply chain:
1. Material sourcing:
Material sourcing is more robust than finding the lowest-cost supplier for a raw material used in manufacturing. Finding the right source for any given material requires a good 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.
This is the big one, folks. As we mentioned previously, at its core, logistics is the act of physically transporting goods from Point A to Point B. First, a company needs to select the best mode of shipment: air, sea, rail or road, for example. Next is the selection of the best carrier or 3PL, based on cost, efficiency and distance. To make the most of it, there will need to be some give-and-take in order to find the right solution.
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.
Both short-term and long-term storage are common parts of logistics 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—and never ties up capital unnecessarily in warehoused goods with longer sales times, either. By forecasting demand, logistics professionals can determine to the best of their abilities how much of each product they will need, where they will need it 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. The product is typically picked up at a warehouse or manufacturing facility then transported to sellers or distributors and finally to buyers.
A supply chain, in its simplest form, is essentially a series of transactions. If logistics fails, the supply chain fails, and transactions grind to a halt. Words cannot truly emphasize the impact and power logistics has on the world around us. This article hopefully displayed the impact of the logistics trade and helped tie it all together to illustrate how it affects our day-to-day lives.
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Director of Marketing & Media, C.L. Services