Sub-optimal logistics efficiency is expensive. According to supply chain management and solutions company GEP, 64% of US and European companies lost up to 20% of their revenues in 2020 due to logistics disruptions, totaling over $4 trillion in lost revenue.
Your company could also be wasting thousands of dollars a year on an ineffective logistics strategy, which is why it's crucial to identify weak points and improve.
While it's clear that an optimized logistics management plan can increase revenues through reduced operating costs and the ability to welcome and satisfy more customers, meeting the challenge can be overwhelming. Where to start?
In this article, we'll look at what logistics management is and how to optimize it within your company.
What is logistics management?
Logistics management is the process of planning, implementing and overseeing a supply chain operation from start to finish.
When your logistics are managed effectively, you're more likely to optimize your system for storing, shipping, tracking and delivering goods or services to other businesses or consumers. This, in turn, can improve your revenues and bottom line.
Logistics management is often divided into inbound and outbound logistics. Inbound logistics refers to the processes involved in acquiring goods and materials, while outbound logistics refers to the process of delivering goods to customers.
Dozens of industries around the world rely on logistics to run their operations smoothly, including postal work, e-commerce, food service delivery, field services, telecommunications, manufacturing, medicine, pharmaceuticals and more.
The logistics market alone accounts for 10% of France's GDP, or €200 billion.
Tasks included in logistics management
In practice, logistics management involves a wide variety of tasks that can streamline your business operations, especially when they are optimized to work in sync with each other.
For example, your company's logistics planning and management team typically performs these five common tasks:
- Stocking or warehousing inventory or products
- Procurement of materials handling equipment
- Route optimization, efficient delivery, transportation management
- Monitoring suppliers and determining whether new ones are needed
- Selecting appropriate software and IT solutions
How do you approach logistics optimization?
While your company may optimize your logistics differently from another, the following best practices work for virtually any industry that relies to some degree on effective logistics management.
Start measuring relevant KPIs
If you don't measure key supply chain metrics, it's almost impossible to understand where to make significant improvements.
The most important KPIs to consider:
- Cash to Cash Cycle Time (CCCT)
- Perfect Order Rate
- Order fill rate
- Number of days in stock
- Inventory turnover
- Reasons for return
- On Time Delivery (OTD)
- Shipped On Time (SOT)
- Supply chain costs as a percentage of sales
In order to effectively measure these important KPIs for logistics performance analysis, every organization should consider setting up a logistics dashboard.
This dashboard can bring together supply chain metrics and provide this information in real time to the decision-makers who need it.
The new digital transport management platforms very often offer an all-in-one solution that enables you to digitize your transport management and gain in performance thanks to the precise analysis of your supply chain KPIs. They enable you to collect all the data linked to your transport activity in real time, and structure it within extremely clear dashboards.
Perform a logistics audit
A logistics audit is a diagnosis of a company's supply chain. This analysis identifies weak points in supply chain management. The audit enables you to identify areas of productivity, to restructure if necessary, or to introduce a new flow into your current logistics supply chain.
An audit takes the guesswork out of what needs to be improved, helping you to identify weaknesses so you know exactly where to implement modern solutions.
Automate as much as possible
Automation is the essence of optimization. The most relevant tools facilitating greater automation and precision in the logistics sector include :
Warehouse Management System (WMS ): a tool for managing warehouse operations. Its aim is to improve knowledge of the quantity and quality of warehouse and inventory activity, avoid order-picking errors, optimize the use of resources and space, and improve internal merchandise traceability.
Transport Management System (TMS): The automation enabled by TMS and the integration of different flows increase your efficiency. This optimization results in significant cost reductions. For example, your transport vehicle routes are better organized.
These two tools help you to automate repetitive tasks, so that your staff can concentrate on more meaningful tasks that further optimize your business as a whole.
Value transparent communication
It's imperative that everyone is on the same page when it comes to optimizing various aspects of your logistics processes. Not everyone likes change!
For this reason, good communication upstream of the optimization process is fundamental. The supply chain manager must explain that optimization is an opportunity to waste less time and be more productive on the workstations. In concrete terms, this will make work more pleasant and safer for them.
The more open and transparent your interdepartmental communications, the more likely your company is to reduce logistics management errors.
Outsource what you can
Similar to automating as many processes as possible, you can also outsource work for which your company doesn't have the time or expertise, especially if it helps you grow your business.
A good example is if you're an e-commerce store that outsources the packaging of your products to free up your time and devote efforts to making more sales and more profit.
Understand your customer better
Finally, remember that your customers' experience can have a significant impact on the success of your business. As such, it's important to understand what they want and when they typically buy from you, so you can optimize your logistics to match demand.
Optimized logistics = more satisfied customers
Logistics management is one of the most important ways of maximizing your company's operations and satisfying your customers. When you focus on improving your logistics systems, you not only enjoy increased efficiency and profits for your company, but you also reap the benefits of greater customer satisfaction, as your customers are more likely to recommend you to others as well as buy from you again.
