What are Logistics Operations in Supply Chain Management?

Logistics operations are the backbone of supply chain management. They include a majority of supply chain operations. They are also responsible for a significant part of supply chain expenses. 

What are Logistics Operations?

Logistics operations are concerned with the flow of inventory through the supply chain. Logistics operations are responsible for the movement of goods between different parties. This includes suppliers, manufacturers, points of consumption, and customers. These include all activities concerning the storage and transportation of products.

Logistics operations can be categorised as follows:

• Procurement
• Warehousing & Inventory Management
• Distribution Logistics
• Order Processing
• Shipping

Incidentally, these operations also define the stages of supply chain management. These operations are essential for all supply chains. But, the scope of operations can change based on the size of the company and target markets.

For instance, the logistics operations of a single-store retailer would only have three locations. These would be the manufacturer, a warehouse, and a retail outlet. Whereas an omnichannel retailer would have complex logistics operations spanning several locations.

Supply Chain Logistics Operations

Logistics operations perform several functions in a supply chain. The roles and responsibilities of logistics operations extend all the way to order fulfilment. 

Let’s understand the various processes that fall under logistics operations:

Procurement

Logistics operations management begins with the first stage of supply chain management. At this stage, you move the inventory from the supplier to the manufacturer.

Operations and logistics management includes both transportation and storage of goods as required. The scope of logistics operations depends on the distance between the supplier and the manufacturing unit. 

In case international borders separate the supplier and the manufacturing unit. Then the logistics operations would involve many cycles of transportation. And you will have to clear customs for the transported goods.

Warehousing & Inventory Management

Warehousing and inventory management in logistics operations involve storage before order fulfilment. 

At this stage, products are moved into storage after manufacturing. This logistics operations management is intricately linked with manufacturing and marketing.

You have to manage the inventory levels based on several criteria. These include available storage space, production capacity, and customer demand. You also need to consider the perishability of the products. These criteria will help you define the ideal inventory levels for an uninterrupted flow of products.

Distribution Logistics

The purpose of distribution logistics is to supply products to the points of consumption. Distribution logistics involves research and planning to define operations and logistics management. 

All decisions in distribution logistics are based on three criteria:

1. Manufacturing Locations
2. Points of Consumption / Target Markets
3. Available Logistics Resources

First you need to identify the ideal storage locations. These would include warehouses, distribution centres, and fulfilment centres. The supply chain logistics operations may have several warehouses and fulfilment centres. The number of storage locations depends on the points of consumption.

Distribution planning also involves supplying required inventory levels to different storage locations. The supply volume is based on the estimated demand at each point of consumption.

The next phase of distribution planning involves identifying transportation resources. You will need to find the best shipping options to move products between the following locations.

• Manufacturer to Warehouses
• Central Warehouses to Distribution Centres
• Distribution Centres to Points of Consumption

Each stage requires different transportation resources. The first two stages would use freights to move large inventory between locations.

The transportation resources in the third stage depend on the point of consumption. The goal is to find ways to improve logistics operations by using minimum storage and transportation resources. 

Order Processing

Order processing is the connecting link between sales and order fulfilment. Once the customer places an order, logistics operations need to confirm the availability of the product in the inventory. 

Operations management in logistics also needs to provide delivery lead time. This is the time required to ship the products to the customer.

Efficient order processing depends on the point of sales and the inventory management systems. You need to connect these systems to automatically confirm availability of the product. 

The next stage involves picking products from the warehouse. This requires accurate order details. Then you need to package the products for shipping. This process falls under warehouse management. A logistics operations software serves as the mediator between these systems.

Shipping Operations Management

Shipping operations management in logistics is concerned with the movement of products. These operations transport goods between different points in the supply chain. These operations can be categorised into:

• Stock Shipping
• Order Fulfilment
• Reverse Logistics

 Stock shipping is concerned with supplying products to distribution centres. The point of origin is usually the manufacturing location. You would use road, air, or ocean freight to transport products in bulk to stock inventory at your storage facilities.

Reverse logistics facilitates returns by picking products from customers’ locations. Then products are shipped to a designated warehouse.

Shipping operations management in logistics involves:

• Identifying ideal mode of transportation for shipping
• Negotiating shipping rates
• Import/Export compliance for global logistics operations
• Customs clearance for international shipments
• Cross docking for distribution
• Shipment tracking
• Communicating shipping status with relevant parties
• Collecting proof of delivery

The purpose of shipping operations and logistics management is to get the products to their destination as quickly and cost-effectively as possible. You can invest in a fleet of vehicles or outsource shipping to a 3PL logistics partner.

Ways to Improve Logistics Operations

Supply chain logistics operations need to be fast, efficient, and cost-effective. You need to control the flow of products throughout the supply chain. You have to efficiently distribute the products to manage the demand. 

Here are a few ways to improve logistics operations for better supply chain management.

Use Logistics Operations Software

Logistics operations software can help you improve the flow of information. The software can help you manage information regarding inventory levels, shipping schedules, shipment status, and so on. On average, companies use 3.8 systems to manage logistics operations.

Logistics operations software also helps connect logistics with other aspects of the supply chain. This includes manufacturing, sales, and customer service. You can connect the point of sales system with logistics operations software. This will help you automate order processing. Similarly, you can link it to CRM to communicate the shipping status with the customers. 

The software can also help you delegate logistics operations roles and responsibilities to relevant departments. For instance, you can assign picking and packaging to the warehouse staff. Then delegate shipping to your 3PL partner.

Get a 3PL Partner for Better Order Fulfilment

Logistics operations can become quite complicated as the business scales up. They also require heavy investment in storage and transportation resources. 

This may not be a viable option for all organisations. Hence, companies use 3PL or 4PL partners to handle logistics operations.

The logistics partners can carry out various functions in the supply chain. These include storage, transportation, distribution, order fulfilment, and reverse logistics. A company can benefit from the resources and expertise of logistics partners. This helps them reduce costs and improve efficiency.

According to the 2023 State of 3PL Industry Report, 76% of companies using 3PL say that their logistics partners implement innovative solutions for supply chain efficiency. Additionally, 3PL partners have helped 68% of organisations reduce logistics costs. 

The benefits of using a reliable 3PL, like PACK & SEND, go beyond logistics operations. Third party logistics have helped 88% of organisations improve customer service.

Alongside handling logistics operations roles and responsibilities, a 3PL partner can also help you effectively and rapidly scale your business and access new markets. You are relieved from the burden of investing in resources. A 3PL partner can help you distribute inventory to new target markets. It can also facilitate visibility over remote logistics operations.

Employ Automation to Improve Efficiency

Automation is one of the most effective ways to improve logistics operations. You can implement automation in several logistics operations. These include such as warehousing, inventory management, order processing, shipping, and so on. 

93% of logistics companies believe that automation improves efficiency and reduces costs. For instance, automating inventory management has helped organisations reduce labour costs.

Automation in logistics operations management can help you improve the flow of information between different departments. It can also help you create streamlined workflows. You can run some operations without human intervention. 

Conclusion

Logistics operations are a crucial part of supply chain management. Logistics operations take over a bulk of supply chain responsibilities. They also have a significant impact on marketing, sales, and customer satisfaction. 

By optimising logistics operations, you can better manage large and complex supply chains. Improving these processes can also help you reduce supply chain expenses.

If you do not want to bear the burden of investing in resources, you can outsource logistics operations to a courier company or a 3PL partner. This will help you develop an agile and flexible supply chain without owning or managing the logistics resources.

Image sources: Colliers Knowledge Leaders, Oreilly, Extensiv, Abdalslam