What Is Logistics & Supply Chain Management?

Introduction to Logistics & Supply Chain Management

Many consumers don't recognize how extensive an entire supply chain is, as they only consider how they procure a product. However, a supply chain spans wherever the item has been, from raw material to sitting on a retailer's shelf.

In order to get from point A to point B, businesses need to organize transportation, storage, and other inventory means. With adequate logistics and supply chain management, companies can streamline these processes, saving money and time.

What is Logistics Management?

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Logistics management involves monitoring the flow of supplies between their origin and the final point of consumption. These points tend to look different depending on the business and its position within its supply chain. The transported materials are also different depending on the industry. The most common inventory logistics management handles include.

  • Food ingredients
  • Raw materials
  • Animals
  • Machinery
  • Liquid
  • Equipment

However, materials can also be non-physical, such as time, labor, and information. Regardless of the type of supplies, logistics management covers the various needs for the specific inventory, such as.

  • Manufacturing
  • Material handling
  • Packaging
  • Shipping
  • Scheduling
  • Transportation
  • Distribution
  • Storage

Logistics encompasses various operations, making it hard for some to understand its purpose. Businesses can think of it as having the right inventory at the right place at the right time. Without logistics, companies can't meet their customers' needs. However, there are two different subsets of logistics, including inbound and outbound logistics.

Inbound Logistics

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Inbound logistics facilities the acceptance of incoming inventory that the company needs either for manufacturing, distribution, or retail. Upon arrival, the receiving team needs to check, collect, and store the items accurately. To orchestrate inbound logistics, managers need to do the following.

  • Manage vendor relationships
  • Procure raw materials
  • Negotiate pricing
  • Arrange transportation and delivery

Outbound Logistics

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On the opposite end of the spectrum, outbound logistics facilitates inventory leaving a business. Outbound logistics managers focus on storage and transportation to ensure products arrive at their final destination intact. Organization is critical as the materials need to be easily accessible at all times in case a customer requests them.

While most businesses strive to limit storage to save costs, there is a fine line between meeting demand and understocking. Transportation is also tricky, as managers need to ensure goods can easily move between locations at any moment. The transportation method also needs to be affordable, or else the expense will eat into profits. Then managers have to consider possible delays, weather, fuel costs, drive time, and anything else that can jeopardize the goods.

What is Supply Chain Management?

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Supply chain management is the overall management of supplies as they evolve from raw materials in production to finished products. Any action of procuring, developing, managing, distributing, or selling products is a part of supply chain management. Although the complexity of this management will depend on the size of the supply chain, each network has common components.

  • Customers are the asset that triggers and run the entire supply chain. Without customers, businesses have no need to orchestrate these complex systems. It all starts when a customer orders a product that the company either has to manufacture or transport.
  • Planning often has its own department or team of employees that organize a production plan. This plan outlines how the company will source raw materials and assemble products.
  • Purchasing also receives its own department of workers that vet suppliers, negotiate procurement costs, and determine what materials they need.
  • Inventory for one business is raw materials for another. In other words, supplies become inventory for the company that buys, checks, and stores it in their warehouse.
  • Production references the production plan that maps out the manufacturing process. At this point, employees move the raw materials into the production area to form the finished products.
  • Transportation is when the finished products are moved from the manufacturing company to the next business down the supply chain.

5 Tips for Logistics and Supply Chain Management

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Large organizations make multiple supply chain management decisions each day, making it critical to have effective practices.

1. Find Reliable Suppliers

It is essential to have a reliable network of suppliers that offer reasonable prices, consistent quality, and prompt deliveries. Otherwise, the businesses can experience low-quality products, delays, and inflated costs. These supply chain disruptions can significantly impact how well they can meet customer demand and preserve profits.

To find reliable vendors, managers should consult other businesses that utilize suppliers to gauge their reputation and work practices. Trustworthy suppliers have excellent customer service, consistent product quality, and ethics. Therefore, companies should ensure that their values line up with their vendors'.

2. Prioritize Employee Development

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Logistics and supply chain management requires extensive employee engagement every day. Therefore, businesses should invest in thorough employee development training to ensure managers can problem-solve and work with others. Some enterprises use coaching, workshops, and shadowing methods to ensure employees are comfortable handling every situation.

3. Continuously Improve Operations

Supply chain management requires managers to look inwardly and identify strengths and weaknesses. This enables businesses to continuously improve their supply chain efficiency and visibility. With consistent enhancement, companies can reduce costs, improve quality standards, and increase output.

4. Leverage Technology

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As with any industry, business intelligence technology significantly improves logistics and supply chain management. With management systems, companies can establish an open line of communication with partners throughout the supply chain to avoid disruptions. Organizations can even integrate their various solutions to create a universal interface to order, track, and sell products.

5. Improve Returns Management

Regardless of how well a business runs its supply chain, it will always experience product returns. However, companies that establish efficient returns programs can mitigate risks and reduce returns costs. Therefore, businesses should determine the best way to track, inspect, and re-introduce returned items.

Advanced point-of-sale (POS) software has functions that facilitate customer returns, refunds, and exchanges. By integrating the POS and inventory control software, managers can actively monitor the activity of returns.