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Logistics Management: What You Should Know for Business Model Enhancement

In the middle of the transformation of business environments, managing the logistics lifecycle has always been a complicated task. Every business needs sales and purchases for materials, and goods, and needs to be transported to specific locations, mostly at the exact times. The need for logistics management is increasing following the massive transactions from the e-commerce industry. Looking at the economy globally, the huge need for logistics management become the growing demand for both customers and companies for their business enhancement. Logistics managers should be ready to overcome challenges throughout the logistics and supply chain on a daily basis.

Supply chain's role in the modern business environment

In every organization, a proper system of obtaining raw materials, producing the goods, and delivering manufactured products to the customers is needed to optimize their streamlined supply chain department. The supply chain department determines the quality of the finished goods and their delivery to the customers.

In this modern era, the transformation of the field of commerce also impacts supply chain management. Compared to previous processes that were more time-consuming and required intensive labor, supply chain processes have now drastically improved to fast delivery from weeks to a few hours and fast communication systems. The modern supply chain has enabled every organization and business to align their strategies with the market and economic demands, as well as benefit in competition with rivals in the market.

Strategic management of the supply chain for the supply chain is important to take care for the business to be successful. It is important for a business to understand the supply chain in-depth for strategic business management as it is the chief cost component of a business. If the supply chain is well understood and managed, the purchase and production requirements of the business are effectively met. Additionally, to support effective supply chain management, the enhancement of logistics management should also become a priority.

What is Logistics?

According to John Gattorna Abby Day John Hargreaves, logistics is defined as the process of strategically managing the acquisition, movement, and storage of materials, parts, and finished inventory (and the related information flows) through the organization and its marketing channel in such a way that current and future possibility is maximized through the cost-effective fulfillment of orders.

Logistics management is the part of supply chain management functions that helps organizations and businesses to plan, manage, and implement processes to move and store goods. Logistics management functions include customer service, sourcing and procurement, production planning and scheduling, packaging, and assembly. Logistics management is also part of all the levels of planning and execution, including strategic operational, and tactical. Furthermore, logistics management coordinates all logistics activities and integrates logistics activities with other functions, including marketing, sales, manufacturing, finance, and information technology.

In order to meet requirements from their customers such as products and unit quantity, logistics managers need to consider these seven key decision areas which have been termed in the "Logistics Mix". The seven elements are as follows:

a. Inventory
b. Facilities
c. Communication
d. Utilisation
e. Transport
f. Materials management
g. Production scheduling

The key core of logistics is management, specifically the management of two distinct flows through the organization; materials and information. The management is responsible for the first insight of production, at the stage of the product's conception, right through the consumption of the product itself. By utilizing these seven elements above, logistics managers can make a significant contribution to the flow of information and materials in the company.

How does Logistics work?

Logistics management consists of two processes, inbound and outbound processes. The inbound logistics process is the process of moving goods from suppliers into a warehouse until the production facility makes the product. Inbound logistics include raw materials, tools, component parts, office equipment, and supplies. Outbound logistics, on the other hand, is the process of moving finished products out of the warehouse inventory and shipping them to customers.

The process is now lasted continued in several production methods used to effectively manage production flow. Push flow method, for example, producing and stocking goods according to the state of the market and the order book. The pull flow method produces goods and materials based on the real demand from the market, this means that there are no unsold products or shortage of stock, but it also means that there is no stock in the warehouse either. The just-in-time method creates production on a regular and controlled flow of raw materials until the product arrives on site when the customers need it.

The optimization of logistics processes consists in rationalizing the supply chain by adopting relevant production methods. Optimizing logistics flows and processes means implementing strategies to manage multiple movements involved in the processes with maximum efficiency. In order to achieve this, logistics managers should first understand the issue and map the flows first before finally automating and optimizing them using supply chain management tools

Logistics = Supply Chain?

Logistics and supply chain are two distinctive features, however, supply chain are responsible for the overall sourcing, processing, and delivery of goods to the end customer, while logistics specifically focuses on moving and storing goods between different supply chain organization. The most important distinction is that logistics is a distinct part of the supply chain and is essential to good supply chain run smoothly. However, each logistics operation is only responsible for a unique and self-contained part of the supply chain. Therefore, effective logistics management leads to successful supply chain management.

To conclude...

A strong logistics management should be implemented in every organization and companies for a successful business enhancement. Organizations and companies should focus on collaboration among transportation providers, buyers, and vendors in managing costs effectively and achieve optimum business goals. Therefore, logistics management helps organizations and companies to improves customer service, brand company's reputation and brand, which later leads to business improvements.

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