What is Logistics & Why is Important for Businesses
Logistics: Connected to our Everyday Life
You have undoubtedly heard the term logistics, and relate it to transportation right away, didn't you? But let me tell you that there's waaaaay more to it.
For starters, did you know that everything you use at home, at work, or even leisure time, is connected to Logistics?
Yes, besides being involved in planning, production & sales. Other business processes require Logistics.
Let’s dive in.
What is Logistics?
Let's think of Logistics as an idea; we are all aware that every great idea is still a beautiful hypothesis until it hits the ground with an action plan.
An idea is an inspiration. Putting up the work to organize it is not a one-time activity; of course, there's an entire process that flows from one task to the next one. There are many points along that journey, from idea to execution. Customer experience is also involved in this operation.
The handling of this work process is called logistics management. Consider everything from information to materials, production & more. Without logistics management, the many phases of the purchase of any product will quickly fall apart.
If you are not familiar with logistics management, don't panic. We'll see a complete summary that involves the relationship between our dear old friend, logistics & other sectors, as well as the importance of investing in it.
Why is Logistics Management Critical?
The purpose of logistics management is to find more efficient & effective ways to move resources & products from conception to completion and, ultimately, to the customer. The driving force behind these actions is meeting customer demand by providing the best possible service to retain & maintain our client's satisfaction.
How? By meeting their requirements.
As customers demand better service, there is a need for faster, more accurate & higher quality shipments. It is through logistics management that customer satisfaction is achieved. But that is not the only benefit of logistics management.
Benefits of Logistics Management
Another goal is to create visibility in the companies supply chain. By analyzing historical data & tracking the movement of goods in real-time, logistics managers can improve material flow & avoid potential disruptions.
Therefore, logistics management helps increase revenue. It improves customer service, adds to the companies good reputation & brand, which in turn creates new & more profitable business. With more visibility in the supply chain, there is an opportunity to save costs on operations, control incoming funds, keep inventory at the correct level & organize the reverse flow of goods.
Logistics Processes
Planning
Planning Logistics is the efficient flow & storage of products from the point of origin to the end of consumption. And planning, on the other hand, encompasses all the strategies employed by a company, affecting all aspects of production. All these strategies range from workforce activities to product delivery. That's why every business requires effective logistics and operational planning at the same time to produce products and deliver them to the end-user.
Successful businesses require active management of operations. This means managing inventory levels, ordering & storing materials while trying to maximize capacity, monitor interactions within the system, & maintain strong supplier relationships.
Operational & logistics planning typically involves the use of spreadsheets, with specific analysis of costs associated with operations for setting performance targets, & monitoring the organizations' progress toward achieving those goals.
Sale
Sale Logistics & sales are complementary business operations that allow a company to ensure the supply of the right products for the right customers in the right place. By coordinating logistics & sales, companies can create the highest levels of customer satisfaction.
Businesses require this satisfaction from the full customer experience, from initial request to delivery. An efficient logistics operation ensures that:
• The client received the products he requested quickly & in the right conditions.
• The customer to the minor has the products in stock when visiting a store.
• If the customer needs to return the product, the process need to be fast and convenient.
Furthermore, choosing the correct distribution strategy allows companies to reach different sectors & increase their market share.
A store serving a local community can grow its business by offering delivery service to out-of-area customers who order online or by phone.
The success of a business, depends directly on effective communication between Sales & Logistics. Sellers are on the front line & know customers' plans. If they communicate this information, this will help improve product availability.
The estimate process plays a vital role in business, while daily interaction of sales provides valuable information about your accounts for logistics.
Maintaining a good communication flow is the key to an efficient sales process.
Operational and production
Good production & logistics management focuses on the design, planning, optimization, & control of functional processes in manufacturing, transportation, supply chains, & service sustainability and logistics.
Modern production & logistics methods are becoming increasingly complex. Product lifespan is decreasing, suppliers & buyers are spreading across the planet, and more and more activities are being outsourced.
Therefore, it is necessary to identify the best location for production facilities and distribution centers, as well as the resources they need. In addition, it is essential to structure production, storage, transportation, distribution, and purchases, since the objective is to offer customers the standard of service they desire & guarantee the reliability of the process.
The mix of production & logistics, represents a balancing act. From an external perspective, customers expect fast response times, as well as high-quality products. From an internal perspective, the company values the profitability and performance of deliveries.
Here are some daily companies challenges:
• What is the production strategy that best supports companies objectives concerning customers, finances, employees, & markets?
• How can we as companies become even more efficient & further reduce costs?
• Are there effective ways to speed up the process, specially response times?
• How can we manufacture products to meet the expectations of our customers?
• How can we reduce high inventory levels & eliminate rigid logistics structures?
Production and logistics teams, therefore, need to work to develop innovative strategies and solutions that ultimately achieve customer satisfaction.
Financial
Traditionally, finance and logistics are considered the two functions of the organization that have always been found on opposite sides of each other.
On one side, logistics wants to expand the business by giving more credit to its customers and maintaining stock to serve it better. On the other hand, the financier is seen as the control function that does not believe in blocking money through excess action.
The fact is, to be financially sound, the business must have enough sales to cover running costs & fixed costs, plus a constant & increasing return on investment. The financial performance of a company, therefore, depends on low stocks, quality of delivery, & delivery time. That is to say: logistics.
Hey there!
I'm glad that you took the time to read this entire article! Now, you know the importance of Logistics & how it is crucial for the companies to succeed. It basically goes hand-to-hand with customer experience.
Still, there's so much more I want to share with you.
That's why I'm working on a 2nd article as we speak, where we’re going to dive into Supply Chain & how it’s different from Logistics. Stay tuned.