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Organizing and implementing a complicated operation end to end is known as logistics. A company cannot survive if the foundation of the logistics process is weak because the logistics industry is the backbone of international and local businesses worldwide. It refers to transporting any material from the source to the point of consumption, and is an integral part of any product that faces many challenges and advancements.
A supply chain is a network of distributors and suppliers in any organization allowing the company to make the shipment of goods. It is an essential part of this industry and is known to be a concept that evolved from the military. The supply of inventory and equipment was carried out by the military logistics making it the lifeblood of a country’s military strength. It was slowly adopted by other industries and has evolved to become the heart of the world business ecosystem.
What is Logistics Management?
Logistics management is the part of the supply chain process involved in planning, implementing, and monitoring the effective and efficient flow of goods, including the management of goods storage and services provided. It is an integral part of the entire supply chain procedure, from the starting point to fulfilling the consumer requirements. Logistic resources mainly include tanks, ships, and pipelines used to make products, raw materials, and equipment for easier flow processes to maximize company profits.
Most supply chain systems largely depend on applying logistic resources configuration because it relies on the demand and supply of products. However, the equipment reliability in a logistic model assessment that has a strong influence on the profits is not taken into consideration.
What is the Logistics Management Structure?
The design of the corporate organizational structure is dedicated to creating the best possible environment for achieving business goals. Since there isn’t any optimal organizational structure for all purposes, the structure should be tailored as per the needs of the company aiming to support the application of the corporate strategy.
The first organizational structure of logistics management is not centrally managed and is divided into the following major segments:-
- Production
- Purchase
- Sales
- Human resources
- Finance
These basic organizational structures based on the hierarchy of powers are:
- Line (linear): These structures are a part of the initial developmental stage of the small-scale organizations with only one management level consisting of the business owner and dependent on the direct command authority.
- Staff: Staff services ensure expert decision-making of qualified line managers in their departmental units. This group entirely depends on specialists from numerous fields responsible for indirect professional management.
- Combined: This organizational structure in logistics is a combination of both Linear and Staff.
The Logistics Management Structures
Functional
Functional organizational structures are created by grouping workers into sections depending on the similarity of skills and tasks. Most mid-size businesses have this structure of logistics organization.
Hybrid
Staff cultures are involved in the total and partial decentralization of decision-making powers to simplify overstuffed and complex managerial structures. Therefore, these hybrid structures are used as cost, investment, profit, revenue, and expenditure centers.
Centers
Also known as organizational project teams, these structures have complex tasks requiring a systematic approach and simultaneously grouping nontraditional collectives. These can only be either temporary or secondary structures.
Project
This group attempts to combine the project mentioned above structures and functional structures. It falls under dual subordination because the tasks are received by the workers who are a part of the project from their manager and operational executives.
Matrix
Most large diversified companies have these structures where one organizational unit responsible for a particular type connects all management activities.
Product
Divisional structure is an integral part of the modifications of the organizational structures of a product. Usually, divisional organizational structures are opted for the growth of the functional organization, how they operate in dynamic environments and when it cannot provide the necessary performance. This division is broken down into independent units further broken down by the product or service type, geographic location or the company’s target customer.
Divisional
In this organizational structure, knowledge, production, sales and environments using strategic business units from other more significant and older companies. However, they can only carry out business inside the company.
Strategic business units
This organizational structure is open to customizations and is usually used when the company cannot cope with rapidly changing market conditions, rising quality requirements, competition and the advancement of information technology. This is a classical approach that emphasizes only one superior.
What is Logistics Management Control?
Logistics management primarily involves the controlling and management of being able to exploit the rational reserves. Logistics processes and operations are usually planned, controlled and managed in a target-oriented manner. It makes supporting logistical planning measurable at an operational level, where the logistics handling is used to specify logistical goals and improve logistical efficiency through current analyses.
Logistics management control is a strategic step that helps integrate logistics into strategic corporate planning and to adopt a strategic control for logistics. This is the best possible way to achieve logistics management objectives.
What are the Different Types of Logistics Management?
Four kinds of logistics management focus on the various aspects of the supply chain process. They are as follows:
Supply
Supply management constitutes the planning and coordination of products or materials required at a specific place and time for supporting the production or activity of the receiving company.
Distribution
This type is involved in managing the distribution of a supplied and stored material to its designated recipient. It consists of processes like the loading, unloading and transporting products and material, stock tracking and accountability of use (record of how and by whom the material is used.)
Production
Production logistics is the management of combining distributed supplies to make a product. This constitutes the coordination needed in the assembling or the manufacturing process.
Reverse logistics
Reverse logistics is an integral part of the production process that constitutes the return of material and supplies. Most plans for removing and re-absorbing excess material in a stock supply are created and carried out here. For instance, leftover bricks from a building site are reclaimed as stock, removed, and returned to the supplier.
The Distribution Network of Logistics Management
In a supply chain, a distribution network is an interrelated group of transportation systems and storage facilities created to receive goods inventories and then deliver them to customers. It is an intermediate and an integral point to deliver products from the manufacturer to the customer, either via retail network or directly.
Distribution networks are integral to the instant gratification society made of today’s consumers. They are a part of the post-manufacturing process of a supply chain, the flow of goods and services, and every other stage delivering final products to the customer’s doorstep. Let us look into some crucial aspects of the distribution network of logistics management:
Developing an efficient distribution network
This is ideally one of the most crucial aspects directed towards the success of a company. It is a significant part of strategic planning that grants permission for the company’s products to reach customers in less time and with ease while keeping the costs low for the company at the same time for larger profit margins.
Involve a far-reaching distribution network
This aspect of the distribution network in the supply chain for goods primarily depends on the product and the location of the target customers. Manufacturers usually have a distribution network for serving wholesalers, who also have their network for shipping to distribution networks that retailers operate.
The one at the last link of the supply chain usually sells their goods in the retail stores they own. Alternatively, a simpler variant of the supply chain would usually involve the manufacturer shipping the products to its distribution network rather than directly to the customers.
Location, i.e. proximity to the consumer
The infrastructure quality and the geographical location are the two main attributes integral to a distribution network system in logistics. It aids in the handling, storage, and transportation functions in a distribution site. It is set up to meet the company’s critical needs for serving its customer base in a particular area.
A high level of sophistication is expected at every single site. The entire distribution network needs to process the order flow of goods optimally for a couple of large items like farm tractors or a massive number of SKUs required for a retail chain.
Planning of the critical needs
A company needs to plan out the requirements for workers, equipment, IT systems, and transportation fleets and determine if a hub-and-spoke distribution network is profitable for their business or a decentralized network.
Tips for Smart Logistics Management
The globalization of the supply chain, the advancing e-commerce market and the ever-increasing demand for manufactured goods have all promoted massive growth in the logistics industry.
Every logistics company is primarily focused on maximising performance and supply chain security, and the current generation of intelligent logistics solutions is quite promising with its tools for optimized vehicle and dock management, fleet management, end-to-end order tracking, and employee safety and health and the like. Let us look into some of the best tips for thoughtful logistics planning:
- Proper Planning: This is the first step for accomplishing any task and encapsulates multiple factors like procuring goods, storage facilities and product delivery to the exact location. A logistics planning process also needs an emergency plan as a plan B.
- Adopt: In the advanced age ruled by automation, technology plays an integral role in increasing the efficiency of an organization. Automation plays a critical role in business process optimization. Valuable software related to smart logistics must be deployed in the process as well.
- Value Relations: The logistics team is the lifeblood of an organization and is greatly responsible for its growth. Everyone needs to be perfect in their allotted field of work from storage to delivery, from the warehouse manager to the delivery guy.
- Warehouse Management: Proper warehouse management is an essential part of logistics management. Many warehouse operations depend entirely on the type of goods the company sells. For instance, perishable goods, like dairy products, require refrigeration, and pulses, cereals and grains require a moisture-free environment. The specifications vary from product to product. The logistics firm should consider adapting the warehouse inventory to smart logistics to minimize wastage.
- Efficient Transportation: The transportation department of a logistics management system is often analyzed to decrease the expenses of the logistics firm and even revamped for quicker delivery of the products. Factors like finding the easiest delivery route that is the shortest yet safest way are crucial for saving money and time as well. These contribute to the efficient transportation of innovative logistics management.
- Measure and Improvise: Logistics network optimization cannot function without integrating measurement, feedback and analysis. Once new strategies are deployed in the system, the output needs to be measured at the same time. This is an essential step because it determines a particular strategy’s success or failure.
Advanced software, as well as measurement tools, should be included in the process to easily determine and classify the information depending on the requirement. The future planning of a product is entirely dependent on this measured information. You will need to analyze the metrics related to several other operations. The metrics include cycle time metrics, cost metrics, and service metrics.
Why Is Logistics Management Important?
Logistics is one of the most essential elements that contribute to a successful supply chain that helps boost the sales and profits of a company or a business that deals with the production, warehousing, shipment and delivery of products. A reliable logistics service can also give the business’ value the required boost it needs to maintain a positive image in the public eye. The top reasons why logistics management is integral to the supply chain are listed below:
- Boosts efficiency: Not only does it help create visibility in the supply chain system of a company but it can also improve production efficiency and take it a step further. Business management uses the analyzed data or the tracked movements of goods and materials in and out of an organization from a transportation management system to optimize processes and avoid potential disruptions.
- Guarantees seamless delivery: Logistics management is integral to successfully deliver products at the right place and at the right time. Professionally organized logistics also choose an expert team of professionals who help ensure fast and safe shipment, warehousing and delivery of products to the respective customers.
- Integral for a successful supply chain process: Logistics is one of the most essential elements of a successful supply chain that boosts sales and profits of organizations dealing with the production, warehousing, shipment and delivery of products. Additionally, reliable logistics services can be highly beneficial for a business as it helps in boosting a business’s value and helps in keeping up a positive public image.
- Ensures the best customer satisfaction: The customers make or break a company or product idea. Customer satisfaction is the key to a business’s ultimate success. A reliable logistics management helps plan out good strategies that help provide better services to meet customer demand. A company can also get repeat orders via creating goodwill for the supplier for each delivery that is met on time.
What is Logistics Inventory Management?
Inventory management is the area of logistics management that is involved in the process of ordering, using, storing and selling the inventory of a company. It also includes managing components, raw materials, and even finished products. It additionally handles the processing and warehousing of such items.
One of the leading roles of logistics inventory management is to help companies store and move items from one place to another. It can be utilized when suppliers send the required materials to companies or when businesses make the shipment of products to the consumers.
What Are The Challenges In The Logistics Management System?
Below is a list of the top challenges that the logistics management system is currently facing:-
- Cost of fuel: This is one of the significant challenges in logistics management. Cutting transportation costs has been of significant concern as the ever-increasing prices of fuel lead to an increase in transportation costs as well.
- Improvement of business process: With the advent of technology in every aspect of our lives and business, it has become challenging for the logistics industry to keep up with the new developments in business processes. Adopting these opportunities sounds welcoming, but adoption and onboarding are tedious and exhausting.
- Improved customer service: Customers have every right to know every minute detail about the delivery of the product they have purchased. With package locations being interconnected with social networking, customer expectations have increased tenfold. However, at the same time, they do not seem willing enough to pay a higher price for fast shipping.
- Economy: Along with high fuel prices, a bigger credit crisis and rising inflationary demands have taken a toll on the economy. This industry is constantly being forced to increase regulations for compliance, declining demand, along with increased capacity and cost centers.
- Driver shortage and retention: Hiring and retention are also an issue even if the demand is lower.
- Government regulations: Goods carriers have to go through several compliance regulations imposed by the federal, state and local authorities.
- Environmental problems: There are several environmental regulations such as the anti-idling and emission reduction regulations imposed by state and local governments. This has led to the possibility of compliance costs exceeding benefits.
- Technology strategy and implementation: Although the industry may acknowledge the benefits of technology, payment issues for implementing the said technology come to light.
Conclusion
An efficient logistics management process makes sure there is a smooth communication and flow of products. It also helps in building better customer relationships. Proper logistics management reduces the need to maintain excess inventory exponentially. It additionally aids in reducing errors, shortening delivery times, and increasing profit and revenues.
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FAQs
The primary purpose of logistics functions is to strategize and execute the efficient storage and transportation of goods from the origin to the paying customers.
One good example is the natural gas industry, where logistics functions mainly involve managing trucks, pipelines, storage facilities, and the like.
- Inbound logistics
- Outbound logistics
- Reverse logistics.
The three main activities of logistics systems are:-
- Order processing
- Inventory management
- Freight transportation.
Logistics constitutes the structure, resources, and processes in transporting goods, inventory management, and other related logistical functions. Logistics management is the management process for executing these activities.
The three objectives of logistics strategy include:
- Cost reduction
- Capital reduction
- Service improvement