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Ever wondered how does logistics add value to the supply chain? Is it via smart functionalities such as real-time tracking or unified collaboration with multiple parties? eCommerce business leaders understand that sound supply chain systems are not built overnight. Also, to build one exemplary system, the role of logistics and its contribution goes beyond just executing timely delivery to generate positive customer experiences.
Let’s take a look at some stats depicting logistics market value across multiple parameters:
This blog explains how does logistics add value to the supply chain and also highlight the relevance of smart logistics solutions in unlocking profitability and sustainability by creating robust supply chain frameworks.
Let us begin by understanding how logistics and supply chains are related to each other.
Logistics is an integral part of supply chain management. The success of logistics is necessary to accomplish outstanding supply chain management. Supply and demand of products are two distinct pillars of any supply chain ecosystem that logistics unite seamlessly by integrating its core components.
Warehousing, inventory storage, packaging, shipping and last-mile delivery – are significant components of the logistics mechanism. Each component has its peculiar challenges, like material storage, load unitizing, site selection, network planning, order picking and dispatch documentation are the core challenges of warehousing. Similarly, material and quantity requirement planning are burning questions of inventory storage.
Supply chain managers can not address these issues without interlinking the logistic components with each other. Therefore, logistic operations make the right product delivery possible at the right time, in the right quantity and in a reduced cost. But such outcomes are difficult to achieve without a real-time information system. Information flow integrates all these components and facilitates the organization to make informed decisions.
To understand how does logistics add value to the supply chain, we need to have a look at the role of logistics in the overall supply chain.
Let’s have a quick look at the various functions next.
Sustainable supply chains are created on proven logistics practices. Effective supply chain operation needs planning and executing smooth storage and flow of products in both forward and reverse directions. This requires seamless integration of all major components like warehousing, inventory control, packaging, and transportation. Here intelligent automation determines the overall success by optimizing decision-making.
Integration ensures a seamless flow of information throughout the system. This enables easier coordination with the suppliers, improves the efficiency of backend processes and induces speed and consistency among inventory, warehousing, transportation, asset utilization and management.
Logistics strategies create business value by effectively meeting customers’ evolving demands. The more a business makes its product available to customers, the more value it generates. In the era of globalization, to meet customer demand at various global locations and at scale, smart logistics practices help create a competitive advantage with synchronized components like warehousing, inventory management and freight management.
Business leaders know that product demands depend on several environmental factors. Therefore, a successful logistics strategy intelligently deploys its capabilities to optimize resource use. For example, during the pandemic, several countries followed strict lockdown policies. In such times, efficient logistic strategies successfully ensured customer product availability and value creation through operations adhering to regulatory restrictions.
Cost-effectiveness is a significant indicator of an efficient supply chain. Successful logistics operations keep costs under control and reduce overall overhead expenses. Climate control warehousing, robust inventory planning and management, faster replenishment cycle, fleet management, cloud sourcing, route optimization, and real-time insights are fast becoming must-haves for all brands.
This helps align supply chain KPIs with organizational goals and incorporate real-time visibility in operations and is one of the most credible answers to the question – how does logistics add value to the supply chain.
For instance, transportation is one of logistics management’s major expenses. Fuel price fluctuations, distance, batch size, and quantity can influence the transportation cost. Therefore, to overcome the supply chain transportation cost challenges, logistics solutions help work on consolidating volumes, route optimization, and multi-stop deliveries.
Marketing can bring new customers, but can businesses cultivate these leads in loyal customers without meeting their product demands? Data states that 70% of businesses agree that retaining old customers is cheaper than acquiring new customers. So, in today’s competitive market, companies increasingly depend on logistics strategies that allow consistent order fulfillment, faster grievance resolutions and efficient operational processes.
Similarly, in a survey, 98% of customers confirmed that shipping impacts brand loyalty, whereas 84% of customers admitted that they replaced the brand after just one negative delivery experience. Sound logistics strategies are an effective way to boost customer experience. Fast and timely deliveries, real-time tracking, and digital POD logistic strategies help create a positive experience for the customer.
The above-mentioned points highlight the relevance of a good logistic system. Besides, it also proves how logistics is the key differentiator in the success of supply chain management. In the following section, we will cover all the top factors that answer the important question – how does logistics add value to the supply chain?
In a fast-paced and information-hungry marketplace, smart logistics allows for product and information movement, timely delivery of products, cost reduction, and integration of its components. All these elements constitute the foundation of robust supply chain management.
Let us understand all these logistics factors that bring accuracy and agility to supply chain management.
In the order fulfillment cycle, logistic functions start with order processing. However, the order processing varies based on business and the fulfillment model being followed. Standardizing the entire process, from order preparation and order entry to status reporting, creates an efficient process to follow. This includes creating tags for key milestone events, capturing soft data, and more.
For instance, in 3PL, the order processing starts with the company receiving a customer order. As a practice, the logistics department is notified, and inventory status is updated. The information is shared among warehousing and transportation. Warehousing staff identifies the product, updates the inventory records, and forward the product for packaging. After packaging, the product is shipped further to their geo-location hub for last-mile delivery. Once the product is delivered, the digital POD is shared with the concerned stakeholders.
Cost-effective and seamless transportation are crucial for the success of supply chain management. Multiple factors regarding the product, like perishability, dimensions, the need for urgency, etc., have a major impact on transportation decisions. Manual interventions carry the risk of unintentional or unseen errors creeping in. However, smart TMS solutions provide automated routing and route optimization features that tremendously save costs and make delivery operations agile.
New-age fleet management solutions ensure effective mode planning and vehicle scheduling, asset utilization, travel time reduction, and risk mitigation by following the required compliance guidelines. Automated Transport Management System (TMS) integrates all logistics components and brings the required level of transparency and visibility to entire supply chain systems.
Manual labeling is often slow, error-prone, and requires more manpower. This leads to incorrect deliveries and greater returns and hampers the profitability of delivery operations. Automated label generation can save operating costs, add speed, reduce returns and improve customer service. Similarly, customers can easily initiate and print labels without too many hassles for intuitive returns.
Automated solutions drive logistics operations by auto-generating labels with distinct sender, recipient, weight, handling, and storage instructions. As a result, this improves material handling, and the customer receives the product in ideal conditions. Automated solutions also print barcode labels, reducing processing time and fastening the process. This further reduces confusion regarding delivery details.
Freight procurement is one of the most important logistics processes, wherein businesses engage freights to transport products from source to destination. The process is significant as it determines the overall expense threshold of the business to get the products shipped or delivered to the customer.
As a process, businesses send RFQ to various suppliers and analyze their quotations, conditions, carrier capacity, pricing, success rates, and related parameters to select the best logistic partner. Automation makes this process fast and makes the decision-making more scientific by considering various parameter metrics. This is how smart logistics management adds value to the supply chain.
Fleet and truckload planning, rider and mode selection, delivery time, and empty mile cost calculation are all important factors to consider in strategy to eliminate the supply chain blockages. All these parameters are important for asset optimization in logistics as it directly affects an organization’s supply chain costing and profitability.
Automation adds accuracy to logistic operations. TMS has data and AI/ML insights support, which empowers supply chain heads to decrease deadhead, idling, overpaying, and unoptimized workload for carriers and riders. KPIs of all processes are regularly tracked, and potential gaps are highlighted promptly.
In eCommerce; timely delivery is one of the major KPIs to adhere. So, ETA becomes significant, as it ensures customer availability and profitability. SLA adherence and the effectiveness of logistic partners are largely dependent on the availability of information in real time. However, ensuring accurate ETAs is not easy since it involves multiple variables, many of which are dynamic in nature.
However, automation makes this possible with real-time tracking and information sharing via a unified platform. All involved stakeholders are notified about delivery timelines. As a result, logistics operations attain much-needed transparency that successfully enhances customer satisfaction, reduces administrative costs, and boosts work satisfaction among riders.
Freight forwarders drive value from freight management by successfully managing the shipping of the product from origin to destination. This process starts with carrier selection and follows a long process of route optimization, documentation, compliance management, and successful execution of deliveries. But such excellence is difficult to achieve without automation.
Smart logistics solutions accomplish international and national operations with robust freight management strategies. Features like automated tracking, multimodal visibility, and daily shipment reports create a 360-degree picture of the entire logistics process to aid in effective decision-making.
All involved parties, like the customer, traders, and logistic managers, expect real-time tracking of the orders. For the logistics personnel, this helps ensure the required control and transparency in the overall delivery mechanism. Nowadays, customers want all information regarding crucial delivery milestones at their disposal, with 91% of customers actively tracking such information.
As we know that customer satisfaction is one of the core goals of supply chain management, which automated logistics solutions meet by making real-time tracking possible. Moreover, this data makes logistics partners aware of possible issues in on-demand delivery, empowers them to take remedial action, and keeps involved parties informed about the circumstances.
Manual logistics planning has many limitations, and efficient route planning and optimization are among them. Tight delivery windows, dynamic traffic conditions, and multiple delivery routes increase the complexity of last-mile delivery operations.
Smart logistics software with built-in AI/ML capabilities helps create optimized routes in the planning and execution phases. Considering historical and dynamic data, the system allows real-time route planning and optimization at the fingertips of delivery riders and logistics managers. Coupled with TMS solutions, this keeps the rider relaxed, reduces their frustration levels, minimizes the chances of delivery returns, and makes each delivery profitable.
Analytical data highlight the system’s flaws, prominent performance gaps, and unrequired processes within the supply chain operations. Smart logistic solutions drive useful insights from operational data. This helps eliminate delivery operations’ shortcomings and enhance supply chain operational value. Similarly, automated logistic systems eradicate the hassle of manual POD scanning and data sharing.
Digital PODs help streamline the delivery process. With real-time and transparent mechanisms in place, it helps reduce the chances of fraud and provides records for claims settlement.
These were a few of the major positive externalities that logistics brings into the supply chain. This also makes it clear that logistics and supply chain management are inseparable for business success as this help reduce overall costs as well as ensure a positive consumer experience.
Automation is the best way to succeed in a competitive market. Choosing the right software can be the difference between success and failure. To realize the potential of how does logistics add value to the supply chain, brands need to understand the functionalities and suitability of logistics solutions in the market to boost their business operations.
Automation-powered logistics management tools can empower businesses to ensure cost-efficiency, agility and flexibility while keeping customer experience intact. Adopting smart and innovative logistics solutions based on smart technologies, such as AI, ML, and Big Data Analytics can help steer businesses toward sustainable growth.
Shipsy’s smart end-to-end delivery orchestration and diverse logistics and supply chain management offerings not only equip businesses with the right automation but also offer hundreds of custom optimization and planning criteria for routing, delivery planning, hub management, distribution, international logistics, Last Mile, and more.
Shipsy helps businesses to orchestrate highly efficient logistics and unlock:
For more information and to get started with Shipsy’s smart end-to-end supply chain management for sustainable business growth, please schedule a custom demo today!
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