The global logistics market stands at a whopping USD 8.6 trillion, and the global supply chain management market is USD 28.9 billion. Still, more than half of the supply chain professionals face operational and management challenges from disruptions, shortages, fluctuating customer demands, and slower response times.
Add technological disruptions, poor real-time operational visibility, sustainability concerns, and value chain gaps in the mix, and the overall picture becomes even grimmer.
Hence, logistics and supply chain management becomes increasingly crucial and a business must-have instead of being a “best-practice” initiative.
Below, we discuss some of the core challenges and industry trends in logistics and supply chain management, and the benefits of having highly optimized supply chains. We also discuss the role of logistics in the supply chain management, and some key considerations to keep in mind while investing in logistics and supply chain management automation.
Supply chain management refers to handling, planning, monitoring, and managing the entire production flow of goods or services. There are five components of supply chain management – planning, sourcing, manufacturing, delivery & logistics, and returning.
On the other hand, logistics management is a part of the supply chain process that plans, implements, and controls the movement of goods and the flow of services efficiently and effectively. There are four areas of logistics management: supply chain, distribution & material, production, and reverse logistics.
Before we dive into the deeper waters to explore the role of logistics in supply chain management and ways to manage logistics and supply chains, let us have a quick look at some of the core differences between the two.
The core differences between logistics and supply chain management (SCM) are shown in the following table:
|Logistics||Supply Chain Management|
|Logistics is a subset of supply chain management activities.||Supply chain management (SCM), on the other hand, encompasses a wide range of activities, such as planning, material sourcing, labor & facilities management, and production and delivery of goods and services.|
|Logistics focuses on resource-efficient (time, money, fuel, etc) goods movement and deliveries to customers.||Here, higher operational performance is the main target such that businesses gain a competitive advantage.|
|Logistics use cases are centered on the movement & transport of goods in a company’s supply chain.||SCM is centered on the entire cycle – from raw material sourcing to production, design, distribution, stocks, inventory, and deliveries.|
Owing to this symbiotic relationship between both, logistics and SCM are critical to each other, and if one derails, redundancies and inefficiencies germinate in the other.
Next, we examine the role of logistics in supply chain management.
Logistics is a key supply chain enabler and connects the sources of demand and supply. It bridges the gap between the market demands and the capabilities of supply sources so as to create a continuum across all the demand points in a supply chain.
This ensures that all the different components, such as the warehousing network, transportation network, inventory control system, and supporting information system, work in an integrated manner to deliver the right product at the right time, at the right place, and that too in a cost-efficient manner.
Efficient and optimized logistics processes make supply chains more efficient, controllable and predictable, and facilitating all this is the role of logistics in supply chain management. In simpler terms, all the stakeholders can collaborate, communicate, check, manage and track their tasks in a streamlined manner without having to rely on manual collaboration.
Logistics involves all the moving parts – carriers, shippers, dispatch, line haul movements, distribution, pick-ups, and the entire Last Mile. If logistics processes are not resource-efficient or manageable, the inefficiencies creep into the entire system. The operational costs balloon up, profits go down, and customer experiences get degraded.
This is why efficient logistics is crucial and the role of logistics in supply chain management is massively important.
Automation and digitization reduce the reliance on manual elements in the entire value chain via smart processes such as automated billings, invoicing, workflow creation, shift management, rosters, etc. Digitizing the logistics processes can be done on multiple levels, such as online booking and management of cargo, tracking and tracing shipments in real-time, route optimization, and autonomous vessels.
Similarly, automation finds multiple application areas in logistics management, such as intelligent transport systems, order allocation, routing, dynamic order clubbing, freight management, status standardization, alerts, notifications, etc.
Thus, automation and digitization of logistics processes and operations ensure transparency, collaboration, communication, flexibility, and responsiveness in the supply chains.
A supply chain is a multi-component ecosystem that is vulnerable to inefficiencies and cost bleeds, especially in the absence of an integrated management system. Integrated logistics management offers a complete view of supply chain and logistics movements so that all the information is readily available to all supply chain stakeholders.
Integration of logistics and supply chain components, such as transportation, distribution, delivery, freight providers, etc, ensures a natural development of collaboration depth that captures the intrinsic supply chain value. This facilitates rapid assessment of end customer demand changes and real-time response on planning and execution levels across all the stakeholders.
Integrated planning and execution ensure full awareness and collaboration on strategic, tactical, and operational levels. Planning and execution are essential because the ultimate goal of the supply chains is not only timely deliveries but also to do so responsively and efficiently such that all the resources are used optimally. Integrated planning involves creating smart execution plans for all the logistics stakeholders, such as suppliers, distributors, carriers, 3PL providers, customers, etc.
This is also where process digitization and automation play a massive role. Process digitization takes our operational redundancies and weeds out repetitive mundane tasks from operations. Once the processes are digitized, automation helps in planning multiple tasks and role responsibilities. This is another example of the important role of logistics in supply chain management.
Visibility into the movement of orders, assets, and tasks or events related to every stakeholder instills trust and transparency in the entire ecosystem. The managers can see which orders are allotted to which riders and which vehicles they are using to complete the deliveries.
There are four major use cases of logistics visibility:
Such granular visibility into real-time events empowers businesses to share dynamic ETAs with end customers. They can track their orders in real-time and can also get alerts related to the delivery milestones so as to get deliveries in the first attempt.
This is yet another crucial consideration for logistics planning. Analytics and reporting leverage data insights from multiple resources such as vehicles, riders, customers, transportation providers, warehousing, etc., to help businesses make better and more strategic decisions.
Incorporating advanced technologies such as AI and ML in the logistics management processes helps reveal hidden trends and patterns in data. Businesses can identify potential areas for improvement, such as cost-cutting, resource optimization, and quality of service.
Procurement and distribution are the two extremes of logistics processes, where one signifies the inflow of goods to be transferred, and the other signifies the outflow or delivery-related movement of goods.
Procurement and distribution are also two key processes that are highly vulnerable to inefficiencies in the absence of smart planning and collaboration. This planning and collaboration is a cumulative result of all the key considerations for logistics management discussed above.
Digitization and automation reduce the reliance on manual elements and help businesses automate mundane processes. Integration of logistics components facilitates seamless delivery orchestration and management. Real-time visibility helps business monitor and control all processes related to goods movement, and analytics helps businesses improve their strategies over time.
Now that we have had a detailed discussion on the key considerations of logistics management, let us move on to the key considerations of supply chain management to understand the vastness of the role of logistics in supply chain management.
Supply chains and logistics form a complex ecosystem with multiple parts and parties. However, the information flow is discontinuous, and all the components are disparate, which means when it comes to standardization or collaboration, either the businesses are relying on manual intervention, or they are relying on the “other party”.
This affects the overall data usability, and businesses often find it hard to make business decisions with a comprehensive understanding of holistic data. These information silos also affect the overall productivity and efficiency of the system.
Process standardization allows businesses to gain better control over the management of supply chain activities. They can set specific terms and conditions for ensuring quality and for task workflow automation. Standardization also makes it possible to update and manage the ever-changing logistics processes and implement a standard workflow across all the supply chain components.
Lack of status standardization and poor soft data management in supply chains makes it harder, if not impossible, to standardize the processes. Even if the businesses are using third-party management systems, they are unable to manage the disparity across all the functions of logistics and supply chain management.
Setting the right KPIs is as important as measuring, tracking, and leveraging them for better operational performance. However, the vague and disjoint nature of the logistics and supply chain components makes it difficult to create, assign, measure, and track the KPIs effectively.
Manual management is impossible in large ecosystems and the lack of end-to-end process automation results in poor KPI measurement. Because all the components, such as transportation, warehousing, distribution, logistics, etc., are disconnected, it becomes impossible to set proper KPIs that measure and track all the functions efficiently and effectively.
Logistics and supply chain management involves multiple parties and multiple stakeholders, which makes communication and collaboration difficult. Checking shipment status, contracts, billings, allocation of orders, planning, distribution, and more – communication and collaboration are crucial for multiple activities.
However, most supply chains lack a unified interface for communication and collaboration, making it impossible to streamline both these functions across all the components.
While automation is getting increasingly adopted across global supply chains and logistics processes, businesses still face challenges in terms of adoption, application, and leveraging the right benefits from automation.
Some of the reasons behind this involve the following:
Businesses need to invest in solutions that automate all the manual and redundant components of the supply chain ecosystem and also standardize the processes for the best results.
The inability to get predictive insights related to costs, shipment delays, transportation, market forecasting, and customer demands is a critical challenge in logistics and supply chain management. Also, supply chain stakeholders often find themselves struggling with visibility issues such as asset management, rider management, route management, distribution, and warehousing management.
This poor visibility affects the overall management of the supply chain and also leads to process inefficiencies and cost leakages.
Now that we have had a detailed discussion of the let considerations and challenges in logistics and supply chain management, let us move on to find how leveraging the right automation in the right manner does a difference.
The key to driving the best results with automation is to first identify the business pain points. For large enterprises that need to manage multiple components in a supply chain, the best option is to invest in smart end-to-end logistics and supply chain management automation, like Shipsy.
Shipsy helps manage multiple components of the entire supply chain ecosystem such as transportation, distribution, routing, deliveries, freight, etc., from a single integrated dashboard. All the stakeholders can collaborate and communicate in a streamlined manner and orchestrate extremely well-planned and efficient deliveries.
Shipsy offers AI-powered route and asset management and offers hundreds of custom optimization criteria for reducing operational costs, and optimizing resource utilization. Shipsy’s automated workflows and smart operations management functionalities help businesses throughout the supply chain, right from freight procurement to all types of doorstep deliveries.
With Shipsy, businesses have unlocked:
For more information and to get in touch with our experts please schedule a custom demo today!