The Role of Logistics in Supply Chain Management
From the collection of raw materials to the delivery of a finished product to a customer, supply chain management encompasses a wide variety of business processes. Logistics refers to the storage, movement, and flow of information, services, and products within the supply chain.
Many businesses have discovered that supply chain management is increasingly complicated as the global supply chain expands. However, without a great logistics management system in place, proper supply chain management is impossible for businesses to accomplish.
Logistics are a crucial and foundational component of effective supply chain management, ensuring that finished products are delivered to customers swiftly and securely. 5 ways that logistics can help businesses to improve their supply chain management include-
1. Supplier Relationships
Supply chain management professionals are aware that one of their most important responsibilities is maintaining a positive relationship with vendors. As with any relationship, great communication is absolutely essential.
Some questions that businesses should ask to better understand their relationship with third party suppliers include-
- How responsive is their customer service team?
- Are there any additional methods available to improve our communication?
- Are their information technology capacities a good match with our business?
The vendor-business relationship should be mutually beneficial in order to best ensure long term stability and sustainability. For example, a global supply chain may not be the most efficient choice for a small business who experiences difficulties when attempting to contact a customer service representative or delayed shipping speeds.
2. Strategy Analysis
A great supply chain management strategy and measurable objectives are great best practices for businesses to implement and maintain. However, supply chain management strategies and objectives that are not effective nor effecient can quickly generate larger issues.
Third party logistics should stay at the forefront of supply chain logistics initiatives. For example, if a supplier is utilizing a third party logistic provider that is not affordable, it may be worthwhile for the business to request that their supplier explores alternative options.
3. Data Accessibility
Advances in supply chain management software programs including inventory management software provide businesses with enhanced data accessibility. Data silos that prevent sharing or access to important data can create disastrous consequences for a business.
Real time updates and universal access to important data increases supply chain management capabilities immensely. Some supply chain management software can even be linked with third party logistics providers to further optimize data sharing and communication.
4. Demand Planning
An excellent demand planning process is useful for a wide variety of business operations ranging from inventory management to product development initiatives. Demand planning provides insight on estimated customer demand and projected sales, which in turn grants businesses with sufficient time to prepare.
When demand planning processes are optimized, the supply chain process is also positively effected. For example, a seasonal rush that demand planning anticipates may indicate that a business should switch from a global supply chain vendor to a domestic vendor in order to increase shipping speeds.
With the foresight that demand planning afforded the business, their raw materials arrive in time for them to create a high quality finished product that they can then sell to their customers. Not only does the business avoid customer service issues that result from being unable to fufill orders but they can also secure additional sales they would have otherwise missed.
5. Consistent Monitoring
The most effective supply chain management and logistics management techniques are ever evolving. Long term supply chain improvements are a necessary part of maintaining a competitive advantage and increasing bottom line profitability.
Although measuring and monitoring the effectiveness of logistics management and supply chain management techniques is time consuming, it is well worth the benefit that businesses experience as a result.
- Supply chains require consistent monitoring and maintenance by a wide range of business professionals. Logistics help with supply chain management, with the objective to provide customers with a high quality finished product in a timely manner. In fact, without logistics, it is impossible for businesses to execute proper supply chain management at all.
- The complexity of supply chain network management is dependent on a variety of factors including whether a business contracts with a global supply chain vendor or a domestic local vendor.
- Logistics can help businesses to improve their supply chain management by optimizing supplier-business relationships, analyzing the effectiveness of an established supply chain management strategy, increasing data accessibility, utilizing demand planning productively, and ensuring consistent monitoring of the entire supply chain management process.