When we talk about logistics, images of trucks, packages, warehouses, trailers, delivery notes, orders, indicators, decisions immediately come to mind… A great hodgepodge of things that need to be put in order. And that is where logistics management comes into play, which is what will make the difference in the results that your supply chain achieves.
What is logistics management
If logistics is the execution of your supply chain processes, logistics management is the act of stopping, raising your head, and coming up with a plan to make your supply chain really work and be efficient. Realizing why we do what we do and what steps we are going to take to do it better. This planning is what allows logistics management to be the source of the value that is provided to the customer.
To understand logistics management, the first thing is to realize the number of areas and processes it covers and the people and departments it involves. From the logistics of supplying products to carry out the work of the company to customer satisfaction and everything in between. The marketing and sales departments with their demand forecasts and advertising campaigns, customer service, purchasing, production, etc.
Likewise, the nature of the decisions they have to make is very diverse, which affects the multidisciplinary approach that logistics has more and more within companies. Logistics management answers questions such as what kind of supply chain we want to be, what type of warehouse is suitable for our needs, where we are going to locate our warehouses and how many we need, what service levels are most appropriate for each product in our catalogue, how much safety stock we need, how we are going to reduce breakages during transport… and so on, almost infinitely.
To complicate it a bit more, in logistics management, bad decisions create problems that, in turn, tend to get bigger over time. Or, perhaps worse, they stay locked up forever with no one to fix them, producing inefficiencies day after day in your supply chain.
Logistics ranges from the mere conception of the product to the final delivery in the hands of the user
If so many tasks, jobs and sections are influenced by logistics management, what are your objectives?
According to the EAE School we can distinguish the following objectives:
Increase quality levels
Regardless of which author we turn to, the objectives will have a common root: the rationalization and improvement of our processes. It’s easy to see how these principles can be applied to the various areas we’ve discussed, whether it’s improving efficiency in unloading our trucks or our ability to reduce inventories by further refining demand forecasting.
How to improve your logistics management
In order to successfully decide on so many issues, logistics management needs a reliable compass: performance indicators or KPIs. Scales and statistics that give a reliable image of the performance of our company in the processes for which we are responsible.
Broadly speaking, we can distinguish three factors that we want to analyze with our KPIs; the speed with which we do things, the cost at which we do them, and the quality the customer receives. Let’s see some examples of the KPIs that we can establish according to each area of our logistics:
Production: units produced per hour, percentage of defective products, cost per unit produced, cost of defective products.
Storage: price per unit stored, percentage of obsolete merchandise, inventory precision, percentage of merchandise out of stock.
Order preparation: preparation time per order, cost per order preparation, accuracy in order preparation.
Transport: average distance of each shipment, average cost of delivery, kilos sent, delivery time, relationship between the cost of shipping and total sales.
Delivery: percentage of successful first-time deliveries, percentage of on-time deliveries -counting only transport, from receipt of the order or from another point-, complete deliveries, deliveries without breakage.
Quality / Customer service: percentage of deliveries with complaints, customer satisfaction surveys, average customer retention/loss, returns.
Creating good indicators will allow you to detect where the pain points of your logistics are and attack them. Is your ability to prepare orders below the competition and do you need to invest in its automation? Do you have problems with your purchases or to predict the demand for defects when sharing information between departments? Or is our difficulty with customers related to breakage and could something simpler help us, such as better protection during packaging?
Indicators can help you know if you need a big gamble, like revamping your entire CRM, or something simpler like investing in non-slip packaging to protect your shipments. And, in addition, they will be your best ally when deciding your logistics management strategies. Knowing why you do things, what things you should stop doing and what you should start doing.
Logistics is so important today that it must be taken into consideration from the outset. From the mere conception of the product to the final delivery in the hands of the user. That is why the comprehensive approach that good logistics management must have is so important.
If we can really fine-tune the whole journey, we will be building a true supply chain instead of just a continuation of uncoordinated links. And to the extent that we make the factors that we pursued with our KPIs (cost, speed and quality) a reality, we will be more efficient, offering more to our customers and, ultimately, having a competitive advantage over the competition.