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Home : Articles : Inventory : Logistics Management

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LOGISTICS MANAGEMENT

No matter what product a firm manufacturers, one of most important parts of that process of serviing customers and manufacturing products has to be logistics. Logistics includes all of the shipping and delivering involved in the production process, including getting raw materials from vendors to the manufacturer and taking the finished products from the manufacturer to the distributors. Since logistics is so critical to the success of a business, managing these transportation decisions effectively is vital.

Logistics management involves a number of elements. First, it includes choosing the vendors who will be providing transportation services. It also includes selecting the most efficient routes for the shipping of goods and investigating the best method for delivery. Plus, in more recent years, logistics management has also included the selection of software and IT resources to help manage the entire process.

Unfortunately, not all firms make wise logistics management decisions, and this can cause problems beyond simply not having their goods get from Point A to Point B in a timely fashion. The failed or delayed deliveries can cause greater buyer dissatisfaction. Damaged goods as a result of transportation can also be an issue. Poor logistics planning can result in higher costs and the implementation of inefficient logistics software can cause more difficulties than it corrects. The majority of these problems are a result of bad outsourcing decisions, either choosing the wrong vendor or of opting to perform delivery tasks in-house without sufficient resources.

To prevent these problems from happening, companies need to adopt several logistic management best practices. These companies need to focus on collaboration not competition. While companies do still have a tendency to look out for their own best interests, the trend towards a more cooperative business environment has helped more firms increase their profit margins. With logistics, one firm can schedule shipping to coincide with their supplier's delivery plans so that instead of having two trucks make two separate trips, one truck can take care of the needs of both businesses, thus reducing the overall costs. Without collaboration between the transportation providers, vendors, and buyers, these type of savings cannot be achieved.

Another issue is choosing transportation providers. Businesses that look only at price may actually put themselves at a competitive disadvantage in their markets. For example, delivery time to customers for firms takes between 3 to 14 days. Those companies at the bottom end of that spectrum are not able to provide the added value of faster shipping times to their customers and may end up losing revenue as a result. In fact, delivery times have become such an issue that they have significantly decreased in the last three years. For example, in 2001, more than one quarter of companies took 20 or more days to deliver the goods while today that number has been reduced quite a bit. Likewise, only a third of businesses three years ago could deliver goods in less than 5 days. Today, that number has grown to just under half. Choosing a transportation provider that get the goods there quickly is obviously important to the big picture.

Even though price should not be the chief consideration, it should be a factor. Businesses need to evaluate quotes while also looking at reliability, collaborative attitude, and efficiency. Furthermore, firms need to ask the important questions early on. Some businesses have actually made the mistake of contracting with transportation companies that do not even serve areas that those companies work with simply because they did not take into account all of the factors when making their decision.

Logistics management is an important way for companies to reduce their costs and to improve their overall customer service. However, these benefits can only be gained when the firm in question makes decisions regarding its company's shipping and delivering methods based on all factors, not just price.

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