Logistics Management

Module-3

What Is Logistics Management?

The logistics management definition explains that it is a process that allows effective
procurement (or buying), storage, and transportation of goods. It ensures that the required
goods reach the right place, time, and person.

 The concept of logistics management ensures customer satisfaction. It relates to the

delivery and storage process.
 The elements of logistics management cover several steps. These steps detail the
transportation process. It helps timely and safe deliveries.
 A different department manages the logistics. It is usually in big companies. Such
departments ensure that every customer is satisfied.
 This process helps lower costs. The goods reach on time without any risks.
 Also, logistics management starts right from raw materials. It continues until the
final goods reach the consumption place.

Components of Logistics Management

Logistics management involves the planning, implementation, and control of the efficient
movement and storage of goods, services, and information from the point of origin to the
point of consumption. It encompasses a wide range of activities, and its components can
vary depending on the specific needs of a business or supply chain. Here are some key
components of logistics management:

 Transportation: This involves the physical movement of goods from one location
to another. It includes modes of transportation such as trucks, ships, trains,
airplanes, and pipelines. Efficient transportation is crucial for timely delivery and
cost-effective logistics.
 Warehousing and Storage: Warehousing involves the storage of goods before they
are distributed. Effective warehouse management ensures that inventory is stored
efficiently, minimizing handling costs and facilitating quick retrieval when needed.
 Inventory Management: This component involves monitoring and controlling the
levels of inventory to meet customer demand while minimizing carrying costs. It
includes ordering, storing, and tracking inventory to ensure optimal stock levels.
 Order Fulfillment: Order fulfillment focuses on the entire process of receiving,
processing, and delivering customer orders. It includes order picking, packing, and
shipping to ensure accurate and timely delivery to customers.
  Supply Chain Planning: Planning is a crucial aspect of logistics management. It
involves forecasting demand, coordinating production schedules, and aligning
inventory levels to meet customer needs. Effective planning helps optimize
resources and reduce costs.
 Information Management: Information technology plays a significant role in
logistics management. Systems for tracking shipments, managing inventory, and
communicating within the supply chain are essential for efficient operations. This
includes the use of technologies like RFID, bar coding, and logistics software.
 Packaging and Labeling: Packaging is essential for protecting goods during
transportation and storage. Proper labeling ensures accurate identification and
tracking of products throughout the supply chain.
 Reverse Logistics: This involves the management of product returns and the
reverse flow of goods. Efficient reverse logistics processes are crucial for handling
returns, repairs, recycling, or disposal of products.
 Risk Management: Logistics management includes strategies to identify, assess,
and mitigate risks associated with transportation, warehousing, and supply chain
activities. This may involve contingency planning and insurance to address potential
disruptions.
 Collaboration and Communication: Effective communication and collaboration
between different stakeholders in the supply chain, such as suppliers,
manufacturers, distributors, and retailers, are vital for smooth logistics operations.
 Performance Measurement and Analysis: Regularly monitoring and analyzing
key performance indicators (KPIs) help assess the efficiency and effectiveness of
logistics operations. This data-driven approach enables continuous improvement in
the supply chain.

What are the major functions of logistics management?

Logistics refers to the process of managing and monitoring the complex
supply chain operations about how the resources are acquired, stored, and transported to
the final destination. There're various functions of logistics management that are extremely
important for the seamless movement of goods or products.

The 7 Major functions of logistics management

1) Order Processing:
Logistics operations tend to begin with order processing as it manages the entire workflow
that determines the orders that are prepared and delivered to the customers. It is a vital
part of fulfilling consumer requirements, so it consists of major activities such as picking,
packaging, and delivering the goods.
2) Material Handling:
Logistics companies are responsible for managing goods within the warehouses. It ensures
that the goods are safely transported throughout the entire process starting from
manufacturing to distribution. Handling goods or materials can be a daunting task,
therefore organizations should streamline the work activities and incorporate the relevant
equipment which is manual, semi-automated, and automated equipment. Moving stored
materials or products is an important function of logistics which can lower the
manufacturing cost and boost the customer experience.
3) Inventory Management:
It manages crucial information about the flow and storage of goods by determining how
much stock is needed. It uses various valuable insights to maintain sufficient inventories.
Inventory management in logistics helps in restocking and predicting the demand in the
operations of the supply chain.
4) Warehouse Management:
It is the major function in logistics management as it is important in running day-to-day
operations in the warehouse and safeguarding the goods. It is advisable that the
warehouses should be nearby to the dealer or the distributors’ place can be beneficial to
maintaining timely delivery.
5) Transportation:
It is required throughout a company’s supply chain to run the operations efficiently which
is also useful in driving high levels of operational excellence. Companies are focusing on
keeping transportation costs under control with advanced routing practices and following
regulations.
6) Packaging and labeling:
It is an important aspect of the supply chain as the product's packaging plays a vital role in
facilitating sales. packaging a product with suitable packages and containers with safety
and customs regulations is extremely essential to enhance logistics functions. Packaging
should be done correctly to eliminate the breakage or spillage of the goods. It also involves
labeling which provides essential information about the goods such as the date of
manufacturing and expiry, the price of ingredients, and so on. It is a critical element that is
used for damage prevention and enhancing material handling.
7) Information and control:
Information and control allow businesses to gain clear visibility of the supply chain
operations. It can help organizations to get real-time insightful data with new-age
technologies. Analyzing those data is useful in evaluating overall delivery effectiveness.
Therefore, embracing the latest technological innovations strengthens the business goals
by significantly impacting the decisions and making the operations more cost-effective.
In order to effectively manage fleets, the most important function of logistics is to
implement transparency in the entire supply chain process. Having a deep knowledge will
enable businesses to create strategies that meet consumer demands.

Benefits of Logistics Management

Given that the movement of goods is what drives cash flow, it stands to reason that
managing that movement—logistics management—is a core business concern. Indeed,
logistics management impacts a company’s bottom line for better or worse. It’s best not to
leave that impact to chance.
The following are six major benefits of effective logistics management.

1. Visibility:
Logistics management affords greater visibility into the supply chain. This enables
businesses to better control costs, tease out efficiencies, spot supply chain problems,
conduct demand planning and gain insights into opportunities.

2. Reduced overhead:
Logistics management enables companies to reduce overhead in areas from cutting
shipping costs to shrinking how much warehouse space they need by proactively
controlling inventory levels.

3. Improved customer experience:

An excellent customer experience (CX) is the driving factor behind repeat sales. By
delivering orders accurately and quickly, you improve the customer experience
which in turn increase brand loyalty and future sales.

4. Preventing loss:
Logistics management helps prevent loss in several ways. One is by a true inventory
accounting, so your company knows exactly how much stock it has on hand at any
given time. Companies can also track movement and current location so stock won’t
be misplaced or diverted without notice. In addition, by ensuring optimal storage
and transport conditions, such as temperature and moisture management, solid
logistics prevents spoilage and damage.

5. Support expansion:
Demand forecasting supports expansion by realistically calculating inventory needs
and ordering, transporting and stocking accordingly. Further, logistics management
best practices help companies scale to fulfill more customer orders on time.

6. Competitive edge:
Delivering orders correctly and on time is a foundational element in the customer
experience—and good CX is key to repeat orders as well as solid brand reputation
and net promoter scores, which in turn help a company acquire new buyers.
Logistics management helps a company consistently deliver, or over deliver, on
promises and sharpen its competitive edge.
 GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICS

A firm can gain competitive advantage only when it performs its strategically important
activities (designing, producing, marketing delivering and supporting its
product) more cheaply or better than its competitors.

Value chain activity disaggregates a firm into its strategically relevant activities in order to
understand behavior of costs and existing and potential sources of differentiation. They are
further categorized into two types

1. Primary – inbound logistics, operation outbound logistics, marketing and sales, and
service
2. Support — infrastructure, human resource management, technology development and
procurement

To gain competitive advantage over its rivals, a firm must deliver value to its customers
through performing these activities more efficiently than its competitors or by performing
these activities in a unique way that creates greater differentiation.

Logistics management has the potential to assist the firm in the achievement of both a
cost/productivity advantage and a value advantage. The under lying philosophy behind the
logistics concept is that of planning and coordinating the materials flow from source to user
as an integrated system rather than, as was so often the case in the past, managing the
goods flow as a series of independent activities. Thus under a logistics management regime
the goal is to link the marketplace, the distribution network, the manufacturing process
and the procurement activity in such a way that customers are service at higher levels and
yet at lower cost.

What Is A Logistics Network?

Being an essential component of the supply chain, a logistics network is a system that
coordinates the movement of goods between suppliers, manufacturers, wholesalers,
retailers and consumers. In particular, a logistics network directly or indirectly manages
the transportation, warehousing and distribution of products from point of manufacture to
end user.
Logistics networks can be incredibly complex. Just as there are innumerable types of
businesses there are just as many combinations of logistics components required to
manage day-to-day operations. An optimal logistics network is one that operates at the
lowest cost, includes efficient distribution and maintains a reasonable level of customer
service. The “right” combination is the one that balances your acceptable level of customer
service with asset management, inventory control and operating costs.
Logistics Network Design

Logistics network design has become extremely dependent on data. How this data is

collected and interpreted has become an art-form in itself. The process of gathering

relevant data and interpreting it into meaningful actions can make the difference whether a

company thrives or just survives.

Being able to design a logistics network that responds dynamically to market conditions
requires data collection and the expertise to translate it into profits. With increasing
automation and dependencies on information systems, the inevitable rise of (helpful) AI is
also becoming more generally excepted.

How to Develop a “Perfect” Logistics Network

While no logistics network is truly 100% flawless, there are critical steps that should be
followed to get as close to the bullseye as possible. These are:
1. Define your requirements
2. Identify current and potential future demands
3. Research candidate networks to model
4. Analyze transportation, distribution, and service costs
5. Identify alternative networks and contingencies
6. Determine the highest value criteria that matters most to you
Furthermore, it’s important to realize as your business grows, different parts of your
business will likely take priority over time. Developing a future-proof logistics network is a
matter of planning an expected growth trajectory and fully understanding all the facets that
make up, and will make up your supply chain.

What are the Different Types of Logistics Networks?

Modern logistics networks are continuously adapting to the pressures of demands and at
the same time, realizing the benefits of incorporating new technologies and forecasting
models. The type of logistics network for any given business is wholly dependant on the
nature of its related supply chain.
For instance, e-commerce has changed how logistics networks function from the ground up
by redefining product fulfilment and last mile delivery. Drop-shipping and third party
suppliers have become mainstays for many small businesses which in many cases, never
come in direct contact with the products they sell. Their entire type of logistics network
operates at arms length through remote partnerships.
 Nevertheless, types of logistics networks can be broken down into a handful of core
competencies:
 Procurement logistics
 Production logistics
 Warehousing and distribution logistics
 Recovery logistics
 Recycling logistics
We could also add, the cost of applying each type of logistical network could in itself be
considered a logistics network in the managerial sense.

What is integrated logistics?

The integrated logistics model is one in which all units, resources and technology
across supply chain and logistics coordinate and work together. It provides supply chain
visibility to all ensuring common bottlenecks in logistics are mitigated.
Based on the maturity of the logistics company or division, integrated logistics solutions
can include:
 Inventory, storage and warehousing
 Transportation, customs and distribution
 Packaging, shipping, delivery, returns and reverse logistics
 Customer support services and marketing management
 IT and data management and analytics

“Integrated logistics is a unique business management process that governs the flow of
materials, information and goods from the point of origin to the point of arrival, in which all
management activities are interconnected and interdependent”.

Key Components of Integrated Logistics

Transportation management

Effective transportation management is crucial to the success of an integrated logistics

strategy. This involves the planning, execution, and monitoring of all transportation
activities, including selecting the most efficient modes of transport, optimizing routes, and
tracking shipments in real-time. Implementing a transportation management system (TMS)
is essential to achieving these objectives and improving overall logistics performance.

Warehousing and distribution

Warehousing and distribution are critical components of integrated logistics, as they

involve the storage and movement of goods within the supply chain. An integrated
approach to warehousing and distribution ensures that these activities are closely
coordinated and aligned with other supply chain functions. This can lead to significant
improvements in inventory management, order fulfillment, and overall customer
satisfaction.

Inventory management

While this blog post is not focused on inventory management, it is worth mentioning that
integrated logistics seeks to optimize inventory levels across the supply chain. By adopting
advanced inventory management techniques and leveraging real-time data, businesses
can minimize stock outs, reduce carrying costs, and maintain optimal inventory levels to
meet customer demand.

Order processing

Order processing is the backbone of any supply chain, as it involves the receipt, handling,
and fulfillment of customer orders. Integrated logistics ensures that order processing is
streamlined and closely aligned with other supply chain functions. This can lead to faster
order turnaround times, improved order accuracy, and enhanced customer satisfaction.

Information technology

Information technology plays a critical role in integrated logistics, as it enables the

seamless exchange of data and information between different supply chain components.
Investing in advanced IT systems, such as enterprise resource planning (ERP) software,
TMS platforms, and warehouse management systems (WMS), is essential for facilitating
integration and promoting data-driven decision-making.

The Benefits of Integrated Logistics

Improved efficiency

By breaking down silos and promoting collaboration between different supply chain
functions, integrated logistics leads to significant improvements in overall efficiency. This
can result in reduced operating costs, faster order turnaround times, and enhanced
customer satisfaction.

Greater visibility

Integrated logistics enhances visibility across the entire supply chain, enabling businesses
to monitor and manage their operations more effectively. With access to real-time data and
advanced analytics, businesses can make more informed decisions and respond more
quickly to changing market conditions.
Increased flexibility

An integrated logistics approach allows businesses to adapt more easily to fluctuations in

customer demand, market trends, and other external factors. This flexibility is crucial for
maintaining a competitive edge in today’s rapidly changing business landscape.

Better customer service

By streamlining operations and improving visibility, integrated logistics enables businesses

to provide a higher level of customer service. This can lead to increased customer loyalty,
repeat business, and positive word-of mouth, all of which are vital for long-term success.

Scalability

Integrated logistics provides a strong foundation for growth, as it enables businesses to

scale their operations more easily and efficiently. With a cohesive, well-coordinated supply
chain, businesses can expand their product offerings, enter new markets, and adapt to
changing customer needs without compromising on quality or customer satisfaction.

Types of Logistics Management

Mainly, there are four types of logistics management, and each of these types focuses on
individual phases of the supply chain.

1. Supply Chain Management

Supply chain management is the process of ordering, planning, and receiving raw
materials that require urgent delivery. As logistics managers, it is their responsibility to
find the most appropriate transportation that delivers the end products within the
deadline. They are also responsible for transporting items based on their volume and
taking accountability in times of failure.

2. Distribution Management

After goods are transported to storage units and distribution centers, managers must
acknowledge their delivery by confirming their destination location. This process is very
time-consuming as it involves loading and unloading items before they finally make it to
the retail or grocery stores.

3. Production Management

Production management is mixing raw materials and different components to create the
final product. To create the final product, a thorough search for the required materials is
needed. Therefore, managers should oversee these processes and align the shipments
with the production schedule to avoid delays in conducting operations.

4. Reverse Logistics and Product Return

In post-production, the residual generated, which consists of unused raw products, must
be taken care of. Plus, in the case of customers returning items to the company, product
managers need to arrange for resources to carefully verify the refund, cross-check the
file, and manage pickups so that products can get back to the inventories.

What is Marketing Logistics?

Marketing Logistics is defined as a process involving the planning, execution, and control
of the movement of goods, services, and information from their origin (manufacturers) to
the point of consumption (consumers). It encompasses a series of interconnected
activities that streamline processes like storage, transportation, inventory management,
and information flow. The primary goal is to ensure that the right products reach the
customers at the right time. Marketing Logistics is also referred to as Distribution
Logistics. The goal is to ensure that customers receive their desired products in a
manner while also saving costs for the company.

Functions of Marketing Logistics

Marketing logistics consists of functions each fulfilling a distinct role within the supply
chain.
1. Planning: Marketing logistics starts with planning. This involves identifying the
routes for distributing products, optimizing inventory levels, and selecting suitable
transportation methods. Planning also includes forecasting customer demand to
ensure that products are available when and where they are needed.
2. Warehousing: Warehousing plays an important role in the logistics process. It ensures
the storage, easy accessibility, and timely distribution of goods.

3. Inventory Management: Effective inventory management is essential for balancing

supply and demand. It involves different aspects, including forecasting, replenishing
stock, and strategi

4. Transportation: Transportation is the backbone of marketing logistics as it facilitates

the movement of goods from one location to another.

5. Managing Logistics Information: In this era of digitalization, efficient information

management is vital for coordinating all logistics operations. et fluctuations in customer
demand.

6. Control: Effective control mechanisms are vital in marketing logistics. This entails
monitoring the movement of goods throughout the supply chain.
 What is Business Logistics?
Business logistics is a business planning framework that is concerned with material
procurement, materials management and overall inventory control. Business logistics is an
activity that takes goods from source to destination location. A business logistics system is
considered to be effective if it helps to reduce the carrying and storage costs of inventory
and increase profits flow in the organization.

Importance of Business Logistics

Business logistics includes the inbound as well the outbound movement of inventory and
supplies. It estimates the demand of the organization, the requirements of the organization
for the project in hand, it decides the sources of procurement of material and the method of
procurement of materials, it exercises control over the physical movement of inventory
between departments and is also concerned with the process of storing the inventory at
various stages so as to achieve an optimum level of demand and supply and reduce costs. It
is a larger concept than distribution management as it includes the task of forecasting and
procurement also. It combines physical distribution and materials management apart from
dealing with the process of procurement.
Business logistics comprises of processes like:
1. Coordination of project requirements
2. Procurement of inventory
3. Control over the physical movement of inventory, and
4. Storage of raw materials, semi-finished products and finished goods so that optimum
demand supplies equilibrium is reached at minimum costs.

Why is customer service in logistics important?

Customer service in logistics ensures that your customers have a positive delivery
experience. High rates of order fulfillment, speed and frequency of delivery, inventory
visibility and on-time delivery are a Here are a few examples of customer service in
logistics:
 Monitoring shipments periodically from the warehouse to destination and regularly
updating customers
 Informing customers if their orders are facing delay due to external circumstances

Importance of customer service in logistics

Quality customer service in logistics leads to transportation savings in the long term, faster
delivery time, and happy customers. The primary goal of a logistics system is to meet
customer expectations. These days customers expect to see an automated tracking system
to monitor their order. As a result, automated shipment tracking becomes a key part of
 customer service. This reduces other operational costs like problem resolutions, customers
calling for tracking updates, etc.

Here are some of the benefits of customer service in logistics:

 Builds brand image
Excellent customer service leads to customer satisfaction leading to an improved brand
image. Positive delivery experience tends to garner positive online reviews from
customers. This builds your brand reputation and paves way to more customers.
 Analyses feedback
A customer service desk will help you analyse positive and negative feedback about the
delivery process. In case of negative feedback, you can solve the problem by creating a
strategy to decrease the number of unsatisfied customers. You can analyse the feedback
further to create a customer service strategy to improve the problem redressal.
 Paves way to repeat customers
Quick problem redressals and query resolutions can gain loyal customers. Customers
believe that companies with quick customer response are more efficient when it comes to
customer satisfaction.
Elements of customer service in logistics
Given below are the key elements of customer service in logistics:
 Delivery time
The company should be able to promise a delivery time that can be fulfilled. If it is a vendor
ordering some items from you to replenish stock in his/her retail store, then the vendor
would have calculated the lead time i.e., the time between placing the order and actual
delivery. This is to fulfill the demand of the said product on time to keep his/her customers
happy. You should accomplish order delivery within the lead time to ensure that the
vendor becomes a repeat customer.
 Correct orders
Once the order is placed, you should ensure that the right order is being processed. The
order might have other conditions attached to it like color, type, etc. All of this should be
correctly followed while the order is being processed.
 Safe delivery
The package should reach the customer without any damage. This is especially necessary
for bulk orders which are being sent to vendors who supply it to the end consumers. If the
products arrive damaged, the customer cannot use the products. If the products are lost,
you have not only lost your shipment but also a customer. Damaged delivery can lead to
product returns which means added costs to initialise reverse logistics. Damaged goods
aggravate several customers and affect inventory, production and marketing.
 Communication
Customers expect to be updated about the location of their products once they have been
dispatched. This helps them to manage time and get ready for the last mile delivery of the
goods. Today, companies have signed up with logistics partners to arm their customers
with online order tracking which decreases a huge workload for the companies. These
partners are responsible for providing customers with a clear explanation for when they
 will receive a product and why an order might be delayed. This ensures a smooth customer
journey.
How to improve customer service in logistics?
Since the boom of e-Commerce shopping, there has been a growing line of customers
demanding temporary storage, quick delivery, etc. This change in trend in the logistics
sector have forced the industry to adopt new technologies and methods for customer
service including demand chain management, resource planning, reverse logistics, demand
driven logistics, green logistics, customer focused manufacturing, etc.
Here are a few methods to improve customer service in logistics:

 Facilitate seamless picking and packing of all orders.

 Select transportation modes and routes carefully.
 Automate timing/location updates, rate quotes, pick-up scheduling and current transit
times with Interactive Voice Response or online shipment tracking.
 Send notifications to customers and respective personnel about weather alerts, changes in
schedules, etc., to avoid roadblocks.
 Check the average response time and try to shorten it by improving contact center visibility
to the customer.
 Continuously improve policies and approaches after analysing customer feedback data to
create more efficient logistics strategies.
 Encourage customers to give feedback about the delivery experience and what can be
improved.
 Make sure that all the confidential customer information and payment transactions are
protected to avoid any data breach.

Physical Supply and Distribution

Physical distribution is defined as the process of physical movement of goods from the
producer to the consumer. It is an important marketing function which describes
marketing activities that involves flow of raw materials from the suppliers to the factories
for production and also the movement of finished goods from production to the final user.

The activities that are included in the efficient movement of goods from producer to end
user or consumer include transportation, inventory control, warehousing, material
handling, forecasting, customer service, plant and warehouse location and order
processing.

According to the eminent marketing guru Philip Kotler “Physical distribution involves
planning, implementing and controlling the physical flow of materials and final goods from
the point of origin of use to meet consumer needs at a profit.”
Objectives of Physical Distribution
The following are the objectives of physical distribution

1. Consumer satisfaction

2. Profit Maximization

3. To ensure the availability of right goods at the right quantity at the right time and the
right place with the least cost for the service.

4.To achieve speedier transportation of goods and maintaining minimum inventory level.

5. To establish the correct price of products by effective management of physical activities

of distribution.

6. To achieve competitive advantage over the competitors by providing the best customer
service.

Components of Physical Distribution

Following are the components of physical distribution

1. Order Processing: Order processing is the first point or in other words, the starting
point of the distribution activity. The functions involved in order processing are receiving
order, handling the received order, granting of credit for the item ordered, generating
invoice, dispatching of order and collecting the bills.

Businesses should be making an effort to reduce the order cycle time which is the time
between placing an order by the customer and delivery of the goods at the customer’s
place.

2. Storage and Warehousing: Storage deals with the storing of goods in proper condition
till the time it is ordered by the customer. Goods that cannot be generally made available
throughout the year need to be stored.

Warehouses act as centres of storage and by providing the functionality it helps businesses
meet the demands of customers. Apart from being a source of storage, a warehouse also
acts as centres for assembling the goods.

3. Inventory Control: Inventory control refers to the process of efficient control of goods
that are stored in the warehouses. Businesses need to maintain adequate levels of
inventory in order to ensure uninterrupted fulfillment of orders.
The level of inventory needs to be optimal, it should not be too less or too more, as less
inventory results in out of stock goods, lost business and unhappy customers, while a high
level of inventory requires huge investment.

4. Material Handling: Material handling refers to the activities that are associated with the
movement of goods from the site of manufacturing till it is loaded to the transport.

Proper material handling results in minimizing the wastage of goods during transport,
reduces unnecessary movement of goods, facilitates quick order processing and efficient
goods movement.

5. Transportation: Transportation is a very essential component of physical distribution

which plays a crucial role in movement of the stored goods from warehouse to the
customers. The process of transporting involves loading and unloading of goods and their
movement from one place to another.