Supply Chain Logistics – Explanations & Strategies

Have you ever heard the saying “It’s not the destination that counts, it’s the journey”?

That may be true for many things in life, but not with supply chain logistics.

When it comes to supply chains, it’s as much about the journey as it is about the destination. Indeed, a slow journey through the supply chain could be just as bad as not as the product not making it to the destination at all.

Wondering how can you strike the right balance with your supply chain logistics strategy?

Below we take you on a journey through the world of supply chain logistics to explain exactly what it is, why it’s crucial to your business’s success, and how you can optimize your supply chain management solutions. Ready to get going?

What is supply chain logistics?

Supply chain logistics is defined as the “part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”

Aside from describing what supply chain logistics does, the definition above specifies that it is one part of what makes up supply chain management. As opposed to focusing on “goods, services, and related information”, supply chain management also entails “coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.”

Another part of supply chain management is supply chain optimization, which is the implementation of tools and strategies to ensure that every part of the supply chain operates at its optimal capacity. Supply chain optimization applies to each aspect of supply chain management, including the flow of goods, services, and information as well as the people involved throughout the supply chain.

Quick sum-up:

• Supply chain logistics – deals with the flow of goods, services, and related information
• Supply chain management – deals with the above, as well as channel partners
• Supply chain optimization – aims at affecting each part of the supply chain to operate at its most efficient level

Why you should optimize your supply chain and logistics

Optimizing your supply chain strategy can result in a range of great benefits for your business – that’s true whether you’re operating ‘offline’ or if you’re dealing with an e-commerce supply chain or a combination of the two.

Here are a few reasons you should optimize your supply chain logistics and supply chain management in general:

1. Reduce your supply chain costs

Supply chain optimization can help reduce your business’s expenses in a variety of areas (including, of course, supply chain finances). When goods, services, and info are flowing at optimal capacity and channel partners are communicating at their highest efficiency, it can mean:

• Fewer mistakes in processing orders
• More cost-effective manufacturing productivity
• Lower labor costs
• Better inventory control
• Reduced waste of stock
• And much more

2. Improve your business profitability

Using supply chain management solutions to optimize operations means improving the efficiency of your supply chain strategy and ultimately leads to increasing your business’s profitability. Remember, supply chain optimization is aimed at raising quality while lowering costs – that naturally will result in improved profit margins.

3. Better supplier synchronization

Within e-commerce supply chains, in particular, communication among and between yourself and your suppliers isn’t just a perk – but a real game-changer. Digital technology allows you to understand how different parts of the supply chain are operating in real-time so that you can make necessary adjustments to make things better. That can mean tweaking the actual performance of your suppliers or even renegotiating contracts with suppliers so that the costs match the quality of service.

4. More supply chain transparency

Access to information is at the heart of a strong supply chain strategy. The more data points you can collect and the more insights you have, the more precise you can be with the layout of your supply chain logistics (and your supply chain management more generally).

That can mean more accurate sales forecasts, better delivery times, more efficient control of credit with suppliers, and more. Ultimately, optimizing your supply chain management solutions will show you a more complete picture of how your business is performing so you can grow a profitable business.

What is reverse supply chain logistics?

Reverse supply chain logistics is “the series of activities required to retrieve a used product from a customer and either dispose of it or reuse it”, according to Harvard Business Review. In other words, reverse supply chain logistics is the process of dealing with order returns and exchanges – something that might not seem so complicated on the face of it, but is an absolutely essential part of developing an effective supply chain strategy.

When you consider the fact that roughly 65% of all e-commerce returns are the result of something that the merchant did wrong, it becomes abundantly clear that supply chain management solutions are something well worth the investment. Combine that with the fact that all retail returns (online and offline) in the year 2018 amounted to almost $370 billion, and it’s no longer just a question of ensuring a great customer experience – it’s a matter of your business’s survival.

A reverse supply chain logistics plan should address questions regarding the transportation of returned goods, inspection and sorting of returned products, potential ‘reconditioning’ or reuse of goods, and the possibility of eventual resale of returned items. Each aspect of the reverse supply chain logistics plan should be tailored to meet the particular characteristics of the products that your business sells (and accepts for returns). For example, the processes you use will be designed very differently if you’re selling stuffed animals compared to how those processes will be for a delicate electronic like a smartphone.

The design of your reverse supply chain strategy may also differ depending on whether or not your business operates online. But not only that – if you do run an online business, then your e-commerce supply chain may look quite different in a much broader sense (not only regarding reverse logistics).

E-commerce supply chain

Conventional supply chains for brick-and-mortar stores operate in what is commonly referred to as a ‘multi-tier’ structure. Manufacturers send their goods to an industrial-sized warehouse, where they’re then sent to distributors and ultimately to the store itself where customers can make their purchases. Compared to e-commerce supply chains, the traditional supply chain model works much more slowly.

E-commerce supply chains operate in a fundamentally different way. Manufacturers still send their goods to warehouses, but those warehouses are typically smaller than what a corporate retailer would have. When customers submit their orders, the goods get shipped directly to them without any stops or delays at other facilities along the way.

There are several implications of e-commerce supply chains, including:

1. Lower supply chain logistics & overhead costs
2. Faster delivery times
3. Fewer opportunities for human error
4. Higher customer satisfaction

E-commerce supply chains are largely possible thanks to advanced supply chain technology that’s been developed over recent years.

Find examples below!

Supply chain technology

Tools for optimizing e-commerce supply chain logistics come in many forms, so to keep things easy we’ve narrowed it down to the top solutions in supply chain technology.

Here are the top 3 types of supply chain technology you can use to optimize your e-commerce business:

1. Warehouse automation

Working with a warehouse that uses advanced technology to quickly sort packages with conveyor belts and barcode scanners will save your business an immense amount of time and money when compared to having human hands sort through tons of packages.

This isn’t really considered so new at this point and shouldn’t be seen so much as a ‘perk’ – paying for a high-end warehouse with the latest technology will make a huge positive difference to your bottom line. If you use a warehouse that handles everything manually, don’t be surprised to see competitors zooming ahead of you.

2. Supply chain IT

As computers have grown stronger and more capable of handling vast amounts of data, the supply chain industry has seen an explosion in data storage and information communication technologies. Those information technology (IT) advancements have made it much easier for businesses to keep their supply chain logistics running at optimal levels.

With supply chain IT, item replenishments can be made automatically with systems that keep real-time information on inventory levels, bottlenecks in the supply chain can be easily identified and resolved, and much more.

3. Omni-channel fulfillment

Optimizing the shipment stage of the supply chain had long been a big obstacle – until technology once again came through for the win. It wasn’t so long ago that shipments would often be delayed because trucks were not filled to capacity, rates could be quite unreasonable, and delivery times could be out of the acceptable range for customers. Those days are in the past thanks to e-commerce supply chain technology.

With supply chain logistics technology, merchants can synchronize with trucking companies in order to match load sizes with trucks that have the available capacity, negotiate transportation rates easily with shipping companies, and find creative last-mile delivery services (e.g. commuters, taxi drivers, etc.) to guarantee quick delivery times even in places where deliveries are notoriously difficult to complete.

Side note: Implementing new e-commerce technologies can potentially cost a pretty penny (whether supply chain related or not). When the time comes to make improvements to your e-commerce business, consider e-commerce loans as a way to gain access to those technological boosts without breaking the bank.

You’ve arrived at your destination

The information provided here should give you a deeper understanding of what supply chain logistics is and how you can optimize them to improve your business’s bottom line. Use these supply chain management solutions to keep your profits high, customer complaints low, and delivery times at a minimum – you won’t be sorry, and neither will your customers!