How poor logistics management can affect your business

The rise of demand-driven supply chains

Once upon a time, supply chains were fairly linear. They met enterprise and customer needs through a rigid beginning-to-end model, focusing solely on production and provision, largely unaffected by the change.

However, today's supply chain is extensive, deep, and continually evolving. After the shift from multichannel to omnichannel retailing, consumers were presented with countless options to purchase their products—through websites, at physical stores and kiosks, via mail-orders and catalogs, from face-to-face sellers, and more.

Rising customer expectations around the speed and convenience of having their purchases shipped kicked off the race to provide faster omnichannel order fulfillment. However, emerging delivery trends like same-day delivery, pick up in-store, cashier-less retail, and "no questions asked" return policies often stressed traditional supply chains to their breaking point.

Challenges that came with faster delivery   

Reliable, on-time shipping and timely delivery of products are essential factors in driving greater customer satisfaction. In an increasingly digitized business environment, vendors are expected to provide real-time status updates about shipments, order tracking, and the availability of inventory at warehouses.

The high level of variability, variety, and uncertainty that comes with omnichannel retailing makes for complex supply chains, complicates planning, and raises logistic challenges:

• Rising fuel expenses and falling transport costs

• Production inefficiencies

• Inadequate storage facilities and complex tax structures

• Low rate of technology adoption

• Improper warehouse facilities and high labor costs

• Driver shortage and retention issues

• Inaccurate inventory information and data processing

• Poor delivery services and transportation inefficiencies

• Government regulations and compliance

Simply transporting goods from point A to point B isn't enough anymore. Agile logistics management strategies are vital to remaining competitive in a volatile marketplace, where operations are entirely demand-driven.

This article will explain the many ways in which poorly managed logistics can negatively affect your business, as well as discuss potential solutions. First, let's see what a good logistics management strategy looks like.

What is logistics management?

A sound logistics plan focuses not only on the shipment of products (or services) but also on maintaining a strong foothold in the marketplace, ensuring business continuity. Logistics management includes strategic steps to optimize the planning, implementation, and control of the transportation and storage of products between two points. Logistical tasks, like production, packaging, warehousing, material handling, security, shipping, and information flow, are also defined.

The main components of logistics management are:

• Inventory management to control the flow of goods in and out of warehouses 

• Demand planning for evaluating and forecasting the demand for goods to ensure availability

• Inbound logistics for bringing materials and goods into the company

• Outbound logistics for transporting of finished products to customers

• Fleet management to manage vehicles and reduce risks associated with the transport of goods

• Warehousing refers to the storage and management of goods and materials in a warehouse

• Delivery fulfillment from a warehouse or facility to the customer

Using technology, supply chain partners and stakeholders can coordinate, optimize, and automate end-to-end logistics operations. Logistics management software transforms how companies conduct logistics operations by improving visibility into the supply chain to leverage data for decision-making.

A comprehensive logistics strategy must include a contingency plan to avoid any logistics failure. And a logistics planning process is incomplete without an emergency plan. At the highest level, the main aim of logistics management is to ensure customer satisfaction.

Types of logistics management

There are five main types of logistics management: supply, distribution, production, customer service, and reverse logistics. Each type focuses on a different aspect of the supply process:

• Supply management - Manages the planning, procurement, and coordinating of materials at a specific place and time to support production

• Distribution and material handling - Manages the loading, unloading, and transportation of materials, tracking of stock, and accountability of use

• Production management - Involves the planning and coordination required to support the manufacturing or assembling process

• Customer service management - Manages the practices, strategies, and technologies used to manage customer interactions and data

• Reverse logistics - Involves the return of items, and reclamation of materials and supplies from the customer to reduce loss and restock inventory

The impact of poor logistics management

Logistics management is the backbone of business because it ensures that the entire supply chain, including shipping and delivery, runs as efficiently as possible. Improving an organization's logistics management processes will translate into increased operational productivity and efficiency.

Coupled with emerging technology, the concepts of managing logistics have reached new benchmarks. However, a poor logistics and supply chain management system can be costly in more ways than one. Not paying close attention to the logistics of your business can impact its bottom line and harm your brand's reputation. Here are some ways in which poor logistics might hit your business:

Delayed projects

Disruptions in the supply chain affect suppliers and customers alike:

• Manufacturer delays - Delays can happen due to human error, inaccurate inventory tracking, back-ordered materials, or poor forecasting of demand.

• Production delays - The delays in manufacturing due to global externalities launch a domino effect in the supply chain that impacts orders in the production segment.

• Warehousing delays - Warehousing delays happen when there is a lack of on-site storage space, or the business lacks dynamic strategies for warehousing operations, like storage, fulfillment, and transport of goods. Operations may become slow and the warehouse may generate a lot of material wastage.

• Shipping delays - Suppliers rely on collaborative order management to prevent common shipping mishaps in last-mile delivery. Shipments can be delayed due to damaged orders and drivers not being on schedule.

In addition, delays can also happen due to reasons beyond the company's control, like weather, traffic, and mechanics. Disruptions are sometimes brought on by poor communication, time management, faulty decision-making, and scheduling mix-ups. Minor disruptions can snowball and cause delays throughout the entire project, and when schedules are delayed, so is the completion date.

Higher project costs

The delay in operations that we just spoke about can feed into higher project costs. Your customer will return a product if delivered to them in a defective condition, sometimes demanding compensation with a new package. Last-minute rushed deliveries will cost you more than scheduled shipments.

The cost incurred by your firm in sending compensation products, the return logistics, labor costs, and managing damaged products will consequently add to the overhead of the business. All the while, your labor costs go up while no value is being added to your project.

While poor logistics management is expensive, it can cost you some meaningful relationships, as well.

Strained work relationships

If scheduling mix-ups and delays happen too often, your workforce may lose morale, and your partners will find better-organized companies to work with.

Poor logistics management is also detrimental to your client relationships. It takes immense effort to acquire a customer. A case of late delivery or damaged goods can weaken the client loyalty that you've worked hard to build for your brand. This leads to the worst outcome of all:

Lost business

If you can't finish your projects on time, your relationship with your clients deteriorates. And you can eventually lose the relationships that make it possible for you to be a contractor in the first place.

Not only will you lose repeat business, but bad word of mouth will cause you to lose new projects, too. Because unhappy customers don't stay quiet.

Inefficient logistics not only reduce your customers' loyalty but also puts a dent in the firm's online and offline brand image. Poor logistics management can derail your supply chain and, if left unchecked, even your business.

Solving the delivery dilemma

Here are some tips that can help respond to disruptions in your logistics management:

• Invest in logistics technology, like artificial and augmented intelligence and advanced analytics, and automate end-to-end logistics operations to improve your business' scalability and competitive edge.

• Visualize dependencies by viewing logistics as a system consisting of various interdependent parts. When you intend to optimize an aspect of the system, it's necessary to consider its influence on the other interlocking parts.

• Automate logistics processes and your supply chain wherever you can, like tracking and monitoring each delivery. This takes the guesswork out of planning your supply chain by letting you gather key performance indicators.

• Smooth out any issues in your business processes with predictive algorithms.

• Implement advanced real-time and dynamic routing to maximize delivery efficiency and deliver to multiple drop locations on the same route.

• Provide customers with multiple payment options, like tap-and-go and digital wallets.

• Adopt contact-less delivery and payment options to keep your customers and your employees safe and healthy.

• Establish a contingency plan to tackle emergencies and avoid any logistics failure.

Conclusion

A complete logistics strategy includes strategic, operational, and tactical levels of logistical planning.

Companies seeking to implement logistics strategies must first consider how they stand to benefit from the initiative. As your business continues to grow, you must diligently find ways to update and enhance logistics planning processes for improving output.

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