Having a well-organized logistics chain is a fundamental competitive element for any company: its success depends largely on it.
Any error within the logistics chain can cause extra expenses to the company and jeopardize the objective of achieving customer satisfaction.
Therefore, in this article, we will define what a logistics chain is, its phases, functions and objectives in order for you to understand its importance.
What is a logistics chain?
We can define a logistics chain as all those procedures and resources used to deliver a product from the factory to the end user.
The primary objective of a logistics chain is to deliver a product, SUCCESSFULLY, at a competitive price, achieving the highest levels of quality and at the price agreed with the customer.
In the words of John J. Coyle, who teaches logistics at the University of Pennsylvania, “logistics is about getting the right product to the customer, the right amount, at the right price, at the right time, in the right place, in the right conditions”.
The person in charge of managing the logistics chain will be responsible for supervising and managing the products from the moment they enter the warehouse until they are delivered to distributors or end users.
“The success of an organization depends hugely on logistics.”
Functions of a logistics chain
The functions of a logistics chain are mainly focused on the transportation of goods as well as their custody and storage, until they are delivered.
Therefore, we can say that a logistics chain’s functions comprise the following processes:
- Transport supervision to guarantee deliveries.
- Maintenance of the transport fleet.
- Management of the organization of the sold merchandise.
- Inventory control.
- Medium/long term study of the product supply and demand.
Phases of a logistics chain
Generally, these are the phases of a logistics chain, although it always depends on the type of company:
- Transportation of goods to the logistics center or warehouse.
- Storage and product monitoring.
- Handling of goods.
- Product preparation.
- Product transportation to the distribution center, or the customer.
Objectives of a logistics chain
The purpose of logistics is to satisfy the end customer in terms of quality and service, at the lowest possible cost for the company.
Guaranteeing the quality of services and / or products created a competitive advantage, but if we can also reduce costs, then we can increase business profits.
Therefore, the logistics chain has to be perfectly structured to make the most of financial and human resources.
What goals can we achieve with a good logistics chain?
- Reduce time dedicated to stock control and revisions, doing only the essential in a simple and easy way.
- Reduce handling costs, by transporting merchandise from one location to another the least times possible.
- Reduce transport costs, minimizing stages or distances along the route, and by grouping loads.
- Acquire supplies in optimal conditions to avoid wasting time preparing or unpacking them.
Differences between logistics chain and supply chain
Usually, the terms logistics chain and supply chain are confused. This is because they are conceptually similar. However, the reality is very different.
Sometimes they are taken as synonyms, but their objectives and functions are completely different.
Logistics are essential for the value chain to work: getting raw materials delivered in good condition and on time, meeting production or shipping deadlines, etc.
However, supply chain is a broader concept, because it covers the entire process from manufacturing to delivering the product to the end user, whilst the logistics network only includes storage and transportation activities once the product has been manufactured.
“Therefore, the logistics network is included within the supply chain.”
There is another difference between the two chains: while the supply chain has a more global approach, seeking competitiveness throughout the process, the logistics chain focuses on satisfying the customer.
Types of logistics
In logistics, we can find different types depending on the type of company. Based on this, we can make 3 distinctions.
The logistics of a trading company focuses on the flow of materials, ensuring that distribution and supply are efficient.
“These companies focus the entire chain so that products reach them in good condition to then resell them.”
We can differentiate, in ascending order:
- Retail companies that buy from the wholesaler and manufacturer, to then sell to the end user.
- Wholesale companies that buy from manufacturers, to then sell to points of sale or retailers.
Logistics functions vary from company to company depending on factors such as objectives, company size or organization.
The most important thing for these companies is to satisfy their end customer. Therefore, the products purchased from third parties have to be according to their needs.
For example, a hotel must have daily consumption goods (beverages, food) in adequate quantity and time as well as covering for unforeseen events.
Industrial businesses tend to have a more methodical and organised logistics. Given the large amount of production which is taken place in industrial buildings, it is very common for the manufacturer to distribute directly to customers.
“Having a well-planned, efficient and orderly logistics chain is essential to meet deadlines and optimize costs.”
Logistics in industrial companies is divided into 4 large categories.
Choosing the most efficient suppliers to supply to logistics centers with the products or with the necessary raw materials for production.
Organizing human resources (personnel), means of production (machinery) and activities (handling, packaging and storage).
Preparing the warehouse and the means of transport. Among the tasks that are carried out we can mention: managing stock, placing products in the right place, distributing spaces correctly or finding the prime location of the premises. It also intends on optimizing delivery routes.
This is essential for any company that wants to be in the market long term, since it is a very important aspect when it comes to customer satisfaction.
Within the tasks of this category we can mention: management of orders and returns, study of needs, manage the necessary after-sales services, etc.
Due to the demands of such a competitive market and globalization, optimizing logistics chain has become a very difficult task to achieve.
However, technological advances have made it possible to improve the relationship between all the different branches that comprise it. See Industry 4.0.
The digitization used in communication and processes allows streamlining and managing complexities of a logistics network.
However, to optimize the work and tasks of a logistics chain, it’s not only necessary to advance in electronic media. There are many other factors that have a big influence on gaining the most out of a business.
These factors are handled by freight brokers.