What is logistics?
Logistics planning is an important factor in every successful business function. It involves the strategic coordination and management of various activities such as procurement, transportation, inventory management, and distribution. Consequently, by effectively planning and executing these logistics planning processes, businesses can optimize their supply chain, reduce costs, and improve overall customer satisfaction.
Logistics is the art and science of managing and controlling the flow of energy, goods, information, and other resources. Today, logistics is an essential part of business, ensuring the seamless transfer of raw materials from suppliers to manufacturers and the timely delivery of finished goods to consumers.
According to the Council of Logistics Management (CLM), “Logistics is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw material in-process inventory, finished goods and related information from point of origin to point of consumption to confirm customer requirements”.
According to Robert A. Novack, “Logistics is an activity involving the creation of time, place, form and possession of utilities within and among firms and individuals through strategic management to create products/services that satisfy the customer through the attainment of value”.
Logistics involves the management of procurement, movement, and storage of parts, materials and finished goods. It also manages the flow of information within an organization and its channel of distribution related to these things. The main objective of logistics is to maximize today’s and future profitability by efficiently fulfilling all the orders without spending too much money. It involves the integration of transportation, information, warehousing, inventory, material handling and packaging.
Distribution logistics includes all activities related to the delivery of finished products and merchandise to a customer. Direct delivery of products is possible from either the production process or the trader’s stock located near the product on site. Similar to procurement logistics, distribution logistics is a market-linked logistics system. It links a company’s production logistics with the customer’s procurement logistics.
Customer orientation plays an important role in distribution logistics due to its close connection with the customers. Workers in a distribution centre frequently have more contact with the customer than sales representatives do. The tremendous significance of service thinking in distribution logistics arises from its customer-centric approach.
It is an accepted fact that there is always a need for a proper and efficient business plan for any particular element such as planning or compelling in an organisation. Similarly, there is also a need for a business to establish a logistics business plan.
The organization must define the logistics business plan clearly to avoid any confusion or vagueness that might hinder the achievement of its desired objectives.
While drafting a logistics plan, it is important to consider all possible present and future scenarios. A logistics manager, skilled in careful planning, analysis, and implementing forecasts to a significant degree, can determine potential future designs for the enterprise.
The logistics business plan should ensure that each team member understands their duties and roles to ensure on-time task completion.
Logistics Planning Process
The logistics planning process involves the following steps:
- Logistics strategic analysis
- Logistics planning
- Managing change
Step 1: Visioning
Visioning is the very first step in Logistics Strategic Planning (LSP). Visioning involves systematically developing organizational consensus on vital inputs for the logistics planning process and identifying potential alternative logistics approaches. The visioning process greatly enhances the value. Achieving an organisational consensus on the key inputs to the logistics planning process both unites the company and grounds it in a common way of thinking. Subsequently, envisioning potential logistics alternatives and scoping the planning effort expands the perspectives of all the players and opens new horizons for the company.
Step 2: Logistics Strategic Analysis
The second major step in the logistics planning process is to conduct the analysis required for making thoughtful choices among potential logistics alternatives. The logistics strategy pyramid depicts the essential components of a logistics strategy. The specific components to be reviewed during the strategic analysis step are identified during the visioning process. The scope may range from broad re-thinking of entire ways of operating, to assessing how the productivity or the effectiveness of any single activity might be improved.
Step 3: Logistics Planning
As the logistics strategic analysis is completed, the logistics plan is then assembled. The logistics plan is a road map that outlines the mission and goals for the logistics function and the programmes, and activities to achieve these goals. The goals should include targets for customer service and cost performance, as well as the major analyses or projects targeted for completion during the current year. Furthermore, the plan should identify specific performance measures for both logistics strategy development (steps one and two) and logistics planning (step three). These processes of logistics strategy development and logistics planning are iterative and overlapping.
That means some of the tasks or activities of the logistics strategy development process (e.g., customer service survey, warehouse network configuration analysis, transportation functional analysis, etc.) may be incorporated as specific projects in the logistics plan. The logistics strategy development activity then is a true process, which never ends and continues to be refined and enhanced over time.
Step 4: Managing Change
The final step in the logistics planning process involves managing change, i.e., coaching the organisation to effectively implement enhanced ways of conducting business. Effective change management relies on several key factors, and we’ll discuss three of them below.
1) Visible Plan
The mission, goals, direction, and specific objectives for the logistics activities need to be clear. A formalised process for logistics strategy development and logistics planning is an important activity to achieve buy-in across the company concerning the objectives for customer service and logistics.
2) Champion in the Management Ranks
Successful change is more likely with a leader who will represent logistics to other functions in the company and customers and other external parties, and who can coalesce and unite the logistics group.
3) Training and Coaching
The logistics leadership group must understand that change is often complicated and that training and coaching are required for success. Specifically, training focuses on developing the needed content knowledge and process skills to operate in the new environment.