When a customer places an online order, a complex system takes place behind the scenes. What might seem like magic is in fact the result of robust logistics management, a quiet yet essential driver of ecommerce operations.
From checking stock availability in warehouses to orchestrating the journey of an item across cities, countries, and even continents, logistics management lies at the heart of it all. Your success as a retailer hinges on managing these processes to achieve operational excellence and ensure customer satisfaction.
Effective logistics management practices equips you with the knowledge to optimize your logistics operations. Here’s how to do it.
- What is logistics management?
- Types of logistics management
- Logistics management across the supply chain
- Challenges in logistics management
- Top logistics management software
- Tips for effective logistics management
- Logistics management FAQ
What is logistics management?
Logistics management refers to the transfer of goods from their origin to the end consumer in an efficient, accurate, and timely way. It ensures every step in the supply chain is coordinated and optimized so the right product reaches the right customer at the right time.
Logistics management encompasses inbound logistics, outbound logistics, inventory control, warehousing, order fulfillment, and transportation.
For ecommerce businesses, the goal of effective logistics management is to streamline operations, save money, improve inventory turnover, garner more business, and drive profitability. For shoppers, effective logistics management translates to fast delivery from distribution centers, accurate orders, easy returns, and an overall seamless shopping experience.
Types of logistics management
Each type of logistics management has its unique set of functions, objectives, and strategies, molded to suit the specific needs of a business or industry. Understanding the different types of logistics management is crucial to determining which approach will best suit your business operations.
Here are some of the most common types of logistics management, along with their function and role in supply chain management.
Inbound logistics management
This is the management of all the incoming resources that a company needs for production. It includes raw materials, equipment, and information. The responsibility here is to ensure that resources arrive in good condition and at an optimal cost.
Outbound logistics management
Outbound logistics management handles the storage and movement of the final product from the end of the production line to the end user. The goal is to deliver the product to the customer in the shortest time possible while maintaining product quality and minimizing costs.
Reverse logistics management
The process of logistics management doesn't always end with the delivery of the product. With the rise of ecommerce, the process of handling returns, also known as reverse logistics, has become crucial. This involves managing all the processes associated with products returned from customers including refunds, repairs, and replacements.
Third-party logistics management (3PL)
Some businesses outsource their logistics management to third-party logistics providers. These 3PL companies offer comprehensive services that include packaging, warehousing, transportation, and inventory forecasting.
Fourth-party logistics management (4PL)
A step ahead of 3PL, fourth-party logistics providers, or 4PL, is where manufacturers outsource all aspects of their supply chain to an external provider. The 4PL provider is a single point of contact, managing the supply chain by organizing and overseeing resources, packaging, warehousing, shipping, and transportation.
Distribution logistics management
This type of logistics management is responsible for moving products from a central warehouse to distributors, retailers and customers. It is a broad field that includes activities such as packaging, inventory management, warehousing, freight forwarding, and order processing.
Production logistics management
Production logistics management synchronizes all phases of the production process including procurement, manufacturing, processing, and delivery. It aims to ensure that each operation is timely and efficient.
Digital logistics management
With technological innovations, digital logistics is becoming increasingly popular. This involves the use of technology, specifically automation, and digitization, to improve efficiency and effectiveness in logistics operations.
Logistics management across the supply chain
Logistics management encompasses the entire supply chain process, involving careful planning and smooth execution across stages like procurement, materials handling, production, and returns.
- Supply. The supply process requires strong relationships with reliable suppliers, ensuring a steady flow of quality goods and materials. Supply management also involves closely overseeing procurement timelines to prevent stockouts or overstocking.
- Production. Production logistics governs the smooth transition of raw materials into finished products. This means having strong management controls, optimizing production planning, ensuring machinery and labor are efficient, and making sure production is aligned with customer demands.
- Materials handling. Logistics management includes receiving, storing, and dispatching goods. Materials handling demands precise inventory control, reducing carrying costs while maintaining sufficient stock levels to meet customer demand. It also means adopting strategies to minimize damages, ensuring goods remain in a sellable condition.
- Returns. Customers expect easy returns, making a streamlined reverse logistics process paramount. This involves managing returned goods effectively, minimizing losses, and turning potential negatives into opportunities for enhanced customer satisfaction.
Challenges in logistics management
The intricate dance of ecommerce logistics is riddled with challenges. These hurdles require strategic planning to ensure seamless operations and continued customer satisfaction. Common challenges include:
- Real-time inventory management. Maintaining accurate, real-time inventory in the fast-paced world of ecommerce is a significant challenge. It’s crucial to update inventory levels to avoid running out of stock or holding too much inventory.
- Accurate demand forecasting. Using historical data to predict market demand to align with inventory management and production schedules is a complex task. Miscalculations can lead to overproduction, excess stored materials, inventory holding costs, and missed sales opportunities.
- Supplier reliability. Maintaining a steady flow of quality materials from reliable suppliers is vital for uninterrupted operations. Unforeseen problems like supplier delays or quality issues can disrupt your entire supply chain.
- Supply chain visibility. Complete visibility into the global supply chain is critical but challenging, particularly for enterprise retailers operating across borders. Predicting potential bottlenecks, managing expectations, and ensuring efficient resource allocation hinges on your ability to track the progress of materials and finished goods.
- Cost management. Managing escalating logistical costs—without compromising service quality—is a perennial challenge. Factors such as rising fuel costs, increasing labor rates, and environmental regulations add to the complexity of logistics management.
- Technological integration. Integrating advanced technology for data collection, automation, and predictive analytics into existing systems can be a hurdle. Ensuring data accuracy and training logistics managers and other staff to leverage these technologies effectively adds to the challenge.
- Regulatory compliance. Keeping up with international trade regulations, customs processes, and local laws is considerable work for global retailers. Noncompliance can result in substantial fines, shipment delays, and reputational damage.
- Sustainable practices. Balancing ecological responsibilities with business objectives presents an increasing challenge. Implementing sustainable logistics practices like waste minimization, reducing your carbon footprint, and adhering to fair trade practices is a growing necessity for brands with environmentally conscious customers.
- Setting up reverse logistics. Effectively managing returns is a critical aspect of ecommerce, yet it can create significant logistical complexities. A streamlined reverse logistics process can minimize losses and turn potential negatives into opportunities for increased customer satisfaction.
Manage inventory from one back office
Shopify POS comes with tools to help you manage warehouse and store inventory in one place. Forecast demand, set low stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.
Top logistics management software
Logistics management encompasses many intricate tasks, and the array of apps on the market mirrors this complexity. Logistics management software includes warehouse management systems (WMS), transportation management systems (TMS), logistics management software (LMS), enterprise resource planning (ERP), order management systems (OMS), and shipping and return systems.
Here’s a look at leading logistics management software solutions:
- Shopify Order Management and Delivery
- NetSuite ERP
- Cin7 Orderhive
1. Shopify Order Management and Delivery
Shopify Order Management and Delivery is an out of the box feature included with the Shopify platform. Use your unified platform to fulfill your orders, manage your inventory, save on shipping rates, and create a great post-purchase experience. Shopify makes logistics easy with order management and order fulfillment solutions and dashboards to track it all.
ShipStation is designed to streamline order fulfillment. Its features include automated shipping, real-time rate calculations, and multi-carrier support. The platform effectively handles high volumes of orders, reducing manual work and boosting overall efficiency.
Shippo offers an easy-to-use platform for businesses to manage all their shipping needs. It integrates with multiple carriers, provides discounted shipping rates, and offers a suite of powerful features like delivery tracking, analytics, and label printing. The platform can help you improve your shipping processes and enhance the delivery experience for your customers.
AscendTMS is a transportation management system designed to simplify logistics management. It offers features such as load and dispatch management, route planning, route optimization, fleet management, load financials, and profit monitoring. By consolidating these tasks, you can save time, reduce costs, and make informed logistics decisions.
5. NetSuite ERP
NetSuite ERP is an enterprise resource planning tool that combines various logistical processes. It offers features for financial management, order management, inventory tracking, and supply chain management. Its holistic approach can help with a unified view of your business, driving informed decision making.
Fishbowl is a warehouse management system designed to streamline inventory management. With features like bar coding, asset tracking, and order management, Fishbowl provides a system for retailers to keep tabs on their inventory, ensuring accurate stock levels and timely order fulfillment.
Brightpearl is a retail operating system that integrates inventory management, order processing, customer service, and accounting. Its real-time reporting and automation capabilities can help you make data-driven decisions and enhance efficiency.
8. Cin7 Orderhive
Cin7 Orderhive is a comprehensive order management system. It allows you to streamline your order processing, shipping, and inventory management. Its automation features and real-time inventory updates are designed to reduce manual work and increase operational efficiency.
Logiwa is a warehouse management system for optimizing warehousing and order fulfillment. It offers robust features like real-time inventory tracking and order routing. By leveraging Logiwa, you can improve your warehouse operations and reduce errors.
Returnly is a software solution focused on simplifying and enhancing the returns process for ecommerce businesses. It offers instant refunds, exchange solutions, and smart return experiences. With this software, retailers can turn returns into a competitive advantage, driving customer loyalty and repeat business.
Tips for effective logistics management
Building a robust logistics management plan is a crucial undertaking, particularly large businesses managing complex operations across borders.
Here are tips on effective logistics management that can increase revenues while minimizing pain points and avoiding potential disruptions:
- Centralize your logistics information
- Embrace automation
- Master inventory management
- Optimize your warehouse layout
- Cultivate strong supplier relationships
- Prepare for the unexpected
- Harness the power of a robust fulfillment network
- Prioritize sustainability
- Keep your logistics plan updated
1. Centralize your logistics information
Set up a logistics management system to store all your data in one place and increase transparency across your supply chain. A centralized hub provides real-time visibility, enhancing decision-making speed and coordination across different aspects of your supply chain. With access to the same data, you can avoid discrepancies, streamline operations, and cut costs.
2. Embrace automation
Automation has become key in logistics management. It eliminates manual errors, reduces repetitive tasks, increases process efficiency, and frees up your team for strategic tasks to personalize experiences for your customers. Consider different ways to incorporate automation—whether that’s software for inventory updates or using robots in your warehouses.
Machine-learning tools can also provide predictive insights, optimize delivery routes, and enhance overall supply chain performance. Staying at the forefront of technological advancement can improve your business operations and give your company a competitive edge, with capabilities like real-time access and real-time monitoring.
3. Master inventory management
Effective logistics management requires precise inventory control. Implement systems to provide real-time updates and insights into your inventory levels, minimizing both stockouts and overstock scenarios. Accurate demand forecasting is crucial for inventory management. It ensures your stock levels match market trends. Use omnichannel inventory optimization to gain visibility across all channels.
4. Optimize your warehouse layout
The layout of your central warehouse directly impacts the speed and accuracy of ecommerce fulfillment. By organizing your warehouse for maximum efficiency, you can streamline operations and reduce picking errors. Regular reassessments and adjustments to warehouse layout can also lead to cost savings.
5. Cultivate strong supplier relationships
Establishing reliable relationships with your suppliers ensures a consistent supply of quality products. It also helps reduce potential disruptions in your supply chains. Approach these as strategic partnerships that contribute to your overall success.
6. Prepare for the unexpected
In the unpredictable world of logistics, a comprehensive contingency plan is a must. It can help mitigate the impact of potential disruptions, from supplier issues to transport delays.
7. Harness the power of a robust fulfillment network
Using a trusted fulfillment network, such as the Shopify Fulfillment Network, can drastically improve your logistics processes. It streamlines order processing, order fulfillment, inventory management, and shipping, which ultimately leads to elevated customer satisfaction.
8. Prioritize sustainability
Sustainable practices in logistics are more than just an environmental responsibility. They can enhance your brand positioning and broaden your customer base. Optimizing routes for fuel efficiency and using eco-friendly packaging can contribute to your business’s long-term sustainability.
9. Keep your logistics plan updated
Given the rapidly evolving dynamics of logistics management, regularly updating your logistics plan is vital. This allows you to accommodate market changes, new supplier capabilities, and emerging technologies.
Logistics management FAQ
What are the key functional areas of logistics management?
The main functional areas of logistics management include demand forecasting, inventory management, warehouse management, order fulfillment, transportation, and customer service. These areas collaboratively ensure that goods move seamlessly from suppliers to customers.
How should a company respond to disruptions in logistics management?
Companies should respond to logistics disruptions with a contingency plan, quick decision making, and transparent communication with all partners and stakeholders. This approach enables them to mitigate the impact, identify alternative solutions, and maintain brand trust.
What performance metrics are tied to efficient logistics management?
Tracking metrics like order accuracy, order cycle time, cost per order, fill rate, and return rate provide insights into how well your logistics system functions and where improvements are needed.
What logistics management processes will improve my supply chain?
Investing in logistics management technology, building strong relationships with suppliers, understanding your distribution network, and leveraging the power of a robust fulfillment network will significantly improve your supply chain.