Although the terms ‘logistics chain management’ and ‘logistics’ are commonly used interchangeably, there are distinctions between them that business professionals should be aware of. Supply chain management covers all processes, from the supply of raw materials to the delivery of a finished product to the final customer.
Alternatively, logistics refers to the movement and storage of raw materials and a finished product between third-party organizations in the supply chain. Logistics is a unique element of supply chain management, while the supply chain covers a much wider range of activities and processes.
The main goal of logistics is to gain a competitive advantage and maximize profitability. One of the main objectives of supply chain management is budget optimization. For each supply chain, but especially the global supply chains, both concepts are highly dependent on each other.
An excellent supply chain management system that integrates superior logistics has an impact on a company’s productivity, efficiency and effectiveness. The combination of well-executed logistics management and supply chain management increases the company’s profitability and success.
How logistics is used in the supply chain
Without the use of logistics management, supply chain management would be impossible to achieve successfully. Not only would a finished product not reach the end customer, but the raw materials would never have been shipped to the company to begin with.
- Logistics Management oversees important supply chain management processes.
- Production of data and documentation required for reporting and processing.
- Storage of goods, including inventory management techniques.
- Identify ways to increase the value of the commercial offer.
- Planning the movement of the finished product through different third-party suppliers.
- Tracking the movement of the finished product throughout the transport process.
While some companies prefer to manage their logistics internally, others rely on third-party experts for their logistics management needs. No matter who oversees logistics management and supply chain management processes, consistency and communication are the foundation for short- and long-term success.
So how can a 3rd party logistics provider help with supply chain management?
3PLs assume control of the time-consuming and difficult aspects of your supply chain, allowing you and your employees to focus on the areas integral to your company’s success.
1. Faster Deliveries
Customers have come to expect speedy delivery of their orders. They want to be able to order a product and have it delivered as quickly as possible, with sites like Amazon offering their members one-click ordering options and shipping speeds of 1 to 2 days.
Thanks to improved supply chain logistics capabilities, small businesses can deliver reliably and quickly. Faster delivery speeds not only create a competitive advantage, they also improve the customer service experience.
2. Increased accuracy
When working with a 3PL, no matter how fast the shipping speeds are, if an order arrives to the end customer damaged, with missing parts or not arriving at all, a company will then have to deal with a customer service problem. Customer service problems not only cost businesses money, but can also damage the reputation of a business and reduce customer loyalty rates. IT tools and supply chain management software allow third-party organizations throughout the supply chain to check the status of a product before it reaches the end customer. Customers can even use supply chain network tools to track the current location of their finished product in the supply chain while anticipating its arrival.
3. Improved Customer Service
Always providing a positive customer service experience is fundamental to any successful business. Not surprisingly, the marketing, manufacturing and logistics processes refer to customer demand forecasts and customer feedback for the development and implementation of best practices.
The ability to produce a strategy that meets and exceeds the needs of potential and existing customers relies heavily on efficient logistics management and supply chain management. Even when it comes to implementing a strategy, companies must always look for ways to increase and improve their customer service capabilities.
4. Business Development
In addition to benefiting from an existing supply chain, logistics companies can help companies expand their operations or move from a domestic supply chain to a more transparent global supply chain. Efficient logistics avoids disruptions in the supply chain during times of change and growth.
Best practices in supply chain logistics and supply chain management can be updated to meet the extensive demands of customers. Companies that can especially benefit from a 3PL service are those that wish to move from a national to a global market, as additional third-party suppliers will need to be added to the supply chain.
5. Value for money
3PLs act as mediators between the shipper and the carrier, creating efficient logistics that reduces the costs of supply chain management and, consequently, increases profit margins. For example, outsourcing responsibilities related to inventory management and delivery of a finished product can increase efficiency while reducing incurred costs.
Labor costs represent a large part of each company’s budget. When each third-party organization in the supply chain works together, there is a reduction in unnecessary labour costs for all parties involved.
6. Time Reduction
One of the greatest advantages of outsourcing to a 3PL is the time it saves your company. Time-consuming tasks such as data entry, invoice auditing, and carrier negotiations, are completed by experienced workers with specialized resources who do those tasks for a living. 3PLs offer sophisticated invoice processing systems and they operate them for you.
Another benefit of using a 3PL service is access to up-to-date information on your shipments. We can measure your success using performance indicators and give you business intelligence and reports critical to analyzing performance.