Logistics and supply chain management are two of the biggest priorities for any business that sells or distributes products, as they’re vital to ensuring that goods reach customers on time.
Whether you operate a retail store or manage a conglomerate with a lengthy product list, your business growth and profits rely on products being created, transported, and delivered without any mishaps.
Supply chain management and logistics ensure that this happens. These two terms are often used interchangeably since, despite their differences, they rely on each other.
In this article, we’ll explain what logistics and supply chain management are, how they affect each other, and why they’re important. We’ll also list the features of applications that support supply chain logistics.
What is logistics?
Logistics refers to the planning, implementation, and control of the physical movement of goods between different parts of a supply chain. The term can also refer to the movement of services and information.
Logistics ensures that goods move from the point of origin, such as the manufacturer, to the point of consumption, such as the customer. Logistics also covers activities related to this movement including transportation, packaging, and warehousing.
Crucial logistics processes include:
- Transportation
- Fleet management
- Demand planning
- Goods handling
- Inventory management
- Packing and order fulfillment
The main goal of logistics is to deliver goods to customers on time and at competitive prices.
There are two main factors involved in this: inbound logistics and outbound logistics.
Inbound logistics relates to obtaining, handling, transporting, and storing materials. An example of this would be an eCommerce seller receiving and storing various products in a warehouse.
Outbound logistics is focused on distribution. It involves collecting and maintaining products and distributing them to the customer. An example would be collecting products from a warehouse or hub, moving them across cities or states when needed, and making the final delivery.
Logistics is the backbone of supply chain management. It ensures that the supply chain functions smoothly without delays in the delivery of materials, goods, and services.
What is supply chain management?
Supply chain management (SCM) encompasses the planning, implementation, and monitoring of the entire network involved in procuring, producing, and transporting goods and services to customers.
Apart from logistics, supply chain management involves strategically creating, maintaining, and consistently optimizing a network of business partners that can deliver value to the consumer.
Managers across the supply chain decide who will make a product, how it will reach desired locations, like warehouses or storage facilities, and the delivery methods that will be used to fulfill orders.
Supply chain managers make multiple key decisions daily to ensure the efficient operation of the network while also striving to gain a competitive advantage in the market. To help with these decisions, they use platforms like the CalAmp Application to gain granular visibility.
Supply chain management has five key components:
- Planning: Estimate customer demand for a company’s product or service and plan to acquire resources to fulfill it. Establish a supply chain and then use metrics to track efficiency in meeting customer expectations and company goals.
- Sourcing: Find suppliers that offer the materials and services to create the product. Implement processes to monitor and manage supplier relationships.
- Manufacturing: Find manufacturers that accept raw materials, build the product, and test for quality. Organize all activities surrounding this process, including packaging and scheduling deliveries.
- Delivery and Logistics: Coordinate orders, deliveries, dispatch, customer invoices, and payments.
- Returning: Build a network that can collect returned products that are either defective or unwanted.
4 key differences between logistics and supply chain management
There are four critical differences between SCM and logistics, primarily related to their scope and focus:
- SCM involves linking two or more companies to create a performance-driven business model.
- Logistics focuses on meeting customer expectations, whereas SCM aims to create and optimize processes to gain a competitive advantage.
- SCM covers many activities, including planning inventory, production, labor, materials, facilities, and deliveries. Logistics is primarily focused on facilitating on-time deliveries.
- Logistics is a part of supply chain management. It controls the storage and movement of goods and services to and from an organization.
Logistics and supply chain management are not interchangeable terms. However, these two processes depend on each other to function.
Logistics is at the heart of supply chain management. Without the efficient flow of goods and services, the entire supply chain would eventually collapse.
3 reasons why logistics is crucial for supply chain management
Logistics serves three key purposes for supply chain management.
Let’s take a closer look.
1. Keep customers happy
Logistics ensures that products and services reach customers on time without depreciating in quality. This is crucial for business growth since happy customers are more likely to make repeat purchases.
With the right logistics system, like the CalAmp Application, fleet operators can use sensors to ensure that their cargo remains intact.
A tilt sensor, for example, can be placed on pallets and packages to ensure they don’t tilt too much during transport. Operators get alerts if the cargo moves beyond a reasonable degree.
These alerts help drivers and operators take action to prevent further movement. For instance, the driver could pull over and secure the packages more firmly or drive at a slower speed to prevent further tilting.
While features like this might seem minute, they play a major role in customer satisfaction. Customers eagerly waiting for their deliveries will be frustrated if they receive a crushed or torn-up box and a broken product.
Effective logistics also ensures that services are completed on time. Waiting for days to get an appliance repaired will reduce customer satisfaction.
2. Improve profitability
Good logistics can help supply chain managers and companies serve a larger market and increase profits.
With the right logistics partners, companies can grow their customer base, increase their supply of products, and expand their service or delivery areas.
A company with an efficient transportation and logistics system is better equipped for scaling. It can accurately evaluate the increasing demand, order and deliver more products, and increase its fleet size to reach broader markets.
Thus, logistics can help companies overcome geographical and transportation restrictions to better serve their customers.
3. Reduce costs
Well-implemented logistics systems can enable supply chain optimizations that reduce purchasing, production, and overall costs.
Logistics is not solely related to customer deliveries; it also covers the transportation of raw materials to manufacturers and products to suppliers or sellers.
So, improving logistics could mean that the manufacturer receives raw materials faster and starts production earlier. This speeds up critical supply chain processes and can save companies hundreds of thousands — or even millions — of dollars.
Poor logistics can have the opposite effect, with delays interrupting crucial parts of the supply chain, increasing production expenses and labor costs, and creating longer delivery times.
Organizations can save thousands of dollars by outsourcing logistics to a third-party company that specializes in creating and managing the complete transportation system.
Whether you handle your logistics in-house or outsource it, a comprehensive fleet management system like the CalAmp Application is essential. A platform like this offers granular visibility throughout the supply chain using fleet, trucking, and asset telematics.
The benefits of effective supply chain management
Proper supply chain management has significant benefits for businesses.
Here are the five major advantages of effective SCM.
1. Reduce operating costs
SCM can improve key processes throughout the planning, production, and delivery stages. This optimization leads to reduced expenses for organizations.
For example, a retail supplier can move high-value items faster with an improved supply chain. This can reduce inventory costs and increase customer satisfaction.
An added benefit is that retailers don’t hold expensive inventory in their stores for too long. As a result, they can better evaluate demand and reduce the risk of theft.
An improvement in one area of the supply chain can positively impact other elements.
2. Identify and solve potential problems
Supply chain managers can use a connected software system to collect and examine historical data. This allows them to perform effective data analysis and identify any issues quickly.
For example, a manager using fleet telematics software can see constant areas of slow driving or high idle times among their commercial fleet vehicles. They can use supporting data to identify what is causing these delays and address them via either re-routing vehicles or coaching drivers in avoiding specific scenarios.
Similarly, software across the supply chain can help identify problems, like delays or inventory shortages, either before they occur or quickly after. Supply chain managers can then take action to rapidly address these issues and keep the system running smoothly.
Data analysis can also elevate existing parts of the supply chain to increase production speeds, reduce costs, and offer a better customer experience.
3. Improve allocation
Effective SCM relies on data and AI-powered tools to monitor and automate crucial parts of the supply chain.
Data-based AI tools can automatically allocate resources and work schedules, giving managers more time to work on high-impact activities and thus maximize the organization’s potential.
Let’s take a supply chain visibility solution like CalAmp as an example. CalAmp automatically collects cargo-related data, like real-time location, temperature, shock, and humidity. Using this data, fleet managers can ensure safety, streamline compliance, and eliminate manual record-keeping.
This frees managers up to handle more critical tasks, like route optimization, fleet allocations and maintenance, driver management, and on-time deliveries.
Most AI-powered supply chain solutions enable managers to predict accurate delivery dates for their products and implement processes to meet them.
4. Boost customer service
SCM is also essential to customer satisfaction since it controls whether products and services arrive on time. A poorly managed or implemented supply chain can lead to frustrating delays for customers and other business partners.
If customers expect their products to be delivered on a specific date, missing those deadlines could turn them toward competitors. The same applies to service-based supply chains, like plumbing and electrical work.
Delays or mishaps are not entirely avoidable, but with the right supply chain tools, you can mitigate consequences when they do occur.
The CalAmp Application, for example, lets you see exactly where your fleet and cargo are at all times.
So, fleet and supply chain managers can immediately notice when a commercial delivery is going to be late and inform customers beforehand. This reduces frustrations and shows your customers that your company values transparency.
5. Increase profits
All of the factors mentioned above enable companies with a productive supply chain to boost profits since they’re essentially spending less money to deliver more products or services faster.
SCM software also facilitates dynamic pricing.
Let’s say your company sells seasonal products. Once the season ends, these items are sold at deep discounts or discarded. To avoid significant financial loss, companies can use historical data and analysis to price their products to meet current demand.
Managers can use similar analytic techniques to improve margins through the supply chain.
Vital features of effective supply chain management
Here are five key indicators of an efficient supply chain:
- Connected: The supply chain harnesses data from multiple sources, including social media, B2B tools, and the Internet of Things (IoT).
- Collaborative: The supply chain uses cloud-based networks and applications to boost collaboration and engagement between business partners.
- AI-powered: A modern supply chain uses AI-powered software to allocate resources, coordinate operations, and make informed decisions. Critical parts of the supply chain are automated.
- Secure: The supply chain must protect data and systems from cyberattacks. When sensitive data is compromised, businesses pay the price, both financially and by losing customer trust.
- Fast: An efficient supply chain relies on real-time analytics to quickly gain and act on insights related to planning, inventory, logistics, and more.
Essential features of supply chain logistics software
Managers and fleet operators rely on applications to improve logistics and provide supply chain visibility.
The logistics solution they use must have the following features.
1. Centralized end-to-end visibility
Whether your supply chain relies on transport via land, air, or sea, your telematics solution should be able to collect real-time data on vehicle and asset location. This data should be visible on centralized software that can be accessed anytime, anywhere.
With the CalAmp Application, smart sensors gather precise shipment locations and send them to managers via the secure website and app.
This enables fleet operators and logistics managers across the supply chain to track deliveries and take action in case of delays or mishaps. Fleet managers can also use this information to optimize delivery routes.
Without this visibility, managers are left in the dark and rely on basic GPS tracking or old-school communication with drivers for updates on products’ locations.
2. Real-time data collection
Modern supply chains rely on instant data collection to better serve their customers.
With real-time data collection from onboard devices, vehicle telematics, trailer telematics, and smart sensors, the CalAmp Application can take logistics management to the next level.
For example, the platform shows real-time weather and traffic overlays so that managers can plan for rough weather and deal with minor traffic-related delays.
Fleet operators can also prevent roadside violations, enforce compliance, boost driver safety, and automate vehicle maintenance.
This greatly benefits supply chain logistics and helps to prevent delays caused by collisions, accidents, or fines. Organizations also avoid the costly expenses that come with these incidents.
3. Accurate reporting
Historical data is just as important as real-time data. While current data ensures smooth operations in the present, historical reports are used for spotting trends, monitoring metrics, and planning improvements throughout the supply chain.
Fleet solutions that automatically record data in an organized manner and enable easy sharing among business partners can improve business intelligence, prevent conflicts, and help optimize the logistics of a supply chain.
Accurate reporting of cargo condition throughout a shipment is essential for reporting to regulatory authorities and even to prove liability in cases of damaged or missing cargo.
An effective logistics and supply chain management system will track and report time- and date-stamped temperature and humidity readings, exposure to light, tilt or shock incidents, or extended dwell time during shipments. It will also generate reports for compliance reporting, insurance claim filing, or to support overall efficiency improvement.
4. Risk management
Logistics and supply chain management are significantly impacted by theft, loss, and related incidents. Companies can lose millions of dollars due to lost, damaged, or stolen cargo.
This is why supply chain managers should use sensors and telematics software to monitor key factors, like location, trailer utilization, idle times, door open/close instances, and driver behavior. This helps to ensure that cargo does not get damaged or lost.
For example, with CalAmp, you can use sensors on the trailer, doors, pallets, and packages, and you can also monitor current conditions to avoid cargo loss and safety risks.
5. Integration and collaboration
Any software within the supply chain must be collaborative and work with multiple partners. It should support easy integration with commonly used software and enable seamless data sharing between teams.
Multiple partners within the supply chain can use CalAmp for fleet telematics and logistics management. A fleet operator can share data related to fleet vehicles with teams from another organization so that both companies know precisely when to expect deliveries.
Seamless data sharing boosts collaboration and helps companies work together to solve problems and enhance the supply chain.
Conclusion
Logistics is an integral part of supply chain management, and while there are critical differences between the two processes, they rely on each other to run efficiently. Improving logistics boosts the supply chain and vice versa.
Supply chain managers must use collaborative, dynamic tools to create and implement an effective system. This also applies to supply chain logistics, where a solution that provides real-time tracking and vehicle data is essential.
A solution like the CalAmp Application is ideal for elevating supply chain logistics and ensuring that customers get their products and services in great condition on time, every time.