This article is Part 1 of a two-part series covering transportation and logistics management.
Before executing a long-term strategy, it’s vital that you have a solid understanding of what transportation and logistics management is. Let’s begin by analysing how the two processes function independently and as a cohesive system:
Logistics focuses on the entire order fulfilment process
Logistics refers to the receipt, production, and distribution of goods and materials in the customer-requested amounts to its final destination. It is also the strategy that determines how your company stores products in its warehouse, tracks orders, and delivers products to its customers.
Simply put, logistics is the overarching business unit that oversees the entire process of order fulfilment and matching customers expectations. It’s both an art and a science.
Transportation Concentrates on Managing Physical Delivery
Transportation within the context of commerce is the movement of goods from one location to another. It’s considered to be a sub-unit of logistics. Companies deliver products by land, air, or sea. Sometimes referred to as transport logistics, it’s a function divided into three significant areas in which a business must engage:
- Operations Management
- Vehicle and Fleet Organization
- Infrastructure Administration
Now that you can see how the two activities operate on their own, it’s time to shift our focus toward how they can work together:
Leveraging Transportation Under the Logistics Umbrella
Practising logistics management, in an effective and efficient manner, requires you to pave the foundation for a transportation network that responds with your business’ needs while remaining economical. Doing so allows you to address unanticipated issues and improve customer service with zero downtime or disruption to your service process.
Transportation is one element of the process. Logistics further provides for inventory planning, goods storage, and demand forecasting in addition to delivery. Optimising your supply chain’s performance means that you satisfy your customers’ needs at the lowest cost possible.
A Balancing Act with a Moving Target
Consider this example to better understand the relationship between transportation and logistics: a pharmaceutical company wants to keep the least amount of inventory on hand to mitigate its investment exposure. The company’s management team attempts to warehouse all stock in a central location since data collection and analysis tells them that it is the best way to achieve this goal.
How does this strategy affect transportation? Deliveries taking place outside the geographical location of the warehouse may experience delays which can lead to disappointed customers. There is even greater potential for revenue loss, primarily when serving industries that deal with temperature and shelf-life issues.
Using the same example above, if the company decides to focus on delivery times and transportation by asking customers to augment their orders, it takes the same problem and propels it in the opposite direction. Asking customers for unreasonably large orders can slow down the process even further. This situation is fertile ground for dissatisfaction.
Automation and Data Logging Bridge the Gap in New Ways
As you can see, transportation and logistics must work in tandem to fulfil customer orders as expected at the lowest price possible. It’s one of the reasons why automation technology is on the rise among transportation and logistics companies. Managers and executives can systematise predictable, redundant tasks across the supply chain network with zero error and at a fraction of the cost.
In addition to automation, data logging is on the rise as well. Both logistics and transportation can participate in data collection and analysis separately and together. Over the long-run horizon, it allows companies to access valuable insights about their supply chain with circumstance monitoring information.
Why It’s Crucial to Actively Manage Your Transportation and Logistics Business Units
Order fulfilment is only one aspect of transportation and logistics management. There are several other reasons as to why it’s crucial to be proactive about this area of your business. Let’s take a closer look at a few of them below:
Optimisation of Inventory Flows
Effectively managing your transport logistics allows your entire supply chain to run seamlessly. You can keep your inventory lean using successful transportation techniques. Plus, you can improve your warehouse’s operational efficiencies, reduce lead times, and save on storage expenses.
As you become more streamlined in your logistics approach, another benefit is reducing your carbon footprint. The transportation industry is known for being a bit ‘emissions-heavy.’
Moreover, customers want to work with companies who take social responsibility to heart. Optimising your transportation process reduces environmental impact while simultaneously delighting your customers.
Becoming a Preferred Shipper
Did you know that there is a shortage of truck drivers worldwide? Experts predict that this trend is going to continue well into the 2020s. Fewer trucks mean less trailer space. Less trailer space equates to longer lead times. Companies that can avoid this pitfall have the strong potential of becoming a ‘preferred shipper.’
Preferred shipper status is the gold standard among customer service indicators that tell industry players that you are managing your logistics process well. Expanding your future capacity is critical to your success.
Final Thoughts and Considerations
Transportation and logistics management is a vast and complicated area of your business that demands time and attention to grow your bottom line and satisfy customers. Both areas of order fulfilment must work simultaneously for optimal results.
This article is Part 1 of our two-part series on transportation and logistics management. In our next post, we offer you our best tips for executing a rock-solid strategy. If you enjoyed this article, check out our post Cargo Insurance: Why You Should Take It. For more information about some of the technological concepts regarding data collection and analysis introduced in this article, please refer to What Is Data Logging?