The disruption to the economy during the COVID-19 pandemic has had a major impact on the logistics industry.
Factory and port closures affected shipping while growing e-commerce demand has caused a surge in truck deliveries. The freight and logistics market in North America is forecast to grow by 3% during the 2021-2026 period, research shows.
What is logistics, and why is it important to businesses? Read on to find out.
What Is Logistics?
Logistics refers to a company’s transportation of raw materials, as well as the packing, shipping, and delivery of its products.
What is the difference between logistics and supply chain management? Logistics is part of the supply chain. Logistics is about a company’s internal processes, while supply chain management encompasses its external network of suppliers, warehouse providers, distributors, and so on.
Logistics incorporates a range of functions within a business, including:
- Inbound and outbound transportation
- Handling of raw materials
- Fleet management
- Order fulfillment
- Inventory management
- Returns management
Reverse logistics refers to the processing of product returns from customers back to the business.
What Is the Importance of Logistics Management?
Logistics management focuses on coordinating logistics so that the processes run as efficiently as possible. In this way, a business can reduce costs and save time.
Effective logistics planning delivers resources to the business at the right time. It then distributes products to their destination quickly and in good condition. This strategic planning helps companies to ensure they provide good customer service.
When customers have a good experience, it contributes to brand loyalty. That makes it more likely they will buy from the company again in the future.
How Does Logistics Management Affect Profitability?
Logistics involves a range of costs. These include including vehicle purchasing or leasing, fuel, warehousing, packing materials, and shipping fees.
Keeping down the costs of supply chain logistics has a direct impact on a company’s bottom line. If they do not have robust logistics management processes in place, they can end up with cash tied up in stock, trucks taking inefficient routes, and products going to waste. All this can affect profitability.
Small businesses can find it a challenge to devote resources to an internal logistics team. But they can outsource operations to a logistics services company to manage their logistics for them. Some businesses choose to handle their own internal logistics, but they outsource their returns management to a third-party logistics (3PL) provider.
Optimize Your Logistics Management to Increase Profitability
Understanding logistics processes is vital to driving growth in your business. Logistics planning is key to cutting costs and improving customer services. With lower costs and higher sales, you’ll see bigger profit margins.
Efficient logistics management will also free up time for your team to focus on other tasks that will help your business to expand.