The Importance of a Good Logistics Strategy in Manufacturing

In 2005, the Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals to add differentiation between logistics and supply chain management. Why? Because logistics is a component of supply chain management (SCM). While SCM is focused on the “big picture,” logistics is only concerned with the storage and flow of goods inside and outside the organization, from point of procurement to point of consumption.

While the two disciplines should be separated in thought, they will remain forever linked because the supply chain is always in flux, which in turn affects logistics. That’s why it’s important that manufacturers have a good logistics strategy. With a good strategy in place, manufacturers can begin to proactively identify changes that can be made to the logistics organization to ensure service levels remain steady in the face of change—or better yet, improve. That means looking deep into your logistics organization for areas of improvement and working with your logistics partners throughout your supply chain.

Analyzing Your Logistics Organization

To strengthen or create a good logistics plan, each individual component of a logistics organization should be scrutinized to find potential cost benefits. While there may be additional components depending on the size of your operation and industry, the following areas provide a good start along with the questions you should be asking yourself.

1. Strategic: Do my high-level organizational objectives align with the logistics organization?
2. Transportation: Are my current transportation methods helping service levels? Could I make changes that might improve them?
3. Structural: Are warehouses and distribution centers optimized? Could efficiencies be increased if some products were manufactured elsewhere?
4. Outsourcing: Are my partnerships with third-party logistics companies benefitting service levels? If not outsourcing, would doing so improve service levels?
5. Logistics Systems: Do my logistics systems provide the data I need to successfully implement a logistics strategy? If not, what types of technology might improve analytics?
6. Competitors: Are my competitors doing better than I am? Could I emulate some of their practices to improve my service levels?
7. Information: Is the information driving my logistics organization real-time and accurate? It not, how can I improve accuracy to avoid decision-making errors?
8. Implementation: What policies and procedures need to be developed or reconfigured to implement new logistics strategies?

3 Tips For Creating an Effective Logistics Strategy

Understanding the importance of a good logistics strategy is one thing; putting plans into action is another. To assist in the creation of strategy, here are three ways some manufacturers are strengthening their logistics organization and improving service.

1. Getting Connected

Digital transformation is enabling manufacturers to design a logistics strategy that connects them to suppliers, partners, and corporations no matter where they are situated, whether it’s across town or across the globe. And it’s making a difference in a number of ways:

• Procurement. Forming closer connections with suppliers and partners aids in the planning process, improves sourcing, manages supplier risk, and boosts collaboration to support long-term plans for growth, innovation, and sustainability.
• Transparency. No longer are manufacturers simply reacting to logistics disruptions—they’re able to anticipate them, modeling the network, creating “what-if” scenarios, and making adjustments as conditions change.
• Analytics. With immediate access to data, manufacturers gain a clear understanding of how well they are handling operations with metrics related to speed, inventory, and finances.

2. Getting Smart

Smart Manufacturing is all about the use of real-time data and technology when and where it is needed by people and machines—and in the form that they need it in. One technology making waves in logistics are smart sensors. Outfitted with GPS, smart sensors are tracking the location of assets, vehicles, inventory, and even people. Manufacturers now use smart sensor data to see at what point in its journey a shipment is at, the whereabouts of a fleet truck, and more. The data also helps predict and confirm when assets arrive and when they leave warehouses, distribution centers, and retail stores. Notifications that an asset is not where it should be also alerts manufacturers to potential problems or even theft in the supply chain.

3. Getting Lean

Lean manufacturing not only benefits what happens on the line, but what’s happening within warehousing and fleet operations. Given the high traffic and importance of warehouses, the potential to go lean in these areas is massive. For example, a common problem in many operations involves a lot of time-wasting and expensive cross-room excursions from order pickers. Getting lean involves creating a smarter layout for the inventory itself, establishing a more intuitive way to track orders, and establishing better communication between warehouse employees. Outside the warehouse, lean manufacturing may involve looking at more efficient routes for your fleet, keeping track of drivers’ unscheduled stops or detours, or streamlining traffic flow in and out of your facility.

A successfully implemented logistics strategy is important for companies who are dedicated to keeping service levels at the highest levels possible despite changes that occur in the supply chain. Remember, the ultimate goal of any logistics strategy is to deliver your customers the right product, at the right quality, at the right price, at the right time, in the right place—while spending as little money as possible.

By reviewing your logistics organization, and creating or reconfiguring your logistics strategy, you’ll be able to better meet the ever-changing demands of your customers and product end-users.