Logistics for business is more than just moving goods from point A to point B. Today, it’s a complete process of improving the company and its interactions with customers and partners. We’ll discuss the tools used for this and how to implement them below.
What is a supply chain?
A supply chain is a broad network that connects all of a company’s processes. It can vary depending on the business, but in general, it covers the entire product journey, from raw material extraction to customer purchase.
Components typically included in a supply chain include:
- planning;
- raw material sourcing;
- labor sourcing;
- manufacturing;
- transport logistics;
- wholesale and retail;
- customer service;
- product delivery.
In general, a supply chain integrates people, technologies, resources, and activities—everything that affects the final product, as it travels an entire route before reaching the consumer.
A sustainable supply chain applies to all types of goods, including intangible products and services.
Supply Chain Elements and Participants
The most important factor in supply chain management is that all participants must work together smoothly and efficiently.
Supply chain participants:
- Suppliers;
- Manufacturers;
- Distributors and wholesalers;
- Logisticians;
- Intermediaries and agents;
- Retailers;
- End consumers – customers.
A company can itself play a specific role in the supply chain of partners, or it can also have its own supply chain for its products.
Supply Chain Diagram and Business Example
A traditional supply chain diagram looks like this:
- Raw material supplier;
- Manufacturing;
- Warehouse/distribution;
- Wholesale;
- Retail;
- Customer.
A modern supply chain also includes a reverse flow, if a customer has requested a product return, service/repair, or recycling/reuse.
An extended supply chain encompasses a large number of enterprises, organizations, and individuals. It would look like this:
- Raw material supplier;
- Supplier of other components;
- Manufacturer;
- Finished goods warehouse;
- Distribution center;
- Logistics partners;
- Wholesale buyers;
- Retail chain (especially relevant for e-commerce);
- End consumer.
Extended chains are often used in the automotive, electronics, and home appliance industries. The product’s journey can be even more complex if it involves multiple intermediaries.
Supply chain (example) in a process such as purchasing coffee:
- Coffee cultivation abroad;
- Processing;
- Exporter;
- Transportation;
- Customs;
- Importer;
- Roasting;
- Distribution;
- Wholesale;
- Coffee shop, store, or online store;
- End consumer.
In this case, the cost of coffee depends on the intermediaries—the shorter the chain, the cheaper it is.
Classification and types of supply chains
Supply chains are present in almost every business process, so their types are divided by flow.
Types of supply chains:
- material – the movement of goods, raw materials, and components;
- information – data supporting the transportation of goods (orders, documentation);
- financial – all monetary transactions (payments, advances, taxes).
An effective supply chain is a balance between these three flows.
Supply Chain Management and an SCM System
Supply chain management is the complete interaction with the supply chain, encompassing the coordination and control of all logistics. An SCM system automates this work, significantly reducing the workload on the operational system.
An SCM system can be either off-the-shelf software or developed specifically for a specific company. Individual SCM elements can also be integrated into systems such as CRM and ERP.
Benefits of using an SCM system:
- cost optimization;
- improved product quality;
- improved customer service;
- ensures profitability and productivity of the enterprise;
- automation of logistics processes;
- Minimizing risks;
- Improving production process control;
- Reducing administrative burden;
- Avoiding disruptions and delays.
Implementing an SCM system significantly simplifies planning raw material and material requirements and ensures that all tasks are completed on time.
Supply chain optimization and automation of logistics processes
Supply chain optimization is primarily aimed at reducing delivery times and improving management and service.
Who needs an SCM system:
- Manufacturing companies;
- Retailers and store chains;
- E-commerce (online stores);
- Companies with international import/export;
- Businesses with highly seasonal demand.
An SCM system will definitely simplify the work of companies with large volumes of goods and multiple delivery stages.
What are the available ways to optimize the supply chain:
- Cargo consolidation;
- Supplier consolidation;
- Choosing the fastest and cheapest routes;
- Avoiding “empty flights”;
- Automated customer notifications with delivery times and all order information;
- GPS monitoring of cargo and containers;
- Proper distribution
- Warehouse inventory;
- Digitalization (electronic waybills, declarations, etc.);
- Demand forecasting using analytics and AI.
3PL/4PL operators are experts in logistics optimization. They are the ones businesses most often outsource to for the execution of flights and transportation control.
Supply Chain Resilience and Risk Management
Who in today’s market can formulate a logistics strategy for a business? This function should be entrusted to transport and logistics companies, as their services include 4PL (Fourth Party Logistics). This is a type of cooperation in which the transport company takes on the comprehensive management of logistics processes. This includes much more than just order delivery.
How does a transport and logistics company optimize a business’s supply chain:
- Select the fastest and most cost-effective delivery routes;
- Find international partners;
- Organize warehousing, which includes unloading and loading, labeling, and repackaging;
- Provides convenient online and 24/7 cargo tracking;
- Performs customs clearance for international shipments;
- Develops a logistics strategy;
- Provides analytics and reporting.
Companies with a well-established supply chain always have a competitive advantage. Therefore, it’s more profitable to invest in the future of your business now. Contact a transport and logistics company that will ensure uninterrupted and fast deliveries for years to come.
