Logistics, Inventory Control, and Supply Chain Management

Logistics Management

Logistics involves controlling the movement of commodities between the source and the point of consumption to suit the needs of customers or companies. In logistics, tangible products such as materials, equipment, supplies, food, and other consumable things are managed.

Inbound and outbound transportation administration, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and administration of third-party logistics service providers are all everyday logistics management operations. To varying degrees, sourcing and procurement, manufacturing planning and scheduling, packaging and assembly, and customer support are all part of the logistics role. It is involved in all levels of strategic, operational, and tactical planning and execution.

Supply Chain Management

Managing raw materials from production to delivery is known as supply chain management. Hundreds of operational supply chain choices are made each day in many firms. These decisions impact how items are designed, manufactured, transferred, and sold. The supply chain varies depending on the company's size and the complexity and quantity of the commodities produced. Still, most supply networks have the following elements in common: 

  • Customers: Customers start the chain of events when they buy a product from a company. The sales order will include criteria that the manufacturing facility must meet for products that must be created upon purchase. 

  • Planning: The planning department will develop a manufacturing plant to create products to meet the customers' demands. The business will then have to obtain raw materials to make the products.

  • Purchasing: The purchasing department receives a list of raw materials and services that the production department needs to fulfill the customers' requests.

  • Inventory: Raw materials are received from suppliers, examined for quality and accuracy, and then placed in the warehouse.

  • Production: Raw materials are moved to the production area based on a production plan. These raw ingredients are used to make the final products that the customer purchased, and then they are sent to the warehouse for shipping.

  • Transportation: When the finished product arrives in the warehouse, the shipping department chooses the most efficient delivery option so the customer can receive the items on or before their deadline.

Logistics trends in 2021

The organization of logistics in commercial businesses significantly impacts their financial performance. The key to successfully managing logistics is to have a meticulously planned strategy for reaching out to customers. Today’s supply chains are much more sophisticated in design, logistics, and inventory management. Therefore, best practices have evolved and act as key differentiators that set them apart from their competitors.

Prosperous companies combine the latest trends with old and established technologies to make the best of both worlds. Common trends in 2021 include: 

  • Artificial Intelligence (AI): AI helps transportation and logistics firms analyze historical trends to forecast and manage inventories and address changeable demand across supply chains. These technologies help reduce human error in the supply chain. Self-driving AI and innovative road technologies are creating a positive shift towards delivery service automation. AI-based cognitive automation technology also adds intelligence to administrative duties and accelerates data-intensive activities.

  • Blockchain: It provides security by utilizing a decentralized ledger system and addressing critical traceability issues. The fundamental goal of blockchain within logistics has been to increase transparency by transmitting data along the supply chain to all parties involved while still guaranteeing data integrity. Blockchain technology has helped smooth out last-mile delivery by decreasing inefficiencies at this level.

  • Robotics: Integrating robotics into logistics boosts the speed and accuracy of supply chain processes and reduces human error. Robots give more uptime and increase output in comparison to human workers. Robots do not take up the position of humans, but they work collaboratively with them to boost efficiency. Physical robots, such as collaborative and autonomous mobile robots, pick and transfer goods in warehouses and storage places. Software robots perform repetitive and mundane tasks that free up time for human workers.

  • Warehouse Automation: Warehouse automation boosts accuracy, speed, and output by minimizing human intervention. Examples of pick and place technologies include automated guided vehicles, retrieval (ASRS),  robotic picking, automated storage, and put-wall picking. These technologies reduce error rates and boost warehouse productivity. Warehouses require a combination of efficient automation technologies to control their operational logistics costs. 

  • Data Analytics & Big Data: Warehouse productivity, performance management, and logistical resources have been upgraded with data analytics. Tracking position, weather, and fleet timetables help in route and delivery planning. Market data analysis assists in improving supplier prices, inventory levels, and the creation of risk management reports. Furthermore, advanced analytics provide insights that help detect anomalies and proactive maintenance solutions.

How Logistics Impact the Profitability of Commercial Transportation Companies

Countless logistics finance statements lack expense information, so it becomes difficult to manage logistics costs. Often, income statements account for these expenses as control accounts. Doing so means that companies must use additional accounts to understand and manage logistics expenses within the organization. Businesses can find better solutions to optimize their operations by analyzing logistics expenses over specific periods. 

The Impact of High Transportation Costs

In an increasingly globalized world, transportation costs are increasing due to a variety of factors. Most notably, the cost of oil is at the heart of today's transportation issues. Most freight transportation relies heavily on increasingly expensive and scarce fossil fuels. According to the US Energy Information Administration, the price of crude oil is the most critical factor driving variations in diesel costs. The supply-demand imbalance of cargo transportation services is an equally important factor in increased transportation costs. This imbalance stems from trade growth surpassing the availability of transportation services. It has created severe congestion and capacity constraints in the United States.

Many organizations are now rethinking their supply chain strategies in response to unpredictable oil prices and expensive transportation options. Three transportation-driven supply chain strategies are quickly gaining traction: 

  • Turning from offshore to nearshoring

Nearshoring occurs when companies procure supplies and outsource manufacturing closer to ending markets to reduce their transportation pipeline length. This shift results in decreased freight costs, increased revenue, and more assets relevant to inventories. 

  • Designing products for transportability vs. marketability/production

Companies minimize weight and boost transportation density by changing the package and product designs. Doing so results in lower freight costs since one truck can transport more goods. 

  • Forgetting lean inventory policies and moving towards hybrid poor transport/inventory practices. These practices focus on safety-stock and cycle-stock policies and consider the benefits of lower transportation costs.

How to Upgrade Your Logistics and Increase Profitability

Managing your freight and keeping an eye on your logistics makes you aware of the location of your goods, improves customer interactions, reduces the need for excess inventory, and increases supply chain reliability. Here are 4 tips and tricks to improve logistics and increase freight management profitability:

  1. Get better rates

Schedule freight services as far in advance as you can to get better pricing. Also, plan off-peak pick-up times and days and use a freight firm to help reduce costs for local/domestic shipment.

  1. Use technology to your benefit

Freight management is embedded into some ERP systems. This integration provides a seamless, behind-the-scenes option for identifying freight carriers, automatically scheduling shipments, and analyzing logistics KPI measures, to name a few. Use these systems to reduce the overall time you spend on each of these tasks. 

  1. Build relationships with carriers

When businesses build strategic, long-term carrier relationships, they receive transportation management benefits that impact the bottom line. Extended contracts allow airlines to find additional consumers in the area to create a more efficient network. You'll get better rates if the carrier is more profitable, or if you have established a long-term relationship with them.

  1. Put your freight program to the test

Evaluate your freight program to determine why it may not be working as it should. Determine your freight requirements and logistics by taking a step back. You may be surprised to see how far a little ingenuity and negotiation can go. 

Inventory Control

Inventory control is the process of assuring the proper maintenance and management of a company’s stock. It enables firms to respond quickly to client demand, ultimately lowering the cost of retaining and storing items. Inventory control reduces the amount of slow-selling products while increasing the amount of high-selling products. Businesses save time and money with inventory control by reducing labor for reordering and receiving unnecessary items. They also avoid using valuable storage space for slow-selling items, lowering carrying costs and making room for faster-selling products. 

By implementing inventory control, you may protect yourself from making impulsive decisions and avoid the misery and expense of overstocked products. As the name implies, inventory control helps you keep track of your inventory levels so you can make the most of your resources and avoid product deterioration and obsolescence.

Equify Financial 

If you ever have the opportunity to expand your company, take it! Here at Equify Financial, we can help you grow and overcome challenges unique to transportation and construction companies. Whether it is providing capital to purchase inventory or staying up with customer demand, our seasoned financial experts are here to identify your goals, develop and plan, and take steps towards success. We provide equipment financing to help you expand and excel. Our team is ready to help! 

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