There are many advantages to running an online business. Generally, online businesses cost less to run than traditional businesses. In addition to the lower costs, they also aren’t restricted by geographical location; which means that they have the ability to reach a wide range of customers living in many places. However, while having customers everywhere sounds great, this also means that online retailers have to be able to deliver their products anywhere; as well as on-time and in good condition. This is where Logistics come in.
In this article, we’ll go over what Logistics is and its impact on the supply chain for online businesses. Let’s dive in, shall we?
What is Logistics?
The term “logistics” refers to the process of managing the way that resources are acquired, stored, and shipped. The goal of logistics is to effectively meet customer requirements on time in a cost-effective way.
Moreover, logistics involves the identification of possible distributors and suppliers and determining how effective and accessible they are. While it sounds simple to move goods from point A to point B, in reality, this process can be quite complex. In a sense, logistics is about activities.
Some factors that play into the these processes of shipping products include, but are not limited to:
- Transportation (air, truck train, ship, or some combination thereof)
- Environmental regulations
- Potential obstacles (road work, road closures, etc.)
- Fuel and energy
- Containers and packaging
- Paperwork (labels, bills of lading, etc.)
- Time tables
Depending on where goods are shipping to, more unusual, yet important, considerations may include customs and enforcement, import taxes and regulations, embargos, and wars.
Though the best practices of logistics vary depending on the relevant business and products, there are a lot of factors to consider. Furthermore, some of those factors may affect each other. For example, the weather may cause a road closure, which causes a detour that leads to an increase in fuel costs.
Computer software automation has revolutionized logistics. Now, when customers order products online, they can receive real-time updates on the progress of their packages. Automation also helps companies to accurately check the progress of goods in the supply pipeline. This is a tremendous help for online businesses.
Logistics vs. Supply Chain Management
Logistics and supply chain management work hand-in-hand. Supply chain management is a broader term referring to the sourcing of raw materials, procuring customer requirements, converting materials to products, and then delivering the products. Supply chain management involves relationships between multiple organizations: manufacturers, wholesalers, suppliers, and retailers.
Logistics are part of supply chain management. Both logistics and supply chain management involve strategic planning. Good logistics make a supply chain run smoothly; otherwise, if it’s poor it can gum up a supply chain, costing business money, inventory, and customers.
Benefits of Selling Online
The internet has forever changed retail and the selling of goods. From giants like Amazon, Target, and Walmart to small businesses, eCommerce makes good business sense. There are a number of distinct advantages to selling online.
Running a business online has lower costs than running a traditional “bricks and mortar” store. Online businesses save money on staffing, utilities, rent or property taxes, building upkeep, heating, and air conditioning costs, and more. Moreover, popular store locations can cost a business a lot of money just to maintain a storefront in a desirable area.
Traditional companies choose a location based on factors like; affordability and proximity to customers, suppliers, and/or distributors, eCommerce businesses can operate from anywhere. The main requirements are access to the internet, phone, and email—and of course, good logistics.
On the other hand, with eCommerce, products are available 24/7; a store is always open. This means a customer in Maine can browse and buy products from a Hawaii-based business at midnight. Without eCommerce (and the logistics to shuttle the goods), the two might never connect.
With the rise in eCommerce, retailers can use niche markets in a way that wasn’t necessarily viable before. Additionally, businesses can take advantage of scalability to develop a greater range of products. With products waiting in a warehouse and not on the shelf, so long as the process works, a business can have greater and more diverse inventory.
In addition, product information, demand for products, cart average total, cart abandonment, and things that customers are searching for can all be tracked with software analytics. This allows businesses to confidently plan marketing and sales strategies.
Why Logistics is Important
Logistics are important to any business, but they are the lifeblood of eCommerce. Owners of eCommerce businesses must be savvy to manage logistics in a way that is cost-effective and timely.
Properly managed logistics can increase profitability for a business. It is the key to a successful supply chain and getting the purchased products in good condition into the hands of customers when they need them. Moreover, being reliable in the delivery of its products is good for a company’s image and its profitability. Satisfied customers are more likely to return and more likely to recommend a business to others.
What Are the Benefits of Logistics Management?
Good logistics management increases the efficiency of the movement of goods through the supply chain, which can save both money and time.
Businesses can use software and analytics to track the movement of products through the supply chain to optimize processes, as well as to mitigate risk and disruptions. A good logistics manager can create reliable strategies to provide better services, which makes for happier customers.
In addition, many eCommerce businesses owners have turned to logistic companies to manage their processes for them so they can focus on growing their business.
A logistics company can handle all or part of supply chain functions; warehousing, packaging, shipping, transportation, security, etc. Furthermore, the companies excel in logistics, which means they know the most cost-effective, efficient, and streamlined ways to move goods through the supply chain.
What Are the Different Types of Logistics?
There are several types of logistics. Each type focuses on a specific area and specific activities.
Supply logistics are also known as procurement logistics. It is the sourcing of materials necessary to manufacture products. It encompasses everything from planning and coordinating to the final delivery of raw materials in a timely manner to the right place for manufacture.
Distribution logistics include the activities that concern the storage and transportation of materials and products. This also includes activities such as loading and unloading products onto delivery vehicles and the actual transportation of products.
Production logistics is the coordination of all of the activities that go into the production of products. It encompasses the manufacturing steps, including which companies will manufacture the required products and where they will be made.
Reverse logistics is sometimes referred to as the aftermarket supply chain. It focuses on product reclamation. Furthermore, this can include sending items back to producers and merchants or sending products to be repaired, reused, or overhauled.
What Are the Functions of Logistics?
Logistics is used to plan, implement, and control the storage and flow of goods to meet customer demand. This can be broken down into seven functions.
Order processing refers to the workflow or processes that take place when customers order products and before the company sends the products to them. It entails things like picking the product, packaging it, and readying orders for shipment.
Companies need to balance inventory. Too much inventory takes up space and is unprofitable; too little and they can’t meet customer requirements. Inventory control is the way that businesses strike the balance between the two.
Warehousing is the secure storage of goods, often in a warehouse, prior to their distribution. It is where goods are held once the manufacturer has created them and before they are sold.
Transportation moves products along the supply chain. For example, moving goods from suppliers to buyers includes transportation of those goods. It’s a critical step in logistics.
Material Handling and Storage
Effective materials handling and storage are essential to cost-effective operations and ensuring quality products. Material handling refers to the short-distance movement of products between transportation and a building or within the building, for example.
Logistical packaging is internal packaging designed to prevent product damage. It is important that logistical packaging be effective without being expensive.
Effective logistics management depends on timely, accurate information. Additionally, competent managers keep their fingers on the pulse of the supply chain and are aware of what is happening with it.
Good Logistics Means Good Business
There are a number of advantages to having an eCommerce business.
Logistics is critical to businesses, especially eCommerce businesses. Good logistics can keep goods moving through the supply chain so that customers get their products on time and undamaged. Logistics encompass all of the activities of all of the organizations it takes to make this happen: from getting the raw materials where they need to be all of the ways through to successful delivery to the customer.