UncategorizedAugust 19, 2022by fieconUnbundling The Logistics Function In Supply Chain Management

Logistics

The rapid growth in global trade which has seen complex supply chain structures being put up, has cemented the role of logistics in the industry. Logistics is a critical component in supply chain management (SCM), as it helps in planning and coordinating movement of products in an effective, safe and timely manner. The end goal is to achieve maximum profitability and competitiveness throughout the entire supply chain network.

As a function of the SCM, businesses work towards systemizing all their activities to rationally manage their resources and increase productivity. With the consumer demands changing by the day, smart businesses align their patterns of movement of products by restructuring their logistics activities or working with professionals in the field. Most businesses which manufacture, import, export or transport goods, prefer to structure their own logistics by incorporating aspects of outsourcing. Case in point is Dell – a global company that designs, develops, and manufactures personal computers and other related computer products. Dell contracts third party vendors who set up logistics parks and distribution warehouses close to its plants to deliver raw materials as well as manage inventory and deliveries.

Among the common activities in logistics management include, warehousing, packaging, transportation, dealing with customs and reverse logistics. Since it is difficult to find a single service provider who is able to manage the entire chain of activities, businesses work with a number of service providers in their logistics functions.

1.Warehousing

Warehousing encompasses the whole process of designing the storage facility, the types of products to be held in the storage facility, and automated solutions within the storage facility for efficiency. It provides a centralized location for the products which makes it easier to track and manage inventory. With a warehouse, the process of storing, stocking, shipping and distributing products is smoothened.

2. Product packaging

This activity has transitioned from a mere cardboard box to a complex coordinated systems which facilitate last mile distribution. Such complexities are witnessed in the new trends being adopted in the e-commerce industry. Warehouses support the activity by providing equipment and supplies such as pallet racks, loading trucks and packaging materials for storing, moving, processing and packaging orders from customers. Not only are the products packed as per the set standards and the customers’ needs, but also flexibility is maximized and costs are minimized. Optimization of the packaging is extremely impactful in all fronts of logistics as a function.

3. Transportation

Transportation is the most important economic activity in logistics. It provides a linkage between a business and its consumers and suppliers, by moving goods from their sourced location to where they are demanded. The process is made possible through inbound logistics involving procurement of materials and goods from supplier locations; and outbound logistics where the products are distributed to the customers’ location. Depending on the product, location of where the shipment is and its final destination, and other special considerations; a business can opt for road, maritime, rail or/and air modes of shipments. Often businesses contract cargo carriers, freight forwarders such as DHL, UPS, FedEx or use their fleet of vehicles after planning their routes and calculating the cost implications to their bottom lines.

4. Customs clearance

For goods to be imported or exported across borders, customs clearance is an important procedure. Most countries stipulate conditions under which products are eligible for importation and exportation in their annually published Foreign Trade policies. These policies are implemented by Customs Departments which act on behalf of the government under customs rules, regulations and tariffs. They are premised in entry and exit points for people and cargo; particularly at airports, seaports and borders gateways.

Custom clearance is facilitated by exports and imports documentation which have to be prepared and submitted for customs examination, assessment and payments, before being released. Some of the documentation include purchase order from buyer, Certificate of Origin, packaging list, Bill of Lading, Bill of entry, Bill of Shipping among others.

Business provide most of the documentation except for the Shipping Bills which are prepared by customs agents for the purposes of classifying the cargo.  Customs agents are licensed by customs to operate and their role is limited to being third party agents helping businesses with customs clearance, through documentation software. Apart from customs agents, businesses can work with a custom broker or freight forwarders who can help them in transacting their customs business.

It is in the best interest of the business to work with third parties/intermediaries who provide quality services, in order to be able to establish a long term relationship that will facilitate efficiency in the logistics function.

5. Reverse logistics

Through reverse logistics, businesses are able to plan the flow of their inventory, packaging materials or part of their finished products from the consumers back to the business. They are then able to recycle, remanufacture, repair, refurbish or salvage the returned products, thus recapturing their value.

With the growing concerns for hazardous waste generation and disposal, various countries are coming up with laws to ensure product companies are responsible for all the waste from their supply chain activities. Companies are adopting standards and measures which are geared towards minimizing environmental hazards through waste recovery. Apple practices reverse logistics by offering its consumers discounts on new iPhones if they turn in the old ones.

This practice is viewed as a corporate responsibility which businesses leverage on as a marketing strategy for brand visibility and positioning.

Author: Inzillia Sasi

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