There needs to be an understanding that high prices do not mean the best quality. Conversely, the lowest price may also not make good business sense. Instead, there need to be solutions that offer the best value for money and value to the business. Bringing all stakeholders and elements of the logistics process together is an important elements of logistics optimization and is called integration. This is a vital point for the continued success of the process. For the process to work well over the long-term, all its relevant parts need to perform at an optimal level.
Traditionally, organizational chart driven organizations will find it difficult to integrate since different areas will be locked into pre-defined silos. Internal integration being vital to efficient logistics, this compartmentalized way of work needs to be re-imagined since it fragments a process and slows down development. Both internal and external integration are vital to success. External integration with suppliers and vendors ensures that they become partners who understand how things work and why they work that way.
When logistics vision is shared, there is a higher chance of success. Similarly, integrating with consumers offers its own benefits. These include a better understanding of their needs and a higher chance of satisfying them.
Route optimisation for transport and logistics
Forming relationships with a customer makes them feel values and important and forms a competitive advantage for the company. Logistics and supply chains often offer the biggest opportunity to reduce costs and increase efficiency. For many companies, better decision making can lead to cost reductions by up to 40 percent. Over the years, through automation and process improvement, many organizations have managed to reduce human effort but in order to achieve true results, the following rules must be observed.
In the increasingly globalized world of today, logistics management offers a unique advantage to the company, both in terms of its function and its potential to act as cost management center. Some of the best practices from industrial companies include:. All aspects of the logistics process including service level agreements, production locations, warehouses, and outsourcing decisions are integrated with overall company strategy. The entire logistics process is regularly evaluated to ensure that it remains aligned strategically with the direction of the company. Any service levels are kept relevant to the customer and all relevant strategy is shared with the right external partners and stakeholders.
In the best companies, the supply chain is customized for every segment of customers or different product categories. The highest revenue generating customers will receive the most customized service while others may receive the same service but with some variety of choices in pricing or timing. There may be relationship building activities with the customers such as scheduled regular meetings to understand their needs and optimize processes accordingly. Most effective companies will ensure that demand and order forecasts are based on real time data.
This helps ensure strategic inventory management and prevents instances of over or under stocking. This end of logistics is usually the responsibility of the vendor or supplier. Suppliers are incentivized to keep costs low and efficiency high. There may be rewards for complying with service level agreements while there may be penalties for delays or poor quality of service or materials.
Contracts often have flexibility to allow for quick responses to changes in demand or requirements. This part of logistics is usually controlled centrally by the company. Defined processes and established benchmarks are required to ensure optimal performance. Expertise is developed among teams to ensure that the right people are running processes.
Regular checks are performed on the supply chain performance to ensure compliance with established and metrics that are defined through the overall company strategy. There are plans defined to manage performance gaps both internally and externally.
There are several stages in the logistics process and not all of them can be controlled one hundred percent. Instead, there is usually a plan of action for identifying and managing risks and this plan needs to be evaluated every month to ensure relevance.
The probability of a risk occurring also need to be assessed. Contingency plans can then be developed for those events most likely to occur or those likely to cause the most loss or damage. Responsibility for risk management and authority for quick decision making also need to be defined and communicated across the company. It is now necessary to have a comprehensive supply chain management system in place. Once the system and process are cohesive, the IT systems can then be connected to both customers and suppliers ensuring a completely integrated supply chain environment.
Any IT systems need to be regularly re-evaluated and updated to keep them relevant. The importance of the logistics function for the global company of today cannot be emphasized enough. Though globalization has meant that many production functions are outsourced to other countries, it has also meant that the need for effective global logistics is even greater now. For this reason, it remains pertinent for a company to create and maintain a strategically focused logistics and supply chain network.
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Logistics Optimization | UPS - United States
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Transportation Optimisation Balance transportation costs with service via customised strategies for shipping, routes and load consolidation.