Logistics plays a crucial role in supply chain management by ensuring the efficient and timely movement of goods from suppliers to customers.
In this article, we’ll explore the principles of logistics, their importance in supply chain management, best practices for logistics management, and the challenges logistics managers face in today’s manufacturing landscape.
Supply chain management refers to managing the entire production flow of a product from raw material sourcing and production through to customer delivery. The word “chain” describes a complex supplier network (the chain’s links) supporting production, procurement, transportation, and distribution of goods and services.
Well-managed supply chains result in optimal inventory levels, fewer delays in product delivery, and the reduction of excess capacity in terms of storage facilities, resources, vehicles, and staff. Proper supply chain management supports strategies for new and improved products, more efficient production methods, and more reliable demand forecasting.
Logistics refers to the movement and storage of items flowing through the supply chain. Supply chain management includes logistics but also the coordination of all the business partners who play roles within the distribution network.
Logistics typically focuses more narrowly on the internal movement of product components and raw materials between their points of origin and end customers. For this reason, logistics often include transportation, warehousing, inventory, materials handling, packaging, and labelling.
Logistics also involves effective inventory control. Efficient inventory practices can save your business money by striking the balance between having raw materials on-hand to manufacture products vs having too much (or not enough) raw materials, which could place financial and storage burdens on the company. Accurate inventory data can also improve demand forecasting.
Effective inventory control is only the first step in warehouse management, however, as it also requires space planning, staff scheduling, order fulfilment, shipping, and receiving. Each of these functions is vital to supply chain management objectives, including timely delivery, cost containment and customer satisfaction.
Logistics documentation can support overall process improvement, boosting productivity and reducing costs within the supply chain. Ultimately, sound logistics can increase the resilience and dependability of supply chains, making your business more competitive, while mitigating the hazards involved in the transportation and storage of product components.
One only has to look at China, a world leader in advanced logistics, to understand how effective logistics supports and enhances supply chain management.
China's transportation infrastructure includes over 5 million kilometres of roads and more than 150,000 kilometres of railway lines, including 37,900 kilometres of high-speed rail. The country is also home to more than 200 airports handling air freight. China’s coastline, meanwhile, supports 34 major seaports along with more than 2,000 smaller inland ports. The Chinese government developed all of these modern, integrated facilities for the express purpose of moving goods to market quickly and efficiently.
This complementary, ever-growing transportation infrastructure links some of the world’s most advanced warehouse facilities, where sophisticated information technology and telecommunication systems coordinate vehicles moving product components throughout the supply chain.
If you’re looking for a reason why China is the world’s largest exporter of manufactured goods, look no further. The country’s combination of world-class transportation, storage, and communication infrastructure gives it a major advantage on the logistics and supply chain management fronts, which will enable it to maintain its position as a global manufacturing leader.
Supply chain disruptions during the pandemic changed the way logistics managers approach inventory control. Over the last few years, many manufacturers and logistics professionals have chosen to increase inventory levels and to diversify component suppliers. In many ways, the industry has transitioned from a “just-in-time” inventory approach in the early 2000s to a “just-in-case” method, which favors increased inventory levels. The pandemic accelerated the adoption of this approach, which has helped supply chain managers counter the rising cost (and often the reduced supply) of raw materials.
Global events have also triggered volatile demand swings for many manufactured products, further complicating inventory control and staff planning. It’s also forcing supply chain managers to rely more frequently on contingent suppliers to accommodate surges in demand.
Another major challenge affecting most supply chain management programs is rising transportation costs. In the first half of 2022, for example, the price of diesel fuel rose by 55%, leading many logistics suppliers to impose fuel surcharges.
To cope with these challenges, logistics organizations are replacing manual, paper-based business processes with digital technology. This includes advanced inventory control databases and telecommunications networks that enable teams to stabilize supply chain workflows and better respond to delays and disruptions. China is a world leader in this technology and they have also taken steps to streamline the global nature of today’s supply chain.
The country’s Belt and Road Initiative (BRI) is one of the most massive logistics and transportation infrastructure projects in history. Inspired by the Ancient Silk Road trade route, its goal is to connect the continents of Europe, Asia, and Africa to facilitate China’s supply chain management.
The configuration of the BRI shortens the distance between markets, reducing transportation times and costs. It has also strengthened the resilience of supply chains, improving service levels and reliability. The BRI enables Chinese manufacturers to manage cross-border supply chains over more than 20 countries.
Difficult as the above challenges can be for today’s manufacturers, there are proven techniques for coping with them in these “interesting times.” By adopting these best practices, your business can build synergy between your logistics and supply chain management functions to keep materials and components flowing smoothly.
Effective logistics management calls for collaboration and communication among all the links in the supply chain, including suppliers, customers, and internal teams. With effective teamwork, stakeholders can raise opportunities for improvement and brainstorm ways to reduce costs, improve efficiency, and stabilize supply chains.
Supply chain management should include regular reviews of existing business processes. Through detailed analysis, teams can identify and eliminate inefficiencies, reduce costs, and improve supply chain performance.
A major benefit of China’s advanced digitization of logistics and supply management processes is that it facilitates data analysis. Taking advantage of online systems and data, your team can identify trends, predict demand, optimize inventory levels, and make more decisions based on timely access to accurate information.
By automating tasks such as inventory management and transportation, and taking advantage of China’s modern infrastructure and facilities, businesses can free up time and resources to focus on other facets of supply chain management, such as customer service and operational improvements.
Recent events remind us of the potential hazards that can disrupt supply chains and product delivery. Unsurprisingly, risk management has become a prime focus for supply chain managers. Through offshore manufacturing, your business can identify and mitigate hazards associated with transportation, production, and product delivery. This can reduce disruptions and ensure the timely and reliable delivery of products to customers.
China’s sophisticated logistics and supply chain network sets it apart on the world stage. If you’re looking to maximize your business’ growth, there has never been a better time to partner with a Chinese manufacturer.
Kingstec has worked with China’s leading facilities for over 40 years and can help your business navigate this dynamic, fast-evolving market, acting as an extension of your mechanical and electrical engineering, design, and logistics departments.
Call us today to learn how your business can partner with world-class Chinese manufacturers.
