How To Achieve Efficient Logistics and Warehousing?

What is logistics?

Logistics is an interdisciplinary science that focuses on coordinating, linking, directing and optimising the flow of materials, raw materials, products and services. It includes the following activities

• Procurement and inventory management
• Distribution
• Warehousing
• Transportation
• Packaging
• Risk management

The European Logistics Association defines it as “The organisation, planning, management and execution of the flow of goods from development and procurement through production to distribution to the final customer, with the aim of satisfying market requirements at minimum cost and minimum capital utilisation”.

The main role of logistics is to ensure that customers receive the goods or services they want at the right time, in the right place, and in the right quantity. Logistics is important for all businesses, but it is essential for small and medium-sized enterprises because it can keep them competitive, reduce costs efficiently, and ensure customer satisfaction.

Interestingly, logistics is not new. The word comes from the Greek ‘logos’, meaning action or reason. It can also be traced back to the Old French word ‘loger’, meaning to procure.

People have been involved in the movement of goods since the beginning of time. The first germ of logistics as we know it today can be traced back to the construction of the Egyptian pyramids and later to military activities.

In the Middle Ages, the term logistics was used mainly in connection with the construction of military fortifications, but it was still without a precise definition. It was not until 1885, with the opening of an English naval school, that a course was set up to study the subject in more detail.

Did you know…?

It was not until the end of the Second World War that businesses fully embraced logistics. Companies began implementing it gradually as they realised how important it was to properly manage goods, materials or raw materials and how this could significantly impact their profits.

Why is logistics important?

Well-designed and implemented logistics are important for many reasons. These include:

• Visibility – Logistics management provides an overview of the entire supply chain. This makes it much easier to control costs, identify process efficiencies, uncover problems and risks, plan demand or learn about new opportunities.
• Cost reduction – Logistics enables companies to reduce overheads associated with transportation or warehousing. The savings can then be reinvested in other areas, such as marketing or advertising.
• Improve customer experience – A good customer experience is a key driver of repeat sales. So, if you want your customers to be happy, it’s not enough to just sell them quality service. Delivering orders directly to their homes quickly and accurately is also key.
• Loss prevention – Logistics management helps prevent losses in several ways. One is inventory visibility, which lets you know how much product you have in stock at any time. Ensuring optimal storage and transport conditions (such as the right temperature or humidity) also helps prevent spoilage and damage and avoid unnecessary costs.
• Competitive advantage – The correct and timely delivery of shipments is essential to customer satisfaction and key to brand reputation. This is a great competitive advantage, as a trustworthy company that provides quality service will find it much easier to attract new customers.

What are warehouses, and what types of warehouses are there?

Warehousing is one of the most important parts of the logistics system. Its role is to ensure the storage of products in the period between their production and consumption. In other words, warehouses bridge space and time. They ensure that finished products are stored in such a way that they maintain their quality and are always ready for immediate shipment.

Warehouses have several other functions. You can choose from:

• Balancing function – warehouses can balance demand in situations of unbalanced material flow.
• Security – Warehouses can maintain supply in the event of unexpected supply disruptions.
• Transformation function – also known as refinement function. Some materials and goods acquire new useful properties through storage. Examples include wine, cheese, wood and fruit.

Warehouses by ownership

Warehouses can be classified according to several factors. Based on ownership, we speak of the following types:

Public warehouses

A warehouse that is not owned by the company or organisation. This includes general commercial warehouses, special commodity warehouses, bonded warehouses, etc. Their main advantage is that they save investment capital and allow storage capacity to be increased. So, if the space you currently use is insufficient, you can expand it.

Public warehouses also reduce the risk of obsolescence and offer various additional services. The downside is that you don’t own the space; you have to pay regular fees for it, and the space supply is limited in certain locations.

Public warehouses are ideal for small and medium-sized businesses that cannot afford to invest in their own private warehouses.

Private Warehouses

Private warehouses are warehouses that belong to you alone. Their main advantages include

• High level of control
• The ability to design the warehouse to your exact requirements
• The ability to use your staff
• Fees are minimal after the initial investment

A private warehouse is an excellent choice, especially for large companies. In some situations, it is also worthwhile for medium-sized companies, but comparing the return on investment and the costs is essential.

The disadvantages of private warehouses are that they require a high initial investment and are fixed in size. If your space is insufficient, you have to invest in building another.

Warehouses by function

Warehouses are divided according to their function:

• Central – the main warehouse, where the company’s finished products are stored before being sent to shops or branches. It is usually the largest, so it is necessary to maintain order and a particular system in it.
• Commercial – used to store goods for sale. It is located at the point of sale or is part of a central warehouse.
• Shipping – used to store products ready to be shipped and sold.
• Transit – found in places where goods are transhipped, such as rail yards or ports. Its primary function is to receive goods, sort them according to need and prepare them for transport.

Warehouses by design

In this case, we are talking about the following types of warehouses:

• Enclosed – Warehouses that are closed on all four sides. They offer the highest level of privacy and security
• Covered – they have one to three sides and a roof. They tend to be more open than enclosed warehouses
• Open – a free space that does not restrict you in any way. You can use it exactly how you want and need it
• High rise – large warehouses up to 8 metres high
• Indoor – single-storey warehouses approximately 5 to 6 metres high
• Multi-storey – warehouses divided into two or more storeys.

What is logistics management?

Logistics encompasses many activities. Its management focuses on ensuring that they all work properly and run smoothly. For example, employees are responsible for monitoring risks that could jeopardise the delivery of goods, selecting a suitable transport provider, and so on.

Experienced managers also know how to intervene in the event of a crisis. They usually have a detailed plan to minimise the damage and prevent it from having a major impact on the entire supply or distribution chain.

Modern software facilitates logistics management by helping companies make the best and most efficient decisions. Many programs can also automate processes such as printing labels, placing orders, or recording new products or materials. This significantly speeds up work and reduces the risk of errors due to inattention.

The seven Rs of logistics

The Chartered Institute of Logistics and Transport, an international organisation for supply chain, logistics and transport professionals, defines the so-called seven Rs of logistics. These are:

• Right product – Logistics focuses primarily on delivering the product that the customer has ordered. The key is to distinguish the order and deliver to the end user exactly what they saw on the website.
• Correct quantity – This is an essential factor, especially if you sell items that can be bought individually or in larger packages. For example, a customer can order a pen or a pack of ten from your e-store. It’s important to keep your stock clearly labelled in your warehouse so you can send out the right alternative at short notice.
• Right condition – Customers expect the product they buy from you to work as intended and have all the promised features. Therefore, you should inspect products before they are shipped to ensure that they are not faulty or damaged in any way. At the same time, if a customer accidentally receives a product that does not work, they should have an easy way to return it.
• Correct address – Part of the logistics process is delivering parcels to the correct address of the person specified in the order. Remember that incorrect addresses lengthen delivery times, increase costs and damage customer relationships.
• Right time – Customers today don’t want to wait a week for products. They expect to have them in their homes in a day or two when they order from you. Don’t wait to send packages. Send them as soon as possible. Also, ensure you’re sending the right parcel, in the right quantity, to the right address so you don’t unnecessarily delay delivery.
• Right customer – Mix-ups, address errors, or other unfortunate situations reflect a lack of respect for the consumer, inattention to detail and a lack of brand credibility. Watch out for these things, as they significantly impact your success and how potential and existing customers view you.
• Getting the price right – Your pricing should be well thought out. If you want them to be competitive, consider your target audience, geographical area and the industry you operate in when setting them.

Expert advice

Don’t be afraid to tinker with your prices. Move them up or down according to the product lifecycle, economic situation or demand. But remember that changes should be manageable. Make them gradual and over shorter periods.

Basic types of logistics

There are several ways of looking at logistics and how it is subdivided. In terms of its basic and main types, these are

Purchasing Logistics

Purchasing logistics is often referred to as procurement or supply logistics. It is the process of acquiring, transporting and storing raw materials, components and supplies that flow into an organisation.

The primary objective of purchasing logistics is to ensure that the necessary inputs for production or service delivery are available in the correct quantity, of the right quality and at the right place at the right time.

Purchasing logistics involves several processes, which are:

• Procurement of raw materials – identifying and selecting suppliers based on thorough research, arranging cooperation, signing contracts and placing orders.
• Transportation – planning the movement of raw materials from suppliers to the company, selecting the appropriate modes of transport, optimising routes and coordinating with carriers. Careful transport management ensures timely and cost-effective delivery of materials.
• Supplier management and coordination – establishing and maintaining good relationships with suppliers, monitoring supplier performance, ensuring schedules are met and resolving any issues or discrepancies.
• Warehousing and inventory management – this includes managing, controlling, and storing incoming raw materials. Sophisticated inventory management reduces the risk of spoilage and ensures that stock is always available in the required quantities.

Production logistics

Production logistics focuses on management:

• The internal movement of goods and materials
• The movement of materials and products from suppliers to the company
• The movement of products and semi-finished goods between workstations.

The role of production logistics is to support smooth production processes, which significantly impact a company’s success.

Distribution logistics

Distribution logistics, or output logistics, refers to the movement, storage and delivery of finished products from an organisation to end users. Its purpose is to ensure that goods are distributed to their intended recipients efficiently and on time.

Distribution logistics includes processes such as

• Product packaging – packing and labelling finished products according to customer requirements and required standards, as well as selecting packaging to ensure adequate protection of the goods
• Order fulfilment – processing orders received through various channels, such as online platforms, retail outlets, or direct sales, selecting the required items from stock and preparing them for shipment
• Distribution of goods to end customers – managing the distribution network to efficiently deliver products to end customers, selecting the most appropriate transport methods, optimising routes, coordinating with carriers and logistics partners, detailed planning, tracking shipments and communicating with customers

Warehouse logistics

Warehouse logistics covers several areas. These include the need to create a warehouse, the choice of managing goods and raw materials, and the correct warehouse space allocation.

It also includes choosing modern information and other systems to support warehousing and ensure you always have up-to-date data on your range.

Reverse logistics

Reverse logistics is the movement of goods or products from end users back into the supply chain. It occurs when products are exchanged or returned. It aims to maximise value recovery, minimise the negative impact of goods’ return, and ensure proper handling.

In addition, reverse logistics also focuses on the disposal or recycling of products and the management of complaints and repairs.

Types of logistics by level of problem

There are three types of logistics, depending on the scale of the problem:

Macro logistics

Macro logistics is the field of logistics that studies and manages complex logistics systems at the level of the macroeconomy or macro processes.

While micro-logistics focuses on specific operations and processes within a company or supply chain, macro-logistics deals with broader issues. These may be related to national logistics infrastructure, international transport and trade, logistics trends, economic impacts, etc.

Macro logistics is essential for understanding and managing global logistics issues and their impact on the economy and society as a whole.

Micrologistics

As outlined above, micro-logistics focuses on specific operations and processes within a company or supply chain. It is a discipline whose main task is planning, organising, managing, and optimising material and information flows.

Metalogistics

Metalogistics deals with problems in companies or industries where micro and macro logistics activities overlap. It is a collaboration between companies, regionally specialised departments, and different industries.

Logistics versus Supply Chain Management

In some cases, logistics is similar to supply chain management. However, there are several differences between the two.

Logistics deals with the movement of goods from the perspective of a single company. These are usually internal activities, such as receiving materials or moving finished products to customers. On the other hand, the supply chain is the network of companies involved in the production or distribution process.

In simple terms, logistics is the responsibility of one company, whereas the supply chain is the responsibility of multiple companies.

How do you optimise your logistics strategy?

If you want your logistics strategy to be successful, you need to know how to optimise it properly. There are several ways to do this:

Inventory management

Keeping track of what’s in your warehouses is challenging for small and large businesses. You should consider automating your inventory management to avoid chaos and increased costs. By choosing the right software, you can:

• Track the movement of every item in real-time,
• Track overstocks and understocks
• Automate procurement management (e.g. through automated purchase orders)
• Better organise your warehouse according to stock availability
• Reduce errors due to inattention.

Did you know…?

Up to 65% of retailers struggle to track inventory through the supply chain. In fact, 73% admit that they can’t predict inventory needs, and 87% consider inaccurate inventory to be a more significant factor in lost revenue than theft.

Warehousing

When it comes to warehousing, several solutions can help you achieve higher levels of efficiency. These include things like warehouse layout control. Consider whether the system you’re using is practical enough. Consider whether certain products or materials could be placed closer together to reduce staff walking time.

Also, look at the level of picking accuracy. That is, how many of the total orders were correct and how many were returned. For returned products, track the reason, and if it was a mistake on your part, try to minimise it in the future.

Transportation

Transport is an essential part of the whole logistics process. So, check it regularly and find out where your weaknesses lie. Eliminating them will save you a lot of money and increase customer satisfaction.

Expert advice

If you offer your customers your transport (with your vehicles), get software to help you plan your routes. Choose one that considers real-time traffic to save time, energy and money.

Packing

Only pack your products in manageable boxes. Larger boxes take up a lot of space and cost a lot more than smaller ones. Well-chosen packaging is safer because it prevents the product from moving from place to place.

Delivery

When it comes to delivery, the first thing to consider is the accuracy of the order. Sending the wrong parcels to customers will reduce both their satisfaction and your credibility. It will also cost you a lot of money.

Review and analyse the delivery of goods. Identify where the most significant errors occur and how to eliminate them.

Logistics partners

Most companies today use public warehouses or third-party transport. This alternative is more practical because it only requires a little up-front investment. In addition, the external company handles many of the responsibilities that would otherwise fall on your shoulders. These include recruiting and training staff, purchasing vehicles, and so on.

However, to keep your customers happy, you need to choose a logistics partner who is experienced enough to provide you with the best service.

Evaluate your relationship with your logistics partner regularly. If there are any weaknesses, talk to them and try to find a solution that suits both parties.

Trained personnel

The various activities that makeup logistics will only work if you have professional staff. They will know how to work with stock, how to sort it, and what to do in different crises.

Be aware that the field of logistics is constantly expanding and offers exciting opportunities. Plan regular training sessions and seminars for your employees to learn to work with new software and adapt to the latest trends.

Enough free space

Your warehouse should be 80 to 85% full. This will allow you to reorganise and reorder when larger deliveries come in. You’ll also have space if older stock accidentally stays in the warehouse and you already receive new stock.

Expert advice

It’s OK to occasionally get close to 100% stock. However, this should not be a regular occurrence.

Storage systems

Do you have warehouse equipment and storage systems that help keep things tidy and organised? Here are some of the essentials you don’t want to miss:

• Pallet racking – the basic type of equipment used to store pallets. The racks are solid and made of beams
• Classic racks – have universal use. They usually store smaller goods that are not loaded on pallets
• Boxes and crates – used for storing and moving smaller goods. They are convenient because they can be used to organise different types of goods and materials
• Cabinets with drawers – used for smaller goods. Like boxes, they can be sorted and organised efficiently
• Other equipment – racks, cupboards or wire baskets are also popular

Trends in logistics

Part of optimising logistics is following and implementing the latest trends. Many new software or systems bring dozens of benefits. For example, they can simplify how we work, automate many tasks, and reduce the risk of human error.

Implementing new trends can also help you stay ahead of the competition. Smooth logistics support brand credibility and customer satisfaction. This directly impacts whether they buy again or leave a positive review, making it easier to attract new customers.