Integrated logistics is the most optimised form of logistics. It consists of integrating every aspect of logistics operations and processes, right from planning to meeting all the customers’ needs. An integrated logistics function or a vendor that provides integrated logistics support coordinates all aspects of logistics, from the point of origin to the point of arrival. This includes all the interconnected management activities and decisions, working closely with the different functions of the business process. Integrated logistics coordinates the entire supply chain activities including raw material sourcing and transportation, inventory management, warehousing, packing and dispatch, shipping of products, and last-mile fulfilment as well as reverse logistics. Integrated logistics can be a valuable lever for business profitability, market success and cost optimization.
To understand how integrated logistics can help a business, we first need to understand the functions of an integrated logistics system.
Functions of integrated logistics and how they help:
The functions of an integrated logistics system can vary based on the production process and the nature of the goods and business. But, regardless of the variation, the purpose of the functions to reduce logistical costs and increase logistical efficiency is universal – maintaining a continuous and uninterrupted flow of the product.
The following are the primary functions of an integrated logistics system:
- Inbound logistics:Inbound logistics is also commonly known as the procurement function. This function mostly consists of inventory management and sourcing as well as transportation of inbound materials. It involves material handling and communication with the supplier to optimise the flow of materials from suppliers to the warehouse and into operations. Purchase planning and selection of suppliers are all covered under this function.
How integrated logistics help inbound logistics and procurement: With an integrated logistics system, all aspects of the business are interconnected. This allows the business to use technology-driven systems to automate the process and provide transparency to the various functions involved. It also makes data available across the supply chain to anticipate and meet customer demands. This data allows optimization of the suppliers and materials. The business can schedule the purchase of raw materials at the right time and ensure minimal wastage of resources and inventory. The coordination between the different activities means reduced company costs and increased efficiency, which leaves all stakeholders satisfied.
- Operations:Operations refers to the various production planningand processes before the product reaches the customers. At this stage, integrated logistics can deal with material handling among the facilities of the firm. An integrated logistics expert can plan operations such as warehouses, factories and service centres to be placed strategically to optimise operations, create cost savings and allow faster time to market or delivery to the customer at a quick pace.
How integrated logistics helps operations: By aligning the operations of the business, integrated logistics gives a level of transparency and better operational control, streamlining the logistics process. This operational control allows the business to establish accountability, reduce operational costs and speed up customer response time. The resources saved from reduced costs can then be used in other areas of the business that need it more.
- Outbound logistics: Outbound logistics is referred to as the physical distribution functionof integrated logistics and involves the movement of the finished products out of the plant to the final customer. It also holds that aspect of the business which delivers to the customer, and hence customer satisfaction is intrinsically tied to an efficient and well-oiled outbound logistics function. Focussed on fulfilling customer demand, outbound logistics can include storage, packing, shipping and transportation, inventory management and last-mile delivery. However, the involvement of customers means outbound logistics needs to be more detailed in its planning and execution.
How integrated logistics helps outbound logistics: An integrated logistics system allows for a previously unachievable level of flexibility in business operation. As every department of the business is working in tandem, you can scale down and scale up your operations as per the needs of the customer and nature of the market. By increasing operational efficiencies through cost-effective methods, an integrated logistics system also provides value for your business with higher profit margins. Owning the entire process guarantees fast delivery time with minimal hindrances, leading to customer satisfaction. When every department is interconnected, each department knows exactly what their role is and when they need to do it, effectively eliminating redundancies from the process.
An integrated logistics system provides a number of benefits to your business that you would not be able to achieve otherwise. Logistics is a complicated system that can be hard to utilise optimally when you don’t have any control over its many moving pieces. Streamlining the logistics process with integrated logistics opens up a world of opportunities to make your business more efficient and profitable. Most importantly, an integrated logistics function is a strong business enabler – whether internal or outsourced to an expert partner, integrated logistics helps a company focus on their core business and keep customers happy with better quality, service and innovation.