6 Vital Components of a Successful Logistics Strategy

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Insights for ProfessionalsThe latest thought leadership for Management pros

Thursday, November 21, 2019

Ensuring your logistics strategy has these essential components will greatly increase your chances of getting the best results for the business.

Article 4 Minutes

Logistics is at the heart of what countless companies do all over the world. If you get your logistics strategy right, you have a solid foundation upon which to expand and evolve as a business.

Many different processes and functions must come together to ensure your efforts in logistics are delivering the best possible results.

Here are six of the most important components your strategy needs to minimize risk and maximize benefit for the business:

1. Clear objectives

Without well-defined objectives and a clear idea of what success looks like, it's extremely difficult for logistics managers and decision makers to feel confident they’re moving in the right direction and achieving the best results.

Goals for logistics should be aligned with those of the organization as a whole, to ensure that every department is contributing to the company's wider mission.

The priorities you choose to focus on will have consequences in key areas such as how your supply chain operates. An emphasis on cost reduction, for example, will dictate how much you’re willing and able to spend with your suppliers.

2. Risk assessment

Risk assessment is vital in many areas of business, but it's particularly important in logistics, simply because of the sheer number of possible problems and disruptions any organization's supply chain faces on a daily basis.

The most common risks include:

A solid logistics strategy will identify the widest possible range of potential threats to your supply chain and evaluate your level of resilience to them. This will help you implement data-driven actions that provide robust protection for the business.

3. Collaboration

Bringing various departments and stakeholders together to contribute to your logistics strategy helps ensure your plans are broad and comprehensive, taking into account the needs of every part of the business.

Steve Murray, principal consultant and chief researcher for Supply Chain Visions, espouses sales and operations planning (S&OP), a simple method that involves all primary functions - from sales and marketing to finance and procurement - collaborating to review and plan business activities.

"[S&OP] does not simply include sales and operations, but must include all parties who impact, or are impacted by, the regular activities of the business. This session must be viewed as a team effort, with all understanding a common set of goals (customer satisfaction, profitability, improved sales, etc.), and agreeing to work together to achieve those goals." - Steve Murray, speaking to Camcode.
 

4. Technology

There are numerous technologies and fields of innovation that are having a major impact on supply chains and logistics as a whole.

One example is the Internet of Things (IoT), a rapidly expanding space that’s expected to comprise more than 64 billion devices by 2025. The IoT encompasses an array of technologies that hold great potential for supply chain management, such as smart sensors that enable real-time tracking of items in transit.

Another key area is automation, which can unlock benefits such as suppliers and clients receiving instant updates when goods have been dispatched and delivered. Adopting systems that handle routine tasks such as these without human input can help you save time and put your staff to better use.

5. Segmentation

Segmenting your customers, products and vendors into common groups, based on shared characteristics and priorities, can make a valuable contribution to your levels of efficiency in logistics.

The essential goal of segmentation - particularly where customers and products are concerned - is to create individual supply chains for each group, which helps you unlock maximum value at the lowest possible cost.

There are various approaches you can take when it comes to creating your segmented groups. Customers, for example, can be categorized by level of importance, which helps ensure that maximum time and attention is dedicated to the clients that carry the most value for the company.

6. Review and adaptation

Constant measurement and review is crucial in logistics, so you're able to make well-informed, up-to-date judgments about whether your strategy is delivering the results the business needs and expects.

It's important you're taking the right measurements to effectively gauge your performance. Possible supply chain metrics include:

  • Percentage of orders that are error-free
  • Time between payment and delivery
  • How long existing supply would last without replenishment
  • Inventory cycles per year

Regular measurement and review can give you valuable insights, but this information is largely worthless if you don't act on it. Adaptability and openness to change in the logistics department can help you stay relevant and competitive, which is particularly important in the current era of digital transformation.

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