Table of Contents
Logistics comprises the planning, implementation, storage and transportation of goods and information, from the point of origin to destination. Logistics management is a key component of supply chain management, it’s goal being to bring operational efficiency, reduce costs, and enhance customer satisfaction. Components of logistics and logistics management therefore plays a pivotal role in optimising processes in business and involves strategic decision-making and coordination between other functions of the supply chain ecosystem.
What are the major components of logistics and logistics management?
Advanced logistics technologies and the impact of the pandemic has transformed logistics operations and management globally. There has been a growing importance on logistics and supply chain agility and efficiency, with logistics companies designing new strategies, diversifying, and taking calculated risks in business.
Moreover, with e-Commerce business opening new doors for the logistics sector, logistics management and logistic services today are more flexible, data-driven, and customer-focused.
To have a better understanding, below is an overview of the different elements of logistics and logistics management components.
| Components of logistics | Components of logistics management |
| Inventory management | Strategic planning and management |
| Warehousing and storage | Inbound and outbound logistics |
| Information flow | Information Systems and technology |
| Order fulfilment | Distribution, delivery and returns management |
| Fleet and transportation | Compliance management |
These logistics components often overlap, making it difficult to define the roles distinctively. In the next section, we will take a look at each of the components of logistics in detail.
5 major components of logistics and logistics services
In this section, we will take a look at the components of logistics services. While some businesses build their in-house logistics capabilities, others prefer to outsource logistics services and focus on their core competencies.
On that note, let’s take a closer look at the major logistics components for businesses today.
1. Inventory management
Managing inventory effectively is a key logistics function. From inventory control to forecasting and demand planning, logistics teams require to ensure that there is minimal overstocking, wastage and stockouts. For example:
- Efficient logistics services involving timely and accurate delivery, can reduce inventory holding costs and inventory can be replenished in time.
- Accurate, data-based forecasting and inventory turnover ratio can enable businesses to provide timely deliveries, maintain optimal stock levels, and reduce costs.
- Diverse delivery options (e.g., same or next day delivery, scheduled deliveries, expedited shipping) to enable customers to select their preferred options and bring agility.
2. Warehousing and storage
The importance of logistics can also be witnessed in how warehousing and storage is optimised and impacts overall inventory and SCM.
- Planned logistics activities can enhance warehouse efficiency. By automating warehouse processes, such as warehouse layout design, storage methods, order picking, and inventory tracking, logistics can improve warehouse management.
- Accuracy in order picking, packaging, labelling and transportation, can improve the order fulfilment process. Efficiency in one activity impacts the other, reduces lead time, maintains order accuracy, and enhances customer experiences.
Of the different elements of logistics, warehouse logistics can imapct overall logistics costs. Based on the location and type of warehouse, businesses can plan storage, delivery timelines, and overall demand for goods (especially for eCommerce).
3. Flow of information
The other important components of logistics services are information flow and control. The first aspect is about how information flows across logistics processes and the next about who can access that information. Whom the information is available to, and how to keep the information secure and safe from unauthorised access. For instance,
- Customer profile details i.e., contact details, billing and shipping address, payment details, etc. is secure information and requires user access control.
- Inventory/stock availability details must be available to different stakeholders to ensure timely reorders, availability, reduce overstocking, manage returned goods, etc.
- Delivery update details should be available to customers and the business. By using relevant IT software, delivery status ETA can be provided which provide customers visibility.
4. Order fulfilment
A discussion on the basic components of logistics is incomplete without understanding its role in the order fulfilment process. This involves the different steps from when the customer places an order to the actual delivery in an accurate, secure and efficient manner. The key logistics functions involved here are:
- Receiving an order through any acceptable channel with complete order details.
- Processing and verifying order details, checking inventory, and arranging for it.
- Picking, packing and labelling the order accurately, as per special requests and standard packaging guidelines.
- Transporting the goods to the customer as per recommended shipping methods, e.g., PTL, LTL or FTL shipping.
- Delivering and tracking the goods to ensure the package is delivered without damage and meets the customer expectations.
Note – A separate process of reverse logistics, returns and refund is initiated if the customer is dissatisfied and wishes to return the goods.
5. Fleet and transportation management
Transportation costs in logistics has always been a challenge for businesses. Though today, the government has introduced several new initiatives to reduce transportation expenses, it’s still high. Cost effective logistics in supply chain therefore is a significant part of logistics businesses requiring adaptability, flexibility and strategic planning.
Transportation and fleet management not surprisingly are major logistics components as it impacts revenue, customer satisfaction, business reputation and more. For instance, to ensure timely deliveries:
- Regular maintenance and supervision of vehicles is required (i.e., check if GPS tracking is functioning, fuel is filled in, all transport regulations are being followed, etc.).
- Appropriate packaging must be provided during materials handling and goods transportation (e.g., eco-friendly packaging solutions for sustainability, cold storage for perishables, etc.) to avoid damages in-transit.
Components of logistics management & its role in logistics operations
Managing all these logistics components is neither easy nor straightforward, and in all cases requires adequate planning, management, monitoring and control. Let’s take a look at the different logistics management components and how efficiency in it can drive enhanced logistics operations.
1. Strategic planning and management
- Designing detailed action plans for logistics across – budgeting, demand forecasting, tactical planning, risk assessment, resource planning, collaboration with vendors, supplier, distributors and third-party logistics services
- Planning involves making short and long-term goals for logistics functions to align with business objectives
2. Inbound and outbound logistics processes
- Inbound logistics – Refers to the inward flow of goods from vendors/suppliers to maintain production schedules and reduce costs
- Outbound logistics – Refers to the outward flow of goods to customers for order fulfilment and can result in logistics efficiency, reduced costs, and customer satisfaction
3. Information systems and technology
Fast track the growth of logistics systems using:
- Advanced tech like RFID and GPS for vehicle/goods tracking
- Tools for accurate demand forecasting in logistics
- Applications for reordering as per economic order quantity
- TMS and other solutions for optimising delivery routes
Technology enables businesses to:
- Take planned risks e.g., through scenario planning and data analysis
- Provide better security and real-time visibility e.g., through access control, use of blockchain and computer vision
- Build sustainability e.g., energy consumption, emission control, green logistics
4. Distribution, delivery and returns management
- Smart planning of a goods distribution channel strategy and delivery, i.e., direct or indirect distribution
- Collaborating with 3PLs for micro-warehousing, fulfilment centres and other logistics facilities
- Working with 3PLs to streamline delivery systems, including B2C and B2B deliveries
- Using technology to optimise routes, reduce shipping delays, optimise inventory and warehouse space, etc.
5. Compliance management
- Trade and regulatory compliance
- Environmental compliance
- Compliance related to data protection, security and safety
- Taxation (e.g., GST impact on logistics)
- Documentation and reporting (e.g., bill of lading, proof of delivery)
Achieving supply chain excellence
In conclusion, the components of logistics and logistics management, from planning to inventory mapping, transportation, delivery and returns, are the building blocks of what makes an efficient supply chain network.
These elements of logistics work collaboratively to ensure that data, information and goods flow seamlessly between the different stakeholders and functions, and any gaps and roadblocks are easily identified and resolved. This enables businesses to reduce costs, meet demand, and optimise resources. By working strategically, logistics companies can reduce expenses, keep customers happy, and gain competitive edge in an already competitive market.
Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.
