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For any business to run optimally, it’s important for different processes and units to work as one. It is no different for supply chain and logistics. For logistics companies and businesses to function efficiently, it’s imperative to adopt an integrated logistics system to ensure that all processes from warehousing to packaging, delivery and customer service are aligned. And while integrated logistics has its advantages, it requires seamless logistics management, technology adoption and coordination between cross-functional teams.
Read on to learn about the meaning of integrated logistics, examples and advantages of integrated logistics, how it works and how small businesses can implement it to reap its benefits in business.
What is integrated logistics?
The integrated logistics model is one in which all units, resources and technology across supply chain and logistics coordinate and work together. It provides supply chain visibility to all ensuring common bottlenecks in logistics are mitigated.
Based on the maturity of the logistics company or division, integrated logistics solutions can include:
- Inventory, storage and warehousing
- Transportation, customs and distribution
- Packaging, shipping, delivery, returns and reverse logistics
- Customer support services and marketing management
- IT and data management and analytics
Instead of having all these units operate in silos, the goal of integrated logistics management is to have all processes interconnected and synced. This naturally will help logistics teams to be more efficient, save time, optimise resources, and have access to real-time data to cut logistics transportation costs and be profitable.
Example of integrated logistics management
Let us understand the concept better with an example of Integrated logistics at the customer’s service. Consider yourself a garments seller who has recently taken up eCommerce online selling. About 30% of your orders come from online buyers, most of whom are located outside your city. A simple example of how integrated logistics can boost customer service would include:
| Logistics process | Description |
| Inventory management | Display on website details on garment measurement, availability and ETA based on pincode provided
Provide additional details on depleting stock e.g., Size ‘M’ only 4 remaining |
| IT management | Simplify payments for customers with OTP based security
Send order confirmation email and SMS Initiate refunds (if requested) |
| Transportation | Auto-coordination with logistics solutions provider on pickup and delivery
Ensure package safety (e.g., transit insurance) to minimise damages and losses, and returns |
| Customer support | Online real-time order tracking (usually using Order ID or Tracking ID number)
Email, phone, chat or WhatsApp support for queries or complaints Status update sent based on order status (e.g., order shipped, order arrived in base city, order out for delivery etc.) |
In most cases, considering the complexities involved in efficient logistics operations, most businesses outsource their logistics activities to a 3PL or 4PL logistics provider based on their budgets and needs.
How integrated logistics works?
Next, let us understand how integrated logistics work and help to solve logistics challenges. By now we understand that all logistics processes within the supply chain system should be interdependent. Procurement must be mapped to inventory, demand and storage, fulfilment to distribution, delivery to returns and inventory – it’s a full cycle.
- Procurement
The procurement phase involves identifying raw material suppliers, demand forecasting, planning purchase, placing POs, checking for quality/quantity and transporting to warehouses for inventory planning. Having an integrated logistics strategy would involve coordination between all these departments and processes, use of technology, stock level updates for replenishments, lead time alerts and more.
- Warehousing and distribution
Warehouse automation systems enable warehousing centres to keep track of stocks in-real-time. This ensures the availability of inventory without disrupting production and supply chain operation. Accordingly, distribution happens. Based on the type of company, distribution can be through inbound or outbound logistics, i.e., distribution of raw material to production units or distribution of finished goods to retailers/wholesalers.
Many eCommerce businesses use micro-fulfilment centres to stock-up near their core markets and customers. Many small businesses also prefer to work with third-party logistics companies with 3PL warehouses to keep stock near their target audience. This also reduces time wasted and risk of damages during loading-unloading.
Technology and analytics play and important role here, with key updates on stock levels, order status, etc. Once again, an integrated logistics strategy must be in place to ensure that these activities do not take place in-silos.
- Packaging, shipping and delivery
The next important functions that can be streamlined with integrated logistics management are packaging, labelling, shipping and delivery. E-Commerce business has made same day or next-day delivery the norm. Customers prefer to buy from brands that promise quick, damage-free, no cost deliveries. With integrated logistics, there’s better coordination between all departments in the logistics system, ensuring that the overall customer experience is never compromised.
- Returns and refund management
Returns and refund management is a key component of online business. The eCommerce sector has made the returns process so convenient and hassle-free that customers expect similar level of efficiency and convenience across all platforms (online and offline).
Integrated logistics facilitates coordination between warehouses and transporters and can plan reverse logistics process in a systematic manner. Once a parcel is picked up from the customer as returns, the system can evaluate the category of return and take further steps. For instance, taking the example of our garment’s seller, if a customer returns an apparel due to wrong size fit or poor quality, the apparel can be restocked, the product description can be updated and it can be resold. However, if the apparel was being returned due to damage to product, then it must be returned to the manufacturer with further plans, e.g., selling in the secondary market, thrift stores etc.
Integrated logistics advantages: Why it’s good for your business
The greatest benefit of integrated logistics is that it brings all departments, vendors, suppliers, distributors and technology in one place. It provides supply chain visibility, brings transparency across processes, and enables them to build a strong communication network.
Some of the notable advantages of integrated logistics systems in business are:
- Increases supply chain visibility
- Reduces operating costs
- Optimises resource management
- Improves customer service
- Facilitates data-driven decision making and planning
- Automates processes through technology adoption
- Higher inter-departmental collaboration
Implementing integrated logistics in the workplace: The way ahead
It is one thing to understand the importance of integrated logistics, and another to set up a system to implement and integrate logistics flow processes and functions. The fact that there are multiple stakeholders and often players involved in the overall supply chain makes it difficult to implement a single architecture for all.
Here are some tips to enable organisations to implement integrated logistics:
- Define the core functions and processes that impact the supply chain – e.g., procurement, inventory, storage, distribution and delivery
- Establish a workflow that explains how each of these core functions will operate
- Identify the loopholes, challenges and bottlenecks in each process
- Find solutions (using technology) to solve for these obstacles
- Adopt technology solutions wherever possible
- Test, run, rectify and repeat
As a small business working with multiple partners, understand how you can integrate all logistics operations in your business.
For instance, if procurement, production and warehousing is being carried out inhouse, and you avail logistics services for transportation only, consider collaborating with logistics partners who have good reputation. Evaluate their delivery timelines, fleet quality, tracking mechanism, customer support offered etc. The importance of customer services in logistics is paramount whether you sell directly to customers or businesses. You will still need to integrate your business processes with your logistics partners, but it will require efforts in certain processes and areas only.
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.
