If you are logistics company or working with logistics transportation companies for the movement of goods and services, then you know that by optimising logistics flows and processes you can be more efficient and even profitable.
Logistics management in India is a challenge known to all – transporters, suppliers, sellers, and customers. Not surprisingly, the Union Budget 2023-24, has allocated a sum of ₹75,000 crore to invest in building 100 critical transport infrastructure projects for better last-and-first mile connectivity to boost the logistics sector (Source: Business Standard, February 2023). And along with infrastructural capabilities, businesses can work on their internal and external logistics flows to ensure better operations and logistics management.
In this article, we take a look at the key logistics processes and workflows to help you understand how to streamline and strengthen your logistics operations.
What is a logistics process flow?
A logistics process or logistics workflow or logistics flow chart outlines the multiple stages in logistics management for the movement of goods, services, and information from its place of origin to destination. It involves planning, organising, managing, and implementing various activities. In general, logistics flowcharts are well designed and documented, and requires periodical updates to ensure wider adherence and timely, efficient, and compliant transportation services.
Inbound vs Outbound logistics process flows
In general, there are two main logistics activities that every business has: Inbound and outbound logistics flows.
|Inbound logistics process flow||Outbound logistics process flow|
|Involves receiving goods, services, information, for production or order fulfilment||Involves releasing goods, services, information, for shipping, distribution, or delivery to the end user|
|E.g., Procurement/receiving raw material in warehouse for storage before production; planning raw material movement from unit-to-unit for production||E.g., Identifying ordered items in micro-fulfilment centres, packaging and labelling them, before shipping to customer|
Considering the different stakeholders involved in the movement of goods, many businesses often choose to work with 3PLs and 4PLs for logistics process optimisation. Third-party logistics providers are experts in their field and provide additional logistical services including warehouse management, packaging, partial truckload services, last-mile delivery services and more. This enables businesses to concentrate on their core competencies.
In many cases, large businesses prefer to work with multiple 3PLs and 4PLs for inbound and outbound logistics, whereas MSMEs and emerging businesses (with limited logistical needs) prefer to manage inbound logistics internally and outsource outbound logistics to external 3PLs providers.
Different stages in logistics process flows
There is no standard template for logistics flowcharts as businesses usually design their own workflows and set SLAs to adhere by. There are multiple factors that impact logistics flows in organisations, including customer location, factory/warehouse location, mode of transportation, frequency of orders etc.
The purpose or objective of a logistics flow design is to ensure that all departments, units, and stakeholders involved in logistics operations are on the same page – that they understand the logistics system, the importance of each step and how it is interrelated to the next, how adherence to SLAs enable efficiency and keeps business compliant, and in turn enhances customer satisfaction and boosts company profits.
Depending on the size of the organisation and the nature of logistics operations undertaken, some of the key logistics process flow involves:
- Inventory and warehousing
- Materials handling
- Packaging and labelling
- Shipping, distribution, and delivery
- Reverse logistics operations (optional)
The different steps are interconnected and any lapse, delay, or error in one will directly impact the overall SCM operations. For instance, if product inventory is not optimised, then order fulfilment cannot commence; if packaging is not carried out timely, then shipping is delayed; if an SLA for managing returned goods is not set in place, then customer experience is affected.
Most businesses operate using three types of logistical flows – Pull, push and Just-in-time. Based on the product/service offered, businesses use a combination of these methods to optimise inventory and production and minimise transportation costs while optimising overall logistics flow.
Types of logistics flow
|Goods are procured and production happens when an order is placed. There are no unsold units or excess, and orders are accepted only as per production capacity. Timelines are provided based on production speed and logistics.||Goods are procured in advance and production continues anticipating demand. If demand is met, there is profit; if demand is less, there is overstocking and losses. Outbound logistics occurs when orders are received.||Controlled production and sales of goods. There is minimal deadstock. Certain goods are procured in advance and production begins. The final loose ends are tied only when orders are received. All inflow of goods is controlled.|
|E.g., production of custom stainless steel cutlery for a new hotel||E.g., producing festival decoration items such as diyas, candles, lights etc.||E.g., baking confectionery items, where certain raw materials are procured 1-2 days in advance, but the actual process and delivery happens on the same day.|
Understanding the key activities of logistics management workflows
In this section, we understand the types of logistics management flows and how they impact the overall supply chain process flow.
For the ease of understanding, we will consider an eCommerce furniture store as an example for logistics process steps.
Planning and procurement:
This will involve a pull and push strategy where raw material (e.g., wood, plastic, steel, iron) for some of the best-selling and in-demand furniture items would be procured in advance and manufactured.
The online store would also list items that are made to order with clear details on timelines (location specific) and packaging details based on transportation arrangements.
Inventory and warehousing:
Warehousing and inventory workflows will have to account for incoming and outgoing goods and finished products – i.e., keep a track of raw materials received, schedule movement of raw materials for manufacturing/assembly, maintain inventory on furniture manufactured and stored, manage information on warehousing bottlenecks including storage spaces, etc.
To optimise logistics management flows businesses can also work with third-party logistics partners to leverage efficient warehouse management services. 3PLs often have warehouses in different locations, enabling businesses to stock products in high-demand areas for quick transportation.
On the one hand, SLAs should be in place to manage all raw materials received and moved within the manufacturing units. Protocols for safety should also be in place especially when using equipment for goods movement to ensure safety of workers and goods.
Similarly, once the furniture is despatched, there should be defined SLAs on handling it during delivery. Details on unwrapping, assembly instructions, number of items and spares, should be made available. This would enable the delivery partner to have clarity and customer to be informed.
Packaging and labelling:
Appears as the easiest task but can alter the entire logistics workflow if done incorrectly. Furniture items require special packaging material, instructions, and skills. Moreover, incorrect packaging can damage the product in-transit leading to returns and/or refunds and subsequent losses.
Labelling on the other hand determines the entire transportation flow. Incorrect labelling will lead to incorrect route allocation, causing delays and customer disappointment.
Shipping, distribution, and delivery:
This is undoubtedly the most crucial step in the logistics systems process flow – the final shipment and delivery to the customer. From ensuring delivery trucks are equipped with GPS for tracking, to notifying customers of order status, the last-mile-delivery in transportation has its own role in the ecosystem. As such, many businesses use order ID and tacking ID numbers, or air waybill numbers to enable customers and suppliers to track packages hassle-free.
Logistics companies usually have detailed workflows on the steps to be followed in case of any incident, e.g., roadblock, bad weather, vehicle breakdown, etc. They also maintain regular checks on routes to identify shorter, safer options and optimise time and cost.
Reverse logistics operations
While this may not be provided by all suppliers/manufacturers, it is the pillar of eCommerce business growth – hassle-free return of goods if not satisfied.
In the case of lighter items like garments or crockery or shoes, returns are easier to manage. However, returns and refunds for heavy items such as furniture and even electronics can be complicated. In such cases, logistics companies and manufacturers should have clear terms and conditions in place, including accountability and responsibility of each party. Similarly, the T&C should be clearly available to the customer before placing an order to ensure that they understand the returns and reverse logistics process flow.
For example, terms can include:
- No return request will be accepted for late deliveries of up to 30 days
- Customers may cancel the order within 3 days if manufacturing hasn’t begun
Mapping a logistics process flow for your business
As can be understood, logistics processes are detailed and needs to be written out for professional efficiency. In many cases, poorly outlined logistics flows can lead to business losses and even loss of customers and bad reputation.
As a MSME owner working with logistics companies or managing logistics operations in-house, follow these steps to efficiently manage logistics workflows:
- Understand and document the logistics needs of every department in the business
- Identify the overlapping tasks, tasks that are time consuming or involve challenges, risks and solutions, and timelines required for each
- Build a core team to manage logistics transportation both within the organisation and externally
- Outline the logistics flow of each process/step, discuss it with stakeholder, update as per feedback
- Use software solutions wherever possible to automate processes
- Negotiate with 3-5 different logistics partners on services provided, rates offered, terms and conditions etc.
- Check on the nature of order received for your business, frequency, method of payment etc. and finalise 2-3 logistics service providers
- Try 2-3 test rounds with selected partners to identify gaps and improvement areas, revise your SLA, and update logistics flow for optimisation