Table of Contents
If you think, manufacturing is only about the production process, then think again. Manufacturing logistics, especially logistics management in industrial manufacturing is a function that’s redefining how large enterprises operate. From using digital technologies to streamline warehousing, to sharing real-time transportation and delivery status with relevant stakeholders, to keeping check on production inventory, whether it’s inbound and outbound logistics, the industrial manufacturing ecosystem is evolving with it. Let’s take a look at the basics of manufacturing logistics, why it is important for businesses, and how to optimise and improve it.
What is manufacturing logistics?
We’ll start with the meaning of manufacturing logistics – What does manufacturing logistics mean?
The term refers to any activity, function or process that is involved in the manufacturing of goods and their storage. This may involve (but is not limited to):
- Keeping stock of raw materials (inventory)
- Transporting raw materials to or within departments/units for production (inbound logistics)
- Storing the finished goods
- Packing the goods and transportation to the customer/distribution centres (outbound logistics)
As such, how logistics supply chain is managed can impact the entire manufacturing process. Manufacturing logistics meaning therefore involves strategic planning, demand management, analytics and more, to bring about operational efficiency in the entire manufacturing supply chain system.
Role of manufacturing logistics in production processes
In the manufacturing ecosystem, the terms production logistics and manufacturing logistics are often used interchangeably as both involve the optimal management of supply chain logistics across the production unit. What’s important to note is that, this function involves not only timely movement of goods but also sharing information to relevant departments within the production unit.
Note: Manufacturing logistics systems also keep check and plan for downtime, holidays, festivals, and any other instances when the manufacturing unit is closed or will not be functioning optimally (e.g., preventive maintenance).
Example of logistics management in manufacturing
For example, in a garment manufacturing factory, manufacturing logistics would involve:
- Inflow of raw materials from the supplier (i.e., procurement logistics, materials handing and unloading)
- Quality and quantity check of the procured raw materials
- Storage and distribution of raw materials to the relevant workstations
- Movement of goods and information between workstations across the production line (e.g., moving cloth pieces from the cutting/design stage to the garment stitching stage, or to the hooks/buttons/zip stitching stage)
- Updating inventory records, calendars and schedules to maintain production timelines
- Quality check (e.g., checking for any defects, ironing etc.) and packaging before distribution to retailers, wholesalers, distribution centres, etc. (i.e., distribution logistics, loading)
The role of logistics in manufacturing is to ensure that at any given point, the inventory, information, and goods are available in the right condition at the right workstation.
Components of manufacturing logistics management
There are certain components that impact how manufacturing logistics systems operate in any organisation.
- First and last mile delivery
- Materials procurement processes
- Production processes (i.e., push or pull system, JIT etc.)
- Warehousing and storage
- Distribution systems and channels
First and last mile delivery
First mile delivery refers to the inception of the logistics management process, that is, the first stage of the movement of goods. In manufacturing, it would involve the movement of raw materials from the supplier to the manufacturing facility. As such, any mishap in the first leg would directly affect the entire manufacturing process. This may be caused by improper packaging, poor loading and unloading, shipping damages and delays, or any other.
Last mile delivery on the other hand refers to the shipment of the finished goods to the customer. Here too, any unforeseen challenges in logistics can impact the overall manufacturing process. For instance, in the case of B2B delivery, if there’s incorrect packaging and a batch is found faulty (i.e., does not pass the customer’s quality test) the entire batch or consignment will be returned. This would involve additional costs, transportation, manufacturing a new batch, and in short, an entire overhaul of the process. As such, in such cases, POD or proof of delivery is essential to confirm that there are minimum rejections and returns.
Raw material procurement
Even if your manufacturing company works with only registered vendors and there are scheduled deliveries planned, movement of the procured raw material comes with its own challenges. One will have to:
- Plan and schedule deliveries (i.e., type of air/water/rail/road transport being used, packaging provided)
- Prepare the manufacturing facility to receive the goods (i.e., quality check, warehouse, inventory)
- Optimise routes, set up tracking systems, prepare for vehicle breaks, driver’s rest time etc.
In brief, procurement is more than placing a purchase order. Success in manufacturing logistics management begins with efficiency in raw material procurement.
Note: Many businesses often tie up with manufacturing logistics companies to ensure planned delivery of raw material to their units.
How production occurs will also impact the manufacturing supply chain. Most manufacturing units operate under three types of production and the logistics flows are designed accordingly.
- Push flow: When goods are produced in advance anticipating demand for goods
- Pull flow: Raw material is procured and the production commences when a customer places an order
- Just-in-time flow: Part of the good is produced in advance and only when an order is placed, the final touches are given to the product
As such, depending on the production process the organisation follows, the internal manufacturing logistics processes will be established.
Warehousing and storage
Warehouse and storage facilities will have to be aligned with the production process being followed. For instance, if you follow the push-flow, i.e., produce goods anticipating demand, then your warehouses will have to be designed to store the finished goods optimally. The goods have to be labelled/tagged, put in the right shelf, packed correctly, inventory software will have to be updated, etc.
For instance, in a toy manufacturing company, warehouse logistics can include:
- Moving within the warehouse toys by type, e.g., stuff toys, dolls, board games etc.
- Storing and sorting toys by categories or age
- Keeping track of fast-selling and slow-selling toys via SKUs (stock-keeping-units)
- Periodic inventory checks and stock-taking
- Order-picking, packaging and labelling as per order received
Optimising storage and transportation therefore are pre-requisites for better industrial manufacturing logistics management.
Distribution systems and channels
And finally, the distribution channels and systems adopted by the manufacturing unit will drive the logistics strategy it adopts. For a manufacturing unit, a distribution channel strategy defined how the business will promote and take their products to the market/end user. This can be via:
- Direct distribution: Setting up independent retail stores to sell the final product, e.g., electronic brands, café shops, clothing brands, shoe brands, farmers market etc.
- Indirect distribution: Partnering with agents, retailers, wholesalers, dealers etc. to distribute the finished product, e.g., FMCG products, auto dealers, steel suppliers etc.
When it comes to managing logistics in manufacturing, it’s imperative therefore for the manufacturer to build a distribution strategy and identify channels to take the products to the market in the most cost-effective and optimal way.
How to optimise manufacturing logistics operations?
In the end, it all narrows down to how well optimised your logistics processes in manufacturing are. After all, there is no benefit to business if resources and efforts are put in the wrong areas. Some tips to optimise manufacturing supply chain and logistics systems are:
- Collaborate with 3PLs and 4PLs for logistics management: Managing logistics optimally requires specialised knowledge and expertise. It’s natural for manufacturing companies to not have the required competence and skills in-house. In such cases, collaborating with a 3PL or 4PL can help to streamline logistics operations, reduce costs, and keep to desired timelines. This also enables the business to focus on the actual production of goods than spending time and resources in planning logistics operation.
- Identify process gaps: In any manufacturing unit, there are processes that add value, that are essential, and those that are redundant. Identifying the gaps and removing logistics processes that do not add value will enable to optimise the entire manufacturing logistics workflow. For instance, machine learning algorithms can be used when handling palletised shipments to automate tasks such as expense calculation and optimisation, inventory forecasting, materials handing etc.
- Use logistics technology across the unit: AI, cloud logistics, blockchain, digital twin – these are all advanced logistics technologies that changing the way logistics operate. In a manufacturing facility for instance, digital twins can be used for optimally planning warehouse layout design. IoT sensors can be used to send reminders on predictive maintenance. Insights from data and analytics can prepare manufacturing units to scale for seasonal demand and prepare logistics and supply chain accordingly.
- Adopt flexible delivery systems: Your delivery system should be designed such that it allows flexibility. This is a common practice in eCommerce deliveries and the same can be applied to manufacturing supply chains as well.
Importance of manufacturing logistics and why you need it?
At this point, you can understand why logistics in manufacturing is important and how your business can benefit from it.
- Reduce overall business costs by planning strategically, inspecting, and investing in areas that deliver positive returns
- Improve efficiency in production by ensuring timely availability of raw material, reducing production lead time, reducing distribution time, etc.
- Enhance customer satisfaction and repeat orders by ensuring there are minimum delivery delays, customers are updated on their shipment status, packages are delivered as per the order requirements/expectations, etc.