Table of Contents
Definition
Business logistics is a group of activities that involves storage and movement of products or information from the source from where raw materials are procured to the final customers. Recycling and disposal of the products are also included in business logistics. It is considered as a new term in business vocabulary.
Earlier, this term was used only for physical distribution of products as well as their material management and physical supply, but now the term has gained broader importance and includes many things apart from physical distribution. It provides acquisition from wholesalers and suppliers right after storage and delivery to the end consumers.
A strong understanding of business logistics is required for every business owner so that he can ensure maximizing profits for their own sake. If business logistics is handled properly, then they not only give maximum earnings for the company but also provide a more positive experience for the customers with regards to product availability and customer convenience is of paramount importance when it comes to product availability. No customer would want to travel hours to purchase their desired product.
Importance of Business logistics
Business logistics holds a lot of importance in every business since it is associated with making the product or service available to the customer. Even after-sales service depends on business logistics. The company’s profitability is directly affected by business logistics.
Following is the importance of business logistics:
1. The Bottom line and business logistics
Consider that you own an apple farm. The final products from your farm are apples that are shipped to grocery stores, markets, and food processing plants. They are used mainly in products where apple is the primary ingredient. These maybe apple tarts, sauces, pies, jams, and other flavoring products.
The primary role that you have to play is to keep your product safe from bugs by the use of pesticides and ensure that the products that you give are sweet and healthy so that it sells and brings good value in the market. Once that Apple is picked from the farm, then it is put in a crate and eventually packed and shipped to its destination. This has to happen in very little time so that the apples are crisp and fresh. This is where business logistics comes into the picture.
If any part or entity of your logistics chain is broken or has a malfunction, then the entire shipment of apples is affected. For example, if the transportation by which you deliver Apple breaks down with no immediate replacement, then there is a possibility that your product will get spoiled before it reaches the market. Not only will the shipment not arrive at the destination within a given time, but it will also be damaged.
These costs are to be borne by the apple farmer. Any mishap that happens in the logistics affects the bottom line directly which includes but is not limited to fuel costs, shipping charges, spoilage of the product, unhygienic storage conditions and all the other things that matter and are involved in getting the product delivered to the final consumer. If the spoilage is reduced, then the logistics cost with also go down, and it will automatically increase your profit margins. This is why business logistics has a lot of importance on the profitability of the organization.
This is true about other products as well. Order placed on eCommerce websites has to be delivered to the customers in the shortest amount of time possible. The customers mustn’t be made to wait for a long time. In this case, the product may not damage, but the repeat business from the customers is lost if they remain unsatisfied. Modern delivery systems are using drones powered by AI to deliver the products to the customers. These drones are fast and ensure that the product is delivered before or on time.
2. Enhanced customer experience
You will get a repeat business of customers a positive experience, and they will buy again and also refer family and friends positively for your product. The customers have no concern in understanding what problems you face while making the product or what glitches you encountered while getting the product in their hands instead all they care about is the product is in excellent condition, and you can get it delivered whenever they require, in the least time.
Online shop keepers often face this problem when their logistics is not able to prepare the order quickly to deliver to the customer. The customer is left waiting, which adds to the negativity of his experience, and then he may go with another online seller next time.
Businesses should work to improve the customer experience by using automation wherever possible. Business automation can also be used in business logistics where they come to know about the stock whenever the stock is running low, and they get an immediate notification to refill it. Customer feedback and update should be continuously collected so that the customers know that the order is in process and will be delivered.
A standard method is to send the delivery tracking number of the courier or the logistics partner to the customer so that they feel empowered. Orders may take a longer time to deliver because of many reasons, such as they may have been shipped from overseas or they are customized. Whatever the reason, it is essential to communicate the same with the customer before placing the order. An approximate time taken to deliver the order should be told to them so that they are satisfied and they don’t feel cheated. It is usually appreciable to be upfront when it comes to delivering the order to the customers.
3. Loss prevention
If you do not have a good understanding of business logistics and then you will always struggle to find why there are spoilage, theft, and losses with the inventory. If the business owner understands and knows for sure that It would take two days to get a product from Vancouver to Montréal, but it is consistency taking three days, then the business owner should confront the shipping partner directly. The problem is to be addressed with the logistic partner, and it needs to be corrected to bring down the delivery days. It’s either that or it is advisable to change the shipping partner.
It is also undesirable to have a lot of inventory in hand. If there is excessive snowfall or the warehouse is damaged because of fire or flood causes the damage in the warehouse, then there could be considerable losses which could have a long-term effect on the confidence of the customer. Not only the existing orders would be delayed, but the future orders should be stopped to normalize the supply chain.
The customer gets the impression that the company is unable to supply the product, which adds to their negative experience. Add to that the insurance claims and dealing with insurance companies which can be very time-consuming for the business owner. Many businesses are underinsured when it comes to insuring their warehouses. A reliable supplier should be present with businesses so that they do not need to absorb the warehouse damage cost and should not have the risk of maintaining excessive inventory.
Take an example of Domino’s pizza, which promises to deliver the Pizza to customers within 30 minutes or its free. While making such a promise, they have to ensure that they have a proper system of delivery. The 30 minutes also includes the time taken to prepare the Pizza, pack it and then deliver it. Of course, such a promise is made within a given perimeter, but if they fail to deliver the product, it goes for free of cost to the customer, which is a loss for them. Many things have to be considered while committing to the customers because if those promises are not fulfilled, then the customer will not give repeat business which is again a loss for the company.
Video on Logistics and Supply Chain Management
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