Paradigm shift: Cost vs Differential Value
Until just a few years ago, logistics was perceived as a sector with little added value, just one more cost within the supply chain, which had a direct impact on the economic side of the activity. Today, however, this perception has changed and the importance it has achieved is paramount; so much so that logistics efficiency is considered a differential and strategic factor in organisations, and one that provides an undeniable competitive advantage for companies.
When we speak about logistics we are referring to the set of means and methods necessary for the storage and distribution of a certain product, to a precise place, in an optimal amount of time and with a sustainable cost range.
Logistics efficiency refers to the effectiveness of a company’s operations and the optimisation of resources to achieve those objectives. Only by taking these concepts into account will we make logistics a differentiating factor for a company; since everything that affects this area will affect the operations of the company.
To pursue this objective, the best thing to do is to start by carrying out a complete analysis of the logistics needs of our company and, consequently, drawing up solutions that maximise efficiency for each of the operations.
Keys to achieving efficiency
It is essential to establish a fluid and sincere communication policy with all areas with influence in the company’s logistics process, in order to be able to promote mechanisms that allow costs to be reduced and the productivity of operations to increase, involving all levels of the organisation.
Critical analysis of the actual cost
The starting point to achieve an efficient logistics process is to carry out a critical analysis process of the actual costs of operations. In this analysis, it is important to identify all the costs that are unnecessary in each process and act accordingly to reduce them until they are eliminated.
Outsource logistics processes
Outsourcing non-core business activities contributes to an optimised supply chain with a higher level of service. As a general rule, outsourcing these activities to specialised external agents reduces costs, in addition to allowing the company to address the peaks and valleys of activity in the workload with greater flexibility and efficiency.
On the logistical level, and with both suppliers and customers, it is essential to seek out collaboration agreements from the organisational point of view and facilitate flows of information (sequencing of deliveries, time flexibility, availability of stocks), which allow for stronger and more advanced partnerships.
Faced with increasingly demanding logistics (seasonal demand, increasingly tense delivery times, service levels demanded by the market, quality guarantees, etc.), companies need to think ahead and carry out a demand planning exercise in order to organise warehouse operations. This planning should act as the driver of the organisation’s supply chain.
Once the demand model that best suits our business and market demand has been outlined, we will know what adjustments need to be made in the design of the warehouse and in the distribution network to be able to manage it successfully in the different sales cycles and to be able to achieve higher profitability rates.
The best ally for optimising the supply chain of an organisation, especially in this age of information and digital transformation, is undoubtedly the domain of an advanced logistics software
It will allow us to have complete visibility of all the processes that make up the supply chain. Starting from the monitoring of actual demand, it will also allow us to control the distribution of the product, guaranteeing the products are available at the right time, in the right place, and in the defined quality, according to the initial planning.
Supporting the company’s logistics processes with a good IT tool is a key factor for the growth of the organisation, it allows us to tackle cost reduction projects to optimise processes and it provides greater added value for our customers, which can ultimately result in a competitive advantage.
As the business grows, our logistics demand is likely to increase. It’s a good idea to bear in mind that it will be necessary to continue investing in resources to respond to this growth. Likewise, the evolution of the business and the increase in some of the logistics areas (equipment, warehouses, etc.) must be accompanied by the development of the rest of the company’s areas for its support and sustainability.
Analysis and verification
All of the above becomes meaningless if effective measurement and control systems are not established, which assess whether the improvements that are being implemented contribute in a real way to increasing the efficiency of the logistics activity, guaranteeing alignment with the business objectives.
The implementation of a logistics control panel allows us to evaluate whether the processes underway are operating correctly. This visibility helps us to detect deviations, facilitates the identification of inefficiencies in aspects with the potential for improvement and, ultimately, speeds up decision-making by providing greater precision.
Buffer warehouse as an alternative to a centralised system
Controlling and organising the stock of finished product in the warehouse and ensuring the quality and optimisation of the supply chain, is essential for improving the company’s productivity.
One possibility, as an alternative to the more traditional central warehouse system, is to work with one or more buffer warehouses. Generally located near the clients’ own factories or in geographically-concentrated areas, they are used for the consumption of material corresponding to the final production.
Due to their size, obviously smaller compared to a central warehouse, they have a greater capacity to react to market needs. They reduce time within delivery periods, improve the quality of service and allow inventory and demand to be monitored daily.
Without a doubt, the implementation of a multi-warehouse system presents several challenges that must be taken into consideration and solved before making a decision. The risk of increases in inventory (overstock) and its direct relationship with the company’s cash flows is a point to keep in check.
Having several warehouses also requires us to multiply the origin of the processes: generation of dispatch notes, orders, sales, etc. The use of computer software with a multi-warehouse scope thus becomes even more important, allowing all the data to be centralised in order to be able to analyse the results and make good business decisions.
Just like the rest of the areas of the company, logistics, is influenced by the digital transformation in which most companies have been immersed in recent years. Logistics 4.0 is driving the digital transformation of the supply chain in an increasingly global environment. However, it is important not to lose perspective. One of the most common mistakes is to see digital transformation as a goal in itself, when in fact it is the way to achieve more efficient business and logistics management.
Digital transformation in the logistics field represents the integration of new digital capabilities, the incorporation of new technologies to improve efficiency in processes such as storage, order preparation or the transport and delivery of products.
Trends in logistics for 2021
The technological advances that will continue to set trends in the field of logistics efficiency in 2021 will revolve around developments in the use of Big Data, artificial intelligence and machine learning, green logistics, etc.
Big Data opens up the possibility of capturing and storing a very large volume of structured data (csv, txt, xml) and unstructured data (images, videos, graphics, etc.) in order to then be able to analyse it.
However, much more important than the size or volume of the data is what the logistics industry can do by having this information to hand.
Artificial Intelligence (AI) and Machine Learning (ML)
ARTIFICIAL INTELLIGENCE (AI) refers to the study, development and application of computer techniques that allow systems to acquire certain skills that pertain to human intelligence: understand situations and contexts, identify objects or images and their meanings, solve problems, etc.
MACHINE LEARNING (ML) refers to the technique by which, based on an archive of data and the repetition of operations, the machines themselves are able to create and improve their behaviour.
The joint development of these two technologies will allow companies to:
- Improve their predictions about market behaviour and anticipate its changes
- Predict consumer trends
- Select the most efficient transport routes and travel
- Have greater control over the processes
Among the most novel trends in 2021 is the irruption of “green logistics” or logistics that is respectful of the environment. The growing concern about global warming is becoming part of the political and social agenda. Consumers are increasingly aware of the effects of their consumption, part of which are due to the logistics chain, which leads to a search for environmentally friendly alternatives.
Sustainable logistics aims to reduce the ecological impact derived from logistics activities, such as CO2 emissions, noise pollution or accidents. It seeks to find a balance between economic growth and, at the same time, protect the environment and social health.
The challenges of sustainable logistics
Use of SOFTWARE TO CALCULATE THE CARBON FOOTPRINT in logistics operations. The results will facilitate decision-making to optimise transport routes and loads to be more efficient and sustainable.
ALTERNATIVE FUEL SOURCES: although the use of more efficient vehicles in the use of energy is still very much limited for logistics, there are new, less polluting alternatives for air travel, as well as hybrid/electric vehicles, which could be key for the logistics of the future.
RATIONAL USE OF SUPPLIES: recycling packaging and using returnable containers.
INTERMODALITY: by combining various means of transport, we make the transport of a load from origin to destination more sustainable. With good planning that allows us to approach transport with slightly longer delivery times, transporting a load by truck from its origin to a port and depositing the container on the ship that will take it to the destination port is less polluting than doing the entire trip by truck, thus significantly reducing the CO2 emissions that are generated.
At Aratubo, we like to lead by example, and when we present the key factors for turning logistics into a differential factor for the organisation, in the era of digital transformation, we do so with honest knowledge of the facts and with a clear objective: logistics efficiency.
Our commitment to the implementation of advanced software to optimise our supply chain, and our commitment to the continuous improvement of our logistics processes, allows us to balance economic growth and sustainability, with the goal of achieving the highest level of customer satisfaction.