What is Logistics Chain?06/10/2022
The logistics chain encompasses all the processes involving a product’s storage, transportation, and distribution as well as the flow of information and movements that take place during the different stages. The role of the logistics chain is to deliver the product to the customer in the agreed amount, at the agreed time, and under the agreed conditions.
The set of processes integrated into the logistics chain guarantees that products are sent correctly from the production or distribution center to the assigned destination. This phase includes stages such as goods dispatch and the transportation of products to other warehouses or the end customer.
The logistics chain covers not only the workflows relating to goods storage and transportation but also the information generated during the different operations. Thus, the logistics chain should connect suppliers, manufacturers, logistics providers, and end customers with the aim of minimizing costs and maintaining the quality of the product or service.
The main objective of the logistics chain is to ensure that merchandise is moved as efficiently as possible from the production lines to its final destination, optimizing stages such as goods storage and transportation.
Types of logistics chains
Depending on a company’s needs and profile, there are different types of logistics chains:
- Logistics chains of industrial organizations. These are characterized by the mass-production of goods, so it’s customary for a single manufacturer to store and distribute products to multiple customers. These types of logistics chains require efficient planning to adequately supply the production lines, fill purchase orders, and, above all, optimize costs.
- Logistics chains of commercial enterprises. These are centered on the acquisition of products for subsequent resale without an intermediate transformation stage. The logistics chains of these businesses stand out for their continuous flow of materials. This calls for efficiency in the storage and transportation phases to avoid any unexpected logistics costs.
- Logistics chains of service companies. The priority of these types of chains is to meet customers’ needs. The logistics chains of service businesses have to adapt to the needs of the organization, which offers intangible and variable services.
What are the stages of the logistics chain?
The logistics chain comprises the organization and coordination of all goods movements, storage, slotting management in warehouses and production and distribution centers, and synchronization between internal and external product conveyance and transportation.
These are the main phases of a logistics chain:
- Logistics planning, taking into account product turnover, SKUs housed, and storage and order fulfillment strategies, among others.
- Recording and receipt of goods and inventory of stock prior to storage.
- Management of storage locations, i.e., the allocation of positions in the warehousing systems to the different SKUs to be slotted.
- Internal movements of goods between two areas in the facility or between differentiated warehouse zones.
- Coordination of order preparation phases, e.g., product picking and packing.
- Goods handling with conventional and/or automatic handling equipment. This stage also covers the possible assembly of products in the warehouse (kitting).
- Organization of goods dispatch and order shipments to points of sale or end customers.
Logistics chain vs. supply chain
The terms logistics chain and supply chain are often used synonymously. However, logistics is actually a phase within the supply chain of a product. The logistics chain is charged with efficiently delivering goods to the end customer by organizing all the processes involved in product transportation, storage, and distribution. The logistics chain includes, for instance, inventory management, order processing, and control of the transportation fleet, among other operations.
The supply chain, meanwhile, encompasses all the tasks of the logistics chain plus those relating to product design and manufacturing, i.e., raw materials procurement and the organization of the production lines. And the person at the top, the supply chain manager, is an executive whose mission is to minimize production costs and to coordinate sales and customer service, all while guaranteeing efficient service to end customers.
How to digitize the logistics chain
New technologies in warehouses, production centers, and other logistics facilities make it possible to automate operations. Information flows produced in the phases of the logistics chain can be digitized with a warehouse management system (WMS).
More and more companies are investing in digital solutions to automate their logistics chains ― as well as their supply chains. A WMS lets you control your inventory in real time. This avoids stockouts, which could tarnish the company’s reputation, and overstock, which increases logistics costs.
This logistics software ensures full product traceability, a fundamental factor in the logistics chains of industrial and food companies. How? The WMS strictly monitors the products by collecting information in the phases the goods have gone through.
Digitization can make all the difference when it comes to order picking, one of the most basic yet most complex operations in the logistics chain. Here’s where a program like Easy WMS from Interlake Mecalux is key: the software automates the management of products in the different locations in the warehouse. Based on a set of rules and criteria preset by the logistics manager, the WMS calculates the ideal location for each SKU in line with the product’s turnover and storage conditions, among other requirements.
In addition, the WMS coordinates the movements of the goods, the automatic and conventional handling equipment, and the operators to ensure the safety and efficiency of the logistics facility. The software determines the operator pick paths and configures order dispatch with the goal of optimizing the logistics chain.