Logistics services encompass a broad field that includes all workflows required to move product from receipt of raw materials through delivery to the end user, and in reverse order, which includes returns and service warranties. Many steps and a lot of planning are involved to bring a finished product to a customer. Materials make many stops along the way, often transforming through production, and sometimes creating waste or byproducts. For a business to run efficiently, it must continually adapt its strategy to changing demand, supply chain disruption and regulations.
There are many different types of logistics services, all which focus on the movement of product related information. They can be broken down to:
Inbound logistics services refer to the receipt of product or raw materials at your facility. Upon receipt at your location, product barcode or RFID tag may be scanned to enter all product information into a database to track the movement of that product for the remainder of its journey. Those items may be designated for a warehouse or used in production, depending on the type of business at hand. If they must be stored, a logistics worker will move them to their storage area for proper keeping. Some products may require refrigeration or climate control to ensure freshness. Perishable products must be managed carefully to reduce spoilage and waste. In some industries, strict guidelines must be followed to meet local or federal regulations.
Outbound logistics services refer to the fulfillment and delivery of product to the customer. Once an order is received and the finished product is ready to be shipped, it must be properly packed, grouped with other items for the same customer, placed in the correctly sized envelope or box, affixed with a label and correct postage, and shipped by a preferred carrier. There are many steps involved and mistakes that are often made by businesses that cost them thousands of dollars every year in shipping costs. Having a logistics consultant review your invoices and recommend changes can add to your bottom line.
Processing returns involves quite a few steps, too. You may have a procedure for accepting returns and issuing return labels. Once product is received, the item may be returned to inventory or vendor or it may be added as a loss, if it cannot be resold. You may grant full or partial refunds to your customer. To be profitable, you need procedures that consider your type of business and the value of a satisfied, return customer.
Third Party Logistics
When a business chooses to use an outside source for fulfillment and shipping, that is considered third party logistics. Products are shipped from the business to the third party’s warehouse where that company will receive orders and complete the sale.
Fourth Party Logistics
When a manufacturer outsources the entire business model to an outside source, it is using a 4PL provider. For instance, if a company can manufacture and ship more cost efficiently in another country by using a 4PL, it makes more sense than shipping the product overseas to fulfill orders.
Delivering product to wholesalers who in turn distribute product to retailers is the process of distribution logistics.
Along the many different routes of raw materials to finished product to end user, there are many workflows, functions, and data passed from one individual to another and one location to another. Different types of logistics services are involved all along the way which require planning, monitoring, and modification to keep the business running smoothly and profitably.