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What is A Logistics Strategy?

Jun 9, 2022

8 min read

A logistics strategy is everything a company plans to do to efficiently coordinate the movement of goods, information, and other resources to deliver finished products to its customers.

Businesses are finding new competitive advantages by aligning their logistics and supply chain strategy with their business strategy.

Successful logistics planning gives an organization a sense of direction about how to work with supply chain partners, including distributors, suppliers, vendors, retailers, shippers, and end users.

In this article, we will discuss the different elements of a successful logistics strategy, and share actionable tips to help you optimize your logistics operations.

How does a logistics strategy help businesses?

Logistics strategy helps businesses improve value creation, reduce costs in the accounting department, optimize warehouse inventory management, and increase customer satisfaction.

An effective logistics strategy creates synergy among supply chain processes, and gives a sense of direction to logistics managers and employees on how to align logistics operations with the business strategy.

Are you lacking a strong logistics strategy? Sifted’s logistics intelligence solution can help simplify logistics for your business.

Improving Your Logistics Strategy

A well-planned logistics strategy helps companies streamline their supply chain operations, adapt to customer demand, and optimize costs.

Below we’ll go over some of the common ways you can improve your logistics strategy and increase customer satisfaction.

Identify your KPIs

Logistics KPIs help companies compare their performance against their logistics goals and provide a sound basis for decision making.

Logistics metrics or KPIs give logistics managers visibility into individual aspects of the business processes, enabling them to measure metrics tied to inventory management (e.g. inventory accuracy), supply chain management (e.g. lead time), transportation (e.g. delivery time), order management (e.g. order accuracy), and distribution (e.g. warehousing costs).

Tracking these metrics gives managers access to actionable data that helps them optimize all relevant logistics processes and improve customer satisfaction.

Automate wherever possible

Combining human capital with automated methodologies enables businesses to free employees from time-consuming, repetitive tasks, and focus on addressing inefficiencies in logistics functions.

For example, warehouse robots can easily pick up, pack, and ship items without the need for human intervention. Similarly, there are plenty of automation solutions that can help small businesses improve the efficiency of their logistics processes.

88 percent of SMBs say that automation enables them to compete with large companies by moving faster, minimizing busywork, and reducing errors.

Automating supply chain management tasks (such as procurement and sourcing of raw materials, managing delivery orders, and negotiating rates) can help you reduce logistics costs, eliminate human error, and improve inventory management.

Are you taking care of supply chain management tasks manually? Automate these tasks with one of Sifted Logistics Intelligence.

Outsource when you can

A 2020 Gartner research found that more than 80 percent of businesses plan to increase their logistics outsourcing spend beyond warehousing and fulfillment.

Businesses should consider outsourcing their logistics operations, especially when they are unable to keep up with increasing demand. For companies with complex supply chains, third-party logistics companies can help streamline supply chain operations and take stress off your in-house team.

Third-party logistics providers specialize in logistics services including transportation, storage, warehousing, order fulfillment, outbound shipping, and delivery to customers. They have access to advanced technology (such as warehouse management systems and real-time shipment tracking) and expert workforce, giving you a competitive advantage.

According to an Armstrong & Associates report, 90 percent of U.S. Fortune 500 companies outsource their logistics and supply chain operations to a 3PL service provider to control costs and increase supply chain efficiency.

Focus on customer satisfaction

Sustainability of a business, whether eCommerce or brick-and-mortar, depends not just on acquiring new customers, but also keeping them happy so they become repeat customers.

Logistics has a critical role in increasing customer loyalty. In fact, according to a 2020 Voxware study, 30 percent of customers say they are less likely to buy from an online seller who doesn’t deliver a product on time.

One of the ways you can prevent customer dissatisfaction is to make sure that your inventory is in sync with your online store. If customers place an order for items that you don’t have in your warehouse, you’ll frustrate your customers and they may choose to never buy from you again.

You can easily counter this by implementing a live stock counter on your online store that should display correct stock levels and the product stockout notice.

Similarly, you should be transparent about your prices and policies with your customers. This includes clearly identifying available shipping options, delivery dates, potential delivery delays, and return policies.

Adapt to the flexibility of the supply chain

Flexibility in supply chains gives a business the ability to respond to long and short term changes in demand or supply situations.

Logistical flexibility focuses on managing supply chain functions and responding to uncertainty by adjusting delivery routes, offering alternative transport options, optimizing inventory allocation and deployment, and transferring information or funds.

Flexibility in the supply chain is critical to an effective logistics strategy because of the unpredictable risks in the supply chain. The impact of the COVID-19 highlighted the need for supply chain flexibility initiatives.

As an example, during the lockdown, many retailers used pop-up distribution centers (rented warehouse spaces) to move closer to their target customers. This allowed them to speed up the delivery process in a cost-effective way.

Check the costs of your transportation

Running transport operations is as complex as controlling its costs due to the unexpected and ever-changing nature of customer demands. If you can’t deliver the right amount of stock in the right place at an affordable price, you risk losing your customers to competitors.

Compare and contrast different modes of transportation and make the switch if it helps you reduce transportation costs and increase profitability. Similarly, consolidating your shipments heading to the same geographic area can help you reduce distribution costs by up to 40 percent.

An effective transportation strategy supports your supply chain strategy, offering multiple options (such as modes of transportation and equipment types) to help you meet the unique requirements (cost, service levels, etc.) of your customers.

Use a logistics system

A logistics system simplifies logistics operations by integrating logistics functions and processes, people, and information. It can analyze large amounts of data, enabling you to make better-informed business decisions.

Logistics software enables you to automate time-consuming, manual tasks, including monitoring inventory levels, receiving and processing orders, planning and scheduling, and optimizing delivery routes.

Are you lacking a strong logistics system? Sifted Logistics Intelligence can help automate parts of the logistics process for your business.

Sifted Logistics Intelligence solution can automate parts of your logistics strategy

A well-planned logistics strategy helps organizations establish a plan of action to streamline movement of goods, minimize errors, and reduce costs. By tracking your KPIs, outsourcing warehousing and fulfillment responsibilities, and implementing a robust logistics system, you can ensure logistics efficiency and logistics improvement in your business.

Sifted Logistics Intelligence gives you complete visibility into your logistics operations in one place. It simplifies logistics management and helps you optimize costs using AI-powered demand forecasting.

Ready to optimize your logistics operations? Get a free demo from Sifted!

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