Posted on January 11, 2019
Logistics and supply chain aren’t the same things. Logistics is the management of the movement of goods whereas supply chain management covers the many other areas. Logistics is a part of supply chain and that means whoever manages your supply chain will be responsible for managing freight forwarders, shipping companies, parcel delivery companies, customs brokers and third-party logistics providers. Logistics providers should be managed in the same way that you manage your suppliers. Costs and contacts can be negotiated. You can source freight forwarders the same way you would source suppliers of the products you need. Shipping and warehousing costs can be one of the largest expenses in your supply chain and it’s critical that your logistics providers are measured and managed to control those costs.
Inventory is the largest expenses in supply chain. The difference between paying for logistics and paying for inventory is that when you incur the expense for logistics – you’ve received that benefit. When a logistic provider ships something to you and you pay them: you’ve incurred the expense for a service rendered. Inventory can be a double-edged sword. Thus, you’ll pay your suppliers for the inventory and you’ll have the product you just paid for but you haven’t received the benefit of that product which comes when you sell it. That’s where the inventory management aspect of supply chain management becomes critical.
The supply chain management conundrum: you need product to sell to your customers, but you won’t have those products until you incur the expense of acquiring the product. You need to have enough inventory on hand to supply your customers what they want, when they want it. You can’t have too much inventory on hand or you will have paid too much money out of pocket.
There’s the added risk that you can build too much inventory because your suppliers might have minimum order quantities or because you thought you would sell more than you did or because something changed in the marketplace. You might end up paying for inventory you never sell. Inventory is a terrible balance act. You need enough but not too much, and you must make the decision on how much to acquire based on unreliable information.
In some companies, customer service isn’t considered part of supply chain. However, if you look at the scope of supply chain management’s definition in the toilet paper industry – “From stump to rump.” You can see that the supply chain isn’t complete until your product reached the end user. Customer service functions as the voice of the customer at your company. What shipping method does your customer want? What size boxes do you need to pack your product in and how many units per pack? Those answers can be driven by your customer, especially if your customer is a big box retailer. There is not a better team positioned to drive your company to deliver what your customers want, when your customers want it, than your customer service team. Since on time delivery (both outbound and inbound) is one of the primary functions of the supply chain management, customer service belongs to supply chain.
Contributor: Dan Anzalone
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.