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In terms of maximizing the flow of raw materials and finished goods moving in and out of your business, what are your options, and how do you put together the perfect logistics network?

Your business depends on efficient supply chain management and distribution processes. By choosing the right intermediary partners and leveraging current technology, developing a sustainable logistics network that achieves the goal of perfect orders is becoming that much more attainable.

What Is A Logistics Network?

Being an essential component of the supply chain, a logistics network is a system that coordinates the movement of goods between suppliers, manufacturers, wholesalers, retailers and consumers. In particular, a logistics network directly or indirectly manages the transportation, warehousing and distribution of products from point of manufacture to end user.

Logistics networks can be incredibly complex. Just as there are innumerable types of businesses there are just as many combinations of logistics components required to manage day-to-day operations. An optimal logistics network is one that operates at the lowest cost, includes efficient distribution and maintains a reasonable level of customer service. The “right” combination is the one that balances your acceptable level of customer service with asset management, inventory control and operating costs.

Furthermore, the importance and inherent costs of transportation cannot be understated. How well your products move through your logistics network has a direct impact on overall profitability. Therefor choosing the right intermediary and 3PL companies is essential for success.

Logistics Network Modelling

In application, there’s no need to re-invent the wheel in terms of the underlying needs a logistics network serves. Modern logistics can be broken down into individual components that, when assembled in a way that serves a category of business efficiently becomes a model for reuse and adaptation. This logistics network “modelling” concept takes into consideration the following points:

  • Production systems
  • Locations
  • Size of facilities
  • Distribution centres
  • Transportation modes
  • Inventory tracking and tracing
  • Management systems
  • Operational policies

How these factors are prioritized will be dependant on your type of business. For instance, if you’re in the business of working with hazardous materials, adhering to regulatory and legal guidelines will hold sway over virtually all other modelling aspects.

Regardless of the culture created by your business operations, a perfect logistics network must anticipate likely contingencies associated with profitable growth. That is, include the ability to deal with the occasional unforeseen downturns and market corrections that do pop up over time, and still be able to manifest long term expansion goals.

Logistics Network Design

Logistics network design has become extremely dependent on data. How this data is collected and interpreted has become an art-form in itself. The process of gathering relevant data and interpreting it into meaningful actions can make the difference whether a company thrives or just survives.

Logistics Network Design

Being able to design a logistics network that responds dynamically to market conditions requires data collection and the expertise to translate it into profits. With increasing automation and dependencies on information systems, the inevitable rise of (helpful) AI is also becoming more generally excepted:

“According to Gartner, supply chain organizations expect the level of machine automation in their supply chain processes to double in the next five years. At the same time, global spending on IIoT Platforms is predicted to grow from $1.67B in 2018 to $12.44B in 2024, attaining a 40% compound annual growth rate (CAGR) in seven years.”

Source: Tina Jacobs – Throughput.world

Taking the ten thousand foot view, we can break logistics network design down into two major operating systems: inbound and outbound logistics. Inbound logistics links raw materials suppliers to their respective manufacturers. From there, finished goods flow through intermediary warehousing and distribution centres using outbound logistics to deliver finished goods to customers.

Inbound and Outbound Logistics Networks

How to Develop a “Perfect” Logistics Network

While no logistics network is truly 100% flawless, there are critical steps that should be followed to get as close to the bullseye as possible. These are:

  1. Define your requirements
  2. Identify current and potential future demands
  3. Research candidate networks to model
  4. Analyze transportation, distribution, and service costs
  5. Identify alternative networks and contingencies
  6. Determine the highest value criteria that matters most to you

Furthermore, it’s important to realize as your business grows, different parts of your business will likely take priority over time. Developing a future-proof logistics network is a matter of planning an expected growth trajectory and fully understanding all the facets that make up, and will make up your supply chain.

What are the Different Types of Logistics Networks?

Modern logistics networks are continuously adapting to the pressures of demands and at the same time, realizing the benefits of incorporating new technologies and forecasting models. The type of logistics network for any given business is wholly dependant on the nature of its related supply chain.

For instance, e-commerce has changed how logistics networks function from the ground up by redefining product fulfilment and last mile delivery. Drop-shipping and third party suppliers have become mainstays for many small businesses which in many cases, never come in direct contact with the products they sell. Their entire type of logistics network operates at arms length through remote partnerships.

Nevertheless, types of logistics networks can be broken down into a handful of core competencies:

  • Procurement logistics
  • Production logistics
  • Warehousing and distribution logistics
  • Recovery logistics
  • Recycling logistics

We could also add, the cost of applying each type of logistical network could in itself be considered a logistics network in the managerial sense.

Closing Thoughts

Over the past few years we’ve seen increasing pressure being put on logistics networks to deliver more using tighter time frames. One such disruptor is Amazon which has transformed the entire shopping experience.

This type of disruption has put enormous strain on traditional retail outlets. We now have a workforce that has adapted to doing business from home and enjoying the convenience of online shopping. Perhaps this explains why major retailers such as Nordstroms, Starbucks and even Walmart are closing locations in major urban centres.

Regardless, it’s fair to say the logistics landscape will continue to change as it adapts to emerging markets and operational systems. This means logistics networks themselves will continue to change.