Retail, CPG and Logistics

The importance and benefits of logistics for businesses

Logistics is the backbone of the supply chain and, subsequently, the entire business. The logistics management system employed by a company can either make it or break it. The global logistics market value reached almost $9,525 billion in 2021, according to a report entitled Global Logistics Market Report and Forecast 2022–2027. The market is anticipated to continue expanding at a CAGR of 5.7% between 2022 and 2027, driven by developments in technologies, to reach a value of approximately $13,326 billion by 2027.

What is logistics?

Logistics is a component of the supply chain that involves the flow of commodities from one point to another, typically through warehousing and transportation. In other words, the processes involved in transferring items internally or from the seller to the customer are collectively referred to as logistics. Logistics generally considers expenditure, the weight of the goods, and transportation, as well as other elements such as client satisfaction and access to adequate warehousing.

Logistics managers must consistently supervise the process' numerous intricacies and closely monitor several details. For example, transportation routes must be chosen based on convenience and efficiency, regulatory frameworks, and the minimisation of concerns such as road construction and repairs, armed conflicts, and inclement weather conditions. It is also important to carefully assess freight companies, packaging solutions, and their corresponding expenses. Understanding what logistics is, and why it plays such a critical role in day-to-day business operations, is the first step toward building a supply chain that can scale with demand.

The importance and advantages of logistics

Logistical solutions vary depending on the nature of the business and its product decisions, but the process is always complex. Not having competent logistics will dent a company’s bottom line. It can be crippling to the entire supply chain because, without proper logistics, there would be no movement of cash from customers to sellers.

Logistics primarily focuses on the movement of goods across various channels, but its implications stretch much further. In business, success in logistics translates to increased efficiencies, reduced costs, enhanced production rates, improved inventory management, efficient use of warehouses, higher client and vendor satisfaction, and better customer experiences. Companies that invest in an elaborate logistics management system enjoy the following benefits.

• Real-time insights: Efficient logistics solutions offer greater transparency and real-time insights that businesses can effectively utilise to make informed decisions. By studying the output data and insights from logistics, organisations can identify supply chain issues and boost productivity by streamlining interactions. End-to-end supply chain visibility encourages growth and fosters the formation of beneficial partnerships between companies.
• Scalability: Effective logistics management paves the way for business expansion. It determines the quantity of inventory needed and helps businesses in developing a strategy to meet the increasing client expectations. Therefore, logistics offers flexible solutions intended to assure scalability and efficiency.
• Cost-effectiveness: By automating and streamlining processes, logistics management can significantly slash administrative costs. It can regulate inventory levels and execute a powerful plan to assess demand and supply to ensure that companies do not spend on unnecessary logistics supplies. Additionally, logistics management can be applied to preventative maintenance to save money. Moreover, it simplifies all operations to encourage organised movement during transit.
• Risk management: Given the dynamic nature of today's markets, unwanted logistics disruptions might negatively impact businesses. A comprehensive logistics framework can efficiently foresee interruptions and prevent them by using a risk management plan. Therefore, it is essential to have a fleet management system that forecasts demand and supply.
• Customer experience: Reliable, on-time logistics directly shapes how customers experience a business, from delivery accuracy to order transparency.
• Competitive advantage: Businesses that manage logistics well can respond faster to market changes and demand shifts than competitors relying on ad hoc processes.

What is logistics management?

Logistics management is the process of planning, implementing, and controlling the movement and storage of goods, services, and related information to meet a business's operational and customer requirements efficiently. It builds directly on the routing, compliance, and risk-mitigation responsibilities logistics managers already handle day to day.

In practice, this typically covers inventory planning, inbound and outbound logistics, fleet management, warehousing, and delivery fulfilment, each managed to keep goods moving at the right cost and the right speed. Done well, it reduces operational costs, improves supply chain visibility, and makes it easier for a business to scale its operations without a proportional increase in overhead.

Logistics vs. supply chain management: What's the difference?

Logistics is the tactical movement and storage of goods within a single company's own operations: transportation, warehousing, and order fulfilment. Supply chain management is the broader, strategic coordination of every organisation involved in getting a product from raw material to end customer: suppliers, manufacturers, distributors, and retailers.

In other words, logistics is one function inside the wider supply chain. A business can run efficient logistics without having full visibility into its supply chain, but it can't run an effective supply chain without solid logistics underneath it.

The 7 Rs of logistics

A widely-used framework from the Chartered Institute of Logistics and Transport (CILT) describes effective logistics as delivering the right product, in the right quantity, in the right condition, to the right place, at the right time, for the right customer, at the right price. It's a useful checklist for evaluating whether a logistics operation is actually working, not just moving goods.

The benefits of logistics outsourcing

By outsourcing logistics management to an organisation that utilises the right technology, processes, and subject expertise, companies can better understand their challenges and drive real business value. Some benefits of logistics outsourcing include:

• Establishing strategies from the outset with a framework for addressing business issues
• Developing a shared services model that spans geographical boundaries
• Monitoring and controlling difficult, multi-faceted transitions
• Guaranteeing a higher standard of delivery
• Supplying a diversified workforce with the skills necessary to meet business needs

How Infosys BPM can help?

Our logistics process outsourcing services are powered by industry-grade tools to redefine your organisation’s operational processes. We provide cross-functional solutions through our experience in retail, consumer packaged goods, and logistics.

Frequently asked questions

When should a business consider outsourcing its logistics?

The usual triggers are order volumes growing faster than in-house capacity, expansion into new geographies where the business has no distribution footprint, freight and warehousing costs rising as a share of revenue, and the need for technology, such as transportation and warehouse management systems, that would be expensive to build internally. If logistics has become a recurring source of missed deliveries or management attention, that is usually the signal.

What are the different types of logistics?

Logistics is generally grouped into four types: inbound logistics (bringing raw materials and supplies into a business), outbound logistics (getting finished goods out to customers), third-party logistics or 3PL (outsourcing logistics functions to a specialist provider), and reverse logistics (managing returns, repairs, and recycling). Most businesses rely on a mix of all four, depending on what they sell and how they distribute it.

Which KPIs should businesses track to measure logistics performance?

The core set is on-time delivery rate, order accuracy (often tracked as the perfect order rate), freight cost per unit shipped, inventory turnover, and warehouse dock-to-stock time. Tracking a small set of these consistently matters more than tracking many occasionally, because trends in these numbers surface problems such as carrier slippage or stock imbalances before customers feel them.

What is the role of technology in modern logistics management?

Transportation management systems (TMS) plan and track shipments, warehouse management systems (WMS) run storage and picking, and IoT sensors provide live location and condition data for goods in transit. Layered on top, analytics and route-optimisation tools turn that data into decisions, such as which carrier to use or when to reroute around a disruption, which is where most of the cost savings actually come from.

How can businesses make their logistics more sustainable?

The main levers are route optimisation and load consolidation to cut fuel burn per delivery, shifting volume to lower-emission transport modes where transit times allow, right-sized and recyclable packaging, and using reverse logistics to recover, refurbish, and recycle products instead of writing them off. Many of these reduce cost and emissions at the same time, which is why sustainability and efficiency programmes in logistics usually overlap.

How can logistics support business resilience?

A logistics operation built around risk management, such as contingency routing, diversified carriers, and real-time visibility into disruptions, can absorb supply shocks such as a port delay or a supplier outage without stopping deliveries altogether. That's what turns logistics from a cost centre into a safeguard for business continuity.