Everything You Should Know About Risk Management in Logistics | Image source: Pexels

In many facets of business, risk management is becoming more and more crucial, and logistics operations are no different. To guarantee that goods are delivered promptly, safely, and with the required quality, risk management in logistics operations is crucial.

Many businesses, however, are unaware of the specifics of risk management in the logistics chain and how to properly execute it.

We’ll discuss why it’s critical to the success of many businesses in this article.

Read also: Unlock Success: 3 Expert Tips to Skyrocket Your Inventory Turnover Rate

What is risk management in logistics?

A deliberate approach to detecting, assessing, and reducing risks that could have an impact on the effectiveness and safety of logistics operations is known as risk management in the industry.

At various phases of the process, from production and storage (inbound logistics) to transportation and delivery of the finished product (outbound logistics), risks might develop in the logistics chain.

Therefore, identifying and analyzing potential risks, putting preventative measures into place, and developing a backup plan to handle unforeseen issues are all part of risk management in logistics operations.

What are the operational risks in the logistics system?

The logistics system is susceptible to a number of operational risks, some of which include:

• Delays in deliveries: deliveries that are delayed can cost money and decrease customer satisfaction.
• Damages to goods: during the transportation of cargo or during transit, issues with packaging, poor storage, and improper handling can result in damage to products.
• Cargo theft: companies that ship expensive goods are constantly worried about cargo theft.
• Communication failures: delays and mistakes can be brought on by breakdowns in communication among the parties involved in the logistics chain.

In addition to the operational risks already mentioned, logistics operations can also pose significant threats to the workers’ occupational safety.

Work safety risks in the logistics system

Transporting freight can be risky, especially if proper safety precautions are not used.

The following are some of the major dangers to workplace safety in logistics operations:

Work accidents: moving large or unsuitable loads can result in serious mishaps, including being driven over by forklifts, crashes, loads tilting over, falling objects, and other situations that endanger the company and the workers’ occupational health.

Repetitive strain injuries (RSI): musculoskeletal injuries such as RSI can occur as a result of repeated load manipulation. Repetitive activities overload the joints and muscles, resulting in these injuries.

Inadequate working conditions: employees in the logistics industry frequently work in challenging circumstances, such as cold or confined areas. The health and safety of the workforce may be impacted by these circumstances.

The risk management sector must collaborate with other areas like quality, job safety, and information technology to ensure a safe and effective work environment and reduce risks in logistics operations.

Ways to minimize risks in logistics operations

Our industry experts have outlined some of the key strategies for reducing risks in logistics operations in order to directly contribute to the logistical success of your business.

We are aware that one of the core responsibilities of the risk management field is to reduce risks in logistics operations.

Implement security procedures

Minimizing risks in logistics operations can be accomplished by implementing clear and effective procedures. The protocols need to include everything, such as preventive equipment maintenance, from employee work safety to cargo safety.

Invest in training

A key component of lowering risks in logistics operations is employee training. Therefore, it is crucial that the business invests in both workplace safety training and specialized training for the duties that employees undertake.

Everything You Should Know About Risk Management in Logistics | Image source: Pexels

Use technology

Technology may be a valuable resource and a wonderful ally in risk control in logistics operations. By using monitoring technologies, for instance, activities and cargo movements may be watched in real-time, and the items’ integrity is protected throughout the transportation process.

Load monitoring systems can record shocks, vibrations, and transport circumstances that result in any kind of damage to the structure or equipment, whether in use, in transit, or in storage, in addition to spotting potential flaws and issues in operation.

In the same way, technology aids logistics experts in creating safer routes due to the dangerous state of the roads or the carelessness of the driver.

Service outsourcing

An intriguing solution to reducing risks in logistics operations is outsourcing services. By working with a specialized company, the organization can rely on qualified personnel and the right tools to complete the duties.

Not confined to the transportation phase. The broad field of logistics includes everything from product procurement through delivery to the final consumer.

Businesses that specialize in particular phases can add a lot to projects by drawing on their experience.

Constant evaluation

To discover potential hazards and chances for improvement, operations must be continually evaluated. The risk management sector must continuously pay attention and monitor operations to spot potential faults and suggest workable fixes.

By implementing these steps, the risk management sector may greatly help to reduce risks in logistics operations, ensuring both the integrity of the cargo and the safety of the workers.

It is crucial that your business implements preventive steps to lower the risks associated with cargo movements or damage to transported items.

Count on 3PL Links Inc. to accomplish this. We are a business that offers value to the logistics industry by providing creative ideas and specialist consulting to improve transit efficiency, quality, and safety.

Learn about our solutions and how they may help your operation become more productive and safe. Contact us now.

5 Tips to Enhance Your Own Distribution Center | Image source: Pexels

The dynamism of activities is typically cited as a distinction when discussing the significance of logistics for a business. Distribution centers (DCs) become a crucial part of a company in this situation since they allow for strategic management of the flow of commodities while also enabling other logistical operations to move more quickly.

The entire company benefits from effective distribution center administration. It is feasible to recognize which problems are recurrent and take steps to streamline the routine with continual monitoring and technology support. This is accomplished by taking corrective and preventative action, improving business capabilities, and guaranteeing client happiness.

Read also: 6 Unheard Tips to Optimize Reverse Logistics in Your Business

5 Tips to Enhance Distribution Centers

Following are five suggestions for enhancing work in distribution centers.

Organize your inventory

The ideal for modern logistics is to do daily rotating inventories. This is due to the fact that after a set amount of time, companies will have counted all stock without stopping the entire activity, which prevents unforeseen costs. Rotating inventories are quicker to do and simpler to analyze because any errors detected would have occurred lately. Counting from the outflow while on a regular order and delaying general inventory is another key point.

Additionally, developing a system for managing the warehouse will prevent stockouts and surplus inventory. An excellent illustration of this is how inventories are organized by streets. In this model, products are recognized by numerical plates that speed up tracking at the time of picking and make it easier to find the shelves and pallet racks that are available to store existing products or replace them.

Adopt a dynamic layout

The best course of action is for businesses to fully understand the structure that is available in their DC and to measure the size of the warehouse based on the inputs and outputs of items in order to arrange the products with the highest turnover in locations that are simple to access. The items’ seasonality is another thing to keep in mind because it affects how this dynamic changes with the seasons.

Implement technological resources

Enterprise resource planning (ERP) and other management and organization-enhancing technology, as well as more specialized solutions like WMS (Warehouse Management Systems), can all be used by businesses to guarantee that storage is carried out as efficiently as possible. Additionally, there is technology that facilitates daily life, like smartphones, data collectors, forklifts, and pallet trucks. These elements enhance the team’s dynamism while also giving the routine additional assertiveness.

The finest investment today is in technological resources to improve the efficiency of operations in your distribution center. They enable us to deal with data, decrease the likelihood of errors, decrease labor expenses, and boost productivity.

Manage deliveries and paths

It has become crucial for businesses to manage deliveries efficiently since customers are getting more and more demanding about when they receive their products. A notable illustration of this is scripted vehicle loading, which ensures increased productivity and assertiveness of deliveries. Within the DC, this process might take a little bit longer, but it results in a significant reduction in delivery time, enabling orders to arrive as anticipated and cutting fuel expenses.

Invest in a performance indicator

It is important to adopt metrics to determine whether or not the business is evolving. When it comes to distribution facilities, indicators can include those that track, among other things, the performance of individual operators, inventory turnover or order management, frequency of damages, and returns rate.

By using these measures, businesses improve their operations, assuring cross-sector collaboration and customer satisfaction, which helps them function on par with market leaders and creates a logistical advantage.

Reverse logistics is a logistical procedure that involves bringing a product back to the distribution site from the point of consumption, such as when a delivery attempt fails or when a product is returned to the store.

Reverse logistics has become increasingly more critical in operations in recent years as e-commerce sales have grown. Invesp conducted a survey that revealed that 30% of online purchases worldwide result in returns or exchanges. This can happen for various reasons, including the fact that the customer has never seen the goods in person before making a purchase and has different expectations regarding its appearance, size, or efficiency.

6 Unheard Tips to Optimize Reverse Logistics in Your Business | Image source: Pexels

Any company that wishes to provide better service for exchanging or returning goods, or that wants to lower the proportion of goods that are returned following failed delivery attempts, must have a solid reverse logistics plan. As a result, it’s crucial to pay attention to several pointers that enhance the reverse logistics sector. When Is Reverse Logistics Used?

Since the e-commerce era has arrived, reverse logistics has gained even more significance. There are, however, a number of other factors that make it necessary. Here are a few instances:

Customer returns: This scenario mostly involves online transactions. The product is frequently not what the buyer expected when shopping online because the decision is made based on photographs, and for this reason, they ask for a return.

Unsuccessful deliveries: There are a number of reasons why a delivery may not take place, including an incorrect address or a customer who is not available to receive the product at the time. The sequence must therefore go back to where it started.

Driver returning damaged products or parts: If the customer or delivery person notices a damaged product during delivery, they must notify and return the damaged item.

B2B returns: Unsold goods may be delivered to distributors or distribution centers for resale.

How To Optimize Reverse Logistics?

Offer the following two types of reverse operations: The exchange or return process for a product must be simple for the customer. Offering the customer a variety of options for how this procedure will be carried out allows them to select the one that will work best for them. One alternative is for the customer to mail the item or for the carrier to pick it up, either for free or for an extra charge.

Invest in an exchange and return policy: The customer must be made aware of the company’s return policy and how it operates. It is crucial to be aware of all dates, the detailed instructions for returning the item, the deadline for refunds, and the requirements for exchange or return (such as the item being unused and in its original packing, etc.). By making everything clear, you may increase consumer confidence and negotiating security.

Inform the customer: It’s critical to keep customers updated on the status of their orders as they are being shipped and returned. Send regular information on the status of the purchase, delivery, and pickup. The consumer won’t have to get in touch with the business multiple times to raise questions or request further information if the procedure is transparent.

Analyze the financial effects: An effective reverse logistics plan lowers the company’s storage and transportation costs. In order to reduce delivery costs, it’s important to take into account things like the chosen delivery routes, frequency of collection, expected operating expenses, amount and weight of commodities, and the requirement for specialized vehicles. Finding the ideal delivery option for the business and its clients will be attainable in this manner.

Agility is key: The client has the chance to rate the business after the return procedure. The customer is more likely to give the store a positive review, tell others about it, and return to conduct business if the procedure is simple and swiftly addressed.

Delivery optimization tools: Using a transportation optimization tool might be crucial for helping with delivery and accelerating the process. It allows for the management of unsuccessful collection attempts, route calculations, and complete shipment tracking.

Customer Loyalty: The Importance of Positive Reverse Logistics

It is crucial to invest in a strong product return procedure because, in the event of a poor reverse logistics experience, it is normal for the client to be hesitant about returning to conduct business out of fear of experiencing the same problem again. According to the Invesp survey, 92% of consumers stated they would continue to shop in stores provided the return process was straightforward and 79% wanted it to not add to their costs.

A positive experience also ensures that the consumer will refer the business and its goods to others, enhancing the company’s reputation.

Unlocking Customer Satisfaction: Is Your Fulfilment Strategy Aligned with Expectations? | Image source: Pexels

According to our memory, the field of flexible fulfillment hit a tipping point around 15 years ago. At this point, a new age in the use of technology and fulfillment operations throughout an expanding supply chain network began.

Sending orders to a few drop shipping companies and distribution facilities was no longer sufficient. It was time to integrate the fulfillment network with the retail network, greatly boosting the potential for revenue generation and the sophistication necessary to do so.

Many retail CEOs have folded their arms throughout these years of change and said, “My store associates will never take the time to put a shirt in a box.” But in the end, the significant rise in revenue and margin increases proved to be simply too strong to ignore.

It is challenging to manage a successful and efficient fulfillment operation from retailers for a variety of reasons. Labor, inventory accuracy, and split shipping are a few examples. But in this post, we’ll focus on what is arguably the trickiest and most important topic of all: how to place inventory in the “Omni” consumer era across the entire network.

Prior to the “Omni” consumer, the majority of retail businesses ran two entirely different channels. Stores were planned, assigned, restocked, and conducted business with customers fully independently from the digital channel when it comes to inventory planning and optimization.

The digital channel generally included one or more specialized locations, which strangely were frequently organized and run like a separate physical location.

Imagine a portion of the demand that would have been met by the digital distribution center being brought into the supply chain and now manifesting up as demand in a physical location to understand the disruptive effect of the omni-consumer and the resulting ship-from-store programs.

When attempting to define what precisely falls under the category of a digital transaction, the situation becomes even more unclear. Visiting a nearby store to look at the merchandise but not making a purchase? Do considerable online research before choosing drive-thru pickup for quickness as opposed to delivering to your address.

In the end, “omni” consumer behavior across all channels necessitates operational excellence in two critical areas: first, much more sophisticated demand forecasting and inventory deployment strategies; and second, the capacity to continuously assess the condition of each stock unit in the network and adjust the order fulfillment algorithm’s decision-making accordingly.

Let’s start with inventory deployment and demand forecasts. We must comprehend the primary causes for which the majority of retailers have launched an in-store fulfillment program in order to comprehend why this procedure over the past ten years required a complete reinvention.

We like to divide these motives into two groups: those that are largely motivated by the retailer’s aim to fully and profitably monetize their owned inventory, and those motivated by the desire to provide customer service and convenience.

If we acknowledge that consumer behavior has changed over the past ten years, preferring that a portion of their online order fulfillment be carried out in a store near them — traditional BOPIS (Buy Online, Pick Up in Store) or drive-thru pickup — or delivered on the same day, then logically, demand that would have previously been met by a carrier delivering products from a shelf in a distribution center must now be met by store inventory and local labor in some way.

Another factor centered on the customer experience is the ambition to even ship ground service from stores to deliver more purchases within two work days.

The demand forecasting algorithm must now shift some of the digital demand away from the Distribution Center and toward specific stores due to the increased popularity of in-store pickup and ship-from-store (same-day and ground deliveries).

Unlocking Customer Satisfaction: Is Your Fulfilment Strategy Aligned with Expectations? | Image source: Pexels

The fulfillment algorithm of the order management system must decide which physical retailer to send an order from if the consumer now directs their digital demand to a particular one. In order to maximize sales while simultaneously lowering overall order fulfillment costs, inventory must now be moved from the distribution center to the storefronts.

We have only discussed the reasons why moving certain demand and supply farther up the supply chain, to stores rather than distribution hubs, is necessary to improve the customer experience so far. Now let’s examine the aspects of the retail business that make in-store shipment necessary.

The capacity to maximize gross margin across the network during the selling season is the most crucial element.

There will always be stock units at less-than-ideal locations throughout the season because no demand forecasting method can foresee the future with absolute accuracy. The best solution to the “problem items” challenge is to link digital demand to retail inventory.

Why? As a result, the local supply/demand matching issue (i.e., local demand meeting shop inventory) becomes a more global issue (i.e., the network as a whole, encompassing all stores, driving digital demand).

In addition to allowing markdown items to be sold at a higher price, connecting both requests greatly lowers the possibility that an item will be offered at a discount.

Avoiding markdowns is a crucial component that is currently the least practiced in the retail industry. This tactic necessitates constant communication—one might even argue unification—between order fulfillment and inventory optimization algorithms, which route orders 24 hours a day.

When it comes time to route the next order, the order management system algorithm goes beyond the most basic factors (stock availability, transportation costs, availability, labor cost, delivery time, etc.) and takes into account the current health—or difficulty level—of each unit for fulfillment. This is made possible by the effective coordination between these two AI-based processes.

One can, for instance, do this to avoid a future markdown that would really end up costing the retailer much more in absolute terms by trading a little bit more shipping or delivery time.

The initial inventory planning process, the inventory health management process throughout the selling season, and the digital demand fulfillment optimization process must all be integrated for inventory management in the era of omni-consumers.

The potential to capture as many sales as possible that require omni fulfillment (BOPIS, same day, ship from store) while lowering operating expenses and boosting gross profit on each transaction is increased by this unification, during the inventory’s lifetime.

Everything You Need to Know About Inventory Management | Image source: Pexels

Inventory management is a crucial investment for businesses that want to increase productivity, cut expenses, and deliver top-notch customer service.

Understanding needs and making the best decisions for the company’s performance are made possible by effective product management.

Following that, we’ll define inventory and go over its different types and management methods.

What is Inventory Management?

The procedure that makes it possible to plan, carry out, and regulate the resources kept on hand by a business is known as inventory management.

The following decisions are made during these processes:

What to supply?
How much to supply?
And when to supply?

3 main goals of inventory control are as follows:

1. Increase service quality or the ability to meet demand by keeping inventory on hand.
2. Reduce total inventory costs by increasing turnover or by lowering expenditures and investments.
3. Reduce expenses while increasing the operational effectiveness of supply processes.

It should be noted that these goals are in opposition to one another, which means that if one is improved, the performance of the others may suffer.

The definition of inventory management, however, is the skill of managing these conflicting aims, directing strategies, and appropriately prioritizing objectives in the face of this scenario.

Why is good inventory management important for your company?

When done correctly, inventory management shows how much you’ve lost due to ineffective product control. If you’re still unsure as to why your business has to engage in inventory management, we’ll explain its significance in the points below:

1. Maintains productive tasks in motion;
2. Increases client happiness when they discover the goods on the shelf;
3. It is directly related to the business’s financial performance;
4. It serves as a key competitive edge.

Now that you are aware of the significance of this activity inside an organization, it is critical to grasp all of its variations and which one your company falls under. Discover which sort of stock best suits the timing and structure of your firm by reading about the various varieties below.

What are the main types of stock?

Anticipation Inventory

It is a form of inventory that a company keeps on hand as a preventative step to make sure there are enough products on board to fulfill potential demand.

When a rise in demand is anticipated or when there is a question mark over the availability of raw materials or finished goods in the future, this inventory is typically retained.

Consigned Stock

Consignment inventory is a business strategy where a manufacturer or supplier distributes their goods to a retailer or reseller who sells them in their enterprise or store but has not yet made a purchase.

Instead, the retailer pays the manufacturer or supplier on a consignment basis only for the goods that are actually sold.

With this strategy, the shop may maintain a wide range of products in stock without having to make significant upfront purchases.

The supplier or manufacturer, on the other hand, gets an additional sales channel for their goods without having to assume the financial risk of maintaining a sizable inventory.

Cycle stock

Businesses that sell products with sales cycles use it. Since the corporation must keep stocks vigilant to prevent losses, it is one of the most challenging forms of inventory to handle.

With cycle inventory, a company may efficiently satisfy consumer demand without running out of products when demand is strong or having extra inventory when demand is low. This might be particularly crucial in sectors like the retail business where demand is highly unpredictable or seasonal.

Inactive stock

Inventory that has not been sold or used for a long time is referred to as inactive inventory. This may happen when a product is rendered obsolete, no longer desired by consumers, or when demand for a specific product has sharply declined.

Inactive inventories are a common source of trouble for businesses since they need storage space and money that could be used to purchase other goods with higher demand.

These inventories may also become out of date or expire, which could cause the business to lose money.

Dropshipping

When a consumer puts an order, the retailer buys the product from a third party – usually a wholesaler or manufacturer – who then distributes the product directly to the end customer. This business model is known as dropshipping.

The supplier manages every aspect of the process, so the retailer need not worry about product storage, management, or shipment.

Dropshipping enables retailers to sell a wide range of goods without needing to make significant inventory investments.

Everything You Need to Know About Inventory Management | Image source: Pexels

Safety stock

The quantity of extra inventory kept in addition to regular inventory to fulfill unforeseen demand or changes in market demand is referred to as protective stock, also known as safety stock.

Buffer stock is used to guarantee that there are adequate products on hand to fulfill client orders and to prevent supply chain disruptions.

Based on the demand’s cyclical nature and the time needed to refill the stock, the protective stock is determined. Depending on the type of product, the predictability of demand, and the accessibility of suppliers, a different amount of protective stock may be necessary.

Contingency stock

In order to deal with unanticipated occurrences that can impact the supply chain, the supplementary stock is kept in addition to normal stock and protective stock.

These occurrences could include strikes, natural catastrophes, delays in raw material supplies, production interruptions, or other unforeseen circumstances that could have an impact on product supply.

Contingency stock, as opposed to protective stock, which is intended to handle typical variations in demand, is kept in expectation of events that could impair the company’s capacity to complete customer orders.

What are the main methods of inventory management?

Inventory management tools are available on the market, and they make up a crucial part of management control. Therefore, we shall discuss the six methods used in the market in this context.

Specific cost or specific price method

Each unit of inventory is given a value using this procedure. It is therefore only applied in situations when it is possible to calculate the price or cost of each item. The remaining steps involve adding everything up to determine the stock’s final worth.

Due to the high stock movement, it is not a recommended strategy for retail. Just imagining it makes you exhausted, having to price one item at a time.

ABC curve

Using the ABC curve, inventory items are divided into three groups according to their monetary value or significance to the company.

Inventory items falling under Category A tend to be more valuable or significant, making up typically 20% of total inventory but 80% of its worth.

The products in Category B, which account for about 30% of the inventory’s total items and 15% of its worth, are intermediate items.

The remaining goods, which make up around 50% of the stock items and amount to about 5% of the stock’s overall worth, fall under category C.

The ABC curve is beneficial to businesses because it enables them to concentrate their inventory management efforts on the most significant or valuable products, ensuring that these things are always available and reducing the risk of production or operational interruptions.

PEPS

PEPS stands for the “First In, First Out” methodology, which suggests that older things should be used or sold before more recent ones.

In this method, older stock products won’t go out of date or expire, which could result in a loss for the business.

One strategy for regulating the output of stock items and preserving the accuracy of the business’s accounting data is the PEPS methodology.

Average cost

The average cost can also be referred to as the average price or weighted moving average, which means that a new cost average is calculated for every new transaction.

In this method, the value of the recently purchased items is added to the previously purchased ones to determine the ultimate price of the sold goods.

It is also possible to fix the average price. If this approach is used, the permanent inventory should have a single average applied to it, and interim sales should not be taken into account.

This concludes our post on everything you need to know about inventory management. We hope we managed to educate you further on the subject of Inventory Management and that you gained knowledge and insights that you can apply to your company’s operations.