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Plan, Source, Make, Deliver and Return…these are supply chain main activities as below

• Plan: Demand Planning, Forecasting, Inventory Management, Sales & Operations Planning, Network Design, Coordination in Supply Chain.
• Source: Procurement, Strategic Sourcing, Supplier Management, Purchasing, Spend Analysis, Strategic Cost Management.
• Make: Material Requirement Planning, Operations and Production planning, Capacity Planning, Quality Management, Lean Manufacturing, and Warehouse Management.
• Deliver: Transportation Management, Network Design, Inventory Management, and Warehouse Management.
• Return: Reverse Logistics, Green Supply Chain Management.

Logistics Concept

 

Logistics management is a supply chain management component that is used to meet customer demands through the planning, control and implementation of the effective movement and storage of related information, goods and services from origin to destination. Logistics management helps companies reduce expenses and enhance customer service.

The logistics management process begins with raw material accumulation to the final stage of delivering goods to the destination.

By adhering to customer needs and industry standards, logistics management facilitates process strategy, planning and implementation.

 

Logistics management involves numerous elements, including:

• Selecting appropriate vendors with the ability to provide transportation facilities
• Choosing the most effective routes for transportation
• Discovering the most competent delivery method
• Using software and IT resources to proficiently handle related processes

 

In logistics management in Bangladesh, unwise decisions create multiple issues. For example, deliveries that fail or are delayed lead to buyer dissatisfaction. Damage of goods due to careless transportation is another potential issue. Poor logistics planning gradually increases expenses, and issues may arise from the implementation of ineffective logistics software. Most of these problems occur due to improper decisions related to outsourcing, such as selecting the wrong vendor or carrying out delivery tasks without sufficient resources.

 

To resolve these issues, organizations should implement best logistic management practices. Companies should focus on collaboration rather than competition. Good collaboration among transportation providers, buyers and vendors helps reduce expenses. An efficient and safe transportation provider is also vital to business success.

 

Logistics Management is the managerial process for carrying out those activities in efficient and effective manner. Logistics is the management of the flow of resources between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations

 

Transportation Management

A transportation management system (TMS) is part of supply chain management (SCM) centered on transportation logistics. A TMS enables interactions between an order management system (OMS) and distribution center (DC) or a warehouse.

 

TMS handles four important operations of transport management:

• Planning: Defines the best transportation strategies based on specified parameters, which would be of higher or lower importance as per the user policy. This includes transportation expenditure, minimum stops possible to guarantee quality, shorter lead-time, flows regrouping coefficient and so on.

 

• Transportation execution: Enables the transportation plan execution. This includes carrier-rate approval, carrier sending, electronic data interchange (EDI), etc.

 

• Transportation follow-up: Permits the following up of any administrative or physical operation regarding transportation. This includes event-by-event transportation traceability, receipt editing, customs clearance, invoicing as well as reserving documents, transport alerts delivery, etc.

 

• Measurement: Includes or should include a strategic key performance indicator (KPI) report functionality for transportation.

 

Standard TMS software modules consist of:

• Load optimization
• Route planning and optimization
• Delivery
• Freight audit, payment, etc.
• Yard administration
• Advanced shipping
• Order visibility
• Carrier administration

 

TMSs are intended to reach the goals mentioned below:

• Minimize expenditures by means of more effective route planning, load optimization, carrier combination as well as mode selection.
• Enhanced accountability with exposure to the transportation chain.
• Better flexibility to make modifications in delivery plans.
• Realization of important supply chain execution demands.

 

Why Logistics and Transportation is Important for Company

Logistics and transportation in Bangladesh is very important for every successful company. This is because there has lot of garments factory and different type of industries and there have need logistics and transportation support. Even small businesses deal with finding suppliers, if not with transporting merchandise to a store. Small business owners also conduct distribution logistics with inventory and warehousing. And, every small business owner can tell you about how they handle reverse logistics, with returned merchandise or refusal of services. Larger businesses may deal in all four logistic fields.

 

In the business environment, logistics either have an internal or external focuses (inbound or outbound). Depending upon the business involved, this part of the chain can be simple or complicated. For more complicated procedures, third parties often are hired to conduct any one of the four fields within business logistics.

 

Third-party logistics (3PL) involves using external individuals or organizations to execute logistics activities that have traditionally been performed within an organization itself. If, for example, a company decides to export its product, it may hire a person or organization to help with distribution logistics. Today, there is a movement toward building fourth-party logistics (4PL), which integrates 3PL competencies and other organizations to design, build, and run comprehensive supply chain solutions. A 4PL general contractor would manage other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.

 

Firms in this industry specialize in the production and distribution of goods, from the first stages of securing suppliers to the delivery of finished goods to consumers. Such firms give advice on improvements in the manufacturing process and productivity, product quality control, inventory management, packaging, order processing, the transportation of goods, and materials management and handling. In the process, these consulting firms might suggest improvements to the manufacturing process in order to use inputs better, increase productivity, or decrease the amount of excess inventory. Consulting firms in this segment of the industry also advise on the latest technology that links suppliers, producers, and customers together to streamline the manufacturing process.

 

Even project management requires logistics, as one vein of this science coordinates a sequence of resources to carry out projects. Typical constraints in project management include scope, time, and budget, or the same constraints involved in business logistics. The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project’s end result.

 

Functions of Logistics Management

Logistics is a process of movement of goods across the supply chain of a company. However, this process consists of various functions that have to be properly managed to bring effectiveness and efficiency to the supply chain of the organization.

 

Discussed the below seven major functions of logistics.

 

Order processing

It is an important task in functions of logistics operations. The purchase order placed by a buyer to a supplier is an important legal document of the transactions between the two parties.

This document incorporates the description or technical details of the product to supply, price, delivery period, payment terms, taxes, and other commercial terms as agreed.

The processing of this document is important as it has a direct relationship with the order or the performance cycle time, which indicates the time when the order is received and when the materials are received by the customer. The order processing activity consists of the following steps:

• Order checking for any deviations in agrees upon or negotiated terms
• Prices, payment, and delivery terms.
• Checking the availability of materials in stock.
• Production and material scheduling for shortages.
• Acknowledging the order indicating deviations if any.

 

Inventory control

Inventory management is to keep enough inventories to meet customer requirements, and simultaneously its carrying cost should be lowest.

 

It is basically an exercise of striking a balance between the customer service for not losing the market opportunity and the cost to meet the same.

 

The inventory is the greatest culprit in the overall supply chain of a firm because of its huge carrying cost, which indirectly eats away the profits. It consists of the cost of financing the inventory, insurance, storage, losses, damages, and pilferage.

 

The average cost of carrying inventory varies from 10 to 25 percent of the total inventory per year depending on the products.

 

Warehousing

Warehousing is the storing of finished goods until they are sold. It plays a vital role in logistics operations of a firm. The effectiveness of an organization’s marketing depends on the appropriate decision on warehousing.

In today’s context, warehousing is treated as switching facility rather than a storage of improper warehousing management. Warehousing is the key decision area in logistics.

The major decisions in warehousing are:

• Location of warehousing facilities
• Number of warehouses
• Size of the warehouse
• Warehouse layout
• Design of the building
• Ownership of the warehouse

 

Transportation

For movement of goods from the supplier to the buyer, transportation is the most fundamental and important component of logistics.

 

When an order is placed, the transaction is not completed till the goods are physically moved to the customer’s place. The physical movement of goods is through various transportation modes.

 

In logistics costs, its share varies from 65 to 70 percent in the case of mass-consumed, very low unit-priced products.

 

Firms choose the mode of transportation depending on the infrastructure of transportation in the country or region. Cost is the most important consideration in the selection of a particular mode of transport.

However, sometimes urgency of the good at the customer end overrides the cost consideration, and goods are sent through the fastest mode, which is an expensive alternative.

 

Material handling and storage system

The speed of the inventory movement across the supply chain depends on the material handling methods. An improper method of material handling will add to the product damages and delays in deliveries and incidental overheads.

Mechanization and automation in material handling enhance the logistics system productivity.

 

Other considerations for selection of a material handling system are the volumes to be handled, the speed required for material movement and the level of service to be offered to the customer.

 

The storage system is important for maximum space utilization (floor and cubic) in the given size of a warehouse.

 

The material handling system should support the storage system for speedy movement (storage and retrieval) of goods in and out of the warehouse.

 

Logistical packaging

Logistical or industrial packaging is a critical element in the physical distribution of a product, which influences the efficiency of the logistical system. It differs from product packaging, which is based on marketing objectives.

 

However, logistical packaging plays an important role in damage protection, case in material handling and storage space economy. The utilization of load has a major bearing on logistical packaging with regard to the packaging cost.

 

Information

Logistics is basically an information-based activity of inventory movement across a supply chain. Hence, an information system plays a vital role in delivering a superior service to the customers.

 

Use of IT tools for information identification, access, storage, analysis, retrieval and decision support which is vital among the functions of logistics is helping business firms to enhance their competitiveness.

 

Different Types of Logistics Management

Logistics management ensures the proper and timely distribution, storage and reclamation of needed materials. It uses a variety of applications from material productions to commodity delivery to military maneuvers. Logistics management has seven types, each emphasizing a different aspect of the supply process.

 

Procurement Logistics and Management

Procurement Logistics is the entire process used to select suppliers and negotiate contracts for delivery of goods or services. It consists of activities such as market research, requirements planning, make or buy decisions, supplier management, ordering, and order controlling.

 

Production Logistics and Management

Production Logistics concerns itself with streamlining and controlling the flow through the supply chain from point of entry to the end, which is distribution logistics. Production logistics activities are related to organizational concepts, layout planning, production planning, and control.

 

Supply Management and Logistics

Supply management involves the planning and coordination of materials that are needed in a certain location at a specific time to support production or activity (as in the case with military supply). Supply logistics must include transportation of the materials and storage as well as a means for evaluating the level of supply at different stages of the process to make sure the flow of materials matches need. This can involve getting all of the construction materials to a construction site or parts that are needed in a manufacturing plant.

 

Inbound  and Outbound Logistics

Inbound would refer more to the transport, storage and delivery of goods coming into your business, whilst outbound refers to the same but for goods going out of your business. Your company will work different supply-chain partners on inbound and outbound logistics

 

Distribution and Material Movement

Distribution involves managing how a supplied and stored material is then dispersed to the locations it is needed. This involves issues of material movement (loading, unloading and transportation), tracking of stock and accountability of use (recording how the supply is used and by whom). This can involve moving supplies from a central warehouse to the shelves of a retail store.

 

Disposal Logistics

Disposal Logistics, also known as reverse logistics, stands for all operations related to the reuse of products and materials. The main function of this field is to reduce logistics cost, enhance service, and save natural resources.

 

Reverse Logistics and Product Return

Reverse logistics involves the reclamation of material and supplies from a production or assembly process. For instance, in the logistics management of a construction project, reverse logistics plans for the removal of excess material and re-absorption of the material into a stock supply.

 

This type of leadership encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners which can be suppliers, intermediaries, third-party service providers, and customers.

 

Seven Right of Logistics Management

 

The management of goods and services from point of manufacture to the point of consumption refers to logistics management. It involves effectual planning, design, execution, control, and monitoring of supply chain activities.  Effective Logistics management facilitates optimization of resources, proper flow of materials, information and capital thereby reducing operational cost and avoiding delays. Organizations rely on its supply chain team for the entire process of logistics.

 

The role of supply chain manages is integral in every industry. In order to become a supply chain manager, the candidates should know how to take care of all the supply chain activities. The main aim of  logistics management deals with taking care of seven right’s these are as follows:

 

1. Right Product

The basic constituent of supply activities are the products that are transported from the manufacturer to the consumers. Supply chain managers should know what kind of product needs to be manufactured, handled and transported. The best strategy is to choose a product that is in demand and that can guarantee profits. Having right knowledge and using the right product will facilitate in efficaciously managing the time and resources.

 

2. Right Place

Next important factor is that the right product should be sent to the right place. The supply chain managers should ensure that they have efficient and experienced delivery staff so that the product is delivered to the right place. The managers can develop a robust delivery system with location tracking so that both the customers and the providers can track the exact location of the product and get it delivered to the right place.

 

3. Right Price

Pricing is imperative for the businesses as it is the factor that decides whether it has incurred profit or loss. The supply chain manager should research market trends and set competitive prices for the goods and services. Furthermore, there should be a system that keeps a record of the prices and updates it regularly so that the products are sold at the right price.

 

4. Right Customer

Customers are the core component of supply chain processes. The managers must have knowledge about their target market. If the products are sold in the right market then the company gains more leads and they get the right customers that can stay with them life-long.

 

5. Right Condition

The quality of deliverables is of utmost importance. It is the duty of the supply team to ensure that the goods are stored properly and delivered to the customers in the right condition.

 

6. Right Time

Time is a crucial factor in logistics. Customer’s satisfaction and long-term relationship are only possible if the products are delivered to the customers at the right time. It is the task of managers to develop a tracking system and coordinate with the delivery team to get the items delivered before the deadline.

 

7. Right Quantity

Sending right amount of products is also important in logistics. It is the task of the supply chain managers to find the right quantity of deliverables and to coordinate with the manufacturing and delivery team to get the right quantity of products delivered to the customers.

 

Five tips for managing logistics more effectively

The more steps there are in your logistics plan, the more efficient your entire process needs to be. If several different materials need to be supplied to a certain location at different times, your supply chain not only needs to be efficient, but also able to quickly respond to problems as they arise. The larger your operation, the more difficult this becomes, and the more prepared your business needs to be. To help your supply chain run as smoothly as possible, here’s our top five tips for effectively managing your logistics.

 

Take the time to make a solid plan

Efficient logistics is all in the planning. The less decisions that need to be made off the cuff during the transportation process, the better. And, while a solid plan can never cover every extenuating circumstance, it will keep ad hoc choices to a minimum. A good logistics manager will therefore make sure to plan well ahead in order to eliminate any delays in the supply chain as best they can.

 

Always have a contingency plan

No matter how fool proof you think your logistics plan is, it’s impossible to prepare for every possible eventuality. A good logistics manager therefore knows their job is far from done after their plan has been made, as they need to follow the supply chain at every point and put out fires whenever they crop up. To do this effectively, you should have contingencies for every element of your logistics plan. You should also know when to stick it out with your original plan and when to switch to your backup — something that can only come with experience.

 

Hire a logistics manager with strong interpersonal skills

When your logistics plans go awry, it’s crucial that the person tasked with sorting out the mess has great interpersonal skills. This is because they’ll not only have to re-arrange things with the employees within your business, potentially making life more awkward for them, but also occasionally have to find a last-minute logistics supplier to fill in.

If your logistics manager is good with people and has a solid network of industry contacts, he’ll be well-equipped to get your business out of any logistics problems. Whether someone within your business fits this profile or you need to look outside of the company, finding the right person for this position is a part of effective logistics management.

 

Automate your systems wherever you can

In the digital age, there are a number of ways you can automate the logistics process, including tracking and monitoring each delivery. These systems take the guesswork out of planning your supply chain by reporting the raw data without bias. Ensuring your business is better informed by using fleet and inventory management software will allow you to refine your processes around the factors that impact your bottom line the most.

 

Learn from your mistakes

Depending on the size of your company, poor logistics management can cost your company up to hundreds of thousands of pounds each year. Perhaps the most important thing you can do when optimizing your supply chain is to learn from your mistakes. Regularly sit down as a team and openly discuss the mistakes you’ve made in the past, focusing on what systems you’re going to put in place to ensure they don’t happen again.

 

Keep these tips in mind and your supply chain is sure to be as effective as possible, potentially saving your company thousands of pounds each year.

 

Logistics Goals

 

Four key logistics goals is important for successful logistics operation. The supply chain to be effective in a multichannel operation, it is necessary for management to meet four goals. Each of these goals includes definitive and specific objectives required within an operation. Fortunately, there are proven best practices to help you achieve those objectives.

 

1) Increased efficiency

To increase efficiency, a company must develop cost-effective transportation rates while reducing overhead, total inventory, and overall cost-per-order processing. You can improve your warehouse operations, including processes, layout, and flow, by working closely with your transportation provider. Establish a two-way relationship with your carrier to frequently share best practices, issues, and opportunities.

 

Conversely, disjointed transportation flow ties up space on the receiving dock. For example, if a product doesn’t meet specifications, it must be double-handled, possibly repackaged, stored, and shipped back to the source. This process uses extra labor and space. What’s more, lack of a reliable delivery time requires you to carry more inventory, which decreases inventory turns and increases costs for the added storage space.

 

To improve logistical efficiencies, consider having the vendor perform value-added services such as packaging, marking, and quality inspections. This improves the chance of errors being caught at the source; source-based services speed product flow through the warehouse.

 

Also, avoid making transportation an afterthought; try to build it into the warehouse process and layout. Consider inbound and outbound conveyances, queuing up shipments by carrier, and the capability to pull orders later in the day to increase customer service.

 

Determine which carriers are able to accommodate business demands, depending on product type and turnaround time. For example, some multichannel merchants have carriers come into the center to help load trucks, while others have an in-house U.S. Postal Service office for shipping.

 

Consider whether facilities issues could affect your operation. For instance, limited delivery-door access can force companies to rely on their carrier to move a loaded trailer and replace it with an empty one. During peak order-shipment periods, this causes downtime and an interruption to the workflow when there’s no empty trailer ready to load. Additional loading doors could solve this issue.

 

Vendor compliance is at the heart of efficient supply chain management. Simply defined, vendor compliance means that product arrives from a vendor in proper condition and is delivered in the agreed-upon manner. In addition to product quality, some vendor compliance standards include packaging and shipping requirements, advanced shipping notices, master-case and inner-case sizes, case labeling, product packaging and polybag specifications, accounting and paperwork requirements, logistics requirements and routing guides, scheduling appointments and statistical sampling requirements, to name only a few.

 

The proactive step of instituting a charge-back policy should be clearly stated in a vendor compliance manual, with the support from senior management. Retailers would rather have receipts arrive on time and be compliant than deal with the hassle of collecting charge-backs. But it’s necessary to put financial penalties for non-compliance into effect. Without setting these standards, a warehouse will have to absorb repackaging and re-labeling costs. And without compliance policies and enforcement, it’s difficult to implement more advanced systems of cross-docking, advanced shipment notices (ASNs), just-in-time inventory, source marking and ticketing, or radio frequency identification.

 

Traditionally vendors, rather than merchants, have controlled inbound freight decisions. This practice costs merchants an estimated premium of 20%-60% above actual transportation costs. But today more merchants are taking control of inbound freight, enabling them to influence their economies of scale and negotiating power to reduce costs. This is not an easy transition to make when you consider the number of documents, parties, languages, and currencies involved in global sourcing. But the benefits are numerous — lower costs, improved visibility of the inbound goods in transit, and the ability to schedule receipts.

 

Another major advantage of controlling inbound freight is the ability to combine inbound, outbound, and reverse logistics to get higher discounts. This always needs to be balanced with the issue of putting all your transportation eggs in one basket. Carriers have areas of strength and weakness. Select vendors for their strengths. Approximately one-third of companies are using multiple carriers — a growing trend.

 

2) Improved customer service

In direct marketing enterprises, fulfillment operations are in partnership with marketing and merchandising. This partnership is like a three-legged stool — without all three legs the stool cannot stand. Fulfillment operations’ inbound and outbound transportation is key to delivering marketing’s promise to the customer to get the shipment delivered on time and in good condition.

 

In direct marketing, customer service must be balanced with costs. First is the cost to acquire a customer, which stands at roughly $10-$25, depending on the efficiency of the prospecting. This figure includes catalog and other marketing costs, as well as the cost of nonresponses. In many businesses, u to 70% of all first-time buyers do not purchase a second time. Most direct businesses need a customer to purchase two or three times to break even.

 

The second cost element to consider is the high cost of being on backorder. Hundreds of customer studies show that in most direct businesses it costs $7-$12 to process one backordered unit of merchandise.

 

The breakdown of backorder costs for a small direct business. If this business had 200,000 orders with 400,000 units, and backorders were calculated at 20%, then 40,000 united would be backordered. At $7.37 per unit, backorders would cost this direct marketer $294,800. More important, the numbers don’t include hidden costs: the buyers’ time to accelerate backorders, air freight to bring stock in faster, and the loss of customer goodwill. Permanently losing a customer because of poor service has the highest cost.

 

The third type of cost element is the erosion of gross demand by customer returns and customer and company cancellations. Typical return rates by category. The higher the fashion nature of the product, the higher the return rate tends to be. Sized or tailored fashion products have higher returns.

 

Returns also cost far more than orders to process, and in many businesses, only one-third of the returns are exchanges. The cost of processing a return includes

 

• The original cost of order processing ($3-$6 in most direct business), including indirect and direct labor, credit-card processing fees, occupancy costs, and phone lines.
• Customer acquisition costs.
• The cost to process returns and refurbishing items, including indirect and direct labor and occupancy costs.
• Loss of shipping and handling revenue if refunded from outbound or inbound transaction.
• Loss of gross margin.
• Potential loss of customer if shopping or return processing experience is unsatisfactory.

 

For high-return categories and businesses, reverse logistics services typically allow customers to send returns into the pipeline closest to their location, either at home or via a retail outlet. The reverse logistics provider should offer systems that provide visibility into goods being returned in advance of receipt in the retailer’s distribution center. This will not only allow the merchant to schedule resources accordingly, but it will also give the merchant an estimate of return goods that will be available to fill new customer orders. Additionally, some merchants start the refund or credit process when customer returns have been received.

 

Another aspect of costs is cancellations. Industry standard for excellent customer service puts cancellations as a percent of demand at 2% or less. For apparel direct marketers, however, it is not unusual for cancellations to be 4%-8%.

There are no historical selling data for apparel, because of the high percentage of new product. New products can run 50%-75%, four seasons a year — that’s simply the nature of the apparel industry. Catalogs with fewer new products or with categories that have a higher ability to be reordered, have lower cancellation rates. Business-to-business cancellation rates may be less than 1% to several percent; home decor rates may be from 1% to 3%.

 

Obviously the speed of getting resalable returns back into inventory availability and the reduction of costs of returns can greatly affect profitability. Leading merchants acknowledge returns as part of the cost of doing business and include a convenient return process as part of the customer experience.

 

On the inbound side, shaving several weeks off receiving can save some of the backorder costs and reduce loss of customers. This is where a potential problem with global sourcing lies. Most direct marketers are unable to reorder except in large quantities. Receipts are generally not planned in multiple shipments because of the minimum purchases required.

 

Increases in supply chain efficiency can reduce inventory levels and out-of-stocks. Take the radio frequency identification (RFID) used at Wal-Mart. Wal-Mart’s use of RFID is early in its implementation, but results are already impressive. According to Linda Dillman, Wal-Mart’s chief information officer, using RFID has reduced out-of-stock merchandise by 16% at participating stores while improving customer service during the past 12 months. The concentration has been in higher-priced, faster-moving product. Additionally, Dillman says, the company can restock RFID-tagged items three times faster than non-tagged items.

 

Getting efficient inbound logistics systems and vendor compliance in place is the first priority. While RFID is in the future for most companies, others need to implement solutions that optimize supply chain efficiency today.

 

3) Increased sales

How can inbound and outbound logistics and transportation help a retailer’s sales? Several opportunities exist for improving service, and those in turn can be used to marketing’s advantage. Look at inbound and outbound freight as separate operations with separate requirements. Bundle the volumes wherever possible with your carriers, but recognize the differences between the channels.

 

With direct promotions and advertised retail product, maintaining on-time and in-stock position is a must. Without an available, reliable source of merchandise, you could end up losing sales and customers. Because it’s difficult to project sales, you need to get product quickly and safely into the logistics pipeline. Product damage from inbound transportation can seriously reduce product availability, and of course without product you can sell, profits decline.

 

Begin by tracking what you have coming inbound–where it is and when it will be delivered. Import and assemble containers of priority product, since delivery by air freight is costly and may exceed the margin of low-priced product. Be aware that direct channels are subject to the Federal Trade Commission’s 30/60 day rule: Direct marketers must notify customers of a possible delay in receiving and, as a result, outbound shipment, or cancel their orders entirely. (A note of clarification: The 30-day promise to deliver begins after take the consumer’s order. If you tell the consumer their order is backordered for two weeks, the thirty days start from the backordered date. At the end of the thirty days, you’re required to send the customer notice. If you reach the 60-day point you have to notify the customer the order is still backordered.) In addition, warehouses are increasingly becoming the “back room” for specialty store operations in the multichannel environment. If you don’t have product that can be moved quickly into a retail outlet, you can miss the sale.

 

As companies become leaner, transportation becomes even more important to meeting sales goals. Plus, there’s a difference between merchandising stores and catalog promotions. Retail customers may substitute another product for what they originally came in to purchase, but catalog and Internet customers are less likely to accept substitutes. That’s why many catalogs adopt charge-backs for late delivery, backorders incurred, and substituted product.

 

The logistics of delivering to the customer can hurt sales if the customer’s expectations are not met–for example, if a gift is delivered late or arrives damaged. If the customer doesn’t want the product that arrives, returns increase the cost of operation.

 

Conversely, logistics can factor into a company’s marketing plan if transportation costs are under control. According to Biz Rate Research, 79% of e-commerce companies were planning to offer free shipping and handling during the past holiday season. Free shipping has proven to increase sales and average order sizes. Most marketers don’t want to give up this source of revenue, though, or they offer it only to their best customers or higher-average order buyers. If your company’s transportation costs are out of control, you’re going to be less willing to offer shipping promotions.

 

4) Building relationships

True two-way collaboration between retailer and carrier is key to the success of logistics execution. Measures of success are total cost, time in transit, and responsiveness of the carrier representative.

 

The single-carrier vs. multicarrier philosophy is one of the primary issues you need to address with regard to carrier relations. Using one carrier allows a higher aggregate volume of shipments, which can result in lower negotiated rates. The downside is total dependence on the carrier and possible problems if there is a carrier service interruption.

 

A good relationship with your carrier representative is vital. Inevitably there will be issues that must be addressed. Trust and a positive attitude can influence how those issues are resolved.

 

Use a structured approach to comparing carriers. When soliciting bids, give carriers as much information about your business requirements as possible. Throughout the bidding process, and later when working with carrier partners, follow these guidelines:

• Stay involved with the process.
• Verify results and reports.
• Audit bills.
• Consider the total costs of transportation in your analysis and reviews.
• Keep options open and treat carrier contracts and relationships as dynamic and evolving — not like a fixed three-year arrangement.

 

In direct businesses, the purchasing and inventory control departments are responsible for analyzing inventory requirements, purchasing and purchase-order writing, receipt planning, vendor communication, routing deliveries, improving backorders, and coordinating required receipts to prevent backorders and stock-outs. They are generally good partners with fulfillment in enforcing vendor compliance. In multichannel and multi warehouse operations, the purchasing and inventory control departments have the prime responsibility to balance or level inventory between channels, warehouses and stores to optimize sales and profitability?

 

Systems implications abound for integrating partner systems, implementing supply chain improvements, and managing necessary IT resources. Hundreds of vendors sell software systems to streamline the supply and logistics process — an indication of the complex requirements for controlling the management of logistics. Many IT vendors deal with market niches, while others deal more generally with logistics overall. Among the functions addressed by these vendors are

• Manifesting and rate shopping plus integrated load and yard management
• Inbound transportation management and freight auditing
• ASN/electronic data interchange (EDI)
• Inbound and outbound product tracking
• Transportation procurement.
• Purchase order management
• Transportation planning and execution and routing guide management
• Carrier management
• Enterprise-wide approach to supply chain.

 

The IT department is the hub of managing and controlling your company’s information resources. It’s important to investigate current state-of-the-art systems and invest in those that will add value to your operation.

 

Conclusion

Finally, Logistics management in Bangladesh is extremely important if your business is to be successful. It involves careful control of the goods both leaving your business premises and entering them, thus keeping your company running smoothly as a whole. These are our top reasons to help perfect logistics management. The goal of logistics is to meet customer requirements in a timely, cost-effective manner. Your role as a logistics and distribution manager is to organize the storage and distribution of goods. You'll ensure that the right products are delivered to the right location on time and at a good cost. You may also be involved in transportation, stock control, warehousing and monitoring the flow of goods.

 

SCP

 

COVID-19 Impacts on Supply Chain

 

The Covid-19 pandemic has had a profound impact on the supply chain and sustainability for the garments sector. Top exporters like Bangladesh have started feeling the heat due to raw material sourcing challenges and cancelled orders. The performance of the RMG sector is more critical for an economy like Bangladesh, since apparel contributes 84% of the country’s export, employing close to 3.5 million people. While gauging the possible impact of the pandemic on the apparel sector, it is imperative to look into the demand side scenario by analyzing the European, US and the emerging markets for apparel export. It crisis has put sustainability into the spotlight. It has exposed vulnerabilities across government and industry, and put the value of sustainability into sharper focus than ever before.  Here are some of the specific impacts we’re seeing, and how things will need to change in the future as we face what we call “the next normal.”

 

Global brands impacts in Supply Chain

Major global fashion brands have taken prompt responses to help in flattening the Coronavirus curve and this has left significant impacts on worker employment, revenues and overall operations.

Nike has released a statement which outlines their halt in operations and closure of stores in the United States, Canada, Western Europe, Australia and, New Zealand to limit the spread of the Coronavirus. However, Nike-owned stores in South Korea, Japan, most of China and in many other countries remain open as per the current stage of the outbreak. [2]

 

UNIQLO had initially shut-down nearly 350 stores in China in late February. In the current stage of the pandemic, about 30 still remain closed, while most of its shops outside Hubei province, the epicenter of the coronavirus outbreak, have reopened. Globally, Uniqlo outlet closures have exceeded 100, with 27 in Europe. All 50 outlets in the United States have closed, following in the footsteps of other major fashion brands. [3]

FIGURE: UBS’s index of which European retailers are most at risk from Covid-19 / Source : UBS

 

The above figure, generated by UBS, is based on the company’s share of sales from China, the total value of products it manufactures in the country, and how quickly inventory turns over. [4]

The highest risk is observed for H&M which sources about 50% of its materials from China. Inditex, and its largest brand Zara, is also at high risk due to its highest rate of inventory turnover despite sourcing only 10% of materials from China. Gymshark which sources about 90% of its materials from China and Taiwan.

Due to large scale closure of stores owing to the lock-down enforced by different governments, apparel sales for Bangladesh have plummeted, leading to brands postponing or cancelling orders. Bangladesh Garments Manufacturers and Exporters’ Association (BGMEA) have claimed that USD 1.5 billion worth of orders have already been cancelled or put on hold by the buyers.

 

Global Cotton and Yarn Supply Chain Dynamics

Global production of Cotton is largely dominated by India, China, the US, Pakistan, and Brazil.

 

FIGURE: World Cotton Production / Source: FAO/OECD

 

The fall in cotton demand from China has led to demand-supply mismatch. Along with this, decrease in yarn exports for India to China will mean an even greater excess supply of yarn and lower prices in the international market. Raw (unginned) cotton in the Gondal (Gujarat) market shed almost 10 per cent to trade at Rs 4,280 a quintal in the first week of March from a level of Rs 4,755 a month ago. Cotton yarn lost 2-3 per cent over the last one month, while synthetic yarn declined by 4-5 percent during the past one month, following a fall in crude prices. [8]

FIGURE: Partner Country’s Share of Cotton Import by Quantity / Source: Bangladesh Bank

 

Although Bangladesh had been a victim of yarn-dumping from India, with import prices quoted to be up to 30% lower than local production costs by India, before the Coronavirus outbreak, domestic prices have since rebounded. Bangladesh Garment Buying House Association (BGHA) has complained that spinners are now charging 15% higher compared to last month due to yarn import disruption from India. Supply chain disruption due to the Chinese lockdown has had negative repercussions across Bangladesh’s textile and Garments value chain, as Chinese imports accounts for a significant portion of the sector’s total import (46% of USD 34 billion as of FY 2018-19).

 

 

The Possible Responses for Supply Chain

While short term sourcing destinations have not undergone dramatic changes as of yet, employment layoffs as a result of government mandated shutdowns and quarantines are inevitable.
While countries that have incorporated some form of automation in their apparel industries are slightly cushioned from this impact, countries such as Bangladesh will suffer greatly given the large number of people employed in its apparel and textiles sector.

With China’s situation being on the road to recovery, it will require at least the first half of 2020 to bring itself back to pre-outbreak capacity levels.

The question then remains of how long global buyers are willing to wait before looking to other sourcing markets or opting to near-shore supply.

 

COVID-19 Impacts the Supply Chain

There has been a broad-based effort to make supply chains more resilient in recent years, but most organizations did not figure a pandemic into their strategies, so their supply chains are not nearly as resilient as they thought they were. Many organizations have experienced some form of supply chain disruption – either through suppliers going offline, a sudden spike in demand or, as has been seen with medical personal protective equipment (PPE), both. 

 

The most important one is the need for more transparency throughout the global supply chain. To achieve true resilience, enterprises will need to gain visibility into their entire supply chains, beyond the tier 1 suppliers. Most supply chains extend to tiers 2, 3, 4 and often beyond – it is critical for enterprises to understand who these suppliers are, where they are located, where they source from, their risk exposure, and so on.

 

What lessons can be learned from this crisis? Make or buy or source but where we source, inbound or outbound. For example, a company in Bangladesh might decide it is too heavily dependent on China suppliers, so it diversifies by adding suppliers in India. But if those Indian suppliers source components from tier 3 and 4 suppliers located in the same China industrial cluster as the current suppliers, then the diversification will not deliver the anticipated resilience. If the company had supply chain transparency, it would be able to identify this vulnerability and require that any tier 1 and 2 suppliers in Indian either avoid sourcing components from the same cluster, or have a strategy to carry enough inventory to weather multi-month disruptions.

 

Supply Chains Re-Examined

In the next normal, organizations will need to reassess their supply chain risks and may need to redefine their supplier relationships. In the past, cost has been the primary criterion for choosing suppliers. In the next normal, there will need to be a more sophisticated cost/risk analysis that factors in transparency. This will be a requirement for achieving true supply chain resilience, which may include paying more for local suppliers.

 

Cost differentials between some geographies have been narrowing over the last decade, so the potential increased short-term costs of taking a risk-based approach is significantly less than it has been in the past. And, as we have learned, taking this type of risk-based approach will deliver enormous benefits during future disruptive events. So, organizations need to determine the supply chain design that will deliver the most resiliency in the event of another large-scale disruption.

 

COVID-19 Shines a Light on Operational Sustainability

The significant impacts on worker employment, revenues and overall operational sustainability. While many organizations may need an overhaul and a re-start for the next normal, it will be interesting to see where investment flows following the pandemic. Will companies and industries that were identified as not sustainable before this crisis receive the same investor interest? Or will investors choose to back companies and industries which are more aligned with a sustainable future, and that generally showed greater resilience during the pandemic? COVID-19 has a way of accelerating trends because it exposes and inflames existing vulnerabilities. This could cause shifts in investment that accelerate the declines of industries and companies that were already waning before the coronavirus.

 

The post-COVID world presents an opportunity to re-invest in a new way. Rather than investing solely to restart the “old normal,” it likely makes more sense to invest in the next normal. Crises always bring with them a degree of opportunity, and as the global economy starts to come back to life, there is a major opportunity for investment in more sustainable companies and industries that will be far more resilient against future global disruptions.

 

Some investors are looking closely at this situation. One obvious example is the fossil fuel industry.  We are now seeing plummeting demand and prices as a result of the pandemic, which place dozens of businesses in serious difficulty. Just before or during the crisis, some industry leaders, such as BP, Shell or Total, have made commitments to be net-zero carbon by 2050. Investors have to ask themselves: Is this really going to happen? And if so, do these companies merit greater investor interest than others, because they are committed to a more sustainable future? Or, will investors turn their attention to other pure-play companies working on alternate forms of energy, which will accelerate the transition from fossil fuels to more sustainable energy sources?

 

Will COVID-19 Impact Climate Change Initiatives?

The response to COVID-19 has also exposed vulnerabilities in how the world functions in the context of a global threat. We have seen that there is little political alignment between different countries and regions, and there is little alignment between government and corporate sectors, so there has not been a coordinated worldwide effort across containment, testing, prevention and treatment.

 

This “every country for themselves” approach has been insufficient in the face of COVID-19. And it shows how ill prepared the world is to face another global challenge that is even more profound than the pandemic: climate change. There needs to be a coordinated response to this challenge from world leaders, which is not happening. Instead, we see countries - and organizations and industries within countries - pursuing their own interests, rather than those of the world.

 

Will the pandemic inspire greater levels of global cooperation against global problems? Will COVID-19 provide a lesson in how it is in each country’s best interest to operate in a way that promotes the world’s best interests?

 

It often requires a great deal of pain to cause fundamental societal change. COVID-19 is providing that pain right now, and it will cause a fundamental shift in investment and activity toward sustainability. The question is: how far will these changes go? It is almost a certainty that there will be a massive reassessment and realignment of supply chains. It is also likely that investors will factor sustainability much more strongly in their evaluation of opportunities. The ultimate litmus test will be climate change – if COVID-19 can break the “every country for itself” mentality, then it could become the most meaningful step forward toward addressing this global issue. These are all important trends to watch in the next normal.

 

Conclusion

Bangladesh’s overdependence on apparel export might prove to be its Achilles heel. Large scale order cancellation and deferment is causing a liquidity crisis across the sector, prompting the BGMEA President to appeal for support, both from international buyers and the government. The government has responded by announcing a stimulus plan of BDT 5,000 crore, explicitly geared towards the export led sectors. The primary goal of the stimulus package is to protect jobs, facilitate regular salary payment and ensure survival of the financially weak apparel factories. Details of the plan are still being worked out and timely deployment of the fund would be imperative to stabilize the sector.

The current lock-down would come to an end on 4th April and the government’s next directive on further extension of the closure will be dependent on the extent of contagion of Covid-19. By looking at the trajectory of the infected numbers in comparable countries, it’s likely that the number of infected patients in Bangladesh might increase sharply over the coming weeks. This would likely disrupt the production process further in apparel factories. Alongside, continued spread of Covid-19 in EU and US, the new epicenters of the disease, would further dampen demand for apparel and lead to another round of order cancellations.

Supply Chain Management in Garments Industry

The garments industry is one of the largest in the world, with a global supply chain. It is a complex system that touches people in every corner. Supply chain management working as a key success factor for the garments industry. That’s why the core focus of top management is to develop an effective supply chain management system. Supply chain management is the process of managing resources, the movement of resources from one party to another, one place to another place, one department to another department, and one section to another section. Here, the movement of resources should be in a way so that the availability of the right resources in the right place, at the right time, with adequate quantity, where the process cost is least. The important thing is supplying the required resources at a minimum cost. Manage the flow of goods and services through the supply chain network.

Today, supply chains are often complex and involve many different parties, including suppliers, manufacturers, distributors, transporters, retailers and customers. These parties may be located in different countries or even own countries.

Functions of Supply Chain Management

Supply chain management has seven major functions. These include planning, sourcing, purchasing, operations, logistics, resource management, and information workflow. Good supply chains perform these functions in a way that meets the wants and needs of final consumers efficiently.

Planning: The first stage of the garments supply chain is planning or conceptualization, which refers to all stages associated with creating a new product or service. This can include brainstorming ideas, defining requirements, researching materials and production methods, developing prototypes and testing them out on customers before full scale production begins.

Sourcing: This step involves finding suppliers or manufacturers who can meet all needs in terms of price, quality, delivery time frame etc. This is where raw materials are procured, or purchased, and then brought together to create the final product. May also want to consider outsourcing some steps or even completely outsourcing an entire process if it makes sense financially or logistically speaking. Generally speaking, we need 11 main categories of suppliers: fabrics supplier, yarn supplier, trims supplier, accessories supplier, packaging materials supplier, machineries supplier, maintenance supplier, fire and safety item supplier, chemical supplier, printing supplier, embroidery supplier, and finally, the cut & sew factory.

Purchasing: Procurement is the process of buying materials needed to manufacture products. These materials are purchased from suppliers, who must be able to deliver them in accordance with the manufacturer’s timeline. Therefore, the manufacturer’s companies and suppliers must communicate and coordinate to ensure timely delivery of materials.

Operations: Operations is everything a company does on a day-to-day basis to run a company. Before a company purchases the needed materials and begins production, it must forecast demand for its products. Forecasting involves anticipating or projecting how many units of a garments will be made during a given period. Accurate forecasting must align with inventory management and production schedules to ensure that the company is operationally positioned to manufacture the right amount of product to meet the needs of consumers.

Logistics: Logistics is a function that involves the coordination of all supply chain activities, such as warehousing, inventory management, and transportation. Companies along the supply chain must communicate effectively to ensure that products reach consumers in a timely and efficient way in the precise form that the consumer expects.

Resource Management: Resource management is the planning, organizing, and controlling of resources. Resources include the labor, the raw materials, and the technology that are required to move products from their raw material phase to finished goods available for consumption. Effective supply chain management requires the right allocation of these resources to the right supply chain activities to optimize the entire system.

Information Workflow: Information workflow is a supply chain management function that relates to what and how information moves between cross functional team members of the supply chain. If information doesn’t flow effectively or communication is poor, the entire process can suffer as a result of disruptions, delays, and mistakes. Employing a systematic approach to sharing information across the supply chain ensures that the right companies have the right data to make the right decisions at the right time.

Importance of supply chain management

Supply chain is a systematic process involving organizations, individuals, activities, and resources to help move a service or a product from a supplier to a customer or end-user. Supply chain management is the management of all supply chain activities to control the flow of goods from one point to another, maximize customer value, and maintain a competitive advantage. Supply chain management entails obtaining raw materials and storing finished goods until they are delivered to the intended recipients. Supply chain management is important for the success of any business, large or small. It can help it gain a competitive advantage by reducing the risks involved in purchasing raw materials and selling products or services. The following are the nine most important objectives of supply chain management.

Increased Productivity: Businesses can better predict demand and cater to it when their supply chain operations, including logistics, resource procurement and delivery, are strategically planned and executed. This improves a company’s ability to adapt to disruptions, changing markets, and shifting industry trends. Manufacturing and shipping delays can be avoided if supply chain leaders invest in making real-time data available and automating supply chain processes.

Reduced Cost: One of the most significant benefits of effective supply chain management is reducing costs and increasing profits. This is because SCM enables manufacturers to assess their current manufacturing processes, identify flaws and inefficiencies, and determine the best course of action to address these issues. Production will run more smoothly as processes improve, allowing to produce more goods for less money.

3. Customer Satisfaction: Effective supply chain management helps businesses in establishing a solid market reputation. It improves a business’s ability to respond to customer needs. This not just pulls new customers but also influences their brand loyalty. To make sure that there is a smooth flow of goods and services, businesses that prioritize customer service should invest in efficient supply chain managment.

4. Better Risk Management: Analyzing both big-picture and granular supply chain data can expose potential risks, allowing businesses to devise contingency plans in advance of unforeseen events. Companies can avoid negative impacts by taking proactive action instead of reacting to the supply chain disruptions, quality control issues, or other concerns as they arise. Companies can also make their operations leaner by monitoring risks, understanding them and taking action to mitigate them.

5. Good Supplier Relations: Supplier relationships must be evaluated by supply chain management software. Many SCM systems include tools for comparing supplier costs and customer service. These operational benefits assist supply chain managers in making informed supplier selections. Strong and robust supply chain management results in good supplier relations. Businesses can determine whether or not a vendor is a good fit by learning how much they charge, how they support their products, and how they deliver.

6. Consistent Quality Assurance: The costs of doing business rise as a result of defects and rework caused by poor systems. One of the benefits of SCM is that it incorporates quality techniques to improve operations, such as quality management systems. This is especially important for manufacturers who have moved their operations to various countries to save money on production. Product standards in different countries may vary, making quality control more difficult when your headquarters are located elsewhere. It’s critical to include quality control when vetting suppliers as part of your supply chain management.

7. Continuous Cash Flow: Whether you’re a small or large business, cash is the most important asset you can have. Companies must ensure that payments aren’t going out faster than resources are coming in if they want to stay afloat.  The variability and the unpredictability of financial inflows and outflows can add to a supply chain’s already complex financial flow. Companies can face a variety of challenges during their business, such as 

• Slow processing due to manual and silo processes
• Unreliable cash flows due to a lack of timely information 
• Costly procedures due to compliance and a lack of employee empowerment 
• High Days Sales Outstanding (DSO) due to invoice reconciliation delays 
• Suboptimal credit decisions due to manual processes for setting optimal limits

However, implementing supply chain management strategics can assist businesses in addressing cash flow issues by allowing them to evaluate their current processes, identify the weakest links that slow or obstruct financial flow, and determine the best solutions to address the problems.

8. Controlled Inventory Management: Every supply chain company strives to reduce or eliminate waste, which can be accomplished by enforcing overstocking controls. Overstocking results in the wreckage of unused materials, whereas understocking results in the failure to fulfil demand, resulting in a loss of business and revenue. The right supply chain management system ensures that your company has a well-organized warehouse and inventory control system in place to reduce holding costs on excess inventory while still allowing you to meet your customers’ needs.

9. Shipping Optimization: Shipping optimization has become a top priority for supply chain executives as a result of rising costs. Recognizing the most efficient shipping methods for small packages, large bulk orders, and other shipping scenarios helps companies deliver orders to customers faster while keeping costs minimum. Not only do cost savings help the company’s bottom line, but those savings can also be passed on to customers, resulting in higher levels of customer satisfaction overall.

Final Thoughts

The advantages of supply chain management are obvious and universal, extending to any organization that isn’t completely self-sufficient. Because the vast majority of businesses worldwide rely on other businesses to function, effective supply chain management is a must for almost every company. Don’t let your supply chain fall behind, and take advantage of the many advantages of a robust supply chain management system to gain some peace of mind.

 

Supply chain challenges in the garments industry

The garments industry is a vast industry producing millions of garments every day. One of the toughest challenges faced by this industry is increasing the cost of garments making and the price of both local and imported raw materials also increasing.

Manufacturers make garments both for the local and export markets but industrial-scale production is for export. You know the export market is highly competitive because China, Bangladesh, Vietnam, India all are fighting for offering a better price to the garments buyers to hold the export share high. You can compete in the market but first of all, you need to minimize your direct and indirect costs associated with the production of your garments. And the right solution is to use supply chain management by which optimal sourcing is possible where cost is minimum. It’s not easy to manage an apparel supply chain. The industry is highly complex with many moving parts. In fact, the apparel supply chain is more challenging than the supply chains of many other products. Here are a few reasons why:

Local:

Global: The apparel industry is a global one, so it can be challenging to manage everything from a single location. You need to be able to communicate with suppliers and partners in different parts of the world, which means having a good understanding of how different cultures operate and what language they speak. There are also significant challenges that arise from working with suppliers in other countries where the legal and moral framework may be entirely different than what you are used to operating within.

Seasonal: Seasonal changes in weather affect demand for certain items at different times of year, so you need to be able to predict when your customers will want new products—and sometimes plan ahead by ordering more inventory if necessary—to ensure that your company has enough product on hand when orders come in during those seasons without overproducing unnecessarily or having an excess amount left over after certain seasons end (which would then have little value).

Apart from these reasons, other challenges include the rising political tensions and trade wars with China and more recently Ukraine and Russia war; concerns about human rights violations and labor abuse; a changing retail landscape that has left many manufacturers scrambling for new revenue sources…