COURSE CODE: BSP 592

COURSE TITLE: LOGISTICS AND RISK MANAGEMENT IN

PROCUREMENT
 INTRODUCTION
"Logistics typically refers to activities that occur within the boundaries
of a single organization and Supply Chain refers to networks of
companies that work together and coordinate their actions to deliver a
product to the market.
• Also, traditional logistics focuses its attention on activities such as
procurement, distribution, maintenance, and inventory management.
• Supply Chain Management (SCM) acknowledges all of traditional
logistics and also includes activities such as marketing, new product
development, finance, and customer service
• Logistics is the process of planning, implementing, and controlling the
efficient, effective movement of goods from point A to point B or from
one company to another.
• Logistics includes everything between raw materials and finished
goods, including transportation, storage, and packaging.
• Logistics also has services like transportation scheduling, inventory
management, and quality control.
What is Logistics?
"Logistics is about getting the right product, to the right customer, in the
right quantity, in the right condition, at the right place, at the right time,
and at the right cost (the 7 Rs)"
What is Logistics Management?
"Logistics Management deals with the efficient and effective management of day-
to-day activity in producing the company's finished goods and services" - Paul
Schönsleben
• Logistics Management
• Logistics management is a crucial link that ensures the smooth flow of
products from suppliers to customers.
• Coordinating the movement of goods, materials, and information in
the supply chain
• One of the primary responsibilities of logistics management is to ensure
the timely and cost-effective movement of goods, materials, and
information throughout the supply chain.
• It involves coordinating various activities, such as transportation,
warehousing, inventory management, and order processing.
• Transportation:
• Choosing the most suitable mode of transportation
• Optimizing routes for efficient delivery
• Tracking and monitoring shipments
• Warehousing:
• Strategically locating warehouses for optimal inventory positioning
• Implementing efficient storage and retrieval systems
• Ensuring proper handling and security of goods
• Inventory Management:
• Optimizing inventory levels to meet demand while minimizing holding
costs
• Implementing effective replenishment strategies
• Utilizing technologies like RFID and barcode scanning for accurate
tracking
• Order Processing:
• Efficiently managing the order fulfillment process.
• Ensuring accuracy and timeliness in the process
• Streamlining communication between suppliers, manufacturers, and
customers
Key concepts and principles of logistics management
Supply Chain Integration: Collaboration and coordination among all
supply chain partners to facilitate seamless information flow and
decision-making.
Lean Logistics: Eliminating waste and non-value-added activities to
optimize efficiency and reduce costs.
Reverse Logistics: Managing the return, disposal, and recycling of
products to minimize environmental impact and maximize value
recovery.
Third-Party Logistics (3PL): Outsourcing logistics operations to
specialized service providers to leverage their expertise and resources .
What is the Difference Between Inbound Logistics and Outbound
Logistics?
"Inbound Logistics refers to movement of goods and raw materials from
suppliers to your company. In contrast, Outbound Logistics refers to
movement of finished goods from your company to customers"
To illustrate this term, we make a small graphic as below,
As you can see, purchasing and warehouse function communicates with suppliers
and sometimes called "supplier facing function".
• Production planning and inventory control function is the center point of this
chart.
• Customer service and transport function communicates with customers and
sometimes called "customer-facing functions
Logistics and logistics management is a subset of processes that fall
under supply chain management that plans, executes, reports and
coordinates the movement of goods within an organization’s network of
stakeholders that include:
• Suppliers
• Production & Manufacturing
• Packaging
• Distribution
• Customers
 What is Supply Chain?
"Supply Chain is the network of organizations that are involved,
through upstream and downstream linkages, in the different
processes and activities that produce value in the form of
products and services in the hands of the ultimate consumer" -
Martin Christopher
 What is Supply Chain Management?
Each researcher defines supply chain management differently.
However, we would like to provide the simple definition as
below,
• "Supply Chain Management (SCM) refers to the coordination
of production, inventory, location, and transportation among the
participants in a supply chain to achieve the best mix of
responsiveness and efficiency for the market being served" -
Michael Hugos
The main fields within logistics include:
• 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 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.
• Distribution Logistics is concerned with the delivery of finished
products to the customer. It consists of order processing, warehousing,
and transportation.
• Major sub-sectors within the industry include air, rail, water, and truck
transportation, urban transit and ground passenger transportation,
warehousing and storage, and motor vehicle repair.
• Logistics involve the integration of these sub sectors, including
information, transportation, inventory, warehousing, material-handling,
and packaging.
• 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.
 Goals of Logistics
For any given supply chain to be effective, it is imperative that third-
party logistics businesses meet several internal logistics goals and
objectives. These business goals include:
• Increasing Efficiency
• Rapid Response
• Fewer Unexpected Events
• Minimum Inventory
• Reduced Transportation and Logistics Cost
• Quality Improvement
• Increased Efficiency
• Increasing efficiency for both inbound and outbound logistics and
transportation should always be a top priority for every logistics
organization.
• To do so, they will need to develop cost-effective transportation rates
while, at the same time, reducing overhead, cost-per-order processing,
and inventory.
• By working closely with a transportation provider, warehouse
operations like processes, layout, and flow can be improved
significantly.
• To increase efficiency, consider having the vendor perform value-added
services like packaging or quality inspections. This will help catch any
errors at the source. Likewise, form a two-way carrier relation with
them to share best practices, trends, and opportunities.
• Rapid Response
• Similar to efficiency, customer satisfaction plays a crucial role in the
overall success of a logistics company.
• To satisfy your customer service goals promptly, consider a rapid
response approach. Thanks to today’s technology, you can now
postpone many logistics operations to the last possible moment.
• This means that you can eliminate excessive inventories that were
usually stockpiled in anticipation of customer requirements.
• You will also be able to shift your operational emphasis from an
anticipatory posture and move toward responding to customer
requirements based on a delivery-to-delivery basis.
• Fewer Unexpected Events
• Unexpected events can happen with every aspect of logistic operations.
An unexpected disruption during manufacturing, goods arriving
damaged at their final destination, delays with the customer order
receipt, or wrong delivery, can all result in wasted time and resources.
• Traditionally, these unforeseen events were addressed by establishing
safety stocks of inventory or by using a high-cost transport mode. More
recently, these have been replaced with sophisticated software, capable
of achieving a positive logistics systems control.
• Depending on how much a company manages to minimize these events,
its logistical productivity will also stand to improve. It is, therefore, in
everyone’s best interest to keep any unforeseen circumstances at a
minimum
• Minimum Inventory
• While on the topic of minimums and unexpected events, inventory management is
critical. In the end, aiming to keep these events at a minimum will also involve
asset commitment and relative turn velocity.
• This turn velocity translates to the rate of inventory usage over a given period of
time. Inventory availability and high turnover rates indicate that your stocks are
used effectively.
• The objective of reducing inventory deployment to the lowest possible levels also
works to satisfy customers and lower the total logistics cost.
• The concept of Zero Inventory has been gaining some traction in recent years as
managers seek to reduce inventory deployment. This type of approach will have
some definite benefits.
• When inventories are reduced to their lowest-possible levels, various operational
defects and inefficiencies also start to show themselves.
That said, having an inventory does provide some benefits of its own.
• When it comes to economies of scale, particularly in manufacturing or
procurement, inventories can generate ROI.
• In any case, the objective is to reduce the inventory to the lowest
possible level, while also achieving the desired operational objectives.
• Reduced Transportation Cost
• One of the major costs associated with logistics is
transportation. Lowering the cost of transportation requires
movement consolidation.
• It’s important to remember that transportation costs are directly
influenced by the type of product being shipped, the size of the
shipment, and the distance
• Quality Improvement
• Another goal that needs to be taken seriously is long-term quality
improvement, increasing sales and boosting customer satisfaction.
• In fact, total quality management (TQM) has become a major trend
throughout the business landscape.
• If a product becomes defective for whatever reason or if service
promises are not kept, there’s nothing much that can be done about it
from a logistics perspective.
Major Components Of Logistics Management:
• Planning
• Packaging and unitization
• Inventory Control
• Transportation
• Information and Control
1. Planning (Storage, Warehousing and Materials Handling)
• Logistics planning serves to interface and synchronize the overall
supply chain as a constant procedure and is fundamental for powerful
supply chain connectivity.
• The market conditions are always unpredictable and frequent situations
occur where there develops an imbalance between demand and supply.
• Logistics management should ensure a constant and continuous supply
of goods by the manufacturers.
• For this, we need great Planning and that’s how it becomes one of the
most important components of Logistics management.
2. Packaging and Unitization
• We previously talked about how maintenance of a product is crucial.
Another aspect of maintenance is the care and conditioning of the
products or goods, which can be achieved by good Packaging and thus
it qualifies as one of the key components of Logistics management.
• Unitization is the method of consolidating a number of individual
things into one huge delivery unit for simpler handling. It is also
likewise significant as this helps stockpiling and transportation.
3. Inventory Control
• Inventory control refers to the procedure of guaranteeing that proper
measures of stock are kept up by a business, in order to have the option
to satisfy client needs immediately while keeping the costs related to
storage to a minimum.
• It consists of a key plan focusing on existing stock, maintaining
information on stock conditions, availability of warehouses, etc.
4. Transportation
• Another key component of logistics management is Transportation
which acts as a connecting link between other logistics company
activities.
• From the manufacturing to the delivery of finished goods to consumers
(also the returns), transportation is required in the whole production
procedures.
• It involves planning, implementing, and controlling the effective and
efficient forward and reverse flow of goods in a supply chain.
5. Information and Control
• It is a system that supports the management of an enterprise.
• Information and control are needed to act as the basis for the smooth
functioning of various operational processes and procedures.
• This involves real-time delivery tracking where the truck driver gets a
real-time update on where to pack the next load and where to deliver.
TYPES OF LOGISTICS
• Reverse Logistics

• Inbound Logistics

• Outbound Logistics

• Third-Party Logistics (3PL)

• Fourth- Party Logistics ( 4PL)

1. Reverse Logistics
- for re-processing, refilling, repair, and recycling or waste disposal.
Reasons for Reverse Logistics
• environmental hazard.
• Rigid laws - unscientific disposal of items, laws making recycling
mandatory
• Transit damage – e.g. leaking containers containing hazardous material.
• Product expiration.
• Erroneous order processing by supplier
• Exchange of new product for the old ones.
• Return for repair or refill.
Success in Reverse Logistic - upon the efficiency of the following
subsystems:
• Product Location:
• Product Collection System:
• Recycling / Disposal Centers
2. Inbound Logistics
Inbound logistics refers to the transport, storage and delivery of goods
coming into a business.
• All the activities related to the material movement till the dispatch of
the products out of the factory gate are known as inbound logistics
activities.
3. Outbound Logistics
Outbound logistics refers to the movement of goods out of the
organization to the ultimate customer.
• All the activities in which the goods are to be made available in the
market for customers are known as outbound logistics activities.
4 Third-Party Logistics (3PL)
It is an outside agency appointed to perform the logistics functions.
Some of the many benefits of using a 3PL provider include:
• Greater flexibility(variable cost)
 Improved operational efficiency
• Enhanced customer service capabilities
• Reduction of capital expenditures (equipment, distribution centers.)
5 Forth-Party Logistics (4PL)
complete outsourcing of manufacturing and logistics functions
including selection of Third Party service provider.
Need for 4PL:
• Ever-increasing customer requirements.
• Competitive and complex market scenario
• Rising globalization, liberalization and privatization.
• Inclination of companies to enter into higher margin business.
Services provided by 4PL
[Link] and storage of materials.
[Link] of products.
[Link] of 3PL companies
[Link] and warehousing management
[Link] of payment and cash flow management
[Link] management and insurance.
[Link] of information, IT solution.
Relating marketing channels, logistics management, and supply chain
management
Components of Logistics Include:
• Inbound Freight
• Outbound Freight
• Warehousing
• Materials Management
• Order Fulfillment
• Inventory Planning
• Demand Planning
Objectives of Logistics Management
There are five main objectives of the logistics management process:
• Minimize Manufacturing Costs
• Logistics management can have a direct impact on manufacturing costs.
For instance, delay in the pickup or delivery of raw materials can delay
production. As a result, it shoots up the manufacturing costs.
• Efficient logistics management improves material handling and fastens
transportation. It also increases its safety, which in turn reduces the
shipping costs of the business.
Efficient Flow of Operations
• Logistics management enables a smooth flow of manufacturing
processes. It ensures timely delivery and optimum utilization of
raw materials.
• To achieve this, businesses need to optimize communications
with other departments.
• Logistics management allows a clear flow of information from
one department to another.
• This is done with solid planning and constant review of the
plan. The smooth process flow makes the entire operations
efficient. An efficient logistics strategy streamlines a complex
network of internal and external processes.
Better Communication Flow
• Logistics management engages with many internal business
functions and external trading partners.
• Other departments rely on logistics to get their raw materials or
transport their finished goods on time.
• Also, the logistics staff needs to coordinate with suppliers,
vendors, and customers to pick up and deliver goods.
Provides Competitive Edge
• The primary goal of logistics management is to provide better customer
service.
• Logistics management aims to eliminate processing errors by
establishing a streamlined process flow.
• Process errors occur due to inefficiencies or discrepancies in the
procedure.
• A good logistics strategy will account for all the loopholes in the
process and device measures to address them. Thus, it minimizes
process errors.
Better Inventory Management
• Inventory management is an essential component of logistics
management. Inventory management has a direct impact on various
business functions.
• These include financial management, production management, and
customer service management.
• An efficient logistics solution also makes the inventory management of
the company effective.
• Because inventory is an integral part of the bigger picture of logistics
management. One of the critical functions of logistics is to keep the
correct levels of stock.
Logistics Management Solution
• As you now know, logistics management is a very vast and complicated
process. Hence, businesses often use simulation and automation
software applications to ease the difficulty of operations.
• These applications improve the efficiency and decrease the time
consumption of the processes.
• Logistics management automation complements other business
operations systems like EDI.
• Automation reduces human errors and increases staff efficiency. For
example, a Logistics Mobility solution will include barcode scanning
technology, which will help count your stock correctly in real-time.
• You can access updated information and track the status of inventory to
make informed decisions. Adopting technology is the only way you can
simplify and optimize your logistics operations
A few crucial benefits of logistics mobility solution include:
• Reduced human interference
• Uninterrupted information flow
• Automatic and real-time inventory updates
• Improved accuracy
• Reduced delivery delays
• Easy stock adjustments
• Remote management of multiple warehouses
EVOLUTION OF LOGISTICS
• Years 30 “Military logistics”
• After the Second World War, the interest of business by the
logistics process arises and an analogy is established between
military logistics and technical material supply and military
logistics is begun to be related to industrial production.
Years 50 “Conceptualization of logistics”
• Logistics becomes more important due to the transition that goes
through the most developed countries, from an economy characterized
by excessive demand to an economy with excess supply, with these
being their main characteristics:
• First developments of the total cost of logistics operations.
• It focuses on the concern to satisfy the customer.
• Distribution channels are of particular importance. You want to sell any
product anywhere.
• Increase new products, as a result the product lines are originated.
60 Years “Outsourcing”
• Logistics took a new approach where “outsourcing” was the
most appropriate mechanism to reach customers, since it had as
its main objective the subcontracting of other companies
because the flow of goods or information was efficient and
reached all parts that were within the reach of the company.
Years 70 “The concept of trial logistics”
• Customer service becomes an indispensable requirement to continue
competing with market leaders.
• Progress in the concept of physical distribution.
• There are periods of recession and growth in the world economy.
• Development of the inventory management strategy.
• The technology for the industrial revolution that occurred during these
times began to emerge, and the cost of information technology was
reduced to improve the quality, which brought about an improved
mechanism for the supply of the goods or information accurately and
precisely at the time the customer made their order, this mechanism is
called “Just in Time”, that is just in time
Since the 80’s “Modification of preferences”
• The energy crisis of the moment drives the movement towards the
improvement of transport and storage.
• Just in Time’s approach was modified by Quick Response (QR) and
Efficient Consumer Response (ECR) with the sole purpose of seeking a
precise delivery with the exact amount, when and where needed, to
meet the customer demand.
• Changes in supply chain preferences where special attention paid to
suppliers, distributors and customer service, defining the end-user’s
demand.
• Inventories, total logistics costs were reduced, and delivery times were
shortened.
• Logistics operations are energy-intensive: environmental-ecological
concern is born.
1990 “Promotion of logistics”
• Logistics went on to become a more integrated process in terms of its
external and internal environment, in other words, its internal processes
within the company were managed according to the relationships that
were with its customers and suppliers.
• This process of integration causes logistics management to begin with a
strategic plan regarding the design of how to reach the final customers,
in order to go out and minimize competition, establishing efficient
plans for the supply of the products.
• Technology continues to position itself in conventional Logistics
processes and Distribution channels
• Outsourcing services
• Demand for logistics services expands
Importance of Logistics
Logistics centers on the movement of goods, but its effects
extend much further. In business, success in logistics translates
to:
• increased efficiencies
• lower costs
• higher production rates
• better inventory control
• smarter use of warehouse space
• increased customer and supplier satisfaction,
• and an improved customer experience.
The Role of Logistics
• The very essence of a business is to exchange goods or services for
money or trade. Logistics is the path those goods and services take to
complete the transactions. Sometimes goods are moved in bulk, such as
raw goods to a manufacturer. And sometimes goods are moved as
individual disbursements, one customer at a time.
• No matter the particulars, logistics is the physical fulfillment of a
transaction and as such is the life of the business. Where there is no
movement of goods or services, there are no transactions—
and no profits.
There are seven pillars of effective logistics:
1. Material sourcing: Material sourcing involves more than finding the
lowest-cost supplier for a raw material used in manufacturing.
• Logistics includes calculating and managing contributing factors and
costs, such as backorder delays, competitor priority rankings and
lockouts, add-on services costs, extraneous fees, increased shipment
costs due to distance or regulatory environments, and
warehousing costs.
• Finding the right source for any given material requires a good
understanding and management of all contributing factors. This process
is called strategic sourcing, and logistics plays an important role in that
planning.
2 Transportation: At the core of logistics is the act of physically
transporting goods from Point A to Point B.
• First, a company needs to select the best mode of shipment—air or
land, for example—and the best carrier based on cost, speed and
distance, including optimizing routes that require multiple carriers.
• In the case of global shipments, the shipper needs to be up to speed on
customs, tariffs, compliance and any relevant regulations.
3 Order fulfillment: To complete a transaction, items must be “picked”
from the warehouse per the customer order, properly packaged and
labeled and then shipped to the customer.
• Collectively, these processes comprise order fulfillment and are the
heart of the logistics sequence in customer distribution.
4. Warehousing: Both short- and long-term storage are common
parts of logistic planning. But warehouse management systems
also enable logistical planning.
• For example, logistics planners must consider warehouse space
availability and special requirements such as cold storage,
docking facilities and proximity to modes of transportation such
as rail lines or shipyards.
5. Demand forecasting: Logistics relies heavily on
inventory demand forecasting to ensure that a business never runs short
on core or high-demand products or materials—and never ties up capital
unnecessarily in warehoused goods with sluggish sales, either.
6. Inventory management: By using inventory management techniques
to plan ahead for increased demand in seasonal or trending products,
companies can keep profits higher and make inventory turns faster,
meaning the ratio of how many times you sell and replace inventory in a
set period.
7 Supply chain management: Logistics is an important link in
the supply chain as it facilitates the movement of goods from
suppliers to manufacturers and then to sellers or distributors and
eventually to buyers.
LOGISTICS STRATEGY
THE FORMULATION OF INTEGRATED LOGISTICS
STRATEGY
What Is a Logistics Strategy?
• When a company creates a logistics strategy it is defining the service
levels at which its logistics organization is at its most cost effective.
• Because supply chains are constantly changing and evolving, a
company may develop a number of logistics strategies for specific
product lines, specific countries, or specific customers.
• Remember, the ultimate goal of any logistics strategy is to deliver what
your customers want, when they want it - and getting that done by
spending as little money as possible.
• That means working with your logistics partners throughout your
Why Implement a Logistics Strategy?
• The supply chain constantly changes and that will affect any logistics
organization. To adapt to the flexibility of the supply chain, companies
should develop and implement a formal logistics strategy.
• This will allow a company to identify the impact of imminent changes
and make organizational or functional changes to ensure service levels
are not reduced.
What Is Involved in Developing a Logistic Strategy?
A company can start to develop a logistics strategy by looking at four
distinct levels of their logistics organization.
• Strategic: By examining the company’s objectives and
strategic supply chain decisions, the logistics strategy should review
how the logistics organization contributes to those high-level objectives
• Structural: The logistics strategy should examine the structural issues
of the logistics organization, such as the optimum number of
warehouses and distribution centers, or what products should be
produced at a specific manufacturing plant.
• Functional: Any strategy should review how each separate function in
the logistics organization is to achieve functional excellence.
• Implementation: The key to developing a successful logistics strategy
is how it is to be implemented across the organization.
• The plan for implementation will include development or configuration
of an information system, introduction of new policies, and procedures
and the development of a change management plan.
Components to Examine When Developing a Logistics Strategy
• When examining the four levels of logistics organization, all
components of the operation should be examined to ascertain whether
any potential cost benefits can be achieved. There are different
component areas for each company but the list should at least include
the following:
• Transportation: Does the current transportation strategies help service
levels?
• Outsourcing: What outsourcing is used in the logistics function?
Would a partnership with a third party logistics company improve
service levels?
• Logistics Systems: Do the current logistics systems provide the level of
data that is required to successfully implement a logistics strategy or are
new systems required?
• Competitors: Review what the competitors offer. Can changes to the
company’s customer service improve service levels?
• Information: Is the information that drives the logistics organization
real-time and accurate? If the data is inaccurate then the decisions that
are made will be in error.
Strategy Review: Are the objectives of the logistics organization in line
with company objectives and strategies.
• A successfully implemented logistics strategy is important for
companies who are dedicated to keeping service levels at the highest
levels possible despite changes that occur in the supply chain.
• The goal of any formal logistics or supply chain strategy is to make
sure you and your company are delivering to your customers what they
want. And delivering to them when they want it. And accomplish all of
that by spending as little money as possible.
• By following these guidelines, you can ensure that your logistics are
aligned with your customers' needs, your inventory targets, and your
company's cost reduction goals.
• Remember, your company may need to review its logistics strategy
from time to time, as supply chains and supply chain priorities change.
If your supplier base had been primarily located in the United States
and Mexico - and now, because of a change in your supply chain, your
suppliers are now primarily located in Asia - you'll need to review your
existing logistics strategy.
• The same transportation and freight forwarding providers you were
using may not be the right strategic partners for that kind of supply
chain realignment.
• Define your service level goals and map your current logistics
landscape. Are you meeting your service level goals? If not, it's time to
take a close look at your logistics strategy .
ADDING VALUE THROUGH LOGISTICS
• Demand to provide the optimal customer experience continues to
escalate, and companies must continually seek out better ways to
deliver customer satisfaction and retention.
• Many companies find that value-added logistics services help give their
supply chain a competitive edge.
• Once limited to services such as shrink-wrapping, display building, and
rainbow pallets, value-added capabilities now include everything from
inscription and embroidery to configuring kits for e-commerce or
inserting coupons or brochures in packages.
How value-added services can benefit your business.
• 1. Expand product offerings. From building gift baskets to creating
twin-packs, value-added services help give your customers more
buying choices.
• 2. Get products shelf ready. Value-added services such as price
marking, tagging, and display building help to streamline the process of
getting products on store shelves.
• 3. Enhance customization capabilities. Personalization is one of
today's hottest trends. Want to offer a choice of embroidered logos on
apparel? Allow customers to choose the face plate for their cellphone?
Value-added services can help you deliver.
4 Manage inventory more efficiently. With the ability to customize
products, you're able to stock fewer SKUs, thereby reducing the cost of
carrying and managing inventory.
5. Reduce the number of suppliers. By asking your existing partners to
perform more value-added functions, you can reduce the number of
suppliers and streamline your supply chain. Even materials such as
cardboard for displays can be shipped to a third-party logistics (3PL)
provider to be built and sent out with customer orders to eliminate one
step in the process.
6. React faster to changing business needs. With value-added
operations close to the end customer, you can delay product
configuration until the last possible minute to respond more accurately to
customer demand.
7. Manage transportation costs. The closer packaging facilities are to
manufacturing operations, distribution centers, or end destinations, the
more cost effectively you can transport products.
8. Control labor costs. With automated solutions and careful review of
supply chain processes, value-added services can help eliminate
downtime and reduce the number of touches required in the packaging
process—ultimately saving money on labor.
9. Ensure continuous improvement. If you team up with a 3PL, they
can assist with process reengineering, packaging needs assessment,
component purchasing, and supplier evaluation to ensure value-added
services are delivering what customers demand.
10. Find a partner. Incorporating value-added services can be
challenging. Experienced 3PLs can be valuable allies. They offer the
flexibility and resources to accommodate unique requirements, seasonal
fluctuations, and business growth. Many of today's 3PLs approach value-
added services with a spirit of collaboration.
Designing a Logistics Strategy
There are three factors to consider when designing a logistics strategy:
• The higher strategies
• The business environment
• The organization’s distinctive competence
• Higher Strategies
• Higher strategies set the organization’s goals and the context for all
logistics decisions.
• The mission sets the overall aims, and the corporate and business
strategies show how these aims will be achieved.
• The logistics strategy must support these higher strategies. If, for
example, the business strategy calls for high customer service, the
logistics strategy must show how logistics will achieve this
• Business Environment
The business environment consists of the factors that affect logistics, but
over which it has no control.
• These include:
• Customers – their expectations, attitudes, demographics
• Market conditions – size, location, stability
• Technology – current availability, likely developments, rate of
innovation
• economic climate – gross domestic product, growth rate, inflation
• Legal restraints – trade restrictions, liability and employment laws
• Competitors – number, ease of entry to the market, strengths
• Shareholders – their target return on investments, objectives, profit
needed
• Organization’s Distinctive Competence
A distinctive competence stems from an organization’s assets, which include:
• Customers – their demands, loyalty, relationships
• Employees – skills, expertise, loyalty
• Finances – capital, debt, cash flow
• Organization – structure, relationships, flexibility
• Products – quality, reputation, innovations
• Facilities – capacity, age, reliability
• Technology – currently used, plans, special types
• Processes – structures, technology used, flexibility
• Marketing – experience, reputation
• Suppliers – service, flexibility, partnerships
• Other assets – knowledge, innovation, patents.
In conclusion:
• The business environment and distinctive competence show where an
organization is now.
• The higher strategies show where it wants to be in the future.
• The logistics strategy shows how to move from one to the other
Logistics Audit
• The purpose of a logistics audit is to collect relevant information about
existing practices and performance of logistics.
• We have details of current performance from the audit.
Two main parts to a logistics audit:
• Getting information about business environment
• (external audit): the nature of customers, types of demand, accepted
service levels, competitors and their operations, benchmarks and
comparisons, economic conditions, geographical and political
constraints, and other relevant external information.
• Getting information about distinctive competence of organization
(internal audit): the structure of the supply chain, warehouse locations
and size, stock holdings, lead times, order processing, damage,
productivity, and other relevant internal information.
• This approach is similar in principle to a SWOT analysis, which lists
an organization’s strengths, weaknesses, opportunities, threats.
• We know where we want to go from a logistics mission, and where we
are at the moment from the logistics audit.
• The next stage is to identify gaps between these two and show how to
bridge the gaps.
Developing the Strategy
There are eight steps for designing a strategy:
1. The external audit gives an analysis of the business environment and
then shows the factors that lead to success in this environment.
2. The internal audit analyses higher strategies from a logistics
viewpoint, giving the context and overall aims for logistics, its strategic
focus and perhaps includes a logistics mission.
3. Design the general features of supply chains that can best deliver the
desired services. This includes the design of the network, location of
facilities, capacity, technology used, and so on.
4. Set specific goals to show what each logistics activity must achieve.
The internal audit shows how well the current logistics achieve these
goals, and identifies areas that need improving.
5. Design the best organizational structure, controls and systems to
support the logistics network.
[Link] logistics, looking at the performance of leading
organizations defining measures to compare actual performance with
planned, optimal and competitors’ performances.
7. Implement the strategy, setting the conditions for lower levels of
logistics decisions.
8. Monitor actual performance, continually look for improvements, keep
the strategies up to date, and give feedback.
LOGISTICS STRATEGY MODELING
• When a company is designing its new logistics network, it will take into
account all the location elements such as customer market, labor pool,
quality of life requirements, and government incentives.
• When these elements have been analyzed, it is possible to create
models which give companies more of an insight into the choices that
they make.
• There are a number of modeling techniques, which can be used, each
coming with its own benefits and pitfalls.
Modeling Techniques
• The use of modeling techniques is important to companies who are
deciding upon their new logistics network.
• The various modeling techniques can allow companies to look at a
comparison of the functioning, cost efficiency, and customer service
efficiency of the various logistics networks that have been proposed.
• Companies can look at the various modeling techniques and decide
which one offers them the best insight into their network options.
Optimization Modeling
• The optimization model is derived from the precise mathematical
procedures that offer the best or optimum solution based on the
mathematical formula used. This model is based on mathematical
formula only.
• This means that there is no subjective input to the model, only
assumptions and data.
• The optimization model looks at data such as the level of customer
service to be obtained, the number and location of distribution centers,
the number of manufacturing plants, the number of distribution centers
assigned to a manufacturing plant, and the inventories that must be
maintained.
• One optimization model that has been used for logistics networks is the
model using linear programming, sometimes referred to as LP.
• This is particularly useful for linking supply and demand limitations of
manufacturing plants, distribution centers, and market areas.
• Given the goal of minimizing costs, linear programming can define the
optimum facility distribution pattern, based on the constraints
identified.
• However, as this uses mathematical formulas, there is no allowance for
any subjective input.
Simulation Models
• A simulation model is defined as creating a model that is based on the real world.
When the model has been created, you can perform experiments on the model to
see how changes made to the model can affect the overall cost of the logistics
network.
• For example, by changing the constraints on the network, it is possible using a
simulation model to see how this affects the cost-effectiveness of the overall
network.
• For a simulation model to be effective, you need to collect significant amounts of
data on transportation, warehousing, labor costs, material handling, and inventory
levels, so that when you make changes to the constraints, the model accurately
reflect the changes.
• However, the changes to the simulation model will not produce the optimum
logistics network, as produced by the optimization model; it will just evaluate the
changes that were made to the model.
• This type of model is very useful when companies have made general decisions on
• Heuristic Model
• Similar to simulation models, heuristic models do not generate an
optimum solution for a logistics network.
• A heuristic model is used to reduce a large problem to a more
manageable size. It has to be understood that heuristic models do not
guarantee a solution and that a number of heuristic models may
contradict or give different answers to the same question and still be
useful to the overall creation of a logistics network.
• Heuristic models are often referred to a "rule of thumb" which can be
useful in creating a logistics network.
• For example, a heuristic model can be used to consider the best site for a
distribution center that is at least ten miles from the market area, fifty
miles from a major airport, and more than three hundred miles from the
next closest distribution center. A heuristic model will look at all areas
 Logistics Challenges
1. Fuel Costs. One of the highest costs contributing to the ‘cutting
transportation cost’ concern is fuel prices.
• Higher fuel prices are likely to increase transportation costs for
international shippers this year by pushing up fuel surcharges.
• Rising US diesel fuel prices are escalating surcharges added to freight
rates, which is reversing a two-year trend that cut into the revenue and
earnings of truckers as fuel prices plummeted.
2. Business Process Improvement. Not withstanding the need
for new technology, which we discuss in number eight on this
list, it has become an increasing challenge for the logistics
industry to stay on top of new advances in business processes.
• Taking advantage of these new opportunities sounds enticing
but adoption and onboarding can be overwhelming.
3 Improved Customer Service. Customers want full
transparency into where their delivery is at all times. These days,
the location of a package is as interconnected as your social
network.
• In fact, as customer expectations have increased, their
willingness to pay for fast shipping has decreased with just
about 64 percent of consumers unwilling to pay anything extra
for less than two-day shipping.
4. Economy. With high fuel prices comes a greater credit crisis
and rising inflationary demands that take a greater toll on the
economy.
• This industry is then pressured by increasing compliance
regulations, declining demand, additional capacity with
additional increases in key cost centers.
5 Driver Shortage & Retention. Hiring and retention
remain an issue despite the lower demand mentioned
above.
6 Government Regulations. Carriers face significant
compliance regulations imposed by federal, state and local
authorities.
7. Environmental Issues. The anti-idling and other emission
reduction regulations brought about by state and local
governments has created concern that the compliance costs could
exceed benefits.
8. Technology Strategy & Implementation. While the industry
understands and supports many of the benefits of these
technologies, some questions remain as to how they will pay for
it and who will help implement the improvements.
SOLUTIONS TO LOGISTIC CHALLENGES
1. Reducing Fuel Costs with Artificial Intelligence
• Rising fuel prices lead to higher shipping costs for companies.
Customers expect to pay a fair price for their deliveries, but if
competitors can offer a lower price for the same service, they
are likely to switch shipping companies.
2. Improving Customer Service with Block chain Technology
• Competition in the logistics industry has seen a dramatic rise in the
quality of customer service.
• Buyers now expect to choose delivery times, and usually want their
packages to arrive not later than 2-3 days after ordering. Customers also
wish to know where their package is at all stages of the journey.
• Block chain technology solves this issue by creating transparency in the
supply chain to minimize errors, delays, and theft.
3 . Smoother Business Processes with Predictive Algorithms
• Business process improvement helps your company to operate
efficiently. If there are problems in your supply chain, you spend time
fixing these issues, losing money, and letting down your customers.
• A 3PL company can use the latest technology, such as predictive
algorithms, to smooth out any issues, identify weak links in the supply
chain, and use their staff and resources to strengthen your business.
Some sizable international freight logistics companies can also carry
out warehousing, collection, and deliveries on your behalf.
• The 3PL company ensures your inventory levels are optimized, handles
the packaging and loading of your goods, and delivers them to your
customers.
4. Cloud Networks for Internal and External Communication
• Global logistics takes clear communication between your staff and
external partners. Many large logistical companies work with
independent truck drivers, shipping companies, air carriers, and
distribution centers. A single chink in the supply chain can lead to
goods being delayed or lost.
• International logistics companies use cloud technology to share real-
time information with all parties simultaneously. New predictive
networks can identify what actions should occur and notify the team
that performs the task.
• The sharing of information ensures the seller, distributors, and
customers are aware of the logistical situation at any given time.
5. Inventory Management with Robotics
• New advanced robotics can pack goods and scan them for package
defects before loading. The sorting speed can be faster than is possible
for a human, and they can manage inventory levels as they work using
integrated software.
• Using built-in radio frequency identification devices (RFID) for
barcoding and scanning, they keep an accurate record of your stock.
• Because the robots connect to the central inventory system through a
cloud network, there are continuous inventory updates. They can even
record which items have damage, allowing you to instantly find a
replacement, reducing the risk of delivery delays.
Humans get tired and can make errors, but robots can work 24/7
year-round as long as they are maintained regularly. There is an
upfront investment, but then there are no staffing costs, and they
can increase efficiency
 CHAPTER TWO
LOGISTICS MANAGEMENT FUNCTION
The logistics mix
1. Storage, warehousing and materials handling
• It is to enable a steady stream of products to be supplied by
manufacturers. Why is this important? Manufacturers need to operate at
peak efficiency, but consumers tend not to demand goods at the same
rate as a manufacturer supplies them.
• There tends to be an imbalance between supply, which is steady, and
demand, which can be unpredictable. The answer is to store the surplus
goods produced by a manufacturer until they are demanded by
consumers
2. Packaging and unitization
A key definition and one of the Rs of logistics is the care and condition
of a product. Packaging is an essential part of that. Unitisation is also
important as this assists storage and transportation.
3. Inventory
Inventory is a logistics element that is closely related to storage and
warehousing. It is concerned with what stock to hold, where the stock is
located and how much stock to hold.
In effect, inventory is controlling the flows of goods going into and out
of a warehouse. How is this achieved? By looking at sales data of past
orders and using various mathematical and statistical tools to attempt to
predict how much goods will be demanded by consumers.
4. Transport
A major element of logistics that most will recognise is transport. This
includes all modes of transport including road vehicles, freight trains,
cargo shipping and air transport. Without transport, goods would be
unable to move from one stage to another within a supply chain.
5. Information and control
The element of information and control is needed by all the elements to
act as triggers to various operational procedures. Information and
control’s role is to help design information systems that can control
operational procedures. They are also key in the forecasting of demand
and inventory as already mentioned.
Logistics activities or Functions of Logistics
1) Order processing
• The Logistics activities start from the order processing which might be
the work of the commercial department in an organization. The
commercial department is the one who ensures that the payment terms
and the delivery terms have been met and then processes the order from
within the company.
2) Materials handling
• Material handling is the movement of goods within the warehouse. It
involves handling the material in such a way that the warehouse is able
to process orders efficiently. Although it may sound a mundane task, it
is an important one and an ongoing activity in any warehouse.
3) Warehousing
• If we take the example of LG or Samsung, these are consumer durable
companies which are present in multiple countries. Their manufacturing
might be at one point, but the distribution is all across the world. Thus,
warehousing plays a huge role and is one of the important Logistics
activities.
4) Inventory control
Inventory management is one of the most important functions of logistics
especially after the adoption of various production techniques such as
Just in time manufacturing, lean manufacturing or other manufacturing
processes where the cost of inventory management is brought down.
5) Transportation
Transportation involves the physical delivery of goods from the company
to the distributor or dealer and from the dealer to the end customer.
• Generally, companies are involved only till the point delivery happens
to the distributor or the dealer. The distributor is then responsible for
the delivery to the end customer.
6) Packaging
• There are two types of packaging – One which the customer sees on the
shelf of supermarkets or hypermarkets where the package appears
attractive and makes the customer buy the packages.
• The other is transport packaging where the products are packed in bulk
so as to avoid any breakage or spillage and yet allow them to transfer
huge volumes of the product safely from one place to another.
Logistics management process
1. Serving Customers
• The main objective of the logistics is to serve the customers by
providing them with the products they need. The logisticians
continuously monitor the demand for the products in different locations.
2. Product Selection
• Selection of the right products is very important in any logistics system.
It directly impacts the supply chain system.
• If you are a logistician, then it depends on you that which category
products you want to move from one point to another point. It is
essential to define this so that you can plan your transportation
methods, your warehouse and your place of establishment accordingly.
3. Quantification
• Quantification means the procurement or sourcing of the material from
the manufacturer or the supplier.
• It focuses on the calculation of the estimate of the quantities.
• You know that sometimes it happens that you get an unexpected
demand for material or sometimes an order in large quantity.
• For this, either you have to import it or you have to procure it to get
ready for fulfilling future demands.
4. Inventory Management
• In the logistics management system, the role of inventory management
is the storage and distribution of goods.
• When the goods are procured in sufficient quantity, they are stored until
a customer places a purchase request.
5. Logistics Management Information System
• The logistics management system of the supply chain system runs on
the communication between the sender, the supplier and the receiver.
• It is very important to establish proper coordination among them to
make the process smooth and free from errors.
• This process is defined as the Logistics Management Information
System (LMIS) that plays a significant role in the delivery of right
products, in the right quantity, at the right place, on the right time.
LOGISTICS AND OTHER FUNCTIONS
All logistics operations, regardless of the size of the organization they
serve, fulfill certain roles that support the movement of goods or services
1. Order processing
• Any delivery process can only function if there is an order processing
system in place. Order processing systems vary from business to
business
• The key part of order processing in logistics management is integration.
Customer-facing solutions, whatever they are, need to be in perfect
sync with the transportation management system (TMS) to make sure
delivery of goods occurs at the right time and meets company and
customer standards alike.
2. Inventory management
• Inventory control is among the logistics functions that are often
grouped together under the inventory/warehousing umbrella. For the
purposes of this guide, we separate inventory and warehouse
management processes.
• Inventory refers to stocking finished goods in a storage facility. In order
to support the transportation and delivery processes, inventory control
requires information for maintaining inventory records, ensuring safety,
predicting demand for goods, and, of course, reordering stock.
• Inventory logistics
• Inventory logistics remains on the borderline between inbound and
outbound logistics, as it involves both
supplier relationship management (inbound logistics) and
order fulfillment (outbound logistics). Therefore, inventory
management is an important part of supply chain management and
needs to be used efficiently.
3. Warehousing
• Warehouse management is a natural extension of inventory activities.
• While inventory covers all locations and, hence, all inventory for order
fulfillment, warehousing is limited to tracking stock movement within a
warehouse.
• At the warehouse level, handling, packing, and shipping workflows are
established.
• Both inventory and warehousing require sophisticated tools that support
the main functions and help reduce costs via automation.
• Especially if your company delivers from multiple warehouses and
needs complex logistical solutions.
4. Packaging
• Packaging includes all the activities and operations implemented to
prepare goods for handling and transportation to and from customers -
in case of reverse logistics and returns specifically. Packaging is one
major logistic function as it determines delivery success.
• First and foremost, packaging needs to be compliant with safety and
any customs regulations that may halt your delivery service.
• Moreover, it's important that packaging matches your storage and
vehicle needs, as well as meets the demand for sustainable materials
and other green logistics aspects.
5. Cargo handling
• Cargo handling is one of the major logistics activities that can't
be overlooked when discussing logistics functions.
• It's closely related to packaging and determines logistical costs
in a very real way.
• Getting the package and handling procedures right is the
foundation of physical distribution. It's equally important for
safe storage and transportation.
6. Transportation
• Naturally, transportation is among the main logistics functions, if not
the main.
• It's required at every step of every supply chain and the way companies
build their transportation management system and functions determines
the success of supply chain management
5 P’s of logistics
The 5 P’s of logistics are an essential framework for logistics
management. Your shipping and logistics company follows these 5 basic
principles in order to provide you with the best service possible. The 5
P’s include people, products, processes, partnerships, and
performance.
1). People
• The people in logistics management refer to the individuals involved in
the process of moving goods from one place to another.
• This includes workers in warehouses, transportation personnel, and
other logistics professionals.
• The people in logistics management are responsible for ensuring that
goods are transported efficiently and effectively while maintaining
safety and security.
• Logistics management professionals must work to ensure that the
people involved in the logistics process are adequately trained and
skilled.
• This requires ongoing training and development to stay up-to-date with
industry changes, new technologies, and best practices. It is also crucial
to foster a culture of safety and accountability to reduce accidents and
injuries.
2). Products
• The products in logistics management refer to the goods being
transported from one place to another. This includes raw materials,
finished goods, and other products.
• Effective logistics management requires a comprehensive
understanding of the products being transported to ensure that they are
handled correctly and transported safely.
• Logistics managers must consider various factors when managing
products, such as size, weight, and fragility. They must also consider
the transportation mode, whether by road, rail, air, or sea, to ensure that
the products are transported in the most efficient and cost-effective way.
3). Processes
• The processes in logistics management refer to the systems and
procedures used to manage the movement of goods from one place to
another. Effective logistics management requires a well-defined process
that is efficient, effective, and reliable. Logistics managers must work
to ensure that processes are continuously evaluated and improved to
achieve better results.
• Logistics processes involve various stages, including order placement,
inventory management, transportation planning, and delivery. Each
stage must be coordinated to ensure that goods are moved in the most
4). Partnerships
• Partnerships in logistics management refer to the relationships between
logistics providers, suppliers, and customers. Effective logistics
management requires strong partnerships with suppliers, transportation
providers, and other logistics professionals to ensure that goods are
transported efficiently and effectively.
• Logistics managers must work to establish partnerships that are based
on trust, transparency, and accountability. They must also ensure that
communication channels are open and that all partners are working
towards a common goal.
5). Performance
• Performance in logistics management refers to the measurement of key
performance indicators (KPIs) to determine the effectiveness and
efficiency of logistics operations.
• KPIs may include metrics such as delivery time, cost per unit, and
inventory turnover. Logistics managers must work to monitor these
KPIs continuously and make adjustments as necessary to achieve better
results.
• Performance measurement is essential in logistics management as it
provides insights into the effectiveness of logistics operations. It also
helps to identify areas for improvement and provides a basis for making
informed decisions.
• In the highly competitive and globalized business world, an effective
supply chain has become an essential part for businesses to flourish and
maintain a leading edge.
• An effective supply chain leverages advanced technologies and
flexibility in the supply chain network to streamline the flow of goods
and services from suppliers to customers.
• The network also depends on the various players involved in the
process, ranging from raw material suppliers to manufacturers,
distributors, and customers.
• An effective supply chain is very much dependent on the people administering the
segment who drive the production and supply pipeline.
• To effectively manage the supply stream, planners and managers need to implement
the three C’s strategy.
Three C’s of the Supply Chain
The three C’s of the supply chain are Communication, Collaboration, and Change
Management.
Communication: An organization needs to open a system of honesty, transparency,
and clear communication among the individuals involved.
• It is important to articulate the vision, target, approaches, production benchmarks,
and goals for new and existing relationships to succeed.
• Keeping all the team updated about the requirements and the capabilities can reduce
ambiguity, go a long way to minimize problems down the line, and keep the team on
the same page of the production.
• As a result, this openness helps organizations in building a strong relationship and
collaboration that supports and enhances bilateral business.
Collaboration: Collaboration is defined as a deeper and stronger
interdependent relationship between various teams or between
organizations and suppliers.
• As a core driver in creating a platform for sharing supply chain insights,
it also focuses on fostering innovation.
• Collaboration of various ideas helps the supply chain segment develop
new and existing operational models or methods.
• It also builds a structural harmony for divergent insight and leverages
the segment to address inefficiencies to ensure a seamless flow of
information, materials, and goods.
Change Management: Due to the dynamic nature of the business
environment, changes in the market, technology, demand of products or
services, and other circumstances bring modification within the
supply chain operation.
• Hence, change management plays a crucial role in this complex
network of supply chains that includes multiple stakeholders, such as
suppliers, manufacturers, distributors, and customers.
• Change management in the supply chain refers to the structured
approach and strategies implemented to navigate and manage changes.
• Implementing the required changes requires careful planning,
communication, and coordination for smooth transitions, preventing
disruption, and enhancing performance.
 CHAPTER THREE
LOGISTICS MANAGEMENT ORGANIZATION
This template here shows a basic type of logistics organization chart. Each of the
managers at the management level leads some assistants, interns, senior staff, etc
The role of logistics manager
A logistics manager may have more than five job duties because they
must wear a variety of hats throughout the workday. For example, they
may troubleshoot paperwork with an overseas shipping port in the
morning, run warehouse inventory reports later and finish up the day by
meeting with customs brokers to negotiate better transportation rates.
Logistics Manager roles
Shipping Supervision
• IT and Data
• Supply Chain Activities
• Materials Management
• Distribution Center Supervision
Shipping Supervision
• Logistics managers may be responsible for the management of shipping
departments or operations. This means they must work with drivers,
focus on route optimization, review performance metrics and exceed
customer service expectations.
• Logistics managers may be responsible for fleets of trucks, forklifts
and other shipping equipment.
• They are responsible for managing and matching the operations to
established budgets. This is difficult because logistical costs and
shipping prices often monthly and seasonally fluctuate
IT and Data
• Sometimes, logistical managers will spend more time using computer
information systems to enter, access and review shipping, inventory and
performance data.
• They may use shipping software to track materials arriving at the
logistics yard, leaving the shipping staging area and transferring
between facilities.
• They may review inventory levels to order more materials, or they
generate reports to reconcile inaccurate inventory counts.
• Logistics managers analyze various forms of data to provide insightful
updates and information to supervisors of other departments, such as
sales and production.
Supply Chain Activities
• Supply chain activities include collaborating with teams for inbound
and outbound transportation projects that require active coordination
with various service providers.
• Logistics managers consult with managers regarding outbound and
inbound transportation contracts, systems, networks and service levels
to make recommendations for creative solutions.
• Logistics managers must establish, monitor and adjust key
performance metrics to ensure that supply chain costs are within budget
projections.
Materials Management
• Some logistics managers spend their time supervising the supply of raw
materials required to support production in manufacturing facilities.
• These facilities may be high output, just-in-time, make-to-order or lean
manufacturing environments.
• Logistics managers must foster a safety culture by implementing safety
policies and training programs for employees. They manage the timely
receipt, processing, and disposition of materials.
Distribution Center Supervision
• Logistics managers may be in charge of distribution centers’ shipping
and receiving departments. They may supervise picking, packing, and
forklift operation employees. They may be assigned to large
warehouses and hundreds of warehouse personnel.
• This means they may have human resources duties, such as leading,
training and scheduling employees, and general managerial duties, such
as providing customer service and office administration.
• Warehouse duties include soliciting ideas for improvements,
coordinating product movements, applying warehouse slotting changes
and adjusting product rotation process.
Skills required for logistics management
1. Ability to see the big picture
• To find success in supply chain settings, professionals must be able to
zoom out and visualize processes from start to finish. “The successful
supply chain expert will be able to anticipate what could go wrong with
everything from packaging to shipping and delivery.
• The combination of critical-thinking skills and past experience often
aid in a professional’s ability to anticipate in this way, he adds.
• “Each and every action has an outcome,”. You must be able to
formulate a contingency plan, if necessary, in order to make the supply
chain flow continuously. Planning ahead is a major component of
logistics.”
2. Adaptability
The supply chain is becoming increasingly complex, with current trends
representing great changes with respect to the last century,” she offers,
explaining that the most successful logistics managers in today’s
workforce must possess the ability to adapt as their organization and its
processes continually evolve.
3. Calm under pressure
• The supply chain work environment is often very fast-paced, and each
step relies on the successful completion of the step prior. Quigley
admits that the environment can come with a considerable amount of
pressure.
• “A manufacturing line that does not have sufficient material or wrong
material can shut down,” he says, explaining that mishaps of this nature
can cause major delays. “This can result in a lot of money lost in a short
amount of time.”
• Successful logistics professionals are able to make split-second
decisions when needed and can often be relied upon to put out any
metaphorical fires that may erupt within the processes they oversee.
4. Effective problem-solving skills
“An effective supply chain management professional will use the
multiple aspects of problem-solving—analysis, business development
knowledge, operational information, psychology, etc.—to accomplish a
[task]. Technology, data, goods and people will all have to be utilized and
often cajoled into helping obtain positive outcomes for your company.”
5. Continually seeking improvement
• “A hyper-focus in continuous improvement expertise is, and will
continue to be, key when separating a company’s supply chain from the
rest of the pack. “Once you see what the finish line is supposed to look
like, you’ll be able to use information gathered from your various
systems to monitor, analyze and adjust processes accordingly
7. Proficient in project management
It’s important to plan your day and tasks as effectively as possible .
• Supply chain management involves so many important details that
must be reviewed carefully and planned for accordingly.
• Incoming products must meet certain standards and must be delivered
according to a specific schedule, with the supply chain manager
effectively navigating elements like timing and cost.
Managing people in logistics
Other than inventory, your logistics workforce is the largest expense in
your distribution centers, eating up 50–70% of the warehousing budget.
It’s why managing and reducing labor-related expenses is a top priority
for just about every logistics executive.
Tips to Improve Logistics Workforce Management
1. Invest extra time up front to hire the right people
• Most experts agree that this is the single best way to reduce turnover
and improve productivity. But many companies rush the hiring process
to fill much-needed positions
2. Pay extra attention to developing DC managers and supervisors
If you’ve got DC( defined contributors) managers and supervisors with
the rare combination of operational acumen and strong interpersonal
skills, invest in their personal development and show them a clear career
path.
• Provide incentives for them to stay, because if they stay, you’ll
experience lower attrition across your entire workforce.
3. Prioritize workforce retention
Kane Logistics and Peerless Research teamed up to survey 252 logistics
executives for a study on logistics workforce management.
When asked to identify their toughest day-to-day challenge, the
respondents’ top response was “finding and keeping qualified,
dependable workers.” For sure, it’s hard to retain warehouse workers.
Strategies to improve retention include:
• Establish a competitive salary and benefits package for the
market you are in. According to a Paychex study, dissatisfaction
here is the top reason workers leave their jobs.
• Show associates a clear career path. Associates need to see your
organization in their personal future.
• Recognize achievement with easy, inexpensive gestures like
personal notes or a rewards program.
• Most workers who leave a job say the company could have
done something to prevent them from leaving.
4. Hire from within
• There is a talent gap in logistics. When a key spot needs to be filled,
many companies instinctively look outside to fill the position. There is
an assumption that bringing in an outsider can accelerate achievement
of a business objective.
• Those that do invest to develop internal talent and hire from within
create a fortuitous cycle. Your logistics workforce appreciates being
part of a culture of learning and advancement, therefore retention and
morale improve, along with overall productivity.
5. Hire from your temporary workforce
• It’s likely that occasional volume spikes require you or your 3PL to
bring in temporary workers to fill the manpower gap. This is actually a
fantastic way to get to know potential permanent associates. As we’ve
mentioned, bad hires can cost you tens, even hundreds, of thousands of
dollars to replace over time.
6. Use a labor management system
• To this point, we’ve talked about the hiring and training aspect of
logistics workforce management, but there’s a technology play that can
have a huge impact on your success.
• Specifically, you want tools that enable you to maximize productivity
so you get the most output from the least number of people.
• Labor management systems (LMS) do exactly that by measuring
individual and team performance against specific productivity goals.
7. Train your logistics workforce better
• Every warehouse operation has a training program. The real issue is
how effective that training program is in getting new hires to maximum
productivity in the shortest amount of time. Poor training hurts you in
several ways.
8. Build strategic relationships with temporary staffing agencies
• The use of temporary labor for warehouse staffing is highly strategic. It
allows you to economically manage fluctuating order volumes by
keeping full-time staff to a minimum and bringing in temporary
workers for short-term spikes. Unfortunately, companies too often view
temp agencies as tactical partners.
ROLE OF GOVERNMENT IN LOGISTICS
National Logistics Policy (NLP) is a transformative initiative launched
by the governments including Rwanda to increase efficiency across the
logistics and supply chain sector.
The NLP’s strategy focuses on streamlining operations, leveraging
technology for digitization, enhancing multimodal transportation
networks, and fostering seamless movement of goods across the country.
National Logistics Policy signifies its comprehensive approach to
addressing the challenges within a countries logistics sector, including
infrastructural bottlenecks, fragmented warehousing, and varied
regulatory frameworks across states. By proposing an integrated digital
system – the Unified Logistics Interface Platform (ULIP) – it intends to
create a single window for all logistics and trade facilitation, reducing
delays and increasing transparency.
The Process of National Logistics Policy Implications
• The National Logistics Policy (NLP) unfolds through a meticulously
orchestrated process, aiming to overhaul a countries logistics and
supply chain infrastructure radically. This involves a multi-tiered
strategy designed to tackle various systemic inefficiencies and promote
a more cohesive, cost-effective, and sustainable logistics ecosystem.
1. Stakeholder Engagement
• The first step involves comprehensive consultations with stakeholders
across the logistics spectrum, including government bodies, private
sector participants, and academia. This collaborative approach ensures
that the policy addresses the real-world challenges and opportunities
within the logistics sector.
2. Infrastructure Development
• A core focus of the NLP is enhancing physical infrastructure. This
includes developing dedicated freight corridors, logistics parks, and
port modernisation projects. Such infrastructure improvements are
crucial for reducing transportation times and costs, thereby increasing
the overall efficiency of logistics operations.
3. Digitization and Technology Adoption
• Implementing advanced technology solutions and digitizing key
logistics processes form another essential aspect of the NLP. Initiatives
like the Unified Logistics Interface Platform (ULIP) aim to integrate
various digital systems across the logistics value chain, facilitating
seamless data exchange and improving tracking and transparency of
goods movement.
4. Policy Reforms and Simplification
• The NLP also proposes significant policy reforms aimed at simplifying
and streamlining regulatory procedures related to trade, customs
clearances, and goods movement. Reducing bureaucratic hurdles and
simplifying documentation processes are targeted to make it easier for
businesses to engage in import-export activities.
5. Skill Development and Capacity Building
• Recognising the need for a skilled workforce to support a modernised
logistics sector, the NLP includes initiatives for skill development and
capacity building. Training programs and partnerships with educational
institutions are envisaged to create a pool of trained professionals adept
at handling the demands of a technologically advanced logistics
infrastructure.
6. Sustainability Initiatives
• The policy underscores the importance of environmentally sustainable
logistics practices. It encourages the adoption of green logistics,
including the use of renewable energy sources in warehousing and
transportation and the promotion of electric vehicles for last-mile
connectivity.
• Implications for Businesses and Industries for NLP
• The National Logistics Policy (NLP) holds transformative implications
for businesses and industries across a country, heralding a new era of
efficiency, cost-effectiveness, and global competitiveness. Here’s an
overview of the critical impacts:
• 1. Reduced Logistics Costs
• One of the primary goals of the NLP is to reduce logistics costs as a
percentage of GDP, which is significantly higher in Rwanda than in
global standards. For businesses, this means potential savings in
logistics expenses, translating to lower overall operational costs and
more competitive pricing for their products and services.
2. Enhanced Efficiency
• By streamlining processes, enhancing infrastructure, and embracing
digitisation, the NLP aims to cut down transit times and improve the
reliability of supply chains. Businesses can expect more predictable and
efficient logistics operations, enabling them to meet customer demands
better and manage inventory.
3. Improved Global Trade Competitiveness
• With the reduction in logistics costs and increased efficiency, A
country's businesses and industries are poised to become more
competitive on the global stage. This could lead to expanded market
access, increased exports, and a more substantial presence in
international markets.
4. Fostering Innovation and Technology Adoption
• The emphasis on digitisation and technology within the NLP
encourages businesses to adopt modern logistics solutions, such as IoT,
AI, and blockchain, for tracking and managing shipments. This drive
towards technology adoption can spur innovation, leading to more
advanced logistics and supply chain practices.
5. Sustainability and Green Logistics
• The NLP’s focus on sustainability and the promotion of green logistics
practices aligns with the global shift towards environmental
responsibility. Businesses will be encouraged to adopt eco-friendly
practices, which can not only reduce their carbon footprint but also
appeal to environmentally conscious consumers.
6. Skill Development and Employment Opportunities
• The policy’s initiatives aimed at skill development and capacity
building in the logistics sector are expected to create a more skilled
workforce, benefiting industries reliant on logistics for their operations.
This can also lead to job creation, contributing to economic growth.
• For businesses and industries, the National Logistics Policy is not just
about enhancing logistics operations; it’s about catalyzing
comprehensive growth, fostering innovation, and building a sustainable
and competitive future.
Why Is National Logistics Policy Important?
• The National Logistics Policy (NLP) is not merely an initiative; it’s a
critical step towards redefining the landscape of logistics and supply
chain management in the world. Its importance stems from several
foundational needs and aspirations of the nation’s economy and its
position in the global market. Here are some reasons why the NLP
holds paramount importance:
1. Global Competitiveness
• In an era where speed, efficiency, and cost determine market leadership,
the NLP aims to equip Rwanda’s logistics sector with the necessary
tools and infrastructure to compete globally. Reducing logistics costs to
a competitive level is essential for enhancing the export potential of
Indian goods and services.
2. Economic Growth
• By addressing the inefficiencies within the logistics and supply chain
sector, the NLP paves the way for smoother internal and external trade
flows. This efficiency is crucial for economic growth, as it directly
impacts the ease of doing business, attracts foreign investment, and
boosts GDP.
3. Inclusivity and Access
• The policy emphasises the integration of various modes of transport
and the development of infrastructure across regions. This inclusivity
ensures that businesses, regardless of their size or geographic location,
have access to efficient logistics services, democratising opportunities
for growth and expansion.
4. Sustainability
• With a clear focus on adopting green logistics practices, the NLP aligns
India’s logistics sector with global environmental goals. This
commitment to sustainability is vital for ensuring long-term ecological
balance and fulfilling the nation’s obligations to future generations.
5. Employment Generation
• The logistics sector is labour-intensive, and the NLP is expected to
create substantial employment opportunities by streamlining operations
and expanding infrastructure. This job creation is crucial for absorbing
the nation’s burgeoning workforce and contributing to societal well-
being.
6. Technological Advancement
• Encouraging the adoption of digital technologies and innovative
logistics solutions, the NLP positions Rwanda at the forefront of the
logistics tech revolution. This advancement is vital for keeping pace
with changing global standards and consumer expectations.
• The National Logistics Policy is a cornerstone for Rwanda’s aspiration
to become a logistics and supply chain hub. Its importance transcends
logistics, touching upon economic, social, and environmental facets,
making it a key driver for comprehensive national development.
• Conclusion
• The National Logistics Policy (NLP) represents a significant stride
toward optimising Rwanda’s logistics and supply chain framework. It
aims to enhance businesses’ operational efficiency and position Rwanda
as a pivotal player in the global logistics arena. This policy, with its
comprehensive approach to addressing critical challenges such as high
logistics costs, infrastructural bottlenecks, and regulatory complexities,
stands as a beacon of Rwanda’s commitment to fostering an
environment conducive to growth, competitiveness, and sustainability
in the logistics sector.
• Green logistics
• Green logistics is defined as logistics operations done without harming our
environment. It involves executing environment-friendly practices in all the
processes in logistics and supply chain management from the point of origin to
the point of consumption.
• Green logistics principles
• Reducing Carbon Emissions: Reducing greenhouse gas emissions by
transportation and warehousing.
• Reducing wastage: Use packing materials as required, and promote reuse,
recycle, refurbish, and remanufacture. Increase the lifespan of resources.
• Optimized use of resources: Use resources like energy, materials, and fuel to
the fullest
• Sustainable Sourcing: Source raw materials without harming the environment.
• Follow rules and regulations: Don’t violate environmental rules and
regulations.
• Importance of Green Logistics:
• As the largest transport medium, logistics makes a significant impact,
making it crucial to transition towards green logistics.
• Environmental Benefits of Green Logistics:
• Reduce Carbon Emissions: Green logistics helps in reducing harmful
carbon emissions which might lower the impact of transportation on
environmental challenges.
• Preservation of resources: Optimised use of resources through green
logistics ensures the preservation of natural resources preventing
overusage of resources and environmental damage.
• Protects biodiversity: Environmentally Friendly Sourcing helps
protect diverse plants and animals.
• Economic Benefits of Green Logistics:
• It helps save costs by improving efficiency and reducing energy usage,
and waste production.
• Sticking to eco-policies helps to avoid fines and legal troubles.
• Helps attract customers who are conscious about the environment and
love eco-friendly practices thereby increasing loyalty and the reputation
of the company.
• Helps in reducing the risks of running out of resources and disruptions
in supply chain management.
• Enhances the company’s competitiveness in the market since green
logistics pave the way for new ideas and technologies.
• Since nowadays environmental concerns are increased businesses who
take sustainability measures are more likely to last and succeed in the
• Tips to Achieve/Implement Green Logistics
• Green logistics can be achieved by environment-friendly and
sustainable practices in the logistics industry.
• Efficient transportation can be attained by,
• Route optimization: Optimise the transportation route by selecting the
route with fewer bumps, shorter distances, and time. Today that is not a
big deal since there are GPS and route optimisation software available.
It will help to find the fastest and fuel-efficient paths.
• Using fuel-efficient vehicles: Make use of vehicles that are made for
fuel efficiency or you can use electric or hybrid vehicles which will
reduce carbon emissions.
• Idle Reduction: Reduce unnecessary engine idling. Turn off the engine
if the vehicle is stopped for a long time.
• Regular maintenance of vehicles: Regular maintenance of vehicles
helps in consuming less fuel and reduces emissions.
• Load optimization: It involves managing the loads carried by vehicles.
The vehicles should not be carrying excess weight which leads to
increased fuel consumption.
• Modern Fleet Management Systems: Invest in advanced technologies
like modern fleet management systems which will help in monitoring
and enhancing the performance of the vehicle fleets. These include
various factors like real-time data, analytics, and optimization to
improve overall efficiency.
 CHAPTER FOUR
LOGISTICS MANAGEMENT TRENDS
Principles of logistic and excellences
Principle 1: Segment customers based on the service needs of distinct
groups and adapt the supply chain to serve these segments profitably.

Principle 2: Customize the logistics network to the service requirements

and profitability of customer segments.

Principle 3: Listen to market signals and align demand planning

accordingly across the supply chain, ensuring consistent forecasts and
optimal resource allocation
Principle 4: Differentiate product closer to the customer and speed
conversion across the supply chain.

Principle 5: Manage sources of supply strategically to reduce the total

cost of owning materials and services.

Principle 6: Develop a supply chain-wide technology strategy that

supports multiple levels of decision making and gives a clear view of the
flow of products, services, and information.

Principle 7: Adopt channel-spanning performance measures to gauge

collective success in reaching the end-user effectively and efficiently.
Influence of logistics management
• Visibility: Logistics management affords greater visibility into
the supply chain. This enables businesses to better control costs,
tease out efficiencies, spot supply chain problems, conduct
demand planning and gain insights into opportunities.
• Reduced overhead: Logistics management enables companies
to reduce overhead in areas from cutting shipping costs to
shrinking how much warehouse space they need by proactively
controlling inventory levels.
• Improved customer experience: An excellent customer
experience (CX) is the driving factor behind repeat sales. By
delivering orders accurately and quickly, you improve the
customer experience which in turn increase brand loyalty and
future sales.
• Preventing loss: Logistics management helps prevent loss in
several ways. One is by a true inventory accounting, so your
company knows exactly how much stock it has on hand at any
given time.
• Support expansion: Demand forecasting supports expansion by
realistically calculating inventory needs and ordering, transporting and
stocking accordingly. Further, logistics management best practices help
companies scale to fulfill more customer orders on time.
• Competitive edge: Delivering orders correctly and on time is a
foundational element in the customer experience—and good CX is key
to repeat orders as well as solid brand reputation and net promotor
scores, which in turn help a company acquire new buyers. Logistics
management helps a company consistently deliver, or over deliver, on
promises and sharpen its competitive edge.
Major Logistics Trends Shaping Logistics Management in 2024
In an ever-evolving landscape, the logistics industry rides the wave of
technology advancement, process automation, and environmental
preservation.
• To thrive in this era of fierce competition, logistics companies must
adapt swiftly to cutting-edge technologies, pioneering processes, and
strategic approaches.
• With logistics technology soaring to new heights, expect a future where
agility and reliability define the industry.
1) Supply Chain Agility
Business occurs faster than ever due to the constant rollout of
technological advances and evolving supply chain trends. Companies
and their supply chains must be nimble if they wish to remain or become
competitive in today's digital [Link] achieve
supply chain agility and stay ahead of the curve, logistics companies can
harness the power of self-managed onboarding, as well as change and
exception management.
2) Global Labor Shortages
• The logistics and 3PL industry grapples with a glaring issue: a global
labor shortage that persists. This shortage significantly contributes to
higher costs of goods, affecting their production and delivery. To
combat the labor shortage, manufacturers and logistics providers turn to
automation. Warehousing processes witness increasing automation,
with machines now responsible for picking products and initiating
packing. Transportation is also embracing automation. Europe leads the
way in experimenting with automated trucking. Companies are
venturing into driverless trucks, starting with two-truck units where the
first truck has a human driver, while the second truck mimics the
driving patterns of the first.
3) Embrace Complexity Through Automation
• Automation is a key resource for modern businesses since it reduces
costs and increases efficiencies, plus it frees your staff to do other, more
productive activities. Logistics companies can harness the power of
automation by implementing end-to-end integrations between backend
WMS/ERP systems and the many eCommerce solutions that are
growing in [Link] companies continue to implement more
platforms and systems into their business processes, there is more data
than ever to collect. Data is extremely useful when making business
decisions. However, the increase in applications and /or platforms also
means the data is spread across various locations. This requires users to
hop between software solutions to find and compile data, which is a
time-consuming and tedious process.
4) Customers Demand Real-Time Data and Visibility
Amazon has tremendously influenced consumer shopping behaviors and
expectations. One impact of the so-called "Amazon effect" is that trading
partners and consumers now expect constant updates on order location
and delivery windows. This is largely due to Amazon's notoriously fast
delivery times (2-day and same-day shipping). So how can your business
provide continuous updates to your clients throughout the shipping
process.
To deliver real-time status updates to your clients, consider integrating
your WMS/ERP with supply chain visibility platforms (such as project44
or FourKites). Integrating the platforms will enable your business to
track and monitor order shipments, along with updating clients with real-
time status updates. In return, your customers remain informed
throughout the entire delivery process and can plan accordingly on their
ends.
5) Supply Chain Transparency and Collaboration Mandate
• Logistics companies work with countless moving parts daily. Real-time
visibility into supply chains is essential for logistics companies to stay
organized and manage their business. One way for them to achieve this
is through integrating their EDI and APIs.
• When integration is done right, EDI and APIs work together to provide
better supply chain visibility and can even help with onboarding. API
integration gives deeper insight into logistics integrations within your
digital ecosystem, while EDI helps start and orchestrate business
processes.
• For example, EDI can be used to kick-start the ordering, shipping, and
fulfillment processes. APIs on the other hand can be used for shipment
tracking, status updates, and inventory management.
6) Less Than Truckload (LTL) Demand
• With the rise in e-Commerce popularity and the demand for faster
shipping, logistics companies are being asked to make smaller
shipments more frequently.
• This is because companies do not have time to wait until they have
enough orders to fill up an entire carrier. One solution is LTL, also
known as less than truckload.
• With this method, multiple smaller orders from various companies are
placed on one carrier—creating a full load with numerous delivery
stops.
7) Persisting Digital Transformation
• End-to-end automation and EDI modernization can greatly increase the
productivity of event-based workflows. When events are mapped to an
automated workflow, humans are removed from the equation. This
means that there is no waiting for a human to complete a task before the
next step in the process can occur. Rather, technology is utilized to
quickly and accurately perform each step in the workflow.
For example, let's say a retailer sends a logistics company an
EDI 204 Motor Carrier Load Tender for an order of office supplies. The
logistics company's EDI software can nearly instantaneously respond to
the 204 with an EDI 990 Response to a Load Tender—either accepting
or declining the order. The two companies will use EDI technology to
continue communicating until the event-based workflow is complete.
8) API-Based Integrations
• API-based integration solutions are growing enormously in popularity. The
reason logistics companies are focusing on implementing API-based
integrations is because APIs perform real-time processing rather than batch
processing. Therefore, logistics companies can strategically incorporate APIs
to receive near-instantaneous data and updates regarding customer orders and
shipments.
• These updates can also be sent to customers and trading partners. This is
important because customers are demanding more frequent updates and
touchpoints from logistics companies concerning their orders. More frequent
updates allow customers to better optimize and manage their business
processes.
• Furthermore, API-based integrations complement EDI integrations which
tend to utilize batch processing. However, API-based integrations are not a
complete replacement for EDI because they require more resources and
9) Logistics Demand Forecasting
• Demand forecasting is the process of estimating future customer
demand for a product or service based on data and pertinent factors.
Logistics companies can analyze factors such as sales history,
seasonality, the economy, market trends, pricing, competition, etc., to
determine expected demand. By doing so, logistics companies can
better prepare and plan so they better manage resources (i.e. employees,
materials, schedules) and operate more efficiently.
• In particular, demand forecasting can occur at a variety of phases in the
logistics supply chain. This includes the pickup, shipping, and delivery
of the actual goods. The more accurate the demand forecast is for each
of these stages, the greater a company can optimize its operations to fit
demand levels.
10) Digital Freight Marketplaces
• Digital freight marketplaces are digital networks where shippers and
carriers can connect and arrange for transportation. They help shippers
to find carriers more easily and help carriers find more business
opportunities—all while helping both parties negotiate the best price for
the project.
• To integrate with the digital freight marketplace, shippers and carriers
harness API integration. This is because the communication between
the parties needs to happen in real-time to expedite the process, which
APIs allow for.
• Freight marketplaces help logistics companies save time and money
because shippers can compare carrier shipping times, prices, and
services from multiple carriers at once and in one location. Freight
marketplaces are also beneficial to carriers because they provide them
11) Ecosystem Integration Implementation
• With logistics companies adding more applications and platforms into
their digital ecosystems than ever before, they need a tool that
integrates all their internal and external disparate systems. The solution
for this is ecosystem integration. Ecosystem integration is a strategy
that connects and integrates a company's key revenue-generating
business processes with those of its ecosystem partners by combining
B2B and EDI, data and application integration, and secure file transfer
technologies into a single software platform.
• So instead of having to use multiple solutions to integrate various
platforms and trading partners, companies can utilize one, all-
encompassing integration platform. Not only does this reduce
integration complexities, but it also helps minimize errors by
simplifying processes and connections.
• Logistics Challenges 2025
• While there are trends for logistics companies in 2025, there are also
challenges.
• Supply Chain Disruptions
• After years of supply chain disruptions, leaders and analysts alike
thought they would be resolved by now. However, this is not the case.
With unforeseen global events like the 2023 Canadian wildfires and the
flooding in California, the war between Russia and Ukraine, as well as
Israel and Hamas, worker strikes, and low water levels at the Panama
Canal, global supply chains are taking a beating.
• Companies need to find ways to build supply chain resiliency in order to
better deliver on their supply chain commitments. One solution is to
implement ecosystem integration software , which offers real-time data
and updates, any-to-any integration, widespread protocol support, and
• Trading Partners Failing to Uphold Commitments
• One of the main reasons companies are having issues with logistics
management? Their trading partners. Trading partners are dropping the
ball when it comes to delivering on their promises.
• Eighty percent (80%) of companies said trading partners failed to
uphold business commitments in 2023, and 27% of respondents said
they had 11 or more trading partners fail to uphold business
commitments throughout the year.
• So what are companies doing about this in 2025? Twenty-nine percent
(29%) said they plan to establish new business partnerships and trading
partners, even though it takes time and effort to forge relationships with
new trading partners. This is still worth it to companies if they can work
with more reliable trading partners that better fulfill their business
commitments and help their business succeed.
• Labor Shortages
• Staffing shortages are widespread in the logistics industry and remain
top of mind for leaders. With more job openings than there are people
to fill them, companies are struggling to be as productive as possible.
When asked what supply chain-related challenges could impact your
company’s ability to meet 2025 business commitments, 32% said
manual processes.
• One way around this is by investing in automation technology. Thirty
percent (30%) of businesses plan to invest in trending technologies like
automation in 2025 to meet supply chain-related business
commitments.
• Rising Operational Costs
• Simply put, it is getting more expensive than ever to operate a business.
When asked what are significant hurdles to achieving your company’s
2025 business objectives, the top answer was the rising costs of goods
and labor.
• To better deliver on supply chain commitments and combat rising costs
in 2025, 32% said they’ll invest in supply chain technology. One option
is ecosystem integration. Forty-three percent (43%) of companies said
ecosystem integration would help them cut costs and 33% said it would
increase revenue and profitability. Therefore, ecosystem integration can
directly impact a company’s cost savings and revenue growth.
• Sustainability Targets
• Companies truly care about sustainability in 2025. Forty-five percent
(45%) of businesses said it was a critical business objective for them (the
third highest answer). However, laws regarding sustainability are rapidly
changing and becoming more aggressive. This is making it harder for
companies to reach these goals as they have to quickly conduct sizable
changes to their operations.
• To reach these targets, companies can streamline supply chain operations
and invest in projects like fleet optimization and cargo consolidation.
Additionally, gaining visibility into their supply chain can help logistics
companies minimize inefficiencies, reduce excess inventory, and
optimize transportation routes. And with 32% of companies saying
ecosystem integration would remove data silos, and by connecting to
visibility platforms like Project44 and FourKites, companies can access
the data they need to create more sustainable operations.
• Conclusion
• Logistics trends are projected to evolve further in 2025 to keep up with global
economic and technical advancements. Overall, logistics industries will prioritize
automation, labor shortages, and strive for real-time tracking to enhance supply
chain management. Embracing new technologies for manual processes, digital
freight marketplaces, and autonomous vehicles is critical for logistics leaders to
remain globally competitive.
• While these trends continue to impact the industry into 2025, the success of trend-
shaping nascent technologies requires that they are integrated with existing
solutions and infrastructure.
• Logistics operations must be capable of enabling processes like ingesting
EDI load tenders, along with determining how future technology can be leveraged
to increase margins. Businesses can then create a next-generation stack that
leverages their previous technology investments while incubating big data, IoT,
and omnichannel solutions, thus positioning them for the future
The Future of Logistics in 2030: A Vision of Efficiency and
Sustainability
Logistics, the backbone of global trade and commerce, is on the cusp of a
profound transformation. As we look ahead to 2030, several key trends
and technological advancements are poised to revolutionize the logistics
industry.
• Hyper-Efficient Supply Chains
• In 2030, supply chains will become hyper-efficient, driven by advanced
data analytics, predictive algorithms, and the Internet of Things (IoT).
Companies will have real-time visibility into their entire supply chain,
allowing them to optimize routes, reduce transit times, minimize
inventory holding costs, and respond rapidly to changing market
conditions. This level of precision will improve cost-effectiveness and
customer satisfaction.
• Autonomous Vehicles and Drones
• The logistics landscape will see a significant increase in the use of
autonomous vehicles for transportation. Self-driving trucks will
revolutionize long-haul freight, reducing labor costs and improving
safety. Drones, both ground-based and aerial, will be used for last-mile
delivery in urban areas, enhancing speed and efficiency while reducing
congestion and emissions.
• Smart Warehouses
• Warehouses will evolve into highly automated, smart facilities.
Robotics and automation will handle tasks such as picking, packing,
and inventory management, while humans focus on higher-value
activities like oversight and troubleshooting. These smart warehouses
will be strategically located near urban centers, minimizing delivery
times.
• Sustainable Logistics
• By 2030, sustainability will be at the core of logistics operations. Zero-
emission delivery vehicles, powered by electricity or alternative fuels,
will become the norm. Companies will adopt circular supply chain
practices, emphasizing recycling, reuse, and reducing waste.
Sustainable packaging materials will replace single-use plastics,
reducing environmental impact.
• Blockchain for Transparency and Security
• Blockchain technology will ensure transparency and security across the
entire supply chain. Every step of the logistics process, from
manufacturing to delivery, will be recorded in an immutable ledger,
reducing the risk of fraud and ensuring product authenticity. Smart
contracts will automate and enforce agreements, streamlining payment
and settlement processes.
• 3D Printing and On-Demand Manufacturing
• Logistics will adapt to the rise of 3D printing and on-demand
manufacturing. Instead of shipping finished products across the globe,
companies will send digital designs to local 3D printing facilities. This
will reduce shipping costs, lead times, and the environmental footprint
associated with traditional manufacturing and shipping.
• Collaborative Ecosystems
• Collaborative ecosystems will redefine logistics in 2030. Companies
will increasingly form partnerships and share resources, such as
warehouses and delivery networks, to improve efficiency and reduce
costs. Sharing economy principles will extend to logistics, allowing
smaller players to compete with industry giants.
• Conclusion
• The future of logistics in 2030 promises a landscape characterized by
unprecedented efficiency, sustainability, and innovation.
• Supply chains will be tightly integrated, data-driven, and optimized for
speed and cost-effectiveness.
• Automation will streamline processes, reducing the need for human
intervention in routine tasks. Sustainability will be a non-negotiable
aspect of logistics, with a focus on reducing emissions and waste.
As the logistics industry embraces these transformative changes, it will
play a crucial role in shaping a more sustainable and interconnected
global economy.
• To succeed in this future, businesses will need to adapt quickly, invest
in technology and sustainability, and prioritize collaboration in an ever-
evolving and highly competitive landscape.
• The logistics of 2030 will be a testament to human ingenuity and our
commitment to building a more efficient and sustainable world.
 CHAPTER FIVE
LOGISTICS AND TRANSPORTATION MANAGEMENT
The Role of Transportation in Logistics Chain
Since logistics advanced from 1950s, there were numerous researches focused
on this area in different applications. Due to the trend of nationalisation and
globalisation in recent decades, the importance of logistics management has
been growing in various areas.
• For industries, logistics helps to optimise the existing production and
distribution processes based on the same resources through management
techniques for promoting the efficiency and competitiveness of enterprises.
• The key element in a logistics chain is transportation system, which joints the
separated activities.
• Transportation occupies one-third of the amount in the logistics costs and
transportation system influence the performance of logistics system hugely.
• Transporting is required in the whole production procedures, from
manufacturing to delivery to the final consumers and returns. Only a
good coordination between each component would bring the benefits to
a maximum.
• Transporting is required in the whole production procedures, from
manufacturing to delivery to the final consumers and returns. Only a
good coordination between each component would bring the benefits to
a maximum.
• Infrastructure comprises human resources, financial resources,
packaging materials, warehouses, transport and communications. Most
fixed capital is for building those infrastructures. They are concrete
foundations and basements within logistics systems.
Future Prospectus of Logistics
Facing the worldwide competition, the improvement of logistics system
should be advanced by both private companies and government. The
main characteristics of future logistics development are:
1. Government Role: To keep competitiveness of industries, the
government has to lead the way to assist the logistics industries, the
government has to lead the way to assist the logistics industries.
• For instance, the idea of freight village of city logistics provides the
environment to promote efficiency and to reduce operation costs.
2. Growth of International Goods Transport: The up-growth of
international freight transport is contributed by several factors.
• Firstly, the blossoming of E-commerce pushes ahead the international
business activities.
• Secondly, the change of production strategy needs international
cooperation, e.g. importing the semi-finished products from countries
with cheaper human resources to those with higher technology to
assemble the final goods.
[Link] of Services: Providing a good customer service becomes
a necessary requirement of business operation with the intense
competition of global market. The quality of services is the main factor
to affect consuming behaviour among the enterprises with high similarity
4. Shorter Product Life Cycle: with the current trend, the merchandise
design is changing day by day, and therefore, the product life cycle is
shorter and shorter, especially in computer science. To confront the
impacts, logistics system must improve its efficiency and reliability of
goods delivery.
5. Channel Cooperation Between Companies: In order to save the
logistics costs, a key concept is to maximize the usage of available
transport capacity. Integrating the logistics demand between numerous
departments helps achieve this purpose. In practice, a conglomerate
could develop its own logistics services for the branches. For some
medium size companies, they could cooperate transport channels with
others
6. Specialized Logistics Delivery: One of the notable trends of logistics
industries is specialized delivery services. For instance, delivering fresh
food from place of origin needs low-temperature containers. Computer
chips, gases and petroleum need particular conveyances to carry. These
demands are rising since the products became more and more delicate.
7. Logistics Centres: The development of logistics centres is good for
industry promotion and the development of national economic system.
Logistics centre could successfully shorten the distance between
production and marketing vertically and also integrate various industries
Conclusion
To sum up, logistics and transportation have some relevance.
(1) Logistics system has a more and more important position in our society
activities.
(2) transportation and logistics systems have interdependent relationships that
logistics management needs transportation to perform its activities and meanwhile,
a successful logistics system could help to improve traffic environment and
transportation development.
(3) Since transportation contributes the highest cost among the related elements in
logistics systems, the improvement of transport efficiency could change the overall
performance of a logistics system.
(4) Transportation plays an important role in logistics system and its activities
appear in various sections of logistics processes.
Without the linking of transportation, a powerful logistics strategy cannot bring its
capacity into full play.
What is Transport
A service that allows freight and passengers to move from one
point to another for a purpose.
• The service must be serviced in the most economical way
because a displacement is performed for providing benefits.
• Transport vehicles and transport systems vary according to
the goods and services to be delivered. The expectation of
transportation demand is to serve the minimum cost in
maximum speed and safety.
Five Major Modes of Transportation
• Road transport
• Railway transport
• Water transport
• Air transport
• Pipeline transport
Road transport
• Road transport exists in all parts of the world, this involves the use of
motor vehicles (cars, lorries, buses, bicycles, and trucks). There are
various types of roads according to size and functions, some roads are
tarred while others are not. The best of these roads are the modern roads
which link major towns. Road transport, when compared with other
modes of transportation,
• is more flexible.
• It is relatively cheaper and faster.
• Road transport has a high capacity for carrying goods over short
distances.
• Maintenance is one of the major disadvantages of this mode of
transport.
Railway transport
• Railways were developed during the period of the industrial revolution
in the 19th century, these were partly for political reasons and for
economic reasons.
• In many countries, they were built especially to penetrate isolated
regions and help promote political unity.
• The major advantage of railway transport includes the provision of
reliable services. It has the ability to convey heavy and bulky goods; it
is also very cheap, safe, and also comfortable for passengers over a
long distance.
Water transport
• Water transport is very important because it is the cheapest way
of transporting bulky goods over a long distance.
• In the world, there are two major types of water transport
namely: Inland water transport and ocean water transport.
Air transport
• Air transport is the newest means of transport; it was introduced in
1903 but developed into full means of transporting people and goods in
the 1930s. The greatest air transportation started after the Second World
War (WWII). This mode of transportation can be used for both
domestic and international flights.
Pipeline transport
• This system of transportation involves the use of hollow pipes in the
transportation of water, crude oil, (petroleum) and gas. This mode of
transportation is safer than using tankers or trailers in the transportation
of these liquids.
 Third-party logistics
• Third-party logistics, or 3PL, is used interchangeably with fulfillment
warehouse or fulfillment center. Companies that provide 3PL services
offer many of the same services as order fulfillment companies. These
services include:
• Warehousing
• Inventory management
• Shipping and receiving
• FTL and LTL freight shipping
• Picking and packing
• Reverse logistics (returns)
A third-party logistics company acts as an eCommerce fulfillment
company. It provides all the services you need to outsource your logistics
operations.
• Different 3PL services companies specialize in different types of
fulfillment and warehousing.
• Some are equipped for cold fulfillment. These warehouses can store
and ship food products that need to be refrigerated or frozen.
• Other 3PL companies are prepared to store and ship hazardous
materials.
• Red Stag Fulfillment is one of the top third-party logistics providers for
heavy, bulky, and high-value products.
The third-party logistics process
• When you outsource your fulfillment, your products ship directly from
the factory to the 3rd-party logistics warehouse. Once your inventory
arrives, the third-party logistics company can provide a range of
services. Here are just a few of the elements of the 3PL process.
1.E- Commerce platform integration
• Most eCommerce businesses depend on multichannel selling to survive.
To support this, your fulfillment warehouse needs strong IT. The
best fulfillment companies integrate seamlessly with multiple sales
platforms.
2. FTL and LTL freight shipping and receiving
• Full truckload (FTL) and less than truckload (LTL) freight can be
essential tools to save you money on freight. This is particularly true if
you often ship large orders to commercial customers or wholesale
orders to retailers. You can also use freight services to ship your
products between warehouses or to a distribution point closer to your
customers.
3. Inventory management
• When you work with a third-party logistics company, you no longer
have to go it alone. Your 3rd-party logistics partner has valuable
experience with inventory management. Your account rep can apply
lessons learned from working with many eCommerce companies to
help you manage your stock. Reach out for advice on restocking levels,
supply chain management, and ideal seasonal inventory levels.
4. Picking, packing, and shipping
• Pick, pack, and ship services are the core of order fulfillment. When
your customer places an order through one of your sales channels, it
goes directly to your fulfillment warehouse. There, a picker finds the
items for the order on the shelves.
5 Same-day shipping
• Your third-party logistics provider may offer same-day shipping. This
service means that your customer orders are picked, packed, and
shipped on the same day they are received. There is usually a time
cutoff for same-day shipping.
6. Reverse logistics
• Reverse logistics is a fancy term for returns. Returns are simply a fact
of life in e Commerce. Your return rate will depend on a number of
factors, including the type of merchandise you sell.
• The reverse logistics process includes examining returned items to
assess whether they are damaged or can be returned to the shelf.
Reverse logistics can also decrease the time it takes to make
undamaged products available for purchase again.
Benefits of third-party logistics
• There are several benefits of this operational model.
• Lower cost of goods sold. When you purchase products upfront, you
will pay the wholesale price. The more you buy, the lower your costs
and the higher your profit margins.
• Greater flexibility in product sourcing. When you use an eCommerce
fulfillment business model, you can more easily source products from
more than one manufacturer. All your items will be stored in the same
warehouse, so orders that include products from multiple suppliers can
ship in the same box. This saves on shipping costs.
• More control over your logistics operations. You get to choose an
order fulfillment partner that provides the services your customers
expect.
• Faster order fulfillment. You can pick a third-party logistics service
with warehouse locations that will get your orders delivered quickly.
• Easier returns processing. The 3rd-party logistics warehouse that
shipped your products can provide customer service and seamlessly
process any returns. This improves customer satisfaction and lets you
put products back into inventory quickly.
 Warehousing and inventory management
• Warehouse inventory management is a process that involves
receiving, storing, and tracking inventory in a warehouse;
managing warehouse staff; and optimizing storage space and
costs; all of which directly impacts fulfillment, shipping, and
the customer experience.
Why is warehouse inventory management important to your
business?
• How you manage inventory in any warehouse influences how much
you spend on logistics costs and how efficient your supply chain runs.
1. Improves order fulfillment accuracy
• If your warehouse is not well-planned and managed, it will cause
delays and issues during the order fulfillment process. Most issues with
orders stem from disorganized inventory, poor picking and packing
processes, and a lack of stock control in your warehouse.
2. Boosts warehouse productivity
• When warehouse inventory is stored and recorded properly and manual
daily tasks are automated, it gives your staff the time and mental
bandwidth to focus on more strategic tasks, such as logistics expansion
and growth.
3. Faster shipping and deliveries
• How you manage your inventory in a warehouse can also impact
shipping speed. There are several way to optimize warehousing
processes to speed up last-mile delivery, from
automating order processing to expanding your distribution network by
splitting inventory across multiple fulfillment centers.
4. Saves you money
• Proper warehouse inventory management can save you money,
including labor, storage, and fulfillment costs.
• Optimizing storage, investing in warehouse automation, organizing
inventory to speed up the picking and packing process, and
implementing technology to automate tasks and reduce human error are
just a few of the ways you can improve your bottom line by
optimizing your supply chain.
5. Increases customer satisfaction
• A warehouse that performs well is one that delivers customer orders
accurately and on time. By making warehouse inventory management a
priority, you ultimately improve customer satisfaction through faster
shipping times, reduced shipping costs, and higher order accuracy rate.
warehouse inventory management processes
1. Warehouse layout optimization
• Optimizing your warehouse space is the first thing to consider when managing a
warehouse. To optimize your warehouse layout, the first step is to assess the
current warehouse layout and determine if it suits your order fulfillment process.
2. Warehouse inventory control tracking and recording
• Managing inventory is one of the most important parts of running an
ecommerce business. The best way to better control stock is to invest in
inventory management software and other tools designed to:
• Automate the order picking process.
• Track inventory in real-time.
• Forecast inventory demand.
• Generate inventory reports.
• Optimize inventory levels.
3. Picking and packing
• The picking and packing process should be optimized as much as
possible to help support your picking and packing team and reduce
human error.
4. Shipping
• If you self-fufill orders, then you know it can be time-consuming
process, not to mention there are several hidden costs associated with
self fulfillment.
5. Reporting and optimizing
• Investing in a warehouse management system (WMS) can help you
determine operational performance and offer inventory reports across
the warehouse.
warehouse inventory management best practices
1. Turn your employees into experts
• By implementing ways to automate and streamline warehouse tasks,
your team can spend more time finding ways to improve processes.
• Your warehouse is only as efficient as the people who manage and
work inside it. Be sure to leverage your team and ask for feedback on
how to improve consistency, efficiency, and accuracy. The best ideas
often come from those who are on the front lines.
2. Use demand forecasting for busy seasons
• If your sales fluctuate seasonally or month-to-month, storage costs may
become costly during the low season. A great way to optimize costs
despite seasonality is by using demand forecasting tools.
3. Automate warehouse inventory systems
• By automating inventory and warehousing tasks and processes, you can
quickly reduce the amount of time spent on managing inventory and
picking and packing orders.
• Many logistics automation solutions offer features that allow you to
process orders automatically, create and manage inventory in real time,
automatically update stock levels, offer the ability to set automatic
reorder points, and much more.
4. Implement warehouse inventory control checks
• As you grow your business, you will start to deal with more SKUs
going in and out of warehouses. To make sure these stock items are not
expired, old, or damaged, it’s important to conduct regular
inventory control checks.
 CHAPTER SIX
Introduction to risk management
Risk refers to the uncertainty or the probability that the actual return
may differ from the expected return.
Basing on the form of actual risk we are mostly concerned with the
possibility of loss occurring than gain.
risk management is: ‘The culture, processes and structures that are
directed towards the effective management of potential opportunities
and adverse effects.’
What is risk
 The risk is seen in terms of unpleasant things that might happen.
 For managers, risk is a threat that something might happen to disrupt
normal activities or stop things happening as planned:
new product will not sell as well as expected,
project will not be successful,
costs of raw materials will rise,
delivery to customers will be delayed,
supplier will go bankrupt
warehouse will be destroyed by fire
Definitions and terms used in risk management
Risk, hazard and uncertainty
Risk. A risk, in fact, is any event which may prevent or impair the
achievement of objectives. In the business sense we need to recognize
that risk is not the same as hazard or uncertainty.
• According to the Institution of Risk Management (IRM), risk is ‘the
combination of the probability of an event and its consequences.
Hazard. This is a source of potential harm or damage. In industrial terms
it is a problem or difficulty caused by deviation from the design intent.
Hazard may cause losses and damage
Uncertainty. is a situation in which we know that an event might happen
but we have no information about the probability of its occurring. None
of us can accurately foretell how every future event will turn out. We are
unsure of whether adverse conditions will prevail.
Exposure. This is simply the impact on the business of a hazard
occurring. Exposure can be seen in foreign currency dealings. The
exposure can be in the form of transaction exposure, translation exposure
is simply the damage that may be brought about as a result of taking
decisions on a single piece of business or transaction.
Risk identification. is the process of ensuring that all of those things that
need to be considered are included in our investigations. One of the
problems here is the risks to be identified may be limited by our own
experience.
Risk evaluation. This is used to make decisions about the significance of
risks to an organizations and whether each specific risk should be
accepted or treated.
Risk appetite. This refers to the propensity of the organization or
individual to accept a certain amount of risk. People who take chances
however risky are said to have a high risk appetite. Some people have
low appetite for risk and will not take chances in any situation.
Risk aversion. refers to the attitude that we should minimize the taking
of risk and the possibilities of loss while risk enthusiasm recognizes risks
and evaluates them with an eye to the opportunities which may be
presented.
Treating. means to manage the risk actively and thereby recognizing die
probability of it occurring and the effect it may have on the organization.
• Treating the risk will rarely reduce it to zero, despite any mitigating
action we may take; it will simply bring the risk down to levels which
are deemed to be acceptable (the risk remaining after being managed as
much as is possible is termed residual risk).
Tolerating a risk. means that a risk has been recognized and has either
been managed down to acceptable levels or that, in the first place, the
risk is so remote or minor a possibility that it is not worth the time,
money or effort involved in doing something about it.
Transferring a risk. means that, once the risk has been identified, it is
resolved by giving it to someone else to manage.
• Insurance is a good example of risk transfer and outsourcing may
achieve a similar result.
• Part transfer may also occur as a means of treating a risk and means
sharing part of the risk with a third party, as might occur in a joint
venture, for example.
Terminating a risk. means that, having recognized a risk, whatever
action may be taken to manage it, it is simply too risky to continue or
perhaps too expensive to manage in relation to the rewards which might
be available.
Risk mitigation. comprises all of those actions that can help to prevent
the risk occurring or to reduce the impact or costs of such risks.
• Risk mitigation will lead to a more secure business environment or
even a safer working environment if we apply it to health and safety
issues.
• In terms of quality, the implementation of total quality management
(TQM) and quality assurance (QA) techniques and procedures is a way
of mitigating the risk of a substandard product or service.
• By building quality into a product, service or process, we are clearly
reducing the chances that something will go wrong and lead to loss,
Basic Methods for Risk Management
1. Avoidance
• Avoidance is a method for mitigating risk by not participating in
activities that may incur injury, sickness, or death. Smoking cigarettes
is an example of one such activity because avoiding it may lessen both
health and financial risks.
2. Retention
• Retention is the acknowledgment and acceptance of a risk as a given.
Usually, this accepted risk is a cost to help offset larger risks down the
road, such as opting to select a lower premium health insurance plan
that carries a higher deductible rate.
3. Sharing
• Sharing risk is often implemented through employer-based benefits that
allow the company to pay a portion of insurance premiums with the
employee. In essence, this shares the risk with the company and all
employees participating in the insurance benefits. The understanding is
that with more participants sharing the risks, the costs of premiums
should shrink proportionately.
4. Transferring
• The use of health insurance is an example of transferring risk because
the financial risks associated with health care are transferred from the
individual to the insurer. Insurance companies assume the financial risk
in exchange for a fee known as a premium and a documented contract
between the insurer and individual.
5. Loss Prevention and Reduction
• This method of risk management attempts to minimize the loss, rather
than completely eliminate it. While accepting the risk, it stays focused
on keeping the loss contained and preventing it from spreading.
Risk Management Process
• The risk management process is a framework for the actions that need
to be taken. There are five basic steps that are taken to manage risk;
these steps are referred to as the risk management process.
• Step 1: Identify the Risk
• The initial step in the risk management process is to identify the risks
that the business is exposed to in its operating environment.
• It is important to identify as many of these risk factors as possible. In a
manual environment, these risks are noted down manually. If the
organization has a risk management solutions employed all this
information is inserted directly into the system.
• The advantage of this approach is that these risks are now visible to
every stakeholder in the organization with access to the system.
Step 2: Analyze the Risk
• Once a risk has been identified it needs to be analyzed. The scope of the
risk must be determined. It is also important to understand the link
between the risk and different factors within the organization. To
determine the severity and seriousness of the risk it is necessary to see
how many business functions the risk affects.
Step 3: Evaluate the Risk or Risk Assessment
• Risks need to be ranked and prioritized. Most risk management
solutions have different categories of risks, depending on the severity of
the risk. A risk that may cause some inconvenience is rated lowly, risks
that can result in catastrophic loss are rated the highest. It is important
to rank risks because it allows the organization to gain a holistic view
of the risk exposure of the whole organization.
Step 4: Treat the Risk
• Every risk needs to be eliminated or contained as much as possible.
This is done by connecting with the experts of the field to which the
risk belongs. In a manual environment, this entails contacting each and
every stakeholder and then setting up meetings so everyone can talk
and discuss the issues.
Step 5: Monitor and Review the Risk
• Not all risks can be eliminated – some risks are always present. Market
risks and environmental risks are just two examples of risks that always
need to be monitored. Under manual systems monitoring happens
through diligent employees. These professionals must make sure that
they keep a close watch on all risk factors. Under a digital environment,
the risk management system monitors the entire risk framework of the
organization.
Risk Management Tools and Techniques
1. Probability and Impact Matrix
• The Probability and Impact Matrix is a foundational tool used in risk management. It
evaluates and prioritizes risks based on their likelihood of occurrence and potential impact
on project objectives.
• Features
• Categorization of risks into a grid
• Prioritization based on predefined criteria
• Visual representation of risk severity
• Pros
• Simplifies complex risk data
• Enhances decision-making
• Facilitates communication among stakeholders
• Cons
• Requires subjective judgments
2. Risk Data Quality Assessment
• Risk data quality assessment evaluates the reliability and credibility of risk data,
ensuring that risk management decisions are based on accurate and high-quality
information.
• Features
• Assessment of data source reliability
• Evaluation of data accuracy
• Identification of data limitations
• Pros
• Improves the quality of risk analysis
• Reduces uncertainty in decision-making
• Identifies gaps in risk data
• Cons
• Can be time-consuming
3. Risk Identification
• Risk identification is a very important starting point within the risk management process.
It appropriately identifies and documents potential hazards to a project or organization.
The company considers internal and external factors to identify potential risks and
hazards. This enables organizations to handle challenges better and reduce their impact.
• Features
• Use of checklists, interviews, and brainstorming
• Documentation of identified risks
• Continuous throughout the project lifecycle
• Pros
• Foundation for all risk management activities
• Encourages proactive risk management
• Better stakeholder management
• Cons
• It can be overwhelming if not prioritized
4. SWOT Analysis
• SWOT Analysis is a strategic planning tool for identifying Strengths, Weaknesses,
Opportunities, and Threats related to business competition or project planning.
• Features
• Examination of internal and external factors
• Strategic insights into business or project
• Facilitation of strategic planning
• Pros
• Simple and versatile
• Promotes strategic thinking
• Identifies opportunities and threats
• Cons
• May not prioritize issues
•
5. Risk Register
• A Risk Register is usually a document that contains all information about
identified risks, including their status and mitigation plans.
• Features
• Comprehensive list of risks
• Risk descriptions, impacts, and mitigation strategies
• Tracking of risk ownership and status
• Pros
• Centralizes risk information
• Facilitates monitoring and control
• Enhances transparency and accountability
• Cons
• Requires regular updating
• It may become unwieldy with large projects
6. Root Cause Analysis
• Root Cause Analysis is a problem-solving method that aims to identify the main
cause of risk or issues rather than merely addressing their symptoms.
• Features
• Use of tools like the 5 Whys and Fishbone Diagram
• Identification of the primary cause of risk
• Implementation of long-term solutions
• Pros
• Prevents recurrence of issues
• Encourages deep understanding of problems
• Focuses on corrective actions
• Cons
• Time-consuming
• Requires experienced facilitators
7. Decision-making
• Decision-making involves analyzing potential risks and choosing the best action to
minimize their effects. By implementing decision-making into risk management,
organizations can effectively mitigate risks and deal with uncertainties.
• Features
• Analysis of alternatives
• Use of decision matrices or decision trees
• Stakeholder involvement in the decision process
• Pros
• Facilitates informed choices
• Aligns risk response with strategic objectives
• Enhances stakeholder buy-in
• Cons
• Can be subjective
• Potentially time-consuming consensus-building
8. Risk Acceptance
• Risk Acceptance is a risk management strategy in which the decision is made to
tolerate a risk's impact without taking active steps to mitigate it.
• Features
• Acknowledgment of risk without direct action
• Reserved for low-impact risks
• Inclusion in the risk register for monitoring
• Pros
• Cost-effective for managing low-priority risks
• Reduces unnecessary efforts on minor issues
• Simplifies risk management process
• Cons
• Requires careful consideration to avoid complacency
• Potential for overlooked cumulative effects
9. Risk Reassessment
• Risk Reassessment ensures that risk management strategies are relevant and practical
by conducting periodic reviews of the risk environment to identify new risks and
reevaluate existing ones.
• Features
• Regularly scheduled reviews
• Adjustment of risk priorities
• Adaptation of risk management plans
• Pros
• Keeps risk management efforts aligned with changes
• Allows for proactive response to new risks
• Ensures continuous improvement in risk management
• Cons
• Can be resource-intensive
10. Brainstorming
• Brainstorming is a creative group problem-solving technique that generates a wide
range of ideas for risk identification and mitigation strategies.
• Features
• Facilitation of open and uninhibited discussion
• Generation of a large number of ideas
• Encouragement of innovative thinking
• Pros
• Promotes team involvement and creativity
• Uncovers unique insights and solutions
• Enhances stakeholder engagement
• Cons
• May produce a large volume of unfeasible ideas
• Requires effective facilitation to be productive
11. Risk Monitoring
• Risk Monitoring is an essential process in risk management for identifying risks,
monitoring residual risks, and identifying emerging ones.
• Features
• Regular tracking of risk triggers and impacts
• Adjustment of risk responses based on monitoring data
• Integration with overall project or organizational reporting
• Pros
• Ensures that risks are actively managed throughout the project lifecycle
• Allows for timely adjustments to risk management strategies
• Improves overall risk awareness and preparedness
• Cons
• Requires dedicated resources for monitoring activities
• It may be seen as burdensome without clear benefits
 Supply chain risk management

• The identification and management of risks within the supply chain and
risks external to it through a coordinated approach amongst supply
chain members to reduce supply chain vulnerability as a whole”.
• supply chain risk management aims at identifying the areas of potential
risk and implementing appropriate actions to contain that risk
Roles and responsibility of risk management department.

Provide a methodology to identify and analyze the financial impact

of loss to the organization, employees, the public, and the

environment.

Examine the use of realistic and cost-effective opportunities to

balance retention programs with commercial insurance.

Prepare risk management and insurance budgets and allocate claim

costs and premiums to departments and divisions.

Provide for the establishment and maintenance of records including

insurance policies, claim and loss experience.

Assist in the review of major contracts, proposed facilities, and/or

new program activities for loss and insurance implications.

Principles of risk management
Risk management should:
Create value – resources expended to mitigate risk should be less than
the consequence of inaction, the gain should exceed the pain
Be an integral part of organizational processes
Be part of decision making process
Explicitly address uncertainty and assumptions
Be systematic(logical) and structured process
Objectives of risk management.
The objectives are categorized in two categories;
a) Pre loss objectives- controlling of risk before the loss occurs. i.e.,
compliance issues.
b) Post loss objectives – identifying the processes and actions that
should be engaged in at the event of sustaining a loss. i.e., survival,
continued operation, stability of earnings etc.
TYPES OF RISK
Market risk
• Market risk is the risk that arises from fluctuations in interest
rates, exchange rates and the prices of instruments used in the
money and capital markets, all of which may affect the financial
performance of the Bank.
The main market risks in the consolidated accounts are
interest-rate risk and foreign-exchange rate risk.
Operational risks.
Operational risk is the risk of loss from failed or inadequate
internal processes, people and systems or from external events.
This includes legal risks, but does not include strategic risks and
reputational risks.
 It can also include other classes of risk, such as fraud, physical
or environmental risks
The five sources of supply chain risk
Demand risk
• Loss of major accounts
• Volatility of demand
• Concentration of customer base
• Short life cycles
• Innovative competitors
• Supply risk
• Dependency on key suppliers
• Consolidation in supply markets
• Quality and managementnd issues arising from off-shore sourcing
• Potential disruption at 2 tier level
• Length and variability of replenishment lead-times
Process risk
Manufacturing yield variability
• Lengthy set-up times and inflexible processes
• Equipment reliability
• Limited capacity/bottlenecks
• Outsourcing key business processes
Network control risk
• Asymmetric power relationships
• Poor visibility along the pipeline
• Inappropriate rules that distort demand
• Lack of collaborative planning and forecasts
• Bullwhip effects due to multiple echelons
Environmental risk

• Natural disasters
• Terrorism and war
• Regulatory changes
• Tax, duties and quotas
• Strikes
 Managing supply chain risk
●Map the supply chain
●Identify the critical paths
●Utilise cause and effect analysis (TQM tools)
●Implement supply chain event management
●Adopt agile/quick practices
●Formalise supply chain risk management
●Risk reduction mechanism
●Supply chain planning and collaboration:
Supplier qualification
Risk enumeration, severity analysis and contingency planning
Relationship management and joint planning
Supply chain education and risk management
Optimising supply chain systems
Post event analysis and lessons learned meetings
 Comprehensive supplier evaluation
• Comprehensive/complete ,inclusive supplier evaluation is equally
important in minimizing risk.
• The supplier evaluation criteria might include:
Tender price
Financial stability
Track record of previous similar work
Method statement for undertaking the work
Available capacity, resources and technical expertise to undertake the
work (including professional qualified staff)
 contingency /emergency plans
• Being prepared for the worst possible emergencies or unexpected risk
situations that can be thought of and then trying to plan beyond that to
situations that you think will ever occur.
Developing such plans help overcome unexpected risk situations by:
• Overcoming operational or organizational crises
• Avoiding loss of business continuity
• Maintaining service or product delivery
• Ensuring alternative personnel and / or resource is available
 • Agility (attentiveness) holds the key
Agile /supple supply chains are designed to respond rapidly to
unpredictable change. They are based upon a number of principles:-

• Very close connection to final marketplace

• Visibility of real demand
• High levels of synchronicity upstream and downstream
• Organisational focus on processes rather than functions
• Advanced level of collaborative planning with supply chain partners
• Continuous search for time compression opportunities
• Today, risk management is becoming a vital component to supply
chains worldwide. Risks are defined as a situation involving exposure
to danger—in global supply chains, there are many risks that could
occur.
• Risks can be either internal or external. Internal risks are ones
under you can control or influence. Examples include cost estimates,
staff assignments, schedule delays, and product design. External risks
are ones out of your control.
• Examples of external risks include governmental or
regulatory actions or a change in currency rates that could affect the
value of an international trade.
The main risks facing supply chains normally fall in the following
categories:
• Financial
• Financial risks can include several things. External factors like
an unfavorable change in exchange rates can have a deep impact on
trade and funding across country lines. Another often overlooked
financial risk is the cost of supplier instability or contractor bankruptcy.
• Internal factors such as budget overruns, finding the limitation,
constructive changes, and missed milestones requiring additional
funding can most times be prevented.
• Scheduling
• There are many risks that threaten a project timeline. Poor
project management and poor wording or changes of scope of work are
primary risks that threaten the timeline and can also have serious cost
implications.
• Other factors like natural disasters—hurricanes, fires, floods—could
greatly impact the project timeline as well.
• Legal
• Legal and contractual risks are often due to disputes or differences
in contractual obligations or what is written in the terms and
conditions.
• Other incidents such as use or misuse of intellectual property can also
be considered as a legal risk, especially when patent infringement is a
possibility.
• Environmental
• Sustainability is a huge priority for businesses. It’s critical to evaluate
the risk to the environment created by your business practices or by
third-party suppliers.
• Environmental risks include the organization’s negative impact on
water, air, and soil because of improper discharge or release
of emissions and other forms of waste.
• Sociopolitical
• The regulatory landscape can change in an instant—most times due to a
new government or to increasing awareness of inequitable social
conditions. Many companies experience difficulty in adapting to these
changes and are forced to reevaluate sourcing efforts.
• Human Behavior
• Employee behavior risks are the most difficult to assess. Risks can
occur when you don’t have the right people with the right knowledge to
do the job. Sometimes the project or activity may be put in danger due
to an illness or injury of key personnel.
Risks can differ from industry to industry, but here are our top risks to
look out for in 2024:
• Top 5 Risks in the Transportation and Logistics Industry
Risk 1: Accidents and Collisions
• Accidents and collisions in transportation can arise from various
factors: human error, equipment malfunction, poor infrastructure, or
adverse weather conditions.
• Statistically, the World Health Organization reports that approximately
1.3 million people die each year as a result of road traffic crashes,
making it a leading cause of death globally.
• Impact
• Human Casualties: The most immediate and tragic consequence of
these accidents is the loss of life and physical injuries. This not only
affects the individuals involved but also their families and communities.
• Property Damage: Accidents can lead to significant damage to
vehicles, infrastructure, and cargo. This results in repair costs, insurance
claims, and potential loss of goods.
• Economic Implications: Beyond the direct costs of repairs and medical
bills, accidents can lead to delays in delivery, increased insurance
premiums, and potential legal liabilities. This can strain businesses,
disrupt supply chains, and increase costs for consumers.
Risk 2: Infrastructure Wear and Tear
• Infrastructure, like roads, bridges, railways, and ports, deteriorates over
time. Factors like heavy usage, environmental conditions, and lack of
maintenance can accelerate this wear and tear.
• As infrastructure ages, it becomes less reliable and can pose significant
risks to the transportation and logistics industry.
• Impact
• Delays: Worn-out infrastructure can lead to bottlenecks, slowing down
the movement of goods and people. This can result in missed delivery
windows and extended transit times.
• Increased Maintenance Costs: Aging infrastructure requires more
frequent repairs and maintenance. This leads to higher costs for both
public authorities and transportation companies, which might be passed
on to consumers.
• Potential Accidents: Compromised infrastructure can be hazardous.
For instance, potholes can cause road accidents, and weak bridges
might collapse. Such incidents not only lead to direct damages but also
pose severe safety risks to the public and transport operators.
 Risk 3: Environmental Hazards
• Environmental hazards, such as hurricanes, floods, earthquakes, and
wildfires, can severely affect transportation routes.
• These natural events can damage or block roads, railways, ports, and
airports, making them impassable or unsafe for use.
• Impact
• Disruption in Supply Chains: Natural disasters can halt the movement
of goods, causing delays or complete stoppages.
• This disrupts supply chains, affecting everything from local deliveries
to international trade.
• Damage to Transportation Mediums: Environmental events can
damage vehicles, ships, trains, and aircraft. Infrastructure like bridges,
tunnels, and tracks can also be severely affected, requiring extensive
repairs or replacements.
• Increased Costs: Natural disasters can lead to a spike in transportation
costs. This is due to rerouting, increased demand for alternative routes,
repair costs, and potential price hikes in affected goods and services.
 Risk 4: Cybersecurity Threats
• As the transportation and logistics industry increasingly relies on digital
tools and platforms for operations, it becomes more exposed to
cybersecurity threats.
• From GPS systems to cargo tracking software, the digital landscape
offers efficiency but also opens doors to potential cyber-attacks.
• Impact
• Data Breaches: Hackers can access sensitive information, including
customer details, shipment data, and financial records. This not only
compromises privacy but can also lead to financial losses and damage
to reputation.
• Disruption of Operations: Cyber-attacks can halt operations by
targeting software systems, causing delays, and affecting the timely
delivery of goods and services.
• Potential for Sabotage: In extreme cases, malicious actors might not
just steal data but also sabotage operations. This could be by altering
shipment details, rerouting goods, or even causing physical harm
through the manipulation of digital controls.
 Risk 5: Regulatory and Compliance Challenges
• The transportation and logistics industry operates in a
complex regulatory environment. As countries and regions update and
change their rules, companies must adapt quickly.
• These regulations can pertain to safety standards, environmental
considerations, customs procedures, and more.
• Impact
• Fines: Failure to comply with regulations can result in hefty fines.
These financial penalties can significantly affect a company's bottom
line.
• Operational Disruptions: Non-compliance might lead to delays. For
instance, if a shipment doesn't meet a country's import regulations, it
could be held at customs, causing disruptions in the supply chain.
• Potential Loss of Licenses: In severe cases of non-compliance,
companies risk losing their operating licenses. This could halt
operations entirely and damage the company's reputation.
How to Mitigate These Risks
• 1. Proactive Safety Measures
• Training: Regularly train staff on safety procedures in transportation
and logistics, ensuring they are equipped to handle emergencies and
everyday operations safely.
• Equipment Upgrades: Invest in modern equipment that meets or
exceeds safety standards to reduce the risk of malfunctions and
accidents.
• Safety Protocols: Establish and enforce strict safety protocols, ensuring
that they are updated as new risks emerge.
2. Infrastructure Investment
• Regular Maintenance: Schedule routine checks and maintenance to
identify and rectify wear and tear before it becomes a significant issue.
• Upgrades: Invest in infrastructure upgrades to ensure transportation
routes and facilities are safe, efficient, and meet current demands.
3. Preparedness for Environmental Hazards
• Contingency Planning: Develop plans for alternative routes and
methods of transportation in case of environmental disruptions.
• Risk Assessment: Regularly
assess vulnerable points in your transportation chain and develop
strategies to minimize potential damages from natural disasters.
 4. Cybersecurity Best Practices
• Regular Updates: Ensure all software and systems are updated
regularly to protect against known vulnerabilities.
• Employee Training: Educate employees about cybersecurity threats
and best practices to prevent breaches.
• Multi-layered Defense Strategies: Implement a comprehensive
cybersecurity strategy that includes firewalls, encryption, and intrusion
detection systems.
5. Staying Updated on Regulations
• Continuous Monitoring: Regularly review and monitor changes in
regulations across all regions of operation.
• Lobbying: Engage in transportation and logistics groups to influence
and understand upcoming regulatory changes.
• Compliance Checks: Conduct routine checks to ensure all operations
are in line with current regulations.
• Tracking and Managing Risk
• It can feel overwhelming to deal with monitoring and managing risk to
your company’s international supply chain because unknown dangers
can impact different sections of this chain. However, there are a few
key steps you can take to track and limit these risks.
1. Measure your carrier’s performance. Whether you use a common or
a contracted company to transport your products to your customers, you
must ensure this carrier consistently performs to a high level.
• Check individual metrics like transit time, shipping time, loading and
unloading time, number of carrier delays and the average shipping
costs.
[Link] revenue loss during unforeseen events. Tracking the total
amount of revenue your company loses due to one of these unknown and
unforeseen dangers can give you the information you need to develop a
more robust risk management framework.
[Link] a risk index value method. When you’re drawing up a new
risk management strategy for your company, you should take each
potential risk in turn and assign it a score that reflects the level of danger
it poses to your international supply chain.
4. Set up regular reviews. Once you’ve set up a comprehensive and
effective risk management strategy for your business, ensure there’s a
governance structure in place that analyzes and reflects on relevant risks
to your supply chain.
[Link] a standard of employee behavior. Try to define your
standards when it comes to your employees’ behavior. The more respect
that each employee has for your company, the more responsible they’ll
feel for responding actively and effectively to any threats to the
international supply chain.
6. Invest in an integrated logistics platform. The best way to improve
your international supply chain connectivity is to invest in an integrated
supply chain management program or software.
• These online platforms allow every stakeholder in your supply chain to
access and share information, making the whole process transparent
from the initial supplier to the paying customer.