Logistics process optimization opportunities

If you’re reading this article, it’s probably because you’re looking to gain better control over the flow of raw materials and products in your company. Whether you’re looking to set up a new logistics process or optimize an existing one, we’ll provide you with easy-to-use methods for doing so. Finally, in the last section, we’ll share with you a list of logistics optimization opportunities to seize!

Before sharing optimization methods and opportunities with you, we’ll start this article with a look at the fundamentals of logistics! If you’re already familiar with them, go to the last section. Enjoy your reading!

What are the 4 main logistics activities?

What are the 4 types of logistics?

Procurement logistics

Procurement logistics correspond to supply chain management approaches. There are 3 methods:

Just-In-Time

Its objective is to supply, at the customer’s request, what he needs, when he needs it, and in the right quantity, without additional production. It is based on continuous flow, takt time and a pull system.

Anticipating production needs

This involves forecasting future requirements for raw materials, components and finished products, to ensure adequate supply and avoid stock-outs. This anticipation is based on theanalysis of historical demand data and on forecasts, taking into account seasonal fluctuations and market trends.

Safety stock or buffer stock

It consists in producing a reserve to compensate for unforeseen events or disruptions to nominal operation.

Internal or production logistics

It covers all movements and circulations of physical and information flows. Two methods are available:

• Push system by anticipating orders without customer requests.
• Pull System according to customer demand.

In the Push case, there are short lead times but risks of overstocking in the event of poor forecasting. And in the Pull case, there are longer lead times and scaling problems, but smooth storage.

Distribution logistics

Distribution logistics correspond to the relationship with the end customer:

• Direct: the manufacturer distributes its products to end consumers by delivery or in-store.
• At indirect sales are made by independent wholesalers or retailers.

Reverse logistics

Reverse logistics is the management of product returns:

• Returns logistics to put returned products back on sale,
• Waste logistics relating to the disposal of products, if possible through waste recycling.

What is a logistics process?

Definition of a logistics process

A logistics process consists of a series of consecutive and sometimes simultaneous stages, covering one or more of the logistics activities described above.

A process begins with an input event (e.g. receipt of a purchase order) and ends with an output event (e.g. last-mile delivery).

Thanks to a logistics process, a manager must be able to measure various operating indicators such as resources, stock levels, lead times, customer satisfaction, error feedback…

A process may or may not be computerized. To increase efficiency or gather information, a logistics manager can use software. In addition to their core functions, these programs track the progress of the process from stage to stage, automate certain steps, streamline interactions, interconnect existing software…

Numerous families of solutions exist, such as ERP, WMS, TMS, vertical software, workflow software, work platforms… We’ll present them at the end of the article.

Example: steps in the order preparation process

Multiple consecutive or simultaneous tasks make up the order-picking process. Listing these steps has a number of advantages:

• Avoid forgetting a step with each new order,
• Have a written procedure that can be easily shared,
• Easily identify steps that can be optimized.

How to create or optimize a logistics process

Step 1 – Perform a process audit before building or optimizing a logistics process

As a reminder, a logistics process covers one or more of the activities listed above. It can take time to cover all activities. It is therefore important to define the scope of work for each logistics process creation or optimization project.

An audit of the specific process will enable the project manager to list each task within the scope studied, and to interview a representative number of employees involved in this logistics process.

Even if he or she is already familiar with them, the project manager will need to gather the following information from employees:

• Specific actions and tasks carried out
• Tools and software used
• Interactions between players
• Figures, such as the number of times an action is carried out per day, the number of orders to be processed, the time spent carrying out an action, stock variations, product storage time, added value for the end customer, costs, error rate, etc.

This information is gold. It will form the basis for identifying friction and waste, and can easily be shown to decision-makers, who will see the importance of this approach.

Step 2 – Mapping Map the current logistics process (resources, inventory, lead times, tools, software)

A picture is worth a thousand words. At this point, a simple schematic is all that’s needed. Here are the rules to follow:

• An action or task = A collaborator = A tool = A box
• In each box, subject + verb + complement
• Show simultaneous actions
• Bring to light the frictions and waste identified during the inventory.

The diagram below represents a process map, which the project manager can create by hand or with the help of mapping software. For the first versions, doing it by hand on Powerpoint is more than enough. But if the project manager has mastered more advanced modeling techniques such as Value Stream Mapping, he should not hesitate to use them.

Red dots are sources of friction and waste. It can be of many kinds: delay, overstocking, waiting for operators, movement, overproduction, defect, customer satisfaction, non-value-added task, supplier relationship, bottleneck…

Step 3 – Analyze and map the target logistics process

Now that the current operation has been analyzed and shared within the company. The target logistics process can then be built. The project manager will have to propose an ideal version, highlighting business needs (currently covered or not).

An analysis will have to be carried out to build the ideal scenarios. More concretely, for the example of the last kilometer, the following elements can be addressed:

• Traffic conditions (speed, time of day, location, etc.)
• Matching routes to fleet type (to avoid sending a delivery person on a bike on the freeway)
• Relevance of current software functionalities

The target function must also be modeled. Numerous modeling techniques exist. It’s up to the project manager to choose the most appropriate one for his or her needs. The important thing is to show the stages in the logistics process, the people responsible for the actions and the needs for improvement. Don’t hesitate to show existing software as well.

On the diagram, requirements correspond to uses that are not yet in place, or to the need to improve current activities.

Depending on the number of requirements, it may be difficult to process everything at once. Provisional alternatives are possible, so that the process can be tested quickly under real-life conditions. It is therefore important to prioritize requirements according to the company’s possibilities and objectives.

To find out more about process modeling and mapping, we invite you to read this article: Process modeling – Step-by-step guidance

Step 4 – Identify opportunities when creating or optimizing a logistics process

Once the target process has been drawn up and requirements targeted. The project manager can look for families of solutions to meet a specific need.

It’s important not to close any doors, and not to rush headlong into a solution! In fact, one need can be covered by several solutions. Listing all possible and imaginable solutions is essential to finding the simplest solution (which is often the least expensive).

Here we present the main families of tools.

Automation of part of a logistics process

There are two types of automation:

• Automation using physical robots on the supply, storage or transport chain. Pallet conveyors, cobots, stacker cranes, autonomous robots, inventory drones…
• Software automation to eliminate non-value-added tasks, support decision-making, perform complex analyses or manage customer relations. Automatic information entry, indicator measurement, AI-assisted picking, complaints management chat…

In any case, they are levers for improving operational efficiency and reducing costs.

Digitizing activities with software

In the event of a problem, it will be necessary to install or replace software.

There are many possible solutions:

• Visit ERP for managing operational and financial processes
• Vertical software such as TMS (for traceability, fleet management, loading/unloading, delivery optimization), WMS (for warehouse management, resource control, component location, pricing), RTO, STS, IMS and more…
• Work platforms like Lapala

To be more specific, for the last mile for example, these tools can offer the following functionalities: route optimization, fleet management, operations monitoring, incident reporting, proof-of-delivery management, dock management (departures and arrivals), indicator tracking, customer journey, parking space search, connection with other software…

Real-time interconnection and synchronization of internal and external tools

Imagine having real-time access to your logistics flows from any of your software applications! Or imagine being able to effortlessly retrieve data from other company departments (production, research, sales, finance, purchasing…).

Without going into too much detail, by connecting internal business software or even that of service providers, a company will have easy access to valuable information for its operations. Conversely, the various business departments will be able to receive real-time logistical information , enabling them to make the right decisions at any given moment.

In addition, the teams will be able to avoid time-consuming searches for information among employees and service providers.

Implementation of improvement tools to eliminate problems

• 5S (Sort, Set in Order, Shine, Standardize, Sustain) – Approach to organizing a workspace
• Visual management – Implementing visual indicators that can be understood by anyone and that enable errors to be detected.
• Andon – Alert system when an operator finds a problem
• Poka-Yoke – A system that makes it impossible to make an error in a process (e.g. a USB key can only be inserted in one direction).
• Kanban – Managing requests and flows visually, especially for Pull systems
• SMED (Single Minute Exchange of Die) – Making the process flexible to adapt to customer demand
• Flow line – Reorganizing spaces into a logical flow to reduce waiting times and unnecessary travel
• Takt Time – Balancing lead times by activity
• Heijunka – Smoothing resource workloads to avoid work peaks
• TPM (Total Productive Maintenance) – Implementing preventive maintenance

Data processing and analysis through a logistics process

Any event or interaction in a logistics process can be measured. However, it needs to be collected, processed and analyzed. In particular, this data-related work enables you to:

• Control logistics flows at any time,
• Reduced risk of malfunction,
• Streamlined communication between departments by rationalizing events,
• Achieve higher levels of customer satisfaction (quality, delivery times, etc.),
• Cost reduction,
• Informed decision-making.

Risk forecasting and control

Occasional problems can happen (natural disasters, stock shortages, delays, epidemics). There are solutions to mitigate or prevent them

In the target situation, risks identified by the project manager can be anticipated in the logistics process. Each risk may lead to the implementation of various actions.

Some fundamentally change the way a process operates, for example by diversifying the suppliers involved, or by introducing safety stocks…

Others require the implementation of a procedure and a business continuity plan. Once these deliverables have been produced, it is also necessary to train and warn teams.

Step 5 – Search for solutions and software

Step 6 – Sustain with a process sheet

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Now you know all about logistics processes. Now it’s your turn! See you soon for more content!