An Overview of Logistics, Reverse Logistics and Delivery in Supply Chain Management 

While the media’s interest in the supply chain has brought the term into the general lexicon, there has been some confusion about its real meaning and how the terms logistics and delivery fit together. Natural disasters, geopolitical risks and other black swan events have made the role of logistics in supply chain management more important than ever in B to B Fulfillment and B to C Fulfillment.

What is Logistics and Delivery?

According to the Council of Supply Chain Management Professionals, logistics is “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements.”

Which means logistics is the portion of the supply chain that primarily deals with the movement and storage of the materials used in product creation. While a supply chain is the entire network of people and companies who are involved with every activity performed in the creation of a product.

It is interesting to note that at one time, the term logistics was chiefly used as a term describing the military science of maintaining an army’s supply lines. The most successful military leaders for example, Alexander, Hannibal, and

Wellington, often developed the best systems of transporting goods and weapons to their troops on the front lines.

The use of cutting-edge logistical technologies is just as crucial to the success of modern businesses as earlier methods were to military campaigns, which were the most technologically advanced enterprises of their day.

What are the Main Components of Logistics?

Because the implementation of a smooth-running logistics process is so critical to a positive customer experience, and thus the bottom line, it is obvious that all aspects of the process must perform at peak efficiency. From shipping charges to fuel costs and warehousing fees, every aspect involving a company’s transportation and storage flow impacts whether or not logistics will attain its main goal – ensuring that the requisite resources are available to the supply chain at the right time. The following are key elements of logistics that work in unison to provide that result.

Inbound Transportation – This term refers to the shipment, storage and distribution of goods or materials from a distributor or supplier to a company. The materials are then stored and routed to production as needed.

Outbound Transportation – Deals with the flow of finished parts or products from a company to the customer. The role of delivery and logistics in supply chain management begins the moment a business receives an order. Then it determines if the product is in stock and optimizes the transfer of the product to whichever warehouse or distribution center will package and ship the order to the customer.

Warehousing – Basically, warehousing is the secure, organized storage of inventory or information within a building or group of buildings, that allows companies to track items and determine key facts about the items, such as: arrival date, location, length of time on-hand or total quantity available.

The traditional brick-and-mortar retail model used warehouses to store products until shelf space opened up at the store. The ecommerce model has an item remaining at a warehouse until an order is placed, when the product is shipped directly to the end-user.

When 3PL providers have warehouses that are strategically located worldwide, they can offer merchants a highly responsive consumer experience for their customers.

Order Fulfillment – Order fulfillment deals with the process of getting the product to the customer, after the placement of the order. From the process of storing the items to the packing and delivery to the consumer, order fulfillment is a function of outbound logistics. It may be handled in-house or outsourced to a 3PL omnichannel logistics provider.

In-house order fulfillment means that the merchant or manufacturer has their own warehouse or distribution center and uses their own employees to pick, pack & ship the items. When a company outsources order fulfillment services, they use a 3PL omnichannel service provider that has the economies of scale, dedicated facilities, equipment & technologies, and trained workforce to more efficiently carry out the order process. This may not only save the merchant time and money but enhance customer journey optimization.

Fleet Management – is a self-explanatory term but can be quite involved. It deals with the management of every private or commercial vehicle, airplane or UAV, rail car or ship used within a supply chain. Since transportation is such an integral component of today’s manufacturing processes, the efficiency and productivity of all modes of transportation rely on the close monitoring and management of staff, lease agreements, licenses, vehicle maintenance, compliance with government regulations, and accident management.

Inventory Management – the goal of inventory management within the logistics process is to ensure that enough inventory is on-hand to satisfy customer demand (the downstream phase of inventory management), and that enough raw materials or components are in-stock to satisfy production demands (upstream phase of inventory management). This availability of product or materials must be accomplished at the lowest possible cost so that the company may remain profitable. Those two types of stock control require three steps of inventory management:

1. Purchasing Inventory involves the purchase and transportation of raw materials or components.
2. Storing Inventory is a crossover term as it can refer to the storage of either raw goods or finished goods.
3. Profiting From Inventory allows companies to closely control the products that they sell, through the release of finished goods to fulfill orders and the delivery of products to consumers.

Materials Handling – moves goods within a storage area, logistics warehouse or distribution center. The method of transfer can be manual (hand-picked), automated (robotics) or semi-automated (lift-trucks).

Demand Planning – This refers to the process of collecting & examining all data about the factors that influence product demand. Natural disasters, weather patterns, geopolitical issues, labor force issues and fashion trends are some of the internal and external factors that can influence product demand. Comprehensive demand planning can affect revenue forecasts, and ultimately the profitability of a business, by ensuring that inventory is in perfect alignment with customer demand.

Are there any other Components of Logistics? 

Reverse Logistics – The simple definition of Reverse Logistics is that it is the process of handling customer returns, which basically reverses the Outbound Logistics procedure. It moves the product from the customer to the seller.

Sounds easy, right? Not when you look at the volume of returns and the fact that some products are returned because the item is damaged. While the return rate at brick & mortar stores generally ran under 10% in 2021, the online return rate was at least 30% for the same time period.

Reasons for returns vary, but when one considers that 20% of consumer returns are based on the premise that the item is damaged, the seller must recognize that not all returned product can be put back into inventory. The goal of an optimized reverse logistics process is to regain the value of the merchandise or dispose of it in the most economical and environmentally responsible manner possible.

There are Five Steps Involved in a Quality Reverse Logistics System

1. Process the Return – As soon as a customer indicates that they want to return a product, the return process begins. This step will normally involve return authorization, a description of the item’s condition, refund approval, credit processing, returns receipt for shipment and product replacement if warranted. Three PL providers use RMA (Return Merchandise Authorizations) management systems to automate and control the process for merchants.
2. Implement the Return to Inventory – When a product is returned to the merchant, the item should be inspected, and a determination made as to whether or not the product can be returned to inventory as-is. This is known as return product review and triage. If the item is damaged, then the decision must be made as to the disposal of the goods. The item can be repaired, refurbished, recycled or scrapped. If the product is repaired or refurbished, it may be put back into inventory, where it can then be sold as new or as a return.
3. Keep Returns Moving – This is most important when dealing with returned items that can be repaired. All returns should be dealt with promptly; either discarded, recycled or repaired. Keeping goods in motion reduces daily waste, conserves space, and puts saleable product back into inventory as quickly as possible.
4. Repair – A decision must be made as to whether or not the product can be fixed or if it must be dismantled for any parts that can be sold.
5. Recycle – Any goods that cannot be re-sold, fixed, or re-used should be recycled.

So, those are the steps that must be taken to successfully complete a customer return, but what are the components that help to effect that outcome? Here are some of the reverse logistics components involved:

• Return Policy and Procedure – A Return Policy and Procedure (RPP) is the set of rules for return that a company states to its customers and employees. A clear and fair RPP if adhered to consistently, builds trust with customers.

• Returns Management – A returns management program not only deals with the actual return, but in ideal cases helps to avoid returns.

• Packaging Management – This component of reverse logistics concentrates on repeat-use or reusable packaging and packing materials, as a way to reduce waste & disposal costs. It also helps a company to reduce the costs of new packaging and shows consumers that the company is purposefully committed to sustainability and environmental issues.

• Unsold Goods – Rather than addressing the issue of consumer returns, this component deals with returns from retailers to manufacturers or distributors.

• Delivery Failure – When a shipment fails, for whatever reason, the package is often sent to a sorting center or to the merchant. When this happens, a quality fulfillment center will have the means to identify the problem and re-send the product.

• Product End-of-Life – Some EOL (End of Life) products that are of no further use to a customer pose a possible environmental problem if disposed of incorrectly. These goods should be returned to the manufacturer where they can be either recycled or disposed of properly.

• Remanufacturing or Refurbishment – This component may also involve the process of reconditioning, which is the dismantling, cleaning and reassembly of the product (with no new parts or repair involved). During this process, items might be repaired or refurbished, or even cannibalized for parts if more than reconditioning is required.

• Repair and Maintenance – Some product agreements include equipment maintenance or repair clauses between businesses and manufacturers. In the case of returned or damaged equipment, the manufacturer sometimes resells the repaired units.

• Rental or Leasing – When manufacturers receive leased or rented equipment that has been returned to them at the end of the lease, they determine which units can be refurbished and either sold, recycled, or rented once again.

What are the Benefits of Reverse Logistics?

As the volume of ecommerce returns increases, the importance of having a top-notch reverse logistics ecommerce provider will also increase. Managing the reverse logistics process can help businesses to minimize the challenges of a customer return and optimize profits.

So, where does Delivery fit into the Logistics Process?

Online shoppers are sometimes confused by the terms “delivery” and “shipping”, thinking that they are the same.  It would be helpful to first define the terms, and to discuss the differences between shipping and delivery.

What is Shipping?

Shipping refers to that portion of the logistics process when a product leaves the manufacturers warehouse and is loaded onto a ship or vehicle that will usually take the product to a distribution center. Once it arrives at the distribution center, the item is ready to be delivered to a customer.

Types of shipping vary, from Full Truckload (FTL) shipping, to Intermodal Shipping, which involves more than one method of transportation. Less Than Truckload (LTL), Flat Bed, Rail Service and International Air and Ocean Freight shipping are other methods of transport that are used to move finished goods to distribution centers.

What is Delivery?

The main thing to remember about delivery is that delivery occurs when a product reaches the consumer or end-user. It is the final stage in the outbound logistics process.

What types of Delivery Services can 3PL Providers offer for eCommerce Merchants?

1. Standard Delivery – usually takes three to five business days and is generally the slowest service.
2. Next-Day Delivery – is often used to transport items after midnight when there is less traffic.
3. Same-Day Delivery – offers same day fulfillment, delivering an order on the same day that the customer places it.

Then What is Last Mile Delivery?

Last Mile Delivery, also known as Final Mile Delivery, describes the delivery process that is the last step in omnichannel supply chain logistics – it gets a finished product directly to a customer. Last mile delivery is a term that has been in the news lately because it is the most expensive and time-consuming segment involved in the transport of a product to a customer.

In rural areas, the long distance and difficult fueling logistics translate into high costs, especially now that fuel costs have risen. And in urban settings, the high volume of traffic, shortage of parking spaces and narrow streets challenge drivers and sometimes delay deliveries. It’s been estimated that 53% of the total costs of shipments are incurred in last mile delivery.

Finding solutions to last mile delivery problems, particularly in global fulfillment, is vital to ecommerce merchants, as many failed deliveries, damaged packages and late deliveries occur during this final stage of transport.

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If you’re considering expanding into global markets, you need the proven technologies and business systems that ModusLink offers. Let ModusLink partner with you to tame the regulatory complexities and logistical problems that international ecommerce can entail.

With ModusLink as your trusted end to end ecommerce solutions provider, you won’t need to know all of the supply chain terminology or cross border logistics services in order to tap into the new revenue streams of global markets. ModusLink will help you to deliver a great CX (Customer Experience) anywhere you want to sell.

Contact ModusLink today for a private consultation with one of our knowledgeable agents.