Supply Logistics

views updated


At the heart of any effective supply logistics strategy is communication and collaboration with all your suppliers. This involves constant interaction via extranets, online business-to-business exchanges, and other specialized communication networks, as well as the sharing of databases, order schedules, and even design planning documents, preferably over real-time electronic networks. Collaboration, in other words, is the key to success in optimizing your supply logistics. Perhaps the most ambitious goal for e-commerce entrepreneurs looking toward the most effective logistics strategy was to move their supply logistics beyond pure overhead to a source of actual strategic advantage over their competitors.

First, you need an accurate assessment of your overall logistics costs. This seems obvious, but according to Industry Week, this simple measurement often remains elusive to companies, concerned as they are simply with getting their supplies ordered and delivered. In order to accurately assess your costs and justify them, the optimal solution is complete transparency across the entire supply chain.

Supply chain management links all elements of the supply chain, from manufacturing and shipping partners to order schedules and inventories, in a central system. This system can be monitored from several different angles and shared with all relevant parties for optimal efficiency. Supply chain management will allow you to make the right decisions at the right time as to when to order and ship supplies for your product lines. This increases speed and diminishes costs due to excess shipping and inventory, as decisions are based on the most comprehensive supply and demand knowledge. In an age of increased outsourcing and complex webs of business relationships in the global economy, supply chains have become particularly convoluted, making them difficult for individual firms to control. The proliferation of electronic business relationships, in the forms of extranets and online business-to-business exchanges, thus makes supply chain management both tempting and technically feasible.

The layers of potentially useful information are many. By integrating comprehensive databases of components into the supply chain management system, your firm can cut costs at almost every corner. For instance, by detailing all the components that goes into a completed product, you can monitor each individual component to determine its optimal production and shipping level, and determine which components are moving below peak efficiency. Such information can help bring your entire supply chain into equilibrium for the greatest level of profitability.


A wide variety of tools for streamlining supply logistics are on the market, from comprehensive supply chain management suites to applications for specific tasks, such as transportation management systems (TMS), warehouse management systems (WMS), demand planning and scheduling (DPF) systems, and advanced planning scheduling (APS) systems. Web-based applications can track supply shipments through entire supply chains to allow just-in-time delivery, where supplies roll in only when they are absolutely needed, greatly reducing inventory.


Depending on your personnel, time, and resources, you may also opt to outsource your supply logistics operations to a third-party, and there is no shortage of such firms. Third-party logistics (3PL) providers cater to all kinds of companies and needs, some taking on only limited functions, others taking over logistics operations entirely.

As with any outsourcing relationship, 3PL contracts try to weigh the disadvantages of the loss of direct control against the benefits of the third party's expertise in the field. Ultimately you need to determine whether the overall cost of a third-party relationship is worth that loss of control, and whether those expenses are made up in lower costs elsewhere. 3PL firms need to demonstrate that they add value to your company beyond simply taking over the hassle of coordinating the supply chain for you. If you choose to contract with a 3PL, it's important to maintain your focus on generating the maximum return on investment, which calls for a high level of transparency in the 3PL's processes so that you can see that the cost and time savings you're seeking are being realized.

In addition to savings in labor, inventory, and transportation and the reduction of cycle time in the supply chain, 3PLs can add value by employing higher levels of supply chain visibility, flexibility in their scheduling, high-level technologies and logistics process innovation, economies of scale that allow for greater leverage in relationships with shippers and transportation companies, and global access.


To the extent that your company procures supplies from international affiliates, you'll need to either develop or contract with a 3PL that enjoys mature international relationships and stable transportation operations. In a competitive e-commerce environment where every dollar counts, the boosted cost of shipping freight, longer hours spent at borders, and higher insurance premiums add up in a hurry, adding greater pressure to streamline your supply logistics operations, particularly where international commerce is concerned.


Dolan, Kerry A. "The Detour Economy." Forbes, February 18, 2002, 52.

Drickhamer, David. "Rough Road Ahead." Industry Week, April 2002, 59.

Hannon, David. "Internet Connections Make Shipments More Visible." Purchasing, November 15, 2001, 47.

Jedd, Marcia. "The Value of E-tools." Logistics Management and Distribution Report, April 2002, S50.

Konicki, Steve. "E-logistics Gets the Kinks Out of Supply Chains." InformationWeek, November 19, 2001, 64.

LePree, Joy. "Take the Right Path." MSI, January 2002, 52.

Lynch, Clifford F. "Price vs. Value: The Outsourcing Conundrum." Logistics Management and Distribution Report, February 2002, 35.

McIlvaine, Bill. "Going After Value." EBN, February 25, 2002, 27.

About this article

Supply Logistics

Updated About content Print Article