- What are logistics?
- Material flows
- 1 The technical dimension
- 2 The functional dimension
- Information flows
- What is the role of logistics in a company?
- Logistics: a central role in the company
- Logistics as a strategic lever
- Logistics as a competitive tool
- The logistics function in an SME / VSE / ETI
- The challenges of good supply chain management in an SME / VSE / ETI
- The supply chain of a small or medium-sized business in detail
- SMEs and VSEs: supply chain management, a lever for growth and profitability
Customer satisfaction is essential to a company’s long-term success. A major part of this satisfaction comes down to logistics: the company’s ability to organise its material flows to meet the needs of its end customers. Logistics is not just a service: it is a strategic function, both a lever for internal optimisation and a tool for competitiveness. In this article, we propose a precise definition of the term, before analysing the role of logistics in a company and highlighting its strategic and competitive importance. At the end of the article, we look at the specific case of SMEs / VSEs.
What are logistics?
Logistics can be defined as a company’s activity relating to the control of its physical flows. The aim is to manage resources efficiently so that they can meet customers’ needs. More specifically, it involves coordinating the movement of goods so that they flow continuously from point A (the supplier) to point B (the end customer). The term comes from military parlance. Logistics refers to the organisation of supplies for troops in the field.
This is a sine qua non for ensuring their integrity and enabling them to continue the campaign.
From the outset, therefore, the concept of logistics has had a strategic meaning. However, logistics in a company is more complex than simply transporting goods. It includes both material and information flows.
There are two material dimensions to logistics:
1 The technical dimension
This covers day-to-day activities such as :
- transporting goods,
- and delivery to distributors or customers.
It takes into account the use of vehicles or transport machines, the layout of premises, the management of returns, the security of goods, etc.
2 The functional dimension
This gives logistics a cross-functional role within a company. The aim is to optimise the product flow network in order to guarantee :
- the quality of goods,
- speed of delivery,
- and cost rationalisation.
For material flows to be possible, a company’s logistics must be crossed by information flows connected to all the departments and/or service providers in the supply chain. These flows are essential because they enable :
- place orders,
- confirm receipt of goods,
- or providing information on stock levels at all times.
Information flows are managed by appropriate software that ensures data transmission and good communication between the links in the supply chain. They also help to forecast requirements for greater efficiency.
What is the role of logistics in a company?
Logistics occupies a very special place in a company. Firstly, because it is essential to any organisation that relies on material flows. Secondly, because it is an integral part of the value chain. Finally, because logistics is also a function, in the sense that it cuts across all departments.
Logistics: a central role in the company
The role of logistics in a company is therefore central, insofar as it affects all departments and influences the overall performance of the organisation. It is a strategic lever in its own right, an added value.
This is a recent development: thirty years ago, logistics was still considered a secondary function.
Today, however, this function is at the heart of the company’s commercial challenges, as it has an impact on production, delivery, stocks and finances. This central role is even more pronounced in network companies, which outsource a large proportion of their activities. The fewer activities a company takes on, the greater the importance of logistics in its operations.
Logistics as a strategic lever
The role of logistics in a company makes it a strategic lever for better management of production, increased customer satisfaction and cost reduction.
- Better production management. By optimising its logistics function, a company can organise each task in such a way as to handle it more efficiently and save time. This is made possible in particular by the automation of processes. It’s a win-win situation: employees are freed from recurring tasks with little added value and have better tools to work with, while management can control product quality more efficiently and rationalise costs.
- Improving customer satisfaction. By virtue of the fact that logistics in a company is concerned with supplying specific products to targeted users, this process is naturally the lever par excellence for customer satisfaction. A quality product, in stock, arriving in good condition and as quickly as possible, is a guarantee of customer satisfaction and loyalty.
- Reducing costs. Optimising a company’s logistics process helps to make significant savings at every level: purchasing management (comparing product and raw material prices), stock management (reducing invoices by limiting the space needed to store goods), and delivery management (finding distribution solutions at the best price, without cutting back on quality).
Logistics as a competitive tool
The role of logistics in a company is also a competitive one. In a context of “chrono-competition”, the “time” factor has become a major parameter of comparison between service providers, and therefore of satisfaction for end customers. By optimising coordination between the departments involved in logistics, we can pursue a common goal: delivering faster, under the best possible conditions, to satisfy our customers.
The logistics function in an SME / VSE / ETI
Logistics is an important function for any business, whatever its size, including small and medium-sized enterprises (SMEs). Supply chain tasks and operations include procurement, warehousing and transport management.
The challenges of good supply chain management in an SME / VSE / ETI
A detailed analysis of each task shows that logistics plays a crucial role in SMEs, VSEs and SMIs. Supply chain management directly affects the company’s operational performance and competitiveness on the market for its sector of activity.
If you run a small or medium-sized business, it is essential to understand that logistics encompasses all the activities involved in managing the flow of products, information and services, from production to final delivery.
Efficient logistics helps to optimise costs, improve service quality and guarantee optimum customer satisfaction. It encompasses transport planning, stock management, the coordination of suppliers and logistics partners, and the implementation of technologies such as warehouse management and shipment tracking systems. By investing in well-orchestrated logistics, an SME can :
- reduce delivery times,
- minimise storage costs,
- and increase its responsiveness to market fluctuations, thereby contributing to sustainable growth and customer satisfaction.
The supply chain of a small or medium-sized business in detail
The list of key tasks in the logistics of an SME includes :
- procurement. This involves managing the purchase of raw materials, semi-finished or finished products required for the production of the SME’s products or services, or available for direct resale.
- Warehousing. This involves storing unfinished products or products in the course of production.
- Storage. This involves finished products awaiting delivery to end customers. Stock management controls stock levels to avoid overstocking or shortages.
- Order management. Order management must be as digital and automated as possible to facilitate real-time tracking at every stage.
Transport. This covers the tasks of the Supply Chain’s entire transport function: selecting the right mode of transport (road, air, river or sea, grouped orders or not, etc.), planning shipments and tracking deliveries to their final destination, and managing the means of transport to move goods efficiently and economically.
- Distribution/delivery. Delivering the order – i.e. the right product, on time, to the right place – is one of the most important links in the chain, which is carried out either by logistics partners, carriers or internal company resources.
- managing product returns. Supply Chain Management (SCM) must be capable of managing product returns (defective, delivered to the wrong place, etc.) in record time, via traceability at every stage, in order to reduce handling costs and increase customer satisfaction.
Generally speaking, logistics in an SME aims to :
- improve operational efficiency,
- reduce costs,
- minimise delivery times,
- guarantee customer satisfaction,
- boost the company’s competitiveness in the marketplace.
SMEs and VSEs: supply chain management, a lever for growth and profitability
The logistics function is highly exposed to variability, especially within SMEs and VSEs with limited human and financial resources. Companies need to be agile and responsive if they are to grow, be profitable and competitive. This variability can be found in :
- and the seasonality of the company’s products, for example.
In a year of sluggish growth such as 2023 for small and medium-sized businesses, working on the management of the logistics function and reducing costs is a major area for optimisation. As a result, the management of logistics tasks and the way they are interlinked provides the best possible service for each manufacturing and then sales operation, and becomes a real strategic lever for your company:
- optimising physical flows,
- regain control over transport,
- services (supply and delivery),
- develop upstream management (forecasting, negotiating transport rates, choosing vehicles, etc.) for each link in the supply chain,
manage incidents and returns as soon as they occur,
- optimise performance analysis and decision-making.
For your SME, digitalising the supply chain is a matter of course. The search for flexibility is part of this competitive approach. The supply chain must adapt to the growing need for agility, which is essential if you are to maintain your competitive edge.
It’s all about placing orders at the right times to respond to consumer needs in the right way.
To conclude on logistics in a company (VSEs, SMEs, ETIs and large groups)
The role of logistics in a company is both central and cross-functional.
Nevertheless, this function is always part of a more global process, that of the supply chain. It is therefore the entire supply chain that needs to be optimised (via Supply Chain Management) to deliver optimum results. Implementing a digital solution such as a TMS (Transport Management System) is part of this approach. DDS is very involved with small and medium-sized businesses, and has listened carefully to the difficulties they encounter in terms of logistics, and has developed its TMS Free offering in response. Discover it now.