Retail logistics concerns itself with the flow of merchandise or products from the source of supply or manufacturer to the retail outlets where they can be purchased by consumers.
Large retailers deal in several types of products. As products are not sold at the location where they are manufactured, every big retailer is required to systematically plan the movement of goods from the manufacturing plants to the warehouses where they are safely stocked in storage containers and later delivered to the stores where they are purchased by customers. They need efficient packaging and delivery services offered at competent prices.
Elements of Retail Logistics
Following are some components of retail logistics:
These can be distribution centres or warehouses or the stock rooms of retail stores. These facilities are managed by retailers to maintain inventory levels in anticipation of increase or decrease in demand.
Regardless of which type of product a retailer deals in, they need to hold stock to some extent. The only question is the level of inventory or amount of stock which needs to be held for each type of product. The location at which this inventory is stocked is important to ensure that immediate increase in demand can be met.
From production to consumption, every product needs to be transported in some manner at every stage of the product cycle. Therefore, a transport operation is undertaken by every retailer which may involve different sizes of vehicles and containers and different forms of transport. Along with this they even need to manage the availability and scheduling of vehicles and drivers.
Unitisation and Packaging
Products are generally purchased by consumers in small quantities. The decision to purchase a product is often made on the basis of product presentation and packaging. Retailers place a lot of focus on developing products in a way that they are easy to handle in terms of logistics. Additionally, their handling and packaging should not cost them too much and upon transportation the products must not lose value or their ability to be sold.
Having relevant information is necessary to ensure that the products reach the locations where the retailers want them to be placed in the right condition. Relevant information includes stock, volumes, movements, prices and most importantly demand and supply.
At every stage of the product journey, retailers are concerned with collecting these bits of information to better understand the journey of a product and to make improvements in their logistics operations to make them more effective and efficient.
Rapid response is related to the ability of a firm to satisfy the requirement of a customer in a timely manner. Orders are executed on the basis of shipment-to-shipment instead of stocking the goods and supplying them strictly according to demand. By using accurate information, logistical operations are postponed to the latest possible time and rapid delivery is executed according to the needs of the consumers.
Any unexpected event which disrupts the system is known as variance. Events such as disruption in manufacturing, damage caused to goods in transit, delays in receiving orders and delivering goods to an incorrect location are some examples of events which can disrupt logistical operations.
Using high cost transportation or keeping safety stock are some traditional solutions to deal with variance. However, these solutions drive the operating costs higher and therefore they have been replaced by information technology systems which help us to control logistics in an appropriate manner.
Benefits of Outsourcing Retail Logistics
Most large retailers are aware that they are not equipped with the resources that are needed to handle transportation of products. It may also not be profitable to add logistics to their existing list of responsibilities. Therefore, they outsource the task of logistics to a third party logistics company. Besides having a meaningful impact on the growth of your business, following are some benefits of having an efficient logistics operation in place:
Avoid Long Term Leases
Most logistic companies offer flexibility in terms of pricing. This flexibility is necessary for most businesses as they are quite likely to experience a surge in demand or slow periods. It allows them to adjust cost accordingly and helps them adapt to their changing needs.
It is especially true for businesses which deal in seasonal products. During the off-season times, the business is slow and they may not need logistics services as frequently as they need them during the season times.
Renting or buying your own warehouse space gives you more control but also lowers your profitability, which is why it is not advisable. As costing is one of the factors which determines the efficiency of logistics operation, locking working capital into long-term fixed warehouse leases is unnecessary.
To handle logistics by yourself, you will need to hire additional staff as you scale. Staff management takes time and commitment. If your business is still in its nascent stages, these can be huge responsibilities.
Besides having to rent a warehouse space, the additional responsibility of hiring and managing staff further increases the costs of handling logistics. By outsourcing the work to a professional logistics company, you will find the time that you need to invest into your business to make it grow.
The chances of a business being successful increases when the people in important positions exclusively handle responsibilities which fall in their area of expertise. To increase the efficiency of their logistics operation, they need to entrust this responsibility to professionals which can handle it in a better way. By outsourcing the function of logistics you will be able to devote more time to your primary skills which will be more profitable for the business in the long run.
Hiring a logistics company may be a costly affair initially, but in the long run it will save you money. A professional logistics company which operates at a large scale is likely to be highly efficient in terms of packaging and shipping.
By having a sound knowledge of retail logistics, it is possible for a business to achieve perfect balance between supply and demand. It helps businesses to create a positive image of their brand in a highly competitive marketplace.