What is logistics planning? Importance and best practices
Effective logistics planning in business is about getting the right products to the right customers at the right time. While the goal is simple, the work of logistics planning can be complex, involving multiple business areas and processes. This guide covers the different elements of logistics planning, along with benefits and best practices.
What is logistics planning?
Logistics planning aims to optimise every part of your supply chain.
Depending on your business structure and industry, it can involve manufacturing, procurement, packaging, ordering, warehousing and distribution.
The broad goal of logistics planning is to identify inefficiencies in and between these systems and processes, so your business can supply customers with the products they need more efficiently.
Why is logistics planning important?
Logistics planning is important for day-to-day operations and sustained business growth. Effective logistics planning can help you improve operations, reduce waste, boost sales, and minimise errors.
In the long term, it can protect you from unexpected disruptions or business challenges — for example, having a strong, transparent supply chain with multiple suppliers and a range of transport partners is valuable if supply chain issues pop up.
Different types of logistics
There are several types of logistics to consider, including procurement, warehousing, packaging, inventory management, distribution and reverse logistics.
Procurement
Procurement is the process of sourcing and purchasing products or raw materials from your suppliers.
Logistics planning in this area can include negotiating sales terms, managing budgets, and requesting tenders or bids for large contracts.
Warehousing
Warehousing is about storing products until they're ready to be sold. Efficient warehousing processes can help you manage your inventory more effectively, minimise delivery delays and reduce waste and carrying costs.
Packaging
Packaging designs and processes ensure that products can be transported, stored, and sold safely, without being damaged or causing damage to others.
It's particularly important in food and beverages — imagine if eggs were sold in soft paper packaging or raw chicken was packaged in leaky plastic!
Effective packaging logistics can boost consumer confidence in your product, reduce wasted product and returns, and maximise profitability.
Inventory
Inventory management is about ordering, storing and tracking the stock and materials that a company needs to produce or sell its goods. Inventory may be one of your largest assets, so it's crucial that you manage it effectively.
Inventory management processes aim to keep the right amount of the right products at the right locations, without wasteful overproduction or over-ordering.
Transportation
Transportation covers the processes involved in transporting and distributing your product. This can include importing goods from overseas, moving product from one location to another, and shipping to retailers or direct to consumers.
Reverse logistics
Reverse logistics are the processes involved when a product comes back to your business from the customer. This can happen as a traditional return to store or warehouse, or as a way of recycling your product at the end of its lifespan.
Challenges of logistics planning
Logistics planning can run into challenges when key processes are disrupted. These interruptions may be planned, making them easier to overcome, or unplanned.
Planned disruptions
Planned disruptions to your supply chain can include:
Supplier closures - temporary or permanent
Software implementations
Manufacturing upgrades
Shifting manufacturing or warehouse premises
Legislative changes
Because you know about planned disruptions ahead of time, you can often minimise the impact on your operations. For example, if you know a supplier is set to close, you can find new suppliers for your product or raw materials.
Unplanned disruptions
Unplanned disruptions include:
Weather events and natural disasters
Outbreaks of disease — the COVID pandemic took many businesses by surprise
Accidents on-site or around your premises
Cybercrime
Civil unrest and war
Unplanned disruption can harm infrastructure, make it difficult to transport or produce goods, damage supplies, halt or delay shipping and delivery, or knock out key business software or machinery.
While it's harder to plan for the unexpected, you can put step-by-step actions in place that lay out how you will respond in those scenarios.
Logistics planning best practices
Best practices for logistics planning include using demand forecasting to drive decisions, distributing inventory across your locations, streamlining inventory management, making the most of software tools, and using multiple transport providers.
Utilise demand forecasting
Demand forecasting involves using historical data and modelling to predict demand over time.
It's a powerful tool for logistics planning optimisation, helping you ramp up production and delivery as needed, get specific products to where they're required, and reduce production of less desirable products.
As a result, you'll see reduced waste and overproduction, happier customers and increased profitability.
Distribute inventory across locations
There's more than one way to distribute inventory. Many businesses choose to warehouse all their products at a central location, but it can be more effective to spread inventory across multiple locations, particularly if your stores or warehouses are far apart.
When you store your inventory across a wider network, it can help you fulfil orders more quickly and lower transit time.
Coupled with smart inventory management and demand forecasting, it can ensure you've the right inventory in the right location before customers order it.
Streamline inventory management
Inventory management is crucial to logistics planning. Streamlining this part of your business means continually assessing inventory levels and sales, shifting inventory to fit location needs, improving ordering and delivery processes, and getting rid of unwanted stock.
The goal is 'just right' inventory management that keeps stock on hand without overbuying or excessively increasing your warehousing costs.
Leverage technology and software
Technology and software are essential for managing a modern supply chain — the complexities of ordering, tracking and delivery are too difficult to manage manually, especially as your business grows.
Software can help with everything including inventory management, distribution and logistics and manufacturing processes.
Use multiple transportation providers
If transport goes wrong, it can slow down your whole operation and damage your reputation with customers. Using multiple transportation providers spreads the risk, so you've backup options if one provider is unavailable.
Benefits of effective logistics planning
The benefits of effective logistics planning include reduced costs, improved customer service and increased profitability.
Reduced supply chain costs
The goal of logistics planning is to reduce supply chain costs by cutting inefficiencies and closing any gaps.
With a more effective setup, you can reduce last-minute delivery costs, achieve 'right size' ordering that meets customer needs without overbuying, and create a diversified supply chain that doesn't rely on single suppliers or delivery companies.
The results are quicker, more consistent delivery and reduced procurement costs.
Improved customer satisfaction
Improved customer satisfaction is another advantage of good logistics planning. Your supply chain and inventory management systems all have a single goal: to get products to customers.
If you can do that quickly and consistently, you'll have fewer delayed and cancelled orders, higher sales volumes, and fewer disappointed customers. In the long term, customer satisfaction becomes customer loyalty, which can pay off in sales revenue and ongoing profitability.
Increased business revenue and profits
Logistics planning also helps increase business revenue and profits by reducing unsold stock and increasing the sales volume of stock at higher prices.
In essence, by understanding customer demand and optimising your delivery systems, you ensure that you get product in front of customers when and where they want it.
Logistics planning FAQs
What are the four main areas of logistics planning?
The four main areas of logistics planning are procurement, warehousing, inventory management and delivery/transport. These represent the key steps in the journey of a product from manufacturing to sale.
What are the different levels of logistics planning?
The different levels of logistics planning are strategic, operational and tactical.
Strategic
Strategic logistics planning is about setting broad business goals for logistics planning, laying out the key elements of your supply chain, and creating KPIs to measure progress.
Operational
Operational logistics planning involves putting systems in place to optimise and streamline your supply chain.
This could mean improving internal business processes, implementing new software or upgrading to an ERP (enterprise resource planning) system, sourcing new suppliers or transport partners, or implementing new inventory management processes.
Tactical
Tactical logistics planning is the ongoing process of supply chain improvement, focusing on identifying gaps and inefficiencies, making small changes, and tracking supply chain performance to make sure it's working well.
Leverage logistics tech with MYOB
Better logistics planning doesn't just get your product from manufacturer to customer — it ensures that products align with demand, are delivered promptly, and sold at a price that boosts profitability for your business.
With an ERP platform like MYOB Advanced Business, designed for inventory management, manufacturing, distribution and stock tracking, you can optimise your supply chain and hook into those business benefits.
Contact our ERP solution specialists to find out more.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.