Retail Logistics Concept, Functions and Challenges
All of the strategies, functions, and procedures required to transfer products from Point 1 to Point 2 are referred to as retail logistics. Philip Kotler (2001) defines logistics as “planning, implementing and controlling the physical flows of materials and final goods from point of origin to point of use to meet customer’s need at a profit”. In order to satisfy consumer expectations, the system will make sure that the appropriate product is delivered to the right client at the right time.
Inbound and Outbound Logistics
Inbound and outbound logistics are two separate kinds of retail logistics. Materials or completed items are sourced by retailers and moved from a source to an internal destination such as a warehouse, fulfillment center, manufacturing plant, or retail shop in order to be added to inventory via the process known as “inbound logistics.” Comparatively speaking, outbound logistics refers to the movement of goods from a retailer’s own facilities to the final customer. Outbound logistics may be seen as a continuation of incoming logistics.
The Logistics Mix and Key Functions
The logistics management task is concerned with managing the components of the ‘logistics mix’. These functions are essential because they result in increased productivity, lower costs, higher production rates, and better inventory control when executed efficiently.
- Order Processing: Any delivery process can only function if there is an order processing system in place. A critical part of logistics functions is checking the order for changes in terms, payment terms, and the availability of stock.
- Inventory Management: All retailers hold stock to some extent. Inventory control requires information for maintaining inventory records, ensuring safety, predicting demand for goods, and reordering stock.
- Warehousing: Retailers manage the warehouse or stock room facilities to enable them to keep stock in anticipation of, or to react to, demand for products. At the warehouse level, handling, packing, and shipping workflows are established.
- Transportation: This is the most crucial and essential function of logistics in supply chain management since it allows items to move from the provider to the buyer. Transportation consumes 60 to 70% of logistics costs, particularly for low unit-priced and mass-consumed products.
- Unitization and Packaging: Retailers are concerned to develop products that are easy to handle in logistics terms and do not cost too much to package, yet retain their selling ability on the shelves.
- Communications: In order to get products to where retailers need them, it is necessary to have information, not only about demand and supply, but also about volumes, stock, prices and movements.
Retail Logistics Market Outlook
According to the Global Logistics Market Report and Forecast, the industry continues to show significant growth potential:
| Metric | Value / Period |
|---|---|
| Global Logistics Market Value (2021) | USD 9,525.1 billion |
| Expected Market Value (2027) | USD 13,326.3 billion |
Challenges in Modern Retail Logistics
The globalisation of supply networks is accompanied by an increase in their level of complexity. While broadening retail logistics operations to a worldwide scale has aided many companies to reduce costs, it has also introduced more risk in the form of disruptions to supply chains. Retail logistics faces a significant risk when there is a scarcity of available workers, particularly in the transportation industry. Furthermore, since large retailers’ rivals are selling the same products at ever-lower rates, many retailers are feeling pressured to do the same without compromising their ability to efficiently fulfil customer orders.
The Role of Technology
Analytics that are powered by data and artificial intelligence can make predictions based on a large number of variables and calculations, which enables real-time decision making and the detection of early warning signs of problems. This makes it possible for supply chains to respond proactively rather than reactively to any problems that may arise. Additionally, blockchain technology shows a lot of potential for a variety of businesses as the logistics industry continues to boom over the years.
