What is logistics efficiency? Strategies and Best Practices

When orders pile up and deliveries slow down, customer satisfaction tends to plummet. Meanwhile, your logistics expenses continue to climb due to

• Poor road networks limit your reach
• Coordination issues across multiple small vendors
• Address location problems and increase failed deliveries
• Unpredictable inventory demands during sales periods

As online shopping continues to grow throughout India, moving products from your warehouse to customer doorsteps, brands like yours must take serious steps to ensure the efficiency of logistics stays tight.

The following guide outlines practical steps to transform your logistics from a cost centre into a competitive advantage, ensuring both your customers and finances are satisfied.

Understanding Logistics Efficiency

Logistics efficiency is about delivering products to consumers in the most cost-effective, timely, and reliable way. 

It involves the entire supply chain process, from procuring raw materials to the final delivery of products to end customers. 

A brand’s efficiency in logistics is measured by how well it can optimise its 

• Cost reduction: Minimising expenses associated with transportation, warehousing, inventory management, and order processing
• Speed of delivery: Delivering products to customers within promised timeframes
• Quality service: Maintaining accuracy in order fulfilment and product condition

Considering the growth of online shopping in India, where e-commerce is expected to reach $325 billion by 2030, brands that deliver products to shoppers quickly, accurately, and cost-effectively will gain an advantage in the marketplace.

Common Challenges in Achieving Logistics Efficiency

The following are some common obstacles you might face when attempting to optimise your logistics operations. 

Infrastructure Constraints

IBEF reports India's e-commerce logistics account for 13-14% of GDP, which is significantly higher than in many developed economies, where it ranges from 8-10%.

This is a result of significant infrastructure hurdles brands face, such as

• Road network limitations: Despite improvements, many areas still have poor road connectivity, affecting last-mile delivery times and costs
• Port and airport congestion: Delays at ports and airports often disrupt inventory replenishment schedules
• Warehouse availability: Finding suitable warehousing facilities in required locations remains a challenge in many parts of the country

Fragmented Supply Chain

The logistics landscape in the country is quite fragmentation, which causes several inefficiencies.

• Multiple small vendors: Numerous small operators rather than integrated service providers
• Coordination difficulties: Managing multiple logistics partners results in  communication gaps and process inconsistencies
• Varying service standards: Quality of service differs significantly across partners and regions

Last-Mile Delivery Challenges

The final step of order delivery, last-mile delivery, costs approximately 53% of total shipping expenses due to 

• Address location issues: Inaccurate or incomplete addresses increase delivery attempts and costs
• Traffic congestion: Urban traffic congestion impacts delivery times
• Rural accessibility: Reaching customers in remote areas demands specialised approaches

Regulatory Complexity

The regulatory ecosystem also complicates the logistics efficiency because of 

• Multiple tax structures: Despite GST implementation, some complexities remain in tax compliance
• Documentation requirements: Varying paperwork requirements across states slow down the  movement of goods
• Permit requirements: Different permits are required for interstate transportation 

Inventory Management Issues

Maintaining the right inventory levels becomes difficult with inefficient logistics, which stems from 

• Demand forecasting difficulties: Inaccurate prediction of consumer demand 

• Seasonal fluctuations: Managing inventory during peak seasons like festival periods requires better planning
• High carrying costs: Storing excess inventory holds up important capital and raises warehousing expenses

Proven Strategies to Improve Logistics Efficiency

Apply these proven methods discussed below to improve your logistics efficiency. 

Map Your Network Design

Set up a well-designed logistics network which will form the foundation for your logistics operations and help reduce transportation costs by 10-15% while improving delivery timeframes.

• Multi-location inventory placement: Position inventory strategically across geographical regions to shorten delivery routes and times
• Hub-and-spoke models: Establish a central distribution hub connected to your smaller fulfilment centres for balanced coverage
• Dark stores and micro-fulfilment: Consider smaller, closely located facilities for quick order processing in high-demand areas

Process Standardisation 

Create standardised processes to improve consistency and eliminate waste. 

This can be achieved through

• Standard Operating Procedures (SOPs): Develop detailed, documented processes for all logistics steps
• Continuous improvement cycles: Regularly review and monitor processes using methodologies like Lean or Six Sigma
• Cross-docking: To minimise your storage time, try to transfer incoming products directly to outgoing vehicles
• Wave planning: Organise your order picking in planned waves for better labour and equipment usage

When developing your SOPs and improvement cycles, consider reviewing the difference between logistics and supply chain management to ensure your standardisation efforts align with your overall business goals.

Demand Forecasting and Inventory Management

Balancing inventory levels with fluctuating customer demand is a must for achieving logistics efficiency.

Make use of

• Advanced forecasting techniques: Historical data, market trends, and AI-powered analytics to predict customer demand patterns
• ABC inventory classification: Categorise your products based on value and movement frequency for easier storage and handling
• Just-in-time inventory practices: Minimise your carrying costs by maintaining minimal but sufficient inventory levels

• Safety stock planning: Calculate optimal safety stock levels based on lead times and demand variability

Transportation and Delivery Planning

For efficient movement of orders, use delivery management systems to improve your

• Route planning: By using algorithms to identify the best delivery routes based on distance, traffic patterns, and delivery windows
• Load consolidation: Combine shipments heading to the same location to maximise vehicle space utilisation
• Carrier selection strategies: Create criteria for selecting the most efficient carriers based on cost, reliability, and service levels
• Multi-modal shipping: Use combinations of road, rail, air, and waterways for minimal cost and speed 

Warehouse Efficiency Enhancements

Structure your warehouse in a way that benefits all operations in order processing.

Below is a typical warehouse layout.

When structuring your warehouse operations, consider how inventory management connects with returns processing. 

This connection between forward and reverse logistics is why many early-stage brands implement both warehouse management systems and returns management systems as complementary solutions.

• Slotting optimisation: Place fast-moving items in easily accessible locations to speed up picking time
• Batch picking: Group similar orders to save movement time within your warehouse
• Zone picking: Assign warehouse staff to specific zones to increase specialisation 

Collaborative Logistics Models

Consider partnership approaches such as 

• Vendor-managed inventory: This allows suppliers to manage your inventory levels for accurate coordination
• Shared transportation: Collaborate with other brands for consolidated shipments
• 3PL strategic partnerships: Build deep relationships with your logistics providers 

The Role of Technology in Modern Logistics

Here are some emerging technologies that aim to advance logistics efficiency.

Government Initiatives Transforming Indian Logistics

India is making major progress in logistics efficiency with initiatives like

1. ULIP: A Milestone in Digital Logistics

The Unified Logistics Interface Platform (ULIP) processed over 100 crore API transactions since its launch in September 2022. 

It connects 43 systems from 11 ministries through 129 APIs, covering more than 1,800 data fields.

ULIP processes approximately 1 crore API transactions weekly, enabling

• Real-time cargo tracking across transport modes
• Automated logistics processes
• Streamlined regulatory compliance
• Reduced operational costs for businesses of all sizes

Leading companies such as Prism Johnson, Asian Paints, and Tata Steel are benefiting from ULIP to verify transporters, automate logistics, and improve supply chain efficiency.

2. ADB-funded SMILE Program

The Asian Development Bank's Strengthening Multimodal and Integrated Logistics Ecosystem (SMILE) program supports India's National Logistics Policy and PM Gati Shakti National Master Plan by

• Strengthening institutional frameworks at the National, State, and City levels
• Standardising warehousing and logistics assets
• Improving efficiencies in external trade
• Implementing smart systems for efficient, low-emission logistics

It aims to uplift India's position in the Logistics Performance Index and aligns with the Atmanirbhar Bharat initiative to strengthen domestic manufacturing and supply chains.

Transportation Management Systems (TMS)

These systems help reduce transportation costs by improving delivery reliability, according to recent industry studies from India Transport & Logistics News.

Key features include

• Automated route planning that calculates optimal delivery paths based on distance, traffic patterns, and delivery windows
• Carrier selection and management tools to evaluate transportation providers
• Freight audit and payment systems to verify charges
• Performance analytics dashboards to monitor key transportation metrics

Warehouse Management Systems (WMS)

These tools help better storage and fulfillment operations, potentially increasing warehouse productivity by 15-20% while reducing errors by a similar margin, as reported by IBEF in "Transforming India's Logistics Sector."

WMS systems provide

• Real-time inventory tracking across locations
• Picking optimisation algorithms for efficient order fulfilment
• Labour management tools to assign tasks and monitor productivity
• Space utilisation analytics for optimising warehouse layout

Benefits of Improving Logistics Efficiency

Improving the efficiency of logistics operations brings significant benefits as mentioned below.

Financial Benefits

Improved logistics efficiency directly impacts the bottom line, because when you optimise transportation, warehousing, and labour processes, it lowers your overall logistics costs by 15-20%, as proven by Gartner's research on logistics transformations.

Since logistics typically constitutes 10-15% of a DTC company's revenue, efficiency improvements become a leading profit driver through

• Reduced inventory carrying costs from better stock management
• Lower return warehousing expenses through streamlined processes
• Fewer financial losses from picking mistakes and shipping errors

Customer First Experience

The most valued improvements you must make to provide shoppers with the best shopping experience that keeps them coming back to your brand include faster delivery times, consistent on-time delivery performance, accurate order fulfilment, flexible delivery options, and transparent order tracking to keep them informed throughout the delivery.

Environmental Sustainability

A proper logistics operation helps reduce carbon emissions by up to 30% through better routing, vehicle utilisation, right-sized packaging, and less return shipping, which is important, especially to increasingly eco-conscious consumers.

Scalability and Risk Mitigation

Efficient logistics systems help your brand by enabling you to handle increased order volumes without proportional cost increases, making expansion to new locations more feasible, and better managing sudden volume spikes during peak seasons.

To Wrap It Up

Optimising the efficiency of logistics operations by implementing network redesign, process standardisation, and technology solutions like TMS and WMS systems gives your D2C brand both immediate and long-term advantages. 

Government initiatives like ULIP and the SMILE program also offer much-needed support for Indian companies looking to improve their logistics. 

Taking proper action on the frameworks outlined above will help you build a logistics system that supports growth and fulfils the expectations of today's demanding online shoppers.

FAQs (Frequently Asked Questions On the Efficiency of Logistics)

How do you measure logistics efficiency?

Logistics efficiency is measured through key performance indicators, including order fulfilment rates, on-time delivery percentage, transportation cost per unit, inventory turnover ratio, and warehouse utilisation. 

What is the meaning of logistics performance?

Logistics performance shows how well your supply chain delivers products at the right time, place, quantity, and quality while managing costs. 

What is cost efficiency in logistics?

Cost efficiency in logistics means minimising expenses across transportation, warehousing, inventory management, and order processing. It involves optimising vehicle loads, reducing empty miles, controlling inventory levels, and implementing automation to lower labour costs without sacrificing delivery performance.