What Is Integrated Logistics?: An Ecommerce Guide

An interconnected supply chain that offers visibility is the key to meeting demand, keeping operations running smoothly, and ensuring customer satisfaction. Switching from a traditional to an integrated logistics approach to your ecommerce supply chain is the best way to meet all of these goals consistently. But what is integrated logistics, and how does it work?

This article explains what integrated logistics is, how it differs from traditional logistics, its benefits, and how you can implement an integrated logistics approach within your own ecommerce business. 

What Is Integrated Logistics?

Integrated logistics is a comprehensive approach to managing the supply chain that involves coordinating and optimizing all logistics functions to work seamlessly together. This includes procurement, transportation, inventory management, warehousing, and distribution. The goal is to streamline operations, reduce costs, and improve efficiency by ensuring that each part of the supply chain is aligned and working towards common objectives.

How Is Integrated Logistics Different from Traditional Logistics?

In traditional logistics, different functions like procurement, distribution, warehousing, fulfillment, and shipping often operate independently. For example, the procurement team might order raw materials without coordinating with the warehousing team, leading to storage issues or stockpiling. Similarly, the distribution team might schedule shipments without real-time data on inventory levels, resulting in delays or incomplete orders. These isolated operations can cause inefficiencies, communication gaps, and higher costs.

Integrated logistics, on the other hand, takes a more connected approach. It aligns every aspect of the supply chain into one cohesive system. By using real-time data sharing and advanced technologies, integrated logistics reduces redundancies, cuts costs, and boosts overall efficiency. 

For instance, with integrated logistics, the procurement team can order materials based on real-time inventory levels, the warehousing team can prepare for incoming shipments, and the distribution team can plan deliveries more accurately. This approach not only makes the supply chain more agile and responsive to changes but also enhances customer satisfaction by ensuring quicker and more reliable service.

Integrated Logistics Across the Supply Chain

Ecommerce businesses must be able to quickly adapt to market demands, manage inventory efficiently, and deliver products promptly in order to successfully grow. Using an integrated logistics approach to managing the entire supply chain makes achieving these goals easier, and includes:

Procurement and Manufacturing

The ecommerce supply chain begins with procurement and manufacturing. Businesses regularly order raw materials or finished goods from producers to sell online. In traditional logistics, the amount of product ordered from suppliers is usually determined by historical sales data, seasonal trends, and market analysis. However, this approach can be somewhat rigid and less responsive to real-time changes in demand or supply conditions. As an example, if a sudden spike in demand occurs or if there's an unexpected delay from a supplier, the traditional logistics model may struggle to adapt quickly, leading to potential overstocking or stockouts.

Demand forecasting when using an integrated logistics approach incorporates real-time data on current inventory levels, lead times, and external economic influences. This means procurement decisions are based on up-to-the-minute information, allowing for more accurate and dynamic responses to changing conditions to support inventory replenishment efforts.

Warehousing and Distribution

Warehouses and distribution centers are responsible for receiving, organizing, and either storing or forwarding inventory shipments to ecommerce fulfillment centers after they’ve left production. This is a complex job no matter the type of product or their handling, storage, and packaging requirements. 

For example, products with a short shelf life are usually handled on a First-In First-Out (FIFO) basis to avoid spoilage. Under this system, the oldest stock is used or shipped out first so that products are sold or used before they expire. FIFO requires tracking the location, quantity, age, arrival date, and departure date of individual lots across a warehouse, which is difficult to do without a unified system. 

Enterprise Resource Planning (ERP) software, transportation management platforms, and Warehouse Management Systems (WMS) are used to keep everyone on the warehouse team on the same page. With a uniform reference for up-to-date data on specific batches, staff have visibility into both inventory quantity and shelf viability. This better informs inventory order planning with manufacturers and enables better stock allocation between warehouses. Fulfillment centers can also plan their inventory storage more effectively when they have easy-to-access records of each pallet’s history.

Order Fulfillment

Fulfillment centers, where inventory is received and orders are prepared and delivered to the end customer, play a key role in determining the cost-effectiveness and timeliness of supply chain operations as a whole. Orders must be accurately prepared on a large scale, with case-specific considerations like lot tracking, kitting, and packaging type taken into account. Because order fulfillment is one of the last steps before a package reaches the customer, mistakes made during this supply chain process have the potential to impact customer satisfaction and brand reputation, as well as other supply chain considerations like reverse logistics. 

Integrated supply chains optimize fulfillment processes by using advanced technology like order and inventory management systems. This technology can optimize the supply chain through functions like automatic inventory alerts and order routing when inventory is being kept at multiple fulfillment centers, among others. This often means considering multiple factors in real time, from a facility’s proximity to the end customer to stock levels to shipping rates. 

Meanwhile, technology inside the fulfillment center speeds up the picking and packing process while improving order accuracy. Warehouse management systems plan out the most efficient route for staff to take when collecting inventory for an order. They then use barcode scanners to ensure they’re picking from the right SKU, and inventory is updated based on the number of units picked. 

Because everything is automated, fulfillment teams require less time and resources. With multiple checks and balances in place, small but ultimately significant mistakes in the fulfillment process are less likely to happen. 

Shipping

Shipping is one of the most important factors affecting supply chain costs, process efficiency, and customer satisfaction. This is especially true for last mile delivery – the final leg of a package’s trip from the fulfillment center to the customer’s designated delivery address.

Even with an efficient fulfillment system, shipping can significantly delay the amount of time a customer has to wait to receive their order. Individual shipping carriers offer varying timelines for delivery and follow their own schedules. There are also different types of shipping to consider, with Less-Than-Truckload (LTL) and Full Truckload (FTL) freight services being best suited for specific case scenarios. Even the roads these carriers take can impact delivery time, and ultimately supply chain speed. Fulfillment centers must select the right service provider for every trip.

In an integrated logistics system, software is used to optimize routes while recommending carriers based on predefined criteria for shipping speed, distance, and cost. They can also help ensure packages are properly prepared for transport with case-specific instructions and shipping labels. 

The Benefits of Integrated Logistics

As a better-informed and more coordinated approach to supply chain management, integrated logistics can make life easier in a number of ways. Here are a few examples of how:

Greater Efficiency

Supply chain optimization helps reduce the amount of time, labor, and resources needed to operate successfully. When businesses optimize these areas, they’re better able to sustain and reinvest in their operations. Process efficiency also benefits customers, who won’t have to wait as long to receive orders.  

Operational Agility and Resilience

The advanced technology used in integrated logistics systems enables businesses to responsively pivot in the face of sudden changes in order volume, order frequency, and market trends. With real-time reporting, workflows and production volumes can be adjusted based on actual need. 

Supply Chain Visibility and Control

When businesses integrate their supply chain, they benefit from increased visibility across the board. Every stage of an order’s journey is connected to the next, and with real-time data and advanced analytics, it’s easy to pinpoint where inefficiencies start. 

Enhanced Customer Experience

Control and visibility play into another benefit of integrated logistics: customer satisfaction. When businesses consistently meet customer demand, they build a reputation for themselves as reliable online retailers. Fast delivery and order accuracy earn further trust among consumers. These positive experiences have the potential to result in repeat sales, increased brand loyalty, and word-of-mouth marketing. 

Cost-Savings

Improved efficiency, agility, and increased visibility all come together to create the last benefit of cost-savings. Integrated logistics minimizes the resources required to move an ecommerce order across the supply chain, and in doing so, reduces spending. For example, optimized ecommerce inventory management practices help ensure enough stock is available to meet demand while avoiding the unnecessary costs of holding excess inventory. The advanced analytics tools that power integrated logistics strategies also provide invaluable context into resource usage and potential opportunities for reduced operating costs.

How to Implement an Integrated Logistics System

Ecommerce businesses today have more reasons than not to adopt the principles of integrated logistics. Doing so isn't easy, however. Supply chain integration requires a comprehensive view of everything from manufacturing to last mile delivery. As different logistical activities are typically handled by different service providers, key systems and data may be siloed. 

Ecommerce businesses with quickly growing and complex needs often hire a VP of Operations to handle communications, standard procedures, and data reporting between different parts of the supply chain. But that’s not your only option. For most growing ecommerce businesses, outsourcing the responsibilities to a third-party logistics (3PL) company is the best solution. 

Building and implementing the advanced analytics, inventory management, and real-time reporting tools needed for an integrated logistics approach to supply chain management can take away the time you need to focus on scaling your business. Partnering with a top-rated 3PL like Shipfusion means gaining access to turnkey logistics solutions so you can begin to optimize your supply chain instantly. 

Success in a space as demanding as ecommerce requires efficiency, and efficiency can only be achieved with a system that’s well connected from end to end. As an industry-leading 3PL, Shipfusion has the advanced warehouse management software, real-time data reporting capabilities, and forecasting tools you need to make the most of a connected approach to supply chain management. Contact one of our fulfillment experts to learn more about our white-glove onboarding and seamless fulfillment solutions.