The right logistics software can transform your logistics operations, steering you away from traditional spreadsheets and towards enhanced efficiency.
The logistics management software landscape for small and medium enterprises (SMEs) has evolved remarkably over the last decade. With significant growth in funding, the sector has witnessed the emergence of diverse solutions, each designed to optimise different facets of the supply chain and logistics. These advancements aim to streamline operations, boost efficiency, and secure a competitive edge in an increasingly complex market. Despite this technological leap, many SMEs (as well as the local logistics teams of larger corporations) continue to rely heavily on spreadsheet-based, operations management, and performance analyses. This preference highlights a gap between the potential of modern logistics software and its adoption at the grassroots level.
While spreadsheets offer familiarity and simplicity, they fall short in addressing the dynamic challenges of today's logistics demands. The limitations of manual data entry, the risk of errors, and the lack of real-time visibility are significant hurdles that can hinder operational efficiency and decision-making processes. As the logistics sector continues to evolve, there's a pressing need for businesses to transition from traditional methods to more sophisticated, software-driven solutions. This shift not only promises enhanced operational capabilities but also opens up avenues for scalability and innovation.
In this blog, we delve into the evolution of logistics technology, examining why, despite the availability of advanced software solutions, a considerable number of SMEs still gravitate towards manual, spreadsheet-dominated workflows. We will explore the barriers to adoption and how businesses can navigate the transition to leverage technology for sustainable growth and competitiveness.
Main Categories of Logistics Management Software
Logistics management software is designed to streamline and optimise the operations of logistics and supply chain management. These solutions encompass a wide range of functionalities to enhance efficiency, reduce costs, and improve visibility across the entire supply chain. The main categories of logistics management software include:
- Order Management Systems (OMS): manage the lifecycle of an order. They typically integrate order processing with inventory and 3rd Party Logistics or warehouse and transportation management systems to ensure accurate fulfilment and delivery.
- Third-Party Logistics (3PL) Software Portals: designed for and deployed by individual logistics service providers. It connects to internal TMS and WMS to offer comprehensive fulfilment services to their clients.
- Inventory Management Systems (IMS): designed for tracking stock levels, orders, sales, and deliveries. They help in forecasting demand, reducing excess inventory, and ensuring that products are replenished efficiently.
- Warehouse Management Systems (WMS): designed to manage the operations of a warehouse or distribution centre. They drive inventory controlling, picking and packing processes, labour management, and storage optimisation.
- Transportation Management Systems (TMS): focus on the planning, execution, and optimisation of the physical movement of goods. They offer features such as carrier selection, freight auditing, payment processing, route planning, and tracking of shipments.
Systems that are less applicable for SMEs as they only deliver strong business case on large scale operations:
- Freight Brokerage Systems (FBS): built by companies that act as intermediaries between shippers and carriers. They facilitate the bidding process, carrier selection, and tracking of shipments.
- Supply Chain Planning (SCP) Systems: offer tools for demand planning, supply planning, production planning, and sales and operations planning. These systems typically generate their own or use demand forecasts from Inventory Management Systems (IMS) to plan broader supply chain activities, including procurement, production, and the transportation of finished goods..
- Supply Chain Execution (SCE) Systems: focused on the execution of supply chain plans. They include integrations with warehouse and transportation management, as well as manufacturing execution systems (MES) that manage the production process.
- Analytics and Reporting Tools: Business Intelligence Systems (BIS) provide insights into the supply chain through data analysis and visualisation. They help in identifying trends, optimising operations, and making data-driven decisions.
Each category of logistics management software can play an important role in enhancing the efficiency, transparency, and responsiveness of the supply chain. The software selection process, whether opting for the best of breed or a single vendor approach, ultimately depends on the specific needs, budget, and the size and complexity of the business's logistics operations.
A more detailed overview of the systems mentioned above, specifically those most relevant to SMEs, will be included in our upcoming eBook titled "Small Business, Big Impact: Transforming Your Supply Chain."
Benefits and Limitations of Logistics Management Systems (LMS) Implementations
Several reports show that around 37% of SME firms (shippers: manufacturers and/or merchants) use some LMS software implementations aimed at cutting transportation costs, and expedite delivery times, improving inventory performance leading to considerable cost savings. However, 59% of them admit the need for implementation of a real-time visibility system to track fulfilment and order delivery.
Overall, by 2026 adoption of LMS software is expected to grow by 10.6%, in contrast Financial Management System (FMS) adoption is forecasted to grow by 15.6%.
Inventory Management: Accurate inventory management is crucial, with real-time data from logistics software helping businesses maintain optimal stock levels and reduce holding costs, directly impacting customer satisfaction and operational expenses. Typical implementations lead to one off reductions of inventory (Working Capital) between 17% and 28%, whilst increasing overall product availability by 7%- 13% on average.
Error Reduction and Data Processing: The adoption of LMS systems markedly decreases manual data entry mistakes and accelerates data processing, ensuring more precise order fulfilment and cost control, capturing 1.9%-6.3% of losses in the logistics spend typically identified via Freight Bill Audits.
Customer Service Improvement: LSMs are instrumental in enhancing customer service by providing timely information on shipments and inventory levels, ultimately boosting customer satisfaction and loyalty.
Automation and Personalisation: Automated logistics software offers tailored solutions for business needs, ensuring efficient and cost-effective delivery. This automation leads to better resource allocation, reducing typical administrative efforts by 26%.
Minimising Human Errors: Logistics software plays a key role in reducing errors from manual data analysis, thus lowering the risk of costly mistakes such as excessive product obsolescence or margin losses resulting from “fire sales” and enhancing operational reliability.
However, whilst logistics management software offers numerous benefits, relying solely on these solutions without considering broader business strategies and integration with other systems can lead to:
- Over-reliance on Technology: Potential disruptions if systems fail or are not updated to handle evolving business needs.
- Data Silos: Lack of integration with other business systems can lead to fragmented data and inefficiencies.
- Limited Human Oversight: Excessive automation may reduce critical human oversight, potentially overlooking strategic opportunities or risks.
Spreadsheets and Manual Processes still dominate logistics management processes, especially for SMEs
Ultimately, the journey towards selecting the right logistics management software (LMS) packages is fraught with complexities, necessitating careful deliberation and a substantial investment of budget, time, and effort to achieve seamless and integrated implementations. Particularly for SMEs, where resources are often constrained, the challenge intensifies. Many find that gaps in the functionalities of chosen systems are frequently bridged with spreadsheet-based workarounds. This practice, while seemingly pragmatic, fundamentally detracts from the intended benefits of these advanced software solutions. Such dependence on manual processes not only diminishes the potential efficiencies and accuracies offered by sophisticated systems but also underscores the essential need for selecting software that precisely matches the unique demands and operational intricacies of the business.
This reliance on spreadsheets and manual interventions, as discussed in our previous blog, "Hitting an Excel Spreadsheet Wall," illustrates a significant barrier to digital transformation within logistics and supply chain management for SMEs. The prevalent use of spreadsheet-based processes, despite the availability of more efficient technological solutions, indicates a gap in the market for fully integrated, user-friendly software options that cater to the specific needs of smaller enterprises.
Ensuring a comprehensive and strategic alignment between the chosen software and the business's requirements is crucial to fully capitalising on the benefits of logistics management technology. It is this alignment that will enable businesses to move beyond inefficient, manual solutions and embrace the full potential of digitalisation in logistics and supply chain operations. The goal is not just to replace spreadsheets with software but to adopt a system that enhances operational efficiency, reduces errors, and drives growth, thereby negating the need for manual workarounds and ensuring a smoother transition to automated processes.
Find the right Logistics Management Software with FLOX
FLOX is a shared transportation and warehousing logistics platform that is dedicated to promoting efficiency, cost savings and sustainability – helping you improve operations across the board. Our platform enables logistics managers, shippers, and service providers to collaborate seamlessly, driving the flow of every order and shipment. Get a pallet delivery quote easily with FLOX.
To try it out with no monthly fees, sign up for FLOX platform access to create an account and start shaping the future of logistics today.