A lot of small businesses rely heavily on logistics these days, and it’s your company’s supply chain that is involved in everything from ordering raw materials through to delivering directly to customers. It’s a huge area, and, quite obviously, one where overspending is often the norm. Why? Well, when you break down every step of what a business does, nothing is ever as lean and easy to manage as you might think.
To outline this, in reality, let’s assume you are a small manufacturing business. Your inventory management system is playing up, so you lose money on sales. By the time you get your order into your supplier, they are all out of stock, too – costing you more money. Then the delivery drivers they use are late getting your raw materials to you, which slows up your production and costs you in lost time.
By this stage, you realize you are out of another important item that you need to create the final product – and lose more time. And all this is before you even get your product finished and ready for the customer – we haven’t taken into account the cost of processing the order, packaging, and delivery to a distributor or direct to the customer.
If you are running on tight margins, you can quickly see how problematic this might be – many small companies end up going out of business after being burned by the logistics process, and it’s often the very first thing to be looked at if you ever go into administration. With this in mind, here are some of the key areas of logistics you should be looking at – and how to avoid major problems.
As with everything in business – and life in general, as it goes – you should never forget the five ‘p’s: perfect planning prevents poor performance. Last-minute decisions and snap judgements tend to lead to mistakes – and expenses – so always take some time to sketch out your current operation, create a detailed timeline that follows the progress of every product, and you can start to work out where to reduce some of your costs.
Streamline The Supply Chain
The next step is to look at your suppliers. If you are buying raw materials from 7-8 different companies, it might be worth finding out if you can ditch a few of them and see if you can get the same or similar products from the others. The fewer places you have to order from, the better it will be for your business as you will shorten your supply chain and reduce time – and costs.
Control Your Own Supply
At some point, it might be worth investing in a fleet and controlling the vast majority of your supply chain yourself. You might need a fleet of trucks, boats – even planes – but there are significant costs involved when you go down this route. A quick glance over at http://www.nautisnp.com/offshore/barges reveals that you will pay a pretty penny if you want to invest in a fleet of barges, for example.
That said, many companies prefer to build their fleets over time, to ensure they have a tight grip on the costs and time they would otherwise spend on other services. You can also run delivery or shipping services for other businesses in your area, charging them a reasonable fee that is less than what they would normally pay – everyone wins, and you get some return on your capital and a cheaper cost per sale than you had before.
Lean And Agile
There are plenty of inventory control theories you can explore, but essentially they all focus on making you a more efficient business. The leaner, the better – you have to have control over the flow of stock coming in and going out of your company. Failure to do so will usually involve failing to meet demand, rising costs, and a lot of wasted resources – and all of it is unnecessary. Once you have decided on your theory of choice, it’s worth investing on a good software system to help you track, trace, and automatically order every piece of stock you need in a more efficient way than you do right now.
Regular Checks And Reviews
Logistics is one of those business processes that needs a lot of tending – much like a garden. If you leave your backyard alone for a couple of months, the next time you go and have a look at it the likelihood is it will be wild and out of control – it’s the same principal for logistics. You need to take a close look at things on a regular basis, trim things when needs be, and invest in other areas if the situation requires it. Track your demand, and you’ll be able to make more accurate estimates of what you’ll need in the future.
Automate As Much As Possible
Your business will need human input – but how much depends on your choices when it comes to automation. According to https://www.camcode.com/asset-tags/how-to-reduce-logistics-costs, the more you can make automatic, the less money you will spend on pretty much everything.
You can reduce staffing requirements, centralize production operations, scale up and down to meet demand with ease, and also get instant snapshots of your current status. Even small companies can benefit from automation, so it’s worth investigating whether you sell a small or large amount of products.
Finally, if you think all this sounds like a complicated beast – you’re right. Logistics is one of those areas of business that is a constant struggle, but you don’t have to deal with it alone. Outsourcing to logistics specialists is a popular way of dealing with your stock, deliveries, and orders, and handing over the reins to another company means you can just set and forget. Yes, it’s going to cost you money, but it will also save you a lot of headaches, stresses and strains.
Do you have any logistics problems or solutions for your small business? Why not share your knowledge in the comments section below?